United States v. Chay, Kah Choon ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 01-3009
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
KAH CHOON CHAY,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 01-CR-0021-C-01--Barbara B. Crabb, Chief Judge.
ARGUED DECEMBER 11, 2001--DECIDED February 28, 2002
Before BAUER, RIPPLE and ROVNER, Circuit
Judges.
RIPPLE, Circuit Judge. After his
indictment for participating in an
international computer-program piracy
ring, Kah Choon Chay pleaded guilty to
one count of trafficking in counterfeit
documents and packaging for computer pro
grams in interstate commerce. See 18
U.S.C. sec. 2318(a). The district court
sentenced him to eight months of
incarceration, three years of supervised
release and $49,941.02 in restitution to
the owners of the copyrighted programs
that Mr. Chay had pirated. This
restitution figure is based on Mr. Chay’s
gross income from sales of the illegal
programs and counterfeit packaging in the
United States. In this appeal, Mr. Chay
raises three arguments regarding the
restitution portion of his sentence. For
the reasons set forth in the following
opinion, we affirm the judgment of the
district court.
I
BACKGROUND
After meeting a "Ms. Lee" in a Kuala
Lumpur, Malaysia computer store in
December 1996, Mr. Chay, a Malaysian
citizen residing in the United States,
embarked on a scheme of international
computer-software piracy. For the next
several years, Mr. Chay bought newly
released computer games in the United
States and then sent them to Ms. Lee in
Malaysia for copying. In return, he would
receive 20 to 30 copies of the games with
counterfeit packaging and instructions.
These counterfeit items were so realistic
that some of his subsequent customers
could not distinguish them from the real
products. Mr. Chay, using a variety of
aliases on eBay and other electronic
bulletin boards and auction sites,
advertised and sold these pirated copies
over the internet.
The scheme came to an end after one of
Mr. Chay’s former roommates, suspicious
of Mr. Chay’s activities, retrieved from
a dumpster a box of Mr. Chay’s business
records and turned them over to the FBI.
The records were enough to prompt an
investigation during which an undercover
agent bought counterfeit computer games
from Mr. Chay via the internet. After
confirming the former roommate’s
allegations, the FBI searched Mr. Chay’s
apartment and seized his computer,
records of his illegal sales of
copyrighted programs, and numerous
illegally copied computer games, some
still in packages bearing a Malaysian
postmark.
Mr. Chay then confessed to his crimes
and pleaded guilty to one count of
violating 18 U.S.C. sec. 2318(a). The
plea agreement, which reserved Mr. Chay’s
right to appeal, acknowledged his
willingness to pay restitution for all
the victims’ losses caused by his
activities:
The defendant agrees to pay restitution
for all losses relating to the offense of
conviction, all losses covered by the
same course of conduct or common scheme
or plan as the offense of conviction . .
. . The exact restitution figure will be
agreed upon by the parties prior to
sentencing or, if the parties are unable
to agree upon a specific figure,
restitution will be determined by the
Court at sentencing.
R. at 9. Notably, the plea agreement did
not specify how the "losses" caused by
Mr. Chay’s activities would be
calculated.
Mr. Chay and the Government could not
agree on the proper restitution figure
before sentencing; accordingly, the court
determined the amount of restitution and
ordered that Mr. Chay pay $49,941.02 in
restitution to the 52 victim companies
holding copyrights that Mr. Chay had
infringed. The court set the restitution
amount according to charts, generated by
the Government and incorporated into the
Presentence Investigation Report (PSR)
through an addendum. This analysis showed
that Mr. Chay had grossed $49,941.02 from
the sale of pirated computer games. The
charts also set forth the precise amount
that Mr. Chay owed each of the 52 victim
copyright holders of the pirated games.
The Government had computed losses for
each company by multiplying the number of
that company’s pirated programs that Mr.
Chay sold by the actual price he received
for them. The charts were based on
evidence obtained from eBay, Mr. Chay’s
computer, and the box of Mr. Chay’s
discarded records turned over to the FBI
by Mr. Chay’s former roommate; this
evidence revealed how many programs Mr.
Chay had sold and the price at which he
had sold them.
At sentencing, Mr. Chay raised two
objections to the Government’s
calculation of the losses caused by his
piracy. The first was to the Government’s
determination of the number of games that
had copyrights, but the court overruled
the objection because Mr. Chay had
presented no evidence undermining the
Government’s figure. The other objection
concerned the restitution amount. Through
counsel, Mr. Chay argued that the court
should reduce the amount of restitution
by his costs in producing and
distributing the pirated games and
programs. Mr. Chay argued that the court
should use his net profit rather than his
gross sales as the restitution amount.
Mr. Chay did not, however, present any
evidence of his costs. The court rejected
his argument, stating that:
[H]e owes the legal owner the full amount
of what he sold because that was a gain
he never should have realized, just as I
would owe you the full $50 for [a stolen
watch] because it wasn’t my watch to
sell. Not just the difference between
what the watch cost you and what I
received for it, but the full amount of
my gain . . . . [I]f he had costs, those
are his to absorb. Those aren’t
chargeable to the defendant [sic] whose
copyright he stole. The copyright owners,
the people that were defrauded of the
opportunity to sell those games don’t
have to pay Mr. Chay’s costs.
Tr. at 15-16.
II
DISCUSSION
On appeal, Mr. Chay raises three
arguments concerning the court’s order of
restitution./1
A. Victim Impact Statement
Citing only commentary to sec. 5E1.1 of
the 1995 sentencing guidelines, Mr. Chay
first argues that a "victim impact
statement" regarding the crime’s
financial impact on the victim should
have been included in the PSR and that
the Government’s failure to do so
mandates a remand. Mr. Chay was, however,
sentenced under the 1998 guidelines, not
the 1995 guidelines. The commentary to
sec. 5E1.1 of the 1998 guidelines, which
was amended to conform with the
Antiterrorism and Effective Death Penalty
Act of 1996, see U.S.S.G. Appendix C,
amendment 571, lacks the provision from
the 1995 sentencing guidelines cited by
Mr. Chay, and nothing else in the section
requires that a victim impact statement
be included in the PSR.
Federal Rule of Criminal Procedure
32(b)(4)(D) does, however, require that a
PSR contain "verified information . . .
containing an assessment of the financial
. . . impact on any individual against
whom the offense has been committed."
Rule 32(b)(4)(F) also provides that "in
appropriate cases, information sufficient
for the court to enter an order of
restitution" should be included in the
PSR. These requirements were both met in
this case by the Second Addendum to the
PSR, which listed the individual victim
companies along with the amount of loss
each sustained (calculated according to
the number of each company’s copyrighted
games that Mr. Chay sold multiplied by
the price at which he sold them). This
list was based on eBay records, computer
logs and Mr. Chay’s discarded records.
Mr. Chay never specifies what additional
information should have been included or
how the absence of that information
affected his substantial rights.
B. Consideration of Mr. Chay’s Finances
Mr. Chay claims that the district court
should have considered his modest
financial condition, revealed in the PSR,
before imposing the restitution order.
Mr. Chay’s crime is, however, a crime
against property covered by the Mandatory
Victim Restitution Act (MVRA), 18 U.S.C.
sec. 3663A, which prohibits the court
from examining the defendant’s ability to
pay restitution. See 18 U.S.C. sec.
3664(f)(1)(A); see also United States v.
McIntosh, 198 F.3d 995, 1003-04 (7th Cir.
2000); United States v. Szarwark, 168
F.3d 993 (7th Cir. 1999).
C. Calculation of Victims’ Losses
Mr. Chay also renews his contention that
his restitution amount should have been
reduced by the costs of his piracy
because his "gain" consisted of only his
profits, not gross sales.
We review a district court’s order of
restitution for an abuse of discretion,
and we "will disturb that order only if
the sentencing court exercised its
discretion using inappropriate factors or
by failing to use any discretion at all."
United States v. Emerson, 128 F.3d 557,
566 (7th Cir. 1997). Given this very
deferential standard of review, Mr.
Chay’s argument is unpersuasive.
Restitution is designed to compensate
the victim for the harm suffered because
of the defendant’s criminal conduct. See
United States v. Behrman, 235 F.3d 1049,
1052-53 (7th Cir. 2000). In determining
the amount of the victims’ losses, the
district court relied upon Mr. Chay’s
gross sales to measure the victims’
losses resulting from Mr. Chay’s conduct.
Mr. Chay submits that his costs in
manufacturing and distributing the
pirated programs should offset the amount
of restitution due the victims.
By focusing on his personal "gain"
rather than the calculation of the
victims’ loss, Mr. Chay fails to address
the real issue posed by the statutory
scheme: whether the district court’s
calculation of the amount of loss Mr.
Chay caused the victims was within the
bounds of its discretion. Mr. Chay’s
position is somewhat analogous to a bank
robber asking that the amount of money he
returns to a bank be offset by the cost
of robbing it. We do not think the holder
of the copyright ought to be required to
subsidize the cost of Mr. Chay’s illegal
activity. Although the record in this
case is sparse, we note that any other
approach might well require a victim to
incur double costs if, in addition to
absorbing the costs of the malefactor, it
had to absorb the costs associated with
the failure to sell its own product in
the regular course of doing business./2
We conclude that the district court did
not abuse its discretion in calculating
restitution based on Mr. Chay’s gross
sales.
Conclusion
For the foregoing reasons, the judgment
of the district court is affirmed.
AFFIRMED
FOOTNOTES
/1 First, he argues that, under U.S.S.G. sec. 5E1.1,
the restitution guideline, the PSR should have
included a victim impact statement. Second, he
asserts that the district court should have
considered his ability to pay restitution before
setting the amount. Third, he renews his argument
that the court should have reduced the restitu-
tion amount by his costs.
We make the preliminary observation that it
appears from the record that Mr. Chay may have
waived or forfeited his arguments that the PSR
should have included a victim impact statement
and that the district court should have consid-
ered his ability to pay restitution in setting
the amount. Compare United States v. Harris, 230
F.3d 1054, 1058-59 (7th Cir. 2000) (finding
waiver of issues because defendant did not raise
them at sentencing), with United States v. Wil-
liams, 258 F.3d 669, 672 (7th Cir. 2001) (finding
only forfeiture of issues despite defendant’s
failure to object at sentencing). After the
district court rejected Mr. Chay’s contentions
that the Government incorrectly determined the
number of copyrighted games and that the restitu-
tion amount should be offset by Mr. Chay’s costs,
the court asked Mr. Chay’s counsel if he had
"anything else . . . to say on Mr. Chay’s be-
half?", and counsel answered "not about other
objections." Tr. at 17; Cf. Williams, 258 F.3d at
672. Although the record in this case is sparse,
we have been unable to find any reference to the
two arguments in question. When counsel responds
to a court’s specific invitation to raise objec-
tions on behalf of his or her client by informing
the court that there are no further objections,
we usually find a waiver of arguments raised for
the first time on appeal because counsel inten-
tionally relinquished the known right to raise
the arguments in the district court. Id. If
waived, an argument is unreviewable. Id. Our
examination of this record leaves us with a
lingering doubt as to whether counsel’s reply
ought to be considered a knowing and intentional
relinquishment of a known right. Id. Although we
believe the question to be a very close one, our
case law counsels that waiver "should not be
found lightly." Id. Here, its resolution is not
outcome determinative because Mr. Chay’s first
two arguments on appeal would fail even when
reviewing for plain error. Out of abundance of
caution, therefore, we shall set forth why these
two claims must fail before addressing the re-
maining issue.
/2 We note that this case does not present us with
an occasion to explore in a definitive way the
various means by which loss might be calculated.
We cannot say that the district court’s reliance
on Mr. Chay’s gross sales was an abuse of discre-
tion.