United States v. Scott Levine ( 2007 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 06-1628
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United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the Eastern
* District of Arkansas.
Scott J. Levine, *
*
Appellant. *
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Submitted: December 12, 2006
Filed: February 21, 2007
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Before WOLLMAN, BEAM, and RILEY, Circuit Judges.
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BEAM, Circuit Judge.
Scott J. Levine was charged in a 144-count indictment, alleging conspiracy to
access a protected computer without authority, unauthorized access of a protected
computer, money laundering, possession of unauthorized access devices, and
attempted obstruction of justice. A jury found Levine guilty of counts 20-54 and 56-
140 (aiding and abetting the unauthorized access of protected computers), counts 142
and 143 (aiding and abetting the possession of unauthorized access devices), and
count 144 (aiding and abetting obstruction of justice). Levine was acquitted of all
other counts, except for six counts, which the government dismissed. The district
court1 denied his motion for judgment of acquittal or in the alternative for new trial.
Levine now appeals claiming (1) that evidence of prior legal problems
involving the Securities and Exchange Commission (SEC) and financial records
showing Levine's "lavish personal expenditures" were improperly admitted; (2) that
the trial court should have submitted the issue of financial loss to the jury by special
verdict; (3) that the trial court improperly responded to a jury question posed during
deliberations; (4) that the evidence was insufficient to support his conviction on aiding
and abetting unauthorized access to protected computers; and (5) that notice was
required under Federal Rule of Criminal Procedure 32(h) before the district court
could depart from Levine's properly calculated advisory Guideline sentencing range.
I. BACKGROUND
A federal grand jury indicted Levine for the counts recited above based on
activity conducted at Snipermail.com, Inc., a corporation Levine controlled.
Snipermail provided its customers with personal e-mail addresses of individuals who
had expressed interest in that customer's line of business. In the course of
Snipermail's business, it earned a sub-contract from entities working for "Company
No. 1," which in turn was a customer of Acxiom Corporation, one of the world's
largest repositories for personal, financial, and corporate data.
The relationship between Snipermail, Acxiom, and Company No. 1 allowed
Snipermail to access Acxiom's "FTP" server, which is a method of communication
used to send and receive files, spreadsheets, and other documents through the Internet.
The indictment charged that, while Snipermail's relationship with Company No. 1
1
The Honorable William R. Wilson, United States District Judge for the Eastern
District of Arkansas.
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allowed access to some files on Acxiom's FTP server, Levine and other employees of
Snipermail found a way to access files which they were not authorized to access and
downloaded those files. To grant themselves greater access to unauthorized files,
Levine and his employees deciphered encrypted password files belonging to Acxiom.
When Acxiom noticed the downloads and the criminal investigation began, Levine
and his employees sought to alter and conceal computer hard drives in an attempt to
thwart the investigation, resulting in an obstruction of justice charge.
II. DISCUSSION
Levine raises five issues on appeal, each of which is explained in its factual
context and discussed below.
A. Admission of Prior SEC Trouble and Financial Records
Levine challenges two of the trial court's decisions–one allowing witnesses to
testify that Levine "had a problem with the SEC" and the other admitting financial
records showing Levine's personal expenditures. Levine argues that the evidence was
irrelevant and unduly prejudicial, and thus inadmissible under Federal Rule of
Evidence 403.
Challenges to a district court's evidentiary rulings are reviewed for abuse of
discretion. United States v. Johnson, 463 F.3d 803, 808 (8th Cir. 2006). We will only
reverse if the error rises beyond the level of harmless error. Id. Further, we are not
bound by the grounds on which the district court admitted the evidence, as "[i]t is a
well-settled principle that we may affirm a district court's judgment on any basis
supported by the record." United States v. Pierson, 219 F.3d 803, 807 (8th Cir. 2000).
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Rule 403 notes that relevant evidence "may be excluded if its probative value
is substantially outweighed by the danger of unfair prejudice, confusion of the issues,
or misleading the jury, or by considerations of undue delay, waste of time, or needless
presentation of cumulative evidence." Fed. R. Evid. 403. However, Rule 403 "does
not offer protection against evidence that is merely prejudicial in the sense of being
detrimental to a party's case. The rule protects against evidence that is unfairly
prejudicial, that is, if it tends to suggest decision on an improper basis." Wade v.
Haynes, 663 F.2d 778, 783 (8th Cir. 1981), aff'd sub nom. Smith v. Wade, 461 U.S.
30 (1983).
Regarding the prior SEC trouble, the government sought to introduce evidence
that Levine had a civil sanction entered against him for violation of securities laws,
requiring Levine to list Mike Castro, rather than himself, as President of Snipermail.
Specifically, the government argued that the structure of Snipermail was relevant both
to show Levine's pattern and practice of fraud as well as showing the true structure of
the company to support the conspiracy charge against Levine and to refute Levine's
defense that his employees conspired to frame him for the conduct charged. Levine
suggested that the prior SEC dealing was dissimilar to the current charges, and that
it was uncontested that he, rather than Castro, actually controlled the company,
making the evidence inadmissible under Federal Rules of Evidence 403 and 404.
However, during opening statements, after explaining the personnel structure of
Snipermail, Levine's counsel suggested that the company's personnel "expanded
because Mr. Levine had two left thumbs or two left feet . . . when it came to
computers" and "that Mr. Levine had to have somebody else send his e-mails."
The trial court characterized the remarks during opening statement as
"assert[ing] that Defendant put others out front for innocent reasons." The district
court then ruled that the evidence was not admissible under Rule 404(b), but rather
was admissible as an admission under Fed. R. Evid. 801(d)–"Statements which are not
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hearsay." The court, however, strictly limited the evidence to only mentioning that
Levine "had a problem with the SEC."
Because the basis of Levine's objection to the admission of the evidence was
relevance rather than hearsay, the court's ruling as to the evidence's admissibility
under a hearsay rule does not answer Levine's objection. However, having reviewed
the record, we find that the admitted evidence was relevant and did not unfairly
prejudice Levine under Rule 403.2
Levine opened the door to this evidence during opening statement by offering,
as the district court found, an "innocent reason" for the structure of Snipermail.
Further, Levine's defense, in part, suggested that other employees of Snipermail
engaged in a conspiracy to frame Levine for the charged crimes. Both the charged
conspiracy and Levine's theory of defense involved conspiracies within Snipermail,
making the structure of the organization relevant. Given that the information had
relevance, and that the trial court severely limited the information regarding the prior
adjudication that could be admitted, we cannot say that it was an abuse of discretion
to allow witnesses to testify that Levine "had a problem with the SEC," particularly
when the district court found that Levine suggested a different reason for the corporate
structure in his opening statement.
As to the financial records, the government sought to introduce corporate credit
cards, corporate bank accounts, and two checking accounts of the Levine Family
Partnership, a part owner of Snipermail, to prove that Levine benefitted financially
from the stealing of Acxiom data. Levine objected on the ground that the unfair
2
Levine's objection at trial was largely based on improper character evidence
under Rule 404(b). However, the trial court only admitted the statement that Levine
"had a problem with the SEC." Levine now appears to argue that this evidence's
probative value outweighed its prejudicial effect, that is, that he "had a problem with
the SEC" is inadmissible under Rule 403.
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prejudice of the records outweighed any probative value, given that it was not
contested that Levine controlled Snipermail and made a salary of over $600,000 per
year. After hearing argument, the trial court received the documents as evidence.
The trial court noted that Levine's conspiracy "theory of defense makes this
evidence admissible." This defense involved submitting evidence of the finances and
salaries of other employees of Snipermail, as well as the lifestyle of at least one of
their spouses–specifically, that she drove a luxury car.
In light of Levine's chosen defense of airing the finances and lifestyles of his
employees, we cannot say that it was an abuse of discretion for the trial judge to find
that the relevance of Levine's own finances and lifestyle outweighed any unfair
prejudice. Aside from Levine's defense, the evidence was also relevant to the
government's theory that Levine's Snipermail business was failing financially and that
the data taken from Acxiom had economic value, providing Levine a motive for the
crime.
Given that under "Rule 403[] the general rule is that the balance should be
struck in favor of admission," United States v. Dennis, 625 F.2d 782, 797 (8th Cir.
1980), and that we "must give great deference to the trial judge who saw and heard the
evidence," id. at 796, we cannot say that the trial court abused its discretion in
admitting either the limited mention of prior SEC problems or the financial records.
B. Determination of Loss
Levine requested that the trial court submit a special jury verdict form to allow
the jury to determine the amount of loss stemming from each count charged in the
indictment. The government objected and the district court denied the request. It
appears that Levine argues that the trial court erred both by not submitting the issue
to a jury and by finding the loss equaled $850,000.
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In reviewing sentencing decisions, "we review the district court's application
of the Guidelines de novo to ensure the proper determination of a Guidelines
Sentence." United States v. Ameri, 412 F.3d 893, 899 (8th Cir. 2005), cert. denied,
126 S. Ct. 1415 (2006). When reviewing a district court's factual findings underlying
Guidelines determinations, we will reverse only if the court clearly erred. Id.
Levine argues that the district court erred in making the loss determination by
itself, rather than by submitting the issue to the jury. The finding that the loss equaled
$850,000 was not a fine imposed upon Levine, but rather was part of the trial court's
calculation of Levine's advisory Guideline sentencing range. Specifically, the amount
of loss caused by Levine's relevant conduct was a specific offense characteristic under
U.S.S.G. §2B1.1(b)(1). We have previously recognized that submitting the matter of
loss to a jury is unnecessary. See United States v. Washburn, 444 F.3d 1007, 1014
(8th Cir. 2006) (affirming the trial court's decision to exceed the jury's loss finding
because "the jury's finding was mere surplusage, as there was no need to submit the
matter of the loss amount to the jury"). We hold that the district court properly denied
Levine's motion for a special verdict form on loss amount, following our precedent in
Washburn.
Though less clear, Levine also seems to argue that the court's finding of fact
that the loss amount equaled $850,000 was incorrect because "the Court punished Mr.
Levine for crimes that were not specifically pled in the indictment." We review
findings of fact for clear error. Ameri, 412 F.3d at 899.
Various amounts of loss were suggested to the court. The pre-sentence report
calculated the loss amount as $58,236,781.64. The government contended that Levine
was responsible for $6,798,721 in loss. Levine contended alternatively that the actual
or intended loss was zero, or that 95% of the stolen e-mail addresses could be
purchased for under $5,000, or that a similar criminal case involving stolen Acxiom
files could be used, where the value of each file was found to be $170 per file, which,
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when multiplied by the number of files Levine was convicted of stealing, would equal
a loss of approximately $30,000. Multiplying the $170 figure by the number of
indicted charges, the loss equaled $893,000, which Levine submitted "represent[ed]
the absolute highest [amount] that a reasonable person" could find as the value of the
stolen files.
Given that Levine's counsel conceded that a reasonable person could arrive at
a loss amount of $893,000, we cannot say that the district court clearly erred by setting
the loss amount at $850,000. As this court has noted before, the commentary to
U.S.S.G. §2B1.1(b)(1) requires us to give the district court "particular deference on
the issue of loss calculation[]," placing a "heavy burden" on the defendant, which
Levine has not met. Ameri, 412 F.3d at 901.
We thus affirm both the district court's decision not to submit the issue of loss
calculation to the jury and the court's decision regarding the amount of loss.
C. Response to Jury Question During Deliberation
Levine challenges a response given by the court to a jury question posed during
deliberation.
At trial, evidence was presented that Levine owned a laptop computer which
contained both personal files as well as files relating to Snipermail sales. The laptop
subsequently crashed, requiring Levine and other Snipermail employees to send the
hard drive to a professional data recovery company. Once recovered, the data was
returned to Snipermail on compact discs. The government introduced testimony that
Snipermail sales data recovered from the crashed computer was not on Levine's laptop
that was surrendered to law enforcement. Additionally, the same witness testified that
a program that deletes files in a manner making them difficult to recover was operated
on the morning that Levine turned the laptop over to law enforcement.
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During deliberation, the jury struggled with Instruction No. 22 and Count 144,
the instruction and charge on obstruction of justice. The jury asked "[d]o we follow
the letter of the indictment when it refers to Instruction 22?" In an attempt to better
understand the jury's question, the trial court asked for clarification and received the
following question from the jury: "Are the deletion of files from the laptop being
considered in [the obstruction of justice count]?" After extended argument from the
parties, during which Levine's counsel conceded that the deletion of the files relating
to Acxiom could be considered in relation to Count 144, the court responded "Yes"
to the jury's question. Levine claims that this response "permitted the jury to convict
Mr. Levine for erasing any file even if it did not relate to Acxiom in any fashion."
In reviewing a trial court's response to a jury's question, we leave the response
"within the sound discretion of the district court." United States v. Morrison, 332 F.3d
530, 532 (8th Cir. 2003) (quotation omitted). However, the "trial court must take
great care to insure that any supplemental instructions are accurate, clear, neutral, and
non-prejudicial," answering "with concrete accuracy, and within the specific limits of
the question presented." Id. (quotation omitted).
Levine contends that because the court's answer was simply "Yes" rather than
"[Y]es, if it pertains to Acxiom directly or indirectly," as Levine's counsel preferred,
the jury might have convicted Levine on the deletion of personal files. This argument
fails. The court's "Yes" answer is not to be viewed in isolation. As this court has
noted, "[w]ell settled is the rule that jury instructions must be read as a whole."
Ryther v. KARE 11, 108 F.3d 832, 846 (8th Cir. 1997) (en banc). On review we
"presume[] that jurors, conscious of the gravity of their task, attend closely the
particular language of the trial court's instructions in a criminal case and strive to
understand, make sense of, and follow the instructions given them." Francis v.
Franklin, 471 U.S. 307, 324 n.9 (1985). In this case, the court reminded the jury that
"all [instructions] are important." Further, the court instructed the jury that to convict
Levine for obstruction of justice they must find that "the defendant corruptly
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concealed hard drives or attempted to do so" and that "the defendant did so with the
intent to impair the hard drives' integrity or availability for use in an official
proceeding," and that they must be convinced of these two elements beyond a
reasonable doubt.
Presuming, as we must, that the jury followed the court's instructions taken as
a whole, and in light of Mr. Levine's admission that deletion of files relating to
Acxiom could properly be considered as obstruction of justice under Count 144 of the
indictment, we cannot say that the district court abused its discretion by answering
"Yes" to the jury's question during deliberation.
D. Denial of Motion for Acquittal and Sufficiency of the Evidence
After the jury returned its verdict, Levine filed a motion for judgment of
acquittal, arguing, in part, that "there is insufficient evidence as a matter of law to
sustain the jury's verdict" on the unauthorized access of a protected computer counts.
The district court denied this motion. Levine now appeals, arguing that the evidence
for counts 20 through 54 and 56 through 140 was insufficient.
When the defendant claims insufficient evidence, we review the district court's
denial of a motion for judgment of acquittal by employing "a strict standard of review
. . . viewing the evidence in the light most favorable to the guilty verdict, resolving all
evidentiary conflicts in favor of the government, and accepting all reasonable
inferences supported by the evidence." United States v. No Neck, 472 F.3d 1048,
1052 (8th Cir. 2007). Further, "[w]e will not lightly overturn the jury's verdict and
will reverse only if no reasonable jury could have found the defendant guilty beyond
a reasonable doubt." Id.
Here, the grand jury indicted Levine in counts 20 through 140 of intentionally
accessing a computer without authorization by means of interstate communication for
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a commercial or personal advantage valued at over $5000. In his motion for
judgment of acquittal, Levine argued that each count related to a specific file and that
the government failed to offer direct proof that Levine himself downloaded the files.
We note, however, that the government need not prove its case by direct evidence.
See, e.g., United States v. Frokjer, 415 F.3d 865, 869 (8th Cir. 2005) (noting that
circumstantial evidence is sufficient for conviction).
The evidence in this case is voluminous. Having reviewed that evidence, we
cannot say that "no reasonable jury could have found the defendant guilty beyond a
reasonable doubt." No Neck, 472 F.3d at 1052. Employees of Snipermail testified
that Levine was instructed on how to use a password to access the Acxiom server, that
he had the master password file for Acxiom, and that he received assistance in
decoding encrypted passwords on that file. The jury also heard evidence regarding
the financial struggles of Snipermail, giving Levine a motive to commit the charged
conduct. Further, the jury heard evidence that one employee, Bill Clinton, admitted
to using his computer to download improper data and that Levine often worked at
Clinton's computer.
Though Levine claims that the lack of an eye-witness requires reversal of his
conviction, in light of this evidence we disagree, and affirm the district court's denial
of Levine's motion for judgment of acquittal.
E. Propriety of 96-Month Sentence
Finally, Levine appeals his sentence, arguing that the district court "departed"
from the Guidelines without giving the parties notice, as required by Federal Rule of
Criminal Procedure 32(h). Levine also contests the reasonableness of the 96-month
sentence imposed. We review conclusions of law, such as entitlement to notice, de
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novo. United States v. Long Soldier, 431 F.3d 1120, 1122 (8th Cir. 2005).3 We
review the actual sentence imposed for abuse of discretion. Id. at 1123. An abuse of
discretion occurs when the "sentencing court . . . fails to consider a relevant factor that
should have received significant weight, gives significant weight to an improper or
irrelevant factor, or considers only the appropriate factors but commits a clear error
of judgment in weighing those factors." Id. (citing United States v. Haack, 403 F.3d
997, 1004 (8th Cir.), cert. denied, 126 S. Ct. 276 (2005)).
Federal Rule of Criminal Procedure 32(h) requires that a court give notice to
the parties before it departs from the applicable Guidelines range on a basis not
identified in either the pre-sentence report or the parties pre-hearing submissions.
Fed. R. Crim. P. 32(h). This rule, added by amendment in 2002, has not been
amended since United States v. Booker, 543 U.S. 220 (2005), which made the
Guidelines advisory.
As to the notice required by Rule 32(h), such notice "is not required when the
adjustment to the sentence is effected by a variance, rather than by a departure." Long
Soldier, 431 F.3d at 1122. Here, the trial court announced its Guideline calculations,
to which neither party objected, other than Levine advising the court that the
Guidelines were only advisory. The court then announced Levine's sentence of "60
months on Counts 20 through 54 and 56 through 140, [and] 96 months on Counts 142,
143, and 144, to run concurrently, for a total of 96 months." The court then said "This
3
Levine's notice argument is most likely subject to plain error review, given that
we can find no objection to the lack of notice made at sentencing. See, e.g., United
States v. Ruff, 472 F.3d 1044, 1047-48 (8th Cir. 2007). In fact, Levine's counsel
encouraged the court to sentence below the advisory range, noting that "since [the
Guidelines are] no longer mandatory, it would not require a formal departure."
However, because the government did not raise the lack of objection and because the
result under either standard is the same, we give Levine the benefit of the doubt and
review de novo.
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is a nonguideline sentence. It's a variance sentence. I took the steps established in
U.S. v. Sitting Bear."
The court correctly termed its sentence as a variance rather than a departure.
See United States v. Sitting Bear, 436 F.3d 929, 932 (8th Cir. 2006) (noting that
Sitting Bear's sentence "was a non-Guidelines sentence, a variance if you will, based
upon the district court's review of the case and Sitting Bear's history in light of all of
the § 3553(a) sentencing factors."). The sentencing court in Levine's case considered
various factors, including the prior SEC adjudication, the factors in 18 U.S.C. §
3553(a), and Levine's character witness and letters. Thus, the court's proper
consideration of these factors and the facts of the case, its indication that it was
following Sitting Bear (itself a variance case), and the court's announcement that the
sentence was actually a variance all confirm that under the rule of Long Soldier,
Levine was not entitled to notice under Rule 32(h).
Reviewing the reasonableness of the 96-months' incarceration imposed, we
cannot say that the court abused its discretion. Levine primarily argues that he
received an unreasonable upward departure for criminal history. However, as
established above, no departure was given.
In varying up from the advisory Guideline level of 26 and a criminal history
category of I, corresponding to an advisory range of 63 to 78 months' imprisonment,
the court focused on the fact that in his prior SEC trouble "Mr. Levine blatantly and
inexcusably violated the securities law by a scheme." Further, the pre-sentence report
did not calculate this securities law violation into Levine's criminal history. Section
3553(a) states that the sentencing court "shall consider – (1) the nature and
circumstances of the offense and the history and characteristics of the defendant." 18
U.S.C. § 3553(a)(1). Because the district court gave weight to a factor specifically
identified in 18 U.S.C. § 3553(a) as a factor that the court "shall consider," we cannot
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say that the court abused its discretion in doing so. Accordingly, the 96-month
sentence was reasonable.
III. CONCLUSION
For the reasons above, we affirm Levine's conviction and sentence.
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