Court: Court of Appeals for the First Circuit; June 8, 1994; Federal Appellate Court
Christian Goodchild was indicted for using two unauthorized Discover credit cards to obtain over $1,000 in goods and services, violating 18 U.S.C. Sec. 1029(a)(2). Following a jury trial, she was convicted and sentenced to eleven months in prison, three years of supervised release, and ordered to pay restitution of $10,090.52 to Discover Credit Card Services.
The appellate court reviewed several key issues: (1) whether the government proved all elements of the offense beyond a reasonable doubt; (2) the admissibility of certain evidence; (3) the effectiveness of counsel; (4) the prosecutor's conduct; and (5) any errors in applying sentencing guidelines.
The court's standard for reviewing evidence requires considering it in a light favorable to the verdict, without weighing witness credibility, and allows for circumstantial evidence. The essential elements of the crime included: (1) the credit cards were "access devices" under the statute; (2) Goodchild used the cards without authorization and obtained goods valued over $1,000; (3) she acted knowingly and with intent to defraud; and (4) her actions affected interstate commerce.
The trial record indicated that Goodchild's father had applied for and received the credit cards prior to his death in 1988, and after his death, Discover issued new cards to the same address without knowledge of his passing. Approximately two months later, Goodchild rented her father's post office box and indicated that her parents could receive mail there, despite their divorce prior to his death.
Defendant was the sole user of post office box 398 when two re-issued credit cards were mailed there. On January 16, 1990, she requested a card from Discover on her deceased father's account, failing to disclose his death. Discover required a power of attorney to authorize her use. Despite this, the defendant made 22 purchases totaling $4,847.11 with card number 2471 between January 16 and February 23, 1990, and 35 purchases totaling $7,137.43 with card number 2620 from January 15 to April 10, 1990, making only two minimum payments on the latter.
An investigation into card number 2471 was initiated by Discover on February 5, 1990, due to excessive charges. After finding no contact with the listed phone number for Anthony Goodchild, the card was deactivated. Discover's collections department later attempted to locate him, discovering he had died three to four years prior. A call to the defendant revealed she was aware of her father's death in a 1988 automobile accident and mentioned issues with the estate and credit accounts, asserting that they had been settled.
Following this information, the accounts were escalated to Discover's fraud unit and subsequently referred to the U.S. Postal Inspectors. Additional evidence linked the defendant to the transactions when she provided specific Discover card records to an insurance adjuster, claiming joint ownership of the cards with her father and stating she had lived in his house since shortly after his death.
Evidence established that the defendant was a regular customer at Nutri-System Weight Loss Centers in Concord, New Hampshire, during 1990, with specific purchases made using two Discover credit cards on multiple dates. The prosecution successfully demonstrated all elements of the crime charged beyond a reasonable doubt, confirming that the credit cards were "access devices" as defined by law, and that their use by the defendant impacted interstate commerce. The primary legal question remaining was whether the government proved the defendant's intent to defraud under 18 U.S.C. Sec. 1029(a)(3), which requires showing that the defendant knowingly and with intent to defraud used unauthorized access devices. The statute defines "unauthorized access device" as one that is lost, stolen, expired, revoked, canceled, or obtained with fraudulent intent.
The jury was instructed that the government must prove the defendant either obtained the cards with fraudulent intent or that they were unauthorized. A "good faith" instruction was given, clarifying that good faith belief in acting properly serves as a complete defense to credit card fraud charges. The court emphasized that the government bears the burden of proving fraudulent intent and lack of good faith beyond a reasonable doubt, and that the defendant has no obligation to demonstrate her good faith. The jury received adequate instructions regarding intent to defraud, with fraud typically established through circumstantial evidence, as direct proof is rare.
Defendant asserts she lacked intent to defraud Discover, citing evidence including her establishment of a post office box following her father's death in September 1988 to manage estate correspondence. She claims to have used credit cards in her own name, consistently disclosed her identity, and made payments from her checking account, albeit late. Although no explicit evidence of late payments was found, it is assumed such evidence exists. Defendant highlights her role as personal representative of her father's estate, with family consent, and states all expenditures were approved by the estate's attorney. Financially, she was capable of settling credit card debts, having received substantial distributions from the estate.
In contrast, the government presents evidence of intent to defraud, including a phone call on January 16, 1990, where defendant requested credit cards linked to her deceased father's accounts without disclosing his death. Following this, she made purchases totaling $11,984.54, with only minimal payments made. Despite her administrative role, she failed to inform Discover of her father's passing until July 1990. During an insurance claim investigation for a burglary, she falsely claimed joint ownership of the cards with her father, a statement she knew to be untrue. The evidence indicates she was capable of repaying Discover, having received over $181,000 from the estate by the time of her indictment.
The jury could reasonably conclude that defendant knowingly obtained and used the expired credit cards for personal benefit with fraudulent intent, satisfying the criteria for the charged crime. Additionally, defendant contested the admission of Discover's "collection memos" on hearsay grounds, arguing that the authors and participants in the relevant calls did not testify. However, these memos were admitted under the business record exception to the hearsay rule, and statements made by defendant were also admitted as admissions under the rules of evidence.
Glen Hall, manager of fraud investigations at Discover, provided testimony regarding the procedures of the fraud investigation unit, which often begins investigations based on referrals from the collections department. These referrals include detailed records of actions taken on delinquent accounts, including interactions with the cardholder and relevant documentation like sales drafts bearing the customer's signature. The collections department primarily engages in telephone outreach to locate cardholders and meticulously logs all actions in account memos, utilizing a shorthand system that Hall is familiar with. These memos are digitized and can be printed as needed.
Exhibits 12a, 12b, 12c, 13a, and 13b, which were printouts of collection memos related to the defendant’s accounts, were submitted in response to a subpoena. The defendant challenged the admissibility of exhibits 12b and 13b, which contained hearsay regarding telephone contacts with a woman who provided information about Anthony Goodchild's residence in Alexandria, NH. Despite the hearsay objection, the district court allowed this evidence not to prove the truth of the statements but to illustrate Discover's investigative actions. The Federal Rules of Evidence permit out-of-court statements to be admitted for purposes other than establishing their truth.
The defendant's primary objection centers on statements she allegedly made on July 19, 1990, after Discover requested a return call via her answering service. In these statements, she identified herself as Christian Goodchild and detailed personal matters concerning Anthony Goodchild, including his death, family dynamics, and issues related to his estate and attorney.
The key issue is the admissibility of computer printouts of collection memos under the business record exception to the hearsay rule as defined by Fed. R. Evid. 803(6). This rule allows for records made during or shortly after an event by someone with knowledge, maintained in the regular course of business, and made as part of standard practices, unless there are indications of untrustworthiness. The memos in question were created during or immediately after telephone conversations with delinquent credit card account holders and were part of Discover's routine business activity.
Although Hall, who did not create the records or participate in the calls, was not the direct source, he was deemed a qualified witness due to his managerial role in the fraud unit and his understanding of the collection procedures. There were no indications of untrustworthiness regarding the records' source or preparation.
The court emphasized the district court's discretion in determining admissibility, including the foundation and trustworthiness of the records. The defendant's argument that the memos were created for litigation purposes was rejected, as the primary purpose of such records was for debt collection, not litigation. This aligns with precedent, as noted in the Tenth Circuit's ruling that similar contemporaneous notes qualified as business records under Rule 803(6).
The court found the defendant's telephone statements made on July 19 to Discover admissible under the business record rule and as admissions under Fed. R. Evid. 801(d)(2)(A). While typically, statements by non-parties are inadmissible for truth unless an exception applies, the statements were deemed relevant as they could reasonably be attributed to the defendant, who had returned a call, identified herself, and made statements about individuals only someone familiar with the family would know. A cautionary instruction was given to the jury, emphasizing that they must be satisfied the defendant was the caller before attributing the remarks to her.
Regarding ineffective assistance of counsel, the defendant argued that poor performance by trial counsel contributed to her conviction. However, the court adhered to the established rule that such claims should be initially presented to the trial court, as they involve fact-specific issues. The court noted that ineffective assistance claims require a two-pronged analysis: establishing that counsel's performance was deficient and that this deficiency prejudiced the defense. The trial judge is typically better positioned to evaluate the quality of representation and its impact, making appellate review less effective if the issue is raised for the first time on direct appeal.
Defendant claims that the prosecutor's actions were prejudicial and warrant reversal. However, a review of the trial record found no unethical or unfair conduct by the prosecutor, despite some aggressive tactics typical in adversarial proceedings. A specific claim regarding the prosecutor's use of the term "uncontradicted testimony" during closing arguments was deemed unfounded, as the term was not used at all. The appellate court expects accurate representation of the trial record by defense counsel.
Regarding sentencing, the court lacked a transcript of the sentencing hearing but based its decision on the presentence report and the judgment. The defendant was sentenced to eleven months in prison, three years of supervised release, and ordered to pay restitution of $10,090.52 to Discover. The sentence was calculated using the Guidelines, with adjustments based on the victim's loss, which the court determined to be $10,090.52, contrary to the defendant's claim of $9,160.27. The government argued for the inclusion of late and finance charges to reach the higher loss figure, which was supported by testimony during the trial. Consequently, the base offense level was increased by three levels. The appellate court reviews loss valuation under a clear error standard, while legal interpretations of the sentencing guidelines are reviewed de novo.
The valuation of "loss" under the Guidelines involves interpreting Commentary 7 to Sec. 2F1.1, which states that loss does not include interest the victim could have earned if the offense had not occurred. The issue at hand is whether the district court erred by including finance charges and late fees in its loss valuation despite this commentary. Courts are required to adhere to the Guidelines commentaries, as established in Stinson v. United States.
Previous cases, such as United States v. Henderson, have explored this commentary's implications, concluding that while the commentary excludes opportunity cost interest, interest should be included in the loss calculation if the victim had a reasonable expectation of earning it. For example, in United States v. Lowder, the court ruled that interest should be included when a defendant promised a specific rate of return. Similarly, in United States v. Jones, the court found it appropriate to include interest charges incurred by credit card issuers when victims made purchases with fraudulently obtained cards.
The district court's inclusion of interest in the loss calculation was deemed appropriate, as it represented a loss of earnings on money that rightfully belonged to the bank. Despite a conflict between case law and the commentary's language, the resolution of such ambiguity lies with the Sentencing Commission, not the current court's ruling.
In cases of fraudulent credit card use, finance charges and late fees are not classified as "interest the victim could have earned on such funds had the offense not occurred," but rather as contractual obligations. These fees are part of the agreement between the credit card company and the cardholder, which the company relies upon when extending credit. The judgment affirms that such charges are valid for loss valuation. The relevant statute, 18 U.S.C. Sec. 1029(a)(2), penalizes the unauthorized use of access devices resulting in a value of $1,000 or more. The term "access device" is broadly defined to include various means of accessing funds. The court's acceptance of figures that included late and finance charges reflects its recognition of these charges as part of the loss calculation, despite not being explicitly stated.
