at the outset i wanted to welcome you all to our court today and judge cards and i wanted to introduce to you and welcome again to our court judge kelly was kind enough to be sitting with us  all week he brings a world of experience and distinction to this task he sat on the united states court of appeals for the th circuit where he has been since one thousand nine hundred and ninety two when he was appointed by president bush so judge kelly we're delighted to have you with us and thank you for your for your labors rb half a nd observation for those of you who may not be familiar with our timing and lighting system you will note that this is a time clock that will tell you how much time you've used and how much remains for you in your argument and there are lights there is a green light which means of course that you can proceed there's an amber or yellow light which is a two minute warning and there's a red light indicating that your time is up when that light goes on we'd be much appreciative if you could bring your remarks to a conclusion one of my colleagues years ago was fond of saying that the red light is not aspirational and so we'd be much appreciated if you would be mindful of it it doesn't mean you've got to stop in the middle of a sentence but if you could bring your remarks to a close we'd be much appreciative rd and the last as you proceed with your arguments today you can safely assume that we've had a chance to review the briefs the materials in the case and some instances we've had a chance to read the record or much of the record as well so feel free to go really  to the heart of your argument with that will begin with the st case which is the united states versus stacey  customary understanding exists that a webmaster cannot permit others to rummage through the backend of a private website webmasters do not have mutual use for most purposes of a customer's website they have merely the military to access it for upkeep much like office custodial staff merely have the ability to access our office spaces for upkeep and the supreme court has not extended the rd party consent rule to individuals that have the mere ability to access property there's two lines of cases that in my view teased this out on one hand there's the co tenant and shared user cases so cases like georg randolph united states v thomas of this court where two parties might share a residence share use of a computer such that they both have the right to enjoy the property and in that circumstance the courts have held rd party consent applies on the other hand there's a line of cases like the hotel operator and guest cases the landlord tenant cases where one party has the mere ability to access property for discrete purpose such as upkeep and that that line of cases is more like this scenario and let's assume you're right about that let's assume that there was no right to consent the administrator what expectation of privacy did your client have and the corporations computer he's not the corporation he was not the registered agent what is that expectation yes you are side i have two arguments for the expectation st is a property based m supreme court's analysis in united states v byrd where the court said that an individual can have a property interest in a rental car even if they're not an authorized user and if so it's the corporation's property the rental car companies property and somebody else webmaster and this is a situation where he's not merely an employee but he is running the corporation he was the c e o and so he could sever the relationship with mr peterson altogether and totally exclude her from the site and so that type of possessory interest and right to exclude has been recognized as sufficient to support forth that he has an interest that was in any way individualized and separate from the corporation's interest yes your honor and in going to and that's going to the cast test a bit and i believe he did because he generated some of the records personally in the back end of that site they might have been owned by the corporation but cour recognized you can have a personal connection or of course everything that a corporation is doing is done through real live people and so every record created by and for a corporation is generated in that sense by an individual who may be an employee or the c e o or the president or the sole shareholder which in this case i take it your client is ishaan or at the trouble i'm having is really the thrust i think of judge ca question how do we tease out his interest from the interest of a corporation so there is one case that i'd point to is united states of the hands off from the old th where the sole owner of corporate shareholder of a company's office was searched by the police without a warrant similar to this case and the court found that he had an interest distinct from the corporation because he frequented the office he spent time in there he personally generated some of the records and it was private he had expectation that other individuals won't invade that office outside of the corporation will didn't he also have a lot of personal stuff on that yes your honor that we don't have that in this case that is correct so the personal property element to this i know the government has emphasized that point but there's no ownership requirement in the th amendment there just needs to be a nexus a personal connection and generating the files frequenting the account and locking it off to others your honor is sufficient to supply that nexus eleven case i'd point to is man q c before today in the supreme court your honor where a union employee shared an office with sever other employees and the court found that he had an interest in the union records but nowhere in the court's opinion did it discuss personal property the focus was on that was his area that he frequent his office and he had expectation that no non union officials would invade that area and so based on man q c and hands all the different factors the court can look to to discern a distinct expectation of privacy are generated the records taken steps to exclude others how much time he spends in the area but to me the property based insurance is pretty strong in this circumstance where i can understand some situations where with employees who work for a company and they have id administrator source that site is not owned by him it's owned by the corporation  honor and that distinguishes it from all of these other possessory interests which might be less than fifty simple in the properties i've got an interest in a hotel room that i could rent for night i've got an interest in a car that i run from davis for the night but that's different from it seems to me the corporations  website which is owned by the corporation created for the benefit of the corporation and everything apparently that's generated on that computer screen is corporate in nature rather than  judged kelly says there's anything personal so that's where i'm having some difficulty discerning the expert there are reasonable expectation of privacy that society is willing to recognize so you're out of one another way that may be looked at the list is so in the united states me carpenter case a couple years ago john roberts chief justice john roberts noted that as technology is advancing the role the th amendment is demanding tain the expectations of privacy that existed at the time of the framers and at the time of the framers this information on the back into this site the customer invoices mr wattles correspondence with customers would have been in his desk drawer in his office and so simply because times have changed and now he has online accounts storing that information doesn't erode or take away his privacy interests and justice gorsuch even made this point in his dissent where he noted that that's why this property based approach makes sense and the digital age because all of our online accounts for businesses individuals are stored on the cloud where individuals might have the ability to access it and so if you have control over individual if they're sent in the car they can exclude others just lay rent the car they don't they don't have a rd person that is in charge of the car and bird you're on or the individual did not return the car he was in an authorized user and yet the court still found that because he merely had the ability to control he could have a th amendment claim or interest in that case your time is short though so it might be helpful if you moved on to some of the other issues ok one in particular that would be of interest to me would be to address whether or not the government has established beyond a reasonable doubt all of the elements of the wire fraud that is to say whether the wires that they alleged were in fact part and parcel of executing for the purpose of executing the scheme to defraud so your honor i would say  no particularly on count one the government's theory has been that the cacique the wire to the casino in count one further the scheme because it was necessary to provide mr waddell control of the funds obtained then sent the casino wire and so there's no that cannot be seen that nd wire is necessary for him to gain control when he had cash in hand or help me with the account itself the wire transfer in count want us to account that seminal hard rock hotel and casino who had control over the optimal financial group think account mr wardle had control over those counted anyone else have access to that account one other individual was listed on that account who was that i talked about the optimal financial group inc account at the st bank of coastal georgia it was there was either courtney johnny or one other individual people that were employees of the companies and i can i do not have a name off the top my head of only one or more than one there was one they listed on each account of the optimal financial group account it was mr waddell and one other individual  same with the south carolina bank and trust account so he didn't really necessarily have sold a one million in control over the counter control as a fax missive again for your honor and under the facts here even the government has noted that when accounts were opened even if other individuals were listed power and control d was turned over to mr mondale he was the only person making withdrawals there's in the record he made all the withdrawals d from the count save one time when you and so one point one last point i'd like to make is that if the court finds evidence insufficient for counts one in three under the sentencing package shock doctrine re sentencing would be appropriate to make sure that that since reflects the scope of mr wattles criminal culpability a moment or two and tell me with regard to the sentencing and whether the district court made an appropriate finding as to the amount of the fraud so mr waddell made objections to all witnesses the alleged victims who did not offer trial testimony and the government responded with no evidence offered no evidence that the sense in hearing so we submit that the district court erred  finding that the government met its burden by preponderance of the evidence for all those victims and so the loss of mountain handsome man is inaccurate and requires remey and thanks very much if your honour's and you have reserved made lease the court the morning your honour's james stewart joel on half the united states the court just engaged to mr wood ellen a long discussion of his claimed privacy interest i have to confess i think the court picked up all my points in my brief i agree with everything the court stated there just briefly he did not have a privacy interest independent of his status as a shareholder because he had no personal connection to the mannish there's no evidence in the record of how much time he spent in the shopping cart portion of his website all the material was and generated automatically by the website when one of his victims ordered gold online and the system generated the receipt he didn't have that personal connection he also didn't attempt to keep it private the evidence is undisputed that i did peterson whom he hired to design create administer and host the web site the website for a period of two years including all the time in which he committed fraud had unfettered access to every aspect of the website because of her administrative privileges and in fact in united states v ziegler the th circuit has held that someone with administrative privileges can't consent to a search of the computer ms peterson wasn't the only person who had administrative privileges waddell himself did he use them to lock her out of the website a couple of times and then shared his own individual logon and password with her and never changed it there was a rd person employee wanda sharp likewise had at the same administrative privileges so because two other people had complete access to the whole website including the shopping cart he did not make any efforts to keep it private but even if he did had a privacy interest in the shopping cart portion of their website the secret service's search was nevertheless entirely constitutional that's because ms peterson had at least a parent and i believe also actual authority to consent to a parent authority exists when given all the facts known to the police at the time they would cause a reasonable person to believe that the rd party ha proprietor because he had the keys to the room could just go in and search the person's room no i wouldn't lie is there a difference there's a difference because there are actually two fundamental differences in this whole case i mean one the corporation owned all the property not one dell and two this is not tangible property like a hotel room this is information data in cyberspace on a website now in a hotel in a ddition the supreme court's long held that residences hold special status for th amendment purposes this website is not a residence it's a commercial business and again it's itself business of intangible property so why did why did the secret service agent reasonably believe she had authority to consent let's let me review what he knew at the time st this whole thing started in november of two thousand and fourteen when one of waddell's victims came to agent rothschild and told him that he had been ripped off of twenty six thousand dollars on why does website so even begin investigation he independently identified thirty other didn't the agent know that  had access to the website basically through our administrative privileges yes she told him exactly that she told him that she had accessed that she had designed to build and maintain the website for two years with regular updates and that she had administrative privileges giving her that thorny her own unique logon and password she also told him that what dell had the same administrative privileges so he knew exactly what that authority conveyed  had the same had likewise administrative privileges so they both had the same ability and authority to access every aspect of the website now it is true that at some of the point in time he did change it but it's not clear exactly when that happened she did miss peterson did testify in right but i guess what i'm focusing on is what she would have communicated to the agent in the words or substance did she not tell the agent in words or substance that our access was because she was an administrator she was there should created the website and we tinker with it from time to time but she did not the wise have access to make entries and debits and credits and so on and so forth right he knew that didn't mean i disagree that she didn't have access remember at the same time that she st approached the age of the law enforcement she gave them a printed out copy of one of the receipts from the shopping cart verifying the complaint so that so that there prove that she had access got that before she ever even talked to law enforcement remember her suspicions are rose when two of waddell's victims independently contacted m peterson and complained and told her that the website was an absolute fraud and then even as i take it your position is this is a secondary or fallback argument your view is that it's a corporate account for corporate purposes he had nothing personal to do with it fraud yes counts and let me focus you on what was bothering me and you can help me with with it if you had charged for the wire sort of at the back end of the transaction that is to say the victim of the fraud is induced to wire transfer a sum of money to a corporate account rock casino account in his name and you charge as the guts of the wire transfer the secondary transfer from the optimal financial group to an account at the hard rock hotel and casino why wasn't this fraud complete when the money was transferred into his account to begin with or when he otherwise took control of it rather than and the back end when he decided to transfer some most of the money to to his gambling account yes your honor initially there's one approximately sixty one thousand dollars mr falk and burke wired that money into the corporate account it's true we did not charge that particular as one dollar of the four point i don't know but we did you did exactly that with regard to folk in burke's nd brother help me with the st count that's who we're talking about you get your multiple steps yes and what you chose to zero in on as the key to the wire crime was the last of the transactions yes we did that with regard to both of the instances in which waddell ripped off open burg with regard to st into but he put it this way suppose he never transfer the wire transfers sixty plus one thousand dollars from his account to the corporate account at the direction of the swindler and it goes into that corporate account and there it sits and it sets and it sets you know that the crime would not be complete at that stage and that's because we measure it would've swindled the money and he wouldn't have used the wires to in the words of  scheme would not have been because as i say said what dell scheme was to never let a sucker off the hook and he kept stringing folk and berg on and on and getting him to invest more money so this is so yes the individual crime that count but how to  furthered the design to get full convert to continue to spend more money to throw good money if you will have to bad that on the st occasion waddell simply withdrew from the corporate account and then from another corporate account sixty thousand hours which you put in a casino account they're out of that induce  alleging yes and that transfer as well as the other one that's at issue here furthered what dell scheme in four ways st it got the money out of the corporate account over which waddell had no exclusive legal right into his personal care who had control over that account besides cordell that somebody else have control yes your honor i i discussed this in my brief i don't think i put their names but i looked it up subsequently in preparation their names arm last names are mckinney and vinson vi and so in two other employees of the corporation they both had significant signature authority on the optimal account and so when the money was in there what they all had new exclusive legal right could he saw the pages that they had us signature authority over the account and so what they'll need to get out of that account to get into his personal account to use it that was part of his scheme that we alleged even in the indictment i mean i've cited six circuit court cases all of which if i meet generalize for a moment say that when money is initially fraudulent money initially goes into account over which even the defendant had access as an individual but he shared it with other people then the problem is i understand from your perspective is that he did not have the unique and singular control over the account that's correct and that's supported by all the six circuit court cases i've  if i can quickly get to the nd reason is that it helped him further the fraud by avoiding detection remember in an earlier stage of the case another one of his employees found out that he was a fraudster because she had s let's go back to the st one that i'm still not sure that i understand the argument because as i understand it at two forty nine pm that same day why dell personally withdraw sixty thousand dollars from that account at the georgia bank thereby leaving only remaining balance with one thousand five hundred dollars at that point he had the sole control over sixty thousand dollars right not legal control because it was the corporate money i'm talking about he had physical control over sixty grand yes w just trying to help me so just bear with me please i'm sorry we can't eat and then sin had no control they couldn't they couldn't touch the money that was now in his hands sixty thousand right right honor because in all of the six i thought control was the heart of your argument i thought your argument was that the fraud had not been completed on the front and because he shared control over this corporate account with two other people mckenney and then sent and that therefore the courts and the law corden not to say that the crime was complete for the purpose of executing the scheme because others had access to it so once he withdraws the money from the account himself they have no control in a physical literal sense over the money what am i missing i know i'm missing something yes or what you're missing is the physical literal sense is not the linchpin that's established in the six circuit court cases that i've cited in each of those cases that in the st account the defendant had some access to it in some of those cases the defendant actually moved the money around in one of the cases the defendant actually used it to invest in another count so yes the let me ask you this question is there any indication if the money is moved through a series  transfers for the purpose of concealment there is no question that our case law suggests that that's more than enough to show that one of the purposes was to execute the scheme that is to say to law a conceal but is that the argument you're making up here and that's the nd way is that an argument you're making here yes yes it is explain it to me if you would that's the nd way in which the transfer further disk eat because if what they all had left the money in there that would have made it possible for mckinney and vinson to see all the activity and they would have grown suspicious now unless you think i'm speculating that's exactly what debra sweet did with regard to another one of his phony corporations a rare spread there that's why i said to you once it comes into my hands personally i make the withdrawal of the cash at that point these other folks have no access and no control over the money why it's not complete attack point because he had no legal right that was the corporate cash he didn't have exclusive individual right which is what the six circuit cases i've cited established again and in each of those cases the defendant it's undisputed that the defendant had some authority over the money when it was in the st account but the problem there was that other people had authority over the money too and so therefore it was necessary for the defendant to make the subsequent wire to his own personal account let me let me the hypothetical i would be off to the tune of a one hundred grand i say i'm going to send your gold bullion just give me a one hundred thousand you said terrific you look like an honest guy marcus and you wire transfer  hundred thousand dollars to me i put it in my corporate account and it sits in that corporate account for four years i don't do anything with it other people have access to it four years later i take the money out of the account in cash and i give it to my son he needs the money he's going to school  addition and then my son in turn deposits it in his checking account and my son wire transfers a to the university of michigan to cover his college expenses and  cite the wire transfer by my son to the university of michigan was that for the purpose of executing the scheme to defraud you know that would go too far yes where's the difference the difference is that in your hypothetical you said i initially put the money in your personal account so that that would mean you had complete authority over it at that stage and a subsequent transfer would not a further the scheme but what else is totally different as i'm trying to explain you never he did not have legal exclusive personal authority over the money when it was in the corporate account he didn't get that until he wired to the hard rock casino where he could but your theory is he didn't have lawful control over the money at any point the money wasn't his no one wants it once it was in his account then he no one else had control over his personal account at the casino in florida i think we've got it th pm backing out of that point about wire fraud your honour's there's no case law that says control turns on legal exclusive personal control of the government inside any six circuit cases in its brief in the case it did cite from out of circuit talk about usable form when the money is in a usable form to the defendant the defendant then has control and subsequent wires cannot be attached the federal wire fraud statute does not reach those wires if this legal rule was the any way it totally made the money recoverable the ridge if it was still in the corporate account and he had discovered what was going on he might have been able to get it back but because it was transferred to his personally through a personal account that certainly seems to me infer that the scheme of getting the money into his own pocket where he could spend it on whatever he wanted without anybody knowing anything about it while you cow one he already had it in his pocket and could have disposed of it in any way the fact that he decided to redeposit a bank and then send it to a casino doesn't make the subsequent wire necessary to dispose of the money or make it unrecover i'd say that that is a legal question what was square was the scheme let's start with that so the scheme is a consumer fraud scheme where mr waddell advertised gold and silver at discount prices on the  internet induce people to wire him money with no intention of ever sending them the gold and just pocketing the money and using it and he actually used it directly from his accounts the mere fact that he transferred money to a casino he used that fraudulent lee obtained funds to go to a casino and spend it and so once it was in that count he had a usable form in standing it took a scene oh didn't conceal it in any way that actually would raise red count one your honor he had kept writing account one it's true that he takes the money out of the corporate account in cash and then physically deposited to a nd account so your argument is he had control at least by that point yes there aren't that he took it out in cash he could have done anything with it he could have paid his bills he could have bought a car he chose to use it to pay off his gambling debts accounts revoke that doesn't happen to really t view that you had in usable form it in advance the scheme in any way to send it any wire made a years later to use to spend or use that money then could be attacked tacked on to a charge like this when the government could have just charge money laundering or sending stolen funs the wire fraud isn't meant to reach this broadly this statute in compas using money from the account for personal uses and i'd like to circle back briefly to the th amendment issue with the website one case your honor judge kelly does involve the use of corporate property or electronic corporate property and that's united states v nagle and the rd circuit which the government had relied on are the court put forward a two prong test the defendant had information stored on a shared network for his business and the court said well he could have an personalized interest in that information if he had a personal connection to it which he did because their files that he generated and if he had taken steps to shield it from others and here you have both of those problems met he had a personal connection they generated the information and it was no your honor at that point at the sentencing stage mr waddell had terminated his counsel and so he is representing himself standby counsel filed an objection stating that the loss amount was in that range  question they count turning back to the wire fraud the government has said that there's instances of mr mckinney making withdrawals from the account in that was at issue in count one there's no evidence of that the only would draw made was one time by mr vinson from count three and i have records cites for that if the court looks at trial exhibit eleven dash r f one a at eight to nine is that count information for the optimal financial group account in count one in the transcripts get into the count a bit and in the the the low for hundreds i think we've got it and i think we have your case we thank you for your efforts we thank you as well on behalf of the united states i noticed ahc ounce will that you were court appointed or we very much appreciate you taking on the burden of representing