Court Opinion

ID: 770436
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:34:39+00
Date Added: 2024-06-11T17:55:50.432064
License: Public Domain

226 F.3d 885 (7th Cir. 2000)
United States of America, Plaintiff-Appellee/Cross-Appellant,v.Jim Gee and William C. Norris, Defendants-Appellants/Cross-Appellees.
Nos. 99-2348, 99-2622, 99-2623, 99-3093
In the  United States Court of Appeals  For the Seventh Circuit
Argued April 3, 2000Decided September 11, 2000

Appeals from the United States District Court for the Northern District of Indiana, South Bend Division.  No. 393-CR-13RM--Robert L. Miller, Jr., Judge.[Copyrighted Material Omitted][Copyrighted Material Omitted][Copyrighted Material Omitted][Copyrighted Material Omitted]
Before Flaum, Chief Judge, and Bauer and Williams,  Circuit Judges.
Williams, Circuit Judge.

1
The United States  government charged William C. Norris and Jim Gee  in a 32-count indictment in connection with a  scheme to assist in the unauthorized reception of  cable television signals.1 Before submitting  the case to the jury, the government dropped two  of the counts against Norris. The jury returned  guilty verdicts on all remaining counts.  Defendants appeal their convictions and their  sentences. The government appeals defendants'  sentences. For the reasons stated below, we  reverse defendants' convictions on mail fraud,  wire fraud, and conspiracy. We affirm Norris's  conviction for assisting unauthorized reception  of cable service, but we remand for resentencing  consistent with this opinion.

2
* Little of the evidence at trial was in dispute.  The government charged, and the defense readily  admitted, that Gee and Norris were involved in  the production of equipment that buyers could use  to transform cable television converters into  devices that could descramble all encrypted cable  programming. A cable television subscriber who  acquires a descrambler from a source other than  the cable company can access premium programming  without paying the cable company any additional  fees. The evidence showed that Bryan Corrigan, a  cooperating witness, developed chips and modules  that could modify cable converter boxes to  descramble all encrypted cable programming. Gee  took Corrigan's work product and sold it to  Norris and other after-market dealers. Norris  sold these chips and modules, and cable boxes  modified by these chips and modules, to home  viewers. These devices allow the user to, among  other things, descramble and view premium cable  television channels without the cable provider's  permission.

3
A jury found Norris guilty of thirteen counts  of wire fraud, violating 18 U.S.C. sec. 1343;  five counts of mail fraud, violating 18 U.S.C.  sec. 1341; seven counts of misdemeanor assisting  unauthorized reception of cable service and four  counts of felony assisting unauthorized reception  of cable service, violating 47 U.S.C. sec.  553(a)(1); and one count of conspiracy, violating  18 U.S.C. sec. 371. The same jury found Gee  guilty of ten counts of wire fraud and one count  of conspiracy.

4
The district court sentenced Norris to 37  months of home confinement and imposed a fine and  special assessments totaling $16,325. The court  sentenced Gee to 37 months of imprisonment and  imposed a fine and special assessments totaling  $8,050.

II
A.  Material Falsehood

5
Norris and Gee claim that their convictions on  wire and mail fraud should be reversed because  the government did not properly allege or prove  materiality and because the court did not  properly instruct on materiality. We review de  novo the sufficiency of an indictment. See United  States v. Agostino, 132 F.3d 1183, 1189 (7th Cir.  1997).

6
In 1999, the Supreme Court ruled that a "scheme  to defraud" under the wire and mail fraud  statutes must include the element of a material  falsehood. See Neder v. United States, 527 U.S.  1, 25 (1999). "[A] false statement is material if  it has 'a natural tendency to influence, or [is]  capable of influencing, the decision of the  decisionmaking body to which it was addressed.'"  Id. at 16 (quoting Kungys v. United States, 485  U.S. 759, 770 (1988)).

7
Earlier in this case, in 1997, defendants filed  an unsuccessful motion to dismiss, arguing, inter  alia, that the indictment failed "to allege any  false or misleading statements" to customers or  cable companies. In response to that motion, the  government acknowledged that the indictment does  not base fraud charges on any misleading  statements or fraudulent omissions.2 Under the  law at that time, the district court correctly  ruled that a material falsehood was not an  essential element of the wire or mail fraud  statutes.3

8
On appeal, the government argues that the  indictment does in fact allege false and  misleading statements.4 However, as the  government acknowledged in 1997, the indictment  does not allege that defendants misrepresented or  concealed a material fact in aid of their scheme.  All the government can point to is the language  in the indictment and argue that the court should  view it as a whole, rather than in a  hypertechnical manner.5 The government  acknowledges that the indictment does not use the  words "material," "misrepresentation," or  "concealment" but suggests that the indictment  sufficiently apprized defendants of the nature of  the charges and all essential elements, including  materiality. The indictment merely alleges a  "scheme to defraud," however, which the Neder  court ruled insufficient. See id. at 20.

9
The government next argues that even if  material falsehoods were not in the indictment,  it introduced sufficient evidence of material  falsehoods at trial to support the verdict. We  review sufficiency of the evidence under a  substantial evidence standard. See United States  v. Durrive, 902 F.2d 1221, 1229 (7th Cir. 1990).  We "view the evidence in the light most favorable  to the government and accept circumstantial  evidence as support, even sole support, for a  conviction." Id. If we find insufficient evidence  to support the verdict, we must reverse with  instructions that the district court grant a  judgment of acquittal. See United States v.  Locklear, 97 F.3d 196, 199-200 (7th Cir. 1996).

10
The government claims that it introduced  evidence that end-users misrepresented and  concealed the use of the illegal descrambler  units from cable operators. This evidence does  not prove, however, that defendants  misrepresented or concealed material facts.  Furthermore, the government did not proffer any  evidence that Norris or Gee ever induced any of  their customers to make false or misleading  statements to their customers' cable companies.

11
The government also points to trial testimony  that demonstrated that the chips and descramblers  sold by Norris and Gee were designed to allow  free access to premium cable channels and to  block the subscriber's descrambler unit from  receiving electronic authorization instructions  from the cable operator. The devices'  capabilities do not, however, prove material  falsehoods by Norris and Gee. The government did  not proffer any evidence that defendants made any  false or misleading statements. Therefore, even  after viewing the evidence in the light most  favorable to the government, no rational jury  could have found the essential element of a  material falsehood.

12
We find that the government not only failed to  allege but also failed to prove that Norris or  Gee made any false or misleading statements.  Consequently, we reverse their mail and wire  fraud convictions and remand with instructions  that the district court grant a judgment of  acquittal on these charges. Accordingly, we find  it unnecessary to review whether the district  court's jury instructions on material falsehoods  were sufficient.

B.  Conspiracy

13
Defendants next argue that their conspiracy  convictions should be reversed on two grounds.  First, they contend that the government failed to  proffer substantial evidence of an agreement  between Norris and Gee to violate 28 U.S.C. sec.  553(a)(1).6 Second, they argue that the  district court's failure to include a buyer-  seller instruction is reversible error.

1.  Substantial Evidence

14
As noted above, we review sufficiency of the  evidence under a substantial evidence standard.  See Durrive, 902 F.2d at 1228. We also note that

15
a sufficiency of the evidence challenge is hard  to win, given the standard of appellate review.  We consider the evidence in the light most  favorable to the government, and we must affirm  the conviction so long as any rational factfinder  could have found the essential elements of the  offense to have been established beyond a  reasonable doubt. We will overturn the verdict  "only if the record contains no evidence,  regardless of how it is weighed, from which the  jury could find guilt beyond a reasonable doubt."

16
United States v. Menting, 166 F.3d 923, 928 (7th  Cir. 1999) (internal citations omitted) (quoting  United States v. Granados, 142 F.3d 1016, 1019  (7th Cir. 1998)).

17
The trial evidence establishes that: 1) Gee  programmed chips that descrambled premium cable  programming; 2) Norris regularly purchased these  chips from Gee; 3) Norris installed the chips  into descrambling equipment and sold the  equipment or just the chips to customers and  distributors; 4) Gee programmed different kinds  of chips, depending on Norris's order; 5) Norris  and Gee established a routine for their joint  venture; 6) Norris and Gee had regular contact  with each other via telephone and facsimile; 7)  Gee visited Norris's shop on at least two  occasions; 8) Norris and Gee collaborated by  sharing instructions, warnings, and disclaimers  and by having Norris train Gee's employee; and 9)  after Gee found out that authorities raided  Norris's shop, Gee shipped all of his cable  supplies out of state. Defendants counter,  however, that this circumstantial evidence  suggests only that they had an arm's-length  business relationship, not a conspiracy.

18
A conspiracy requires the government to prove  (1) the existence of an agreement to commit an  unlawful act; (2) that defendants knowingly and  intentionally became members of the conspiracy;  and (3) the commission of an overt act that was  committed in furtherance of the conspiracy. See  United States v. Lahey, 55 F.3d 1289, 1293 (7th  Cir. 1995). "The existence of a mere buyer-seller  relationship between [defendants, however,]  without more, is not sufficient to establish a  defendant's guilt. The government must prove that  a defendant knowingly and intentionally joined  the charged conspiracy, knowing the conspiracy's  aims and intending to achieve them." Menting, 166  F.3d at 927; accord United States v. Mims, 92  F.3d 461, 465 (7th Cir. 1996); see also United  States v. Townsend, 924 F.2d 1385, 1394 (7th Cir.  1991) ("The buy-sell transaction is simply not  probative of an agreement to join together to  accomplish a criminal objective beyond that  already being accomplished by the transaction.").

19
A conspiracy is more than a buyer-seller  agreement. A conspiracy

20
is an agreement with a particular kind of object-  - an agreement to commit a crime. . . . What is  required for conspiracy in such a case is an  agreement to commit some other crime beyond the  crime constituted by the agreement itself. . . .  But insofar as there was an agreement between  [defendants] merely on one side to sell and on  the other to buy, there was no conspiracy between them no matter what [the buyer] intended to do  with the [contraband] after he bought [it]. . .  . A person who sells a gun knowing that the buyer  intends to murder someone may or may not be an  aider or abettor of the murder, but he is not a  conspirator, because he and his buyer do not have  an agreement to murder anyone.

21
United States v. Lechuga, 994 F.2d 346, 349 (7th  Cir. 1993) (en banc); see also Direct Sales Co.  v. United States, 319 U.S. 703, 709 (1943)  (ruling "that one does not become a party to a  conspiracy by aiding and abetting it . . . and  the inference of [conspiracy] cannot be drawn  merely from knowledge that the buyer will use the  goods illegally").

22
To find sufficient evidence of a conspiracy, we  have "looked for evidence of 'a prolonged and  actively pursued course of sales coupled with the  seller's knowledge of and a shared stake in the  buyer's illegal venture'. . . . Other important  indicia of conspiracy include 'the length of  affiliation, the established method of payment,  . . . the extent to which the transactions are  standardized, and the demonstrated level of  mutual trust.'" Menting, 166 F.3d at 928 (quoting  United States v. Pearson, 113 F.3d 758, 761 (7th  Cir. 1997)). If enough of these factors show more  than a mere buyer-seller agreement, this court  will not reverse a jury's conclusion that a  conspiracy existed. See United States v. Clay, 37  F.3d 338, 342 (7th Cir. 1994); accord Pearson,  113 F.3d at 761.

23
Here, the government proffered sufficient  evidence to conclude that Gee knew what Norris  was doing with the chips. Moreover, over a period  of 13 months, Gee and Norris had regular dealings  with each other and developed a routine for their  orders and payments. Defendants argue, however,  that their transactions could just as easily be  construed as routine commercial transactions  between business associates and not as  "standardized" transactions between conspirators.  The supplies Gee sold to Norris and the equipment  Norris sold to his customers were not contraband  per se.7 Furthermore, Gee and Norris did not  have a financial interest in each other's  business or share in any of their business  profits or losses.

24
We will not reverse the verdict if we find that  the jury, when looking at the evidence in the  light most favorable to the government, could  have rationally determined that a conspiracy  existed. See Durrive, 902 F.2d at 1229-30. While  defendants' arguments have merit, a rational  factfinder could find that the government  established the essential elements of conspiracy  beyond a reasonable doubt. Evidence of a 13-month  cooperative relationship between Norris and Gee,  which included standardized transactions, the  sharing of disclaimers, and Norris's training of  Gee's employee, supported the conspiracy  allegations. Consequently, we find sufficient  evidence to support the jury's conspiracy  verdict.

2.  Buyer-Seller Jury Instruction

25
Defendants also argue that the district court  should have included a buyer-seller jury  instruction. They make this argument though they  did not suggest this instruction below and never  argued this theory of the case to the jury. We  review jury instructions not objected to at trial  under a plain error standard. See United States  v. Reynolds, 189 F.3d 521, 524 n.2 (7th Cir.  1999). Plain error is: (1) an error; (2) that is  plain, meaning obvious or clear; and (3) that  affects substantial rights. See United States v.  Olano, 507 U.S. 725, 732-34 (1993). Furthermore,  "[i]n order to reverse a conviction for plain  error, [we] must determine . . . that the error  'seriously affects the fairness, integrity or  public reputation of judicial proceedings.'"  Mims, 96 F.3d at 465 (quoting Olano, 507 U.S. at  732).

26
District judges should inform juries that  repeated transactions do not constitute a  conspiracy. See United States v. Thomas, 150 F.3d  743, 745 (7th Cir. 1998). "If a jury rationally  could find in the defendant's favor on some  material issue, then the jury must be instructed  on that subject." Id. at 746 (citing Mathews v.  United States, 485 U.S. 58, 63 (1988)).  Furthermore, because the line between a  conspiracy and a mere buyer-seller relationship  is difficult to discern, district judges should  instruct juries in appropriate situations on the  distinction. See Mims, 92 F.3d at 464.

27
This case presents one of those situations. The  proffered evidence of a conspiracy was  circumstantial and not overwhelming. The evidence  was as consistent with a buyer-seller  relationship as it was with a conspiracy. The  instructions allowed the jury to make a guilty  finding without determining whether the  government had proved the existence of a  conspiracy. Cf. id. at 466.

28
We have no way of knowing whether, had the jury  understood the distinction between a conspiracy  and a buyer-seller relationship, it would still  have convicted Norris and Gee of conspiracy.  Because a rational jury could find that Gee dealt  with Norris without any agreement between them to  commit any future crimes, the district court  should have included a buyer-seller jury  instruction. Moreover, the district court should  have sua sponte included a buyer-seller  instruction because it knew that the conspiracy  evidence was weak.8

29
The district judge's reservation about the proof  of a conspiracy should have alerted him to be  certain that the jury correctly evaluated the  evidence before determining whether a conspiracy  existed. See Thomas, 150 F.3d at 745-46. This  plain error substantially affected defendants'  rights. The jury could have concluded that  defendants had a buyer-seller relationship and  thus acquitted them on the conspiracy charge.  Therefore, the failure to give a buyer-seller  instruction

30
affected the substantial rights of the defendants  because we cannot be sure whether the jury made  the factual findings of conspiratorial agreement  necessary for a verdict of guilt. Though we  cannot know the probability that the error  changed the outcome--a properly instructed jury  might, nonetheless, have determined that there  was a conspiratorial agreement--we are certain  that the error had a substantial potential to  affect the outcome. Thus the error affected the  defendants' substantial rights.

31
Mims, 92 F.3d at 466.

32
Having satisfied the prerequisites for reversal  on grounds of plain error in this case, we must  determine whether the error is one that  "seriously affects the fairness, integrity and  public reputation of judicial proceedings."  Olano, 507 U.S. at 732. As we found in Mims, this  is a difficult question when the evidence was  sufficient to support a conspiracy conviction.  See Mims, 92 F.3d at 466. However, where, as  here, "the existence of a conspiratorial  agreement was closely contested and conflicting  evidence was presented on the issue, the failure  to ensure a jury finding on this essential  element undermines the essential fairness and  integrity of the trial." Id. Consequently, we  must reverse the conspiracy convictions.

C.  Norris's Proposed Jury Instructions

33
Norris proposed several instructions to advise  the jury that the cable equipment at issue in  this case was not contraband or illegal per se  and that this circuit had ruled in 1988 that a  person could not be convicted under 47 U.S.C.  sec. 553 for selling a descrambler with the  intent that the buyer use it for lawful  purposes.9 We review the district court's  refusal to give a party's instruction by  determining whether the omission prejudiced the  party. See United States v. Katalinich, 113 F.3d  1475, 1482 (7th Cir. 1997).10

34
A defendant is only entitled to an instruction on  his theory of defense if: (1) the defendant  proposed a correct statement of the law; (2) the  evidence lends some support to the defendant's  theory; (3) the defendant's theory of defense is  not part of the charge; and (4) the failure to  include the defendant's instruction would deny  him a fair trial.

35
Id. The district court rejected defendants'  proposed instructions, finding that Instruction  18 properly covered the topics addressed in  Norris's proposed instructions. Instruction 18  states

36
The government does not have to prove that the  equipment involved in a particular count was sold  for the sole and specific purpose of cable  television theft, or that the equipment was  actually used illegally. The government must  prove that Mr. Norris intended the equipment  involved in a particular count to be used for  unauthorized reception of cable service, or that  he acted with specific knowledge that the  equipment involved would be so used.11

37
While Norris's Proposed Instruction No. 5 would  have provided more direct guidance than  Instruction 18, the district court's refusal to  use his instruction did not prejudice Norris. His  proposed instruction accurately states that cable  descramblers are not per se illegal and that a  person is criminally liable only if he sells the  devices with the intent or specific knowledge  that the buyer will use them for unauthorized  purposes. Like Norris's proposed instructions,  Instruction 18 states the wilfulness requirement  to convict under sec. 553. Consequently, the  district court's refusal to use his proposed  instructions did not prejudice Norris.

38
Accordingly, we find that the district court  did not err when it rejected Norris's Proposed  Instructions Nos. 5 through 8. While we would  have preferred Norris's Proposed Instruction No.  5, we do not find that he was prejudiced by the  use of Instruction 18.

39
D.  Norris's Relevant Conduct Under U.S.S.G. sec.  1B1.3

40
Defendants contend that the district court erred  in its loss calculations by holding against  defendants conduct not necessarily found criminal  by the jury and not found criminal by the court  at all. First, they maintain that because the  district judge determined for purposes of his  evidentiary ruling that the government had not  proven its conspiracy case,12 the court  should not have considered as relevant conduct  any losses other than those related to the  descrambler sales specifically charged in the  indictment. In other words, the court should  ignore any losses only attributable to the  conspiracy conviction. Second, defendants  maintain that losses from sales not addressed by  a specific count in the indictment cannot be  included as relevant conduct because the jury did  not specifically find such sales illegal. While  we have already ruled that defendants' conspiracy  convictions must be reversed, we will offer some  comments on this relevant conduct question  because it will be relevant at Norris's  resentencing.

41
The Supreme Court allows the sentencing court  to include acts or omissions in its sentencing  calculations even if the jury acquitted the  defendant on those acts or omissions. See United  States v. Watts, 519 U.S. 148, 157 (1997). This  apparent contradiction exists because sentence  calculations require a lower standard of proof  than criminal convictions. "The Guidelines state  that it is 'appropriate' that facts relevant to  sentencing be proved by a preponderance of the  evidence, and we have held that application of  the preponderance standard at sentencing  generally satisfies due process." Id. at 156; see  also U.S.S.G. sec. 6A1.3 cmt. Given the district  judge's determination prior to the jury verdict  that there was not a preponderance of evidence to  support the conspiracy counts, a novel question  arises. May the district judge ignore acts that  the jury found attributable to a defendant beyond  a reasonable doubt if the judge believes that  they do not pass the preponderance standard?

42
In Edwards v. United States, the Supreme Court  ruled that "regardless of the jury's actual, or  assumed, beliefs about the conspiracy, the  Guidelines nonetheless require the judge to  determine [relevant conduct]." 523 U.S. 511, 514  (1998) (emphasis added). Moreover, we have  consistently held that the sentencing judge alone  is left to determine all issues of relevant  conduct. See United States v. Joiner, 183 F.3d  635, 643 (7th Cir. 1999); see also United States  v. Bell, 154 F.3d 1205 (10th Cir. 1998); United  States v. Brown, 148 F.3d 1003 (8th Cir. 1998),  cert. denied, 525 U.S. 1169 (1999). The district  judge may not, however, ignore specific conduct  for which the jury found a defendant guilty. See  Edwards, 523 U.S. at 514 (ruling that "relevant  conduct" includes conduct for which the defendant  is convicted).

43
The district court addressed defendants'  arguments in its April 6, 1999, opinion denying  defendants' motion for a new trial and denying  their motion to reconsider the loss calculations.  After summarizing defendants' arguments, the  court concluded:

44
The court's ruling under Fed. R. Evid.  801(d)(2) (E) was not the final word on whether  the charged conspiracy was proven. In count 32,  the jury found Mr. Norris and Mr. Gee guilty of  the conspiracy that had not been proven to the  court's satisfaction in the government's case in  chief. While the jury was not required to find  each charged overt act to have been proven, the  jury had to find that Mr. Norris and Mr. Gee  agreed to assist criminal conduct. It is one  thing to say as the Watts Court said, that a  jury's finding that a count was not proven beyond  a reasonable doubt does not preclude a sentencing  judge from finding that the activity charged in  the count was proven by a preponderance of the  evidence. It is quite another to say (as the  court believes it must to accept the defendant's  argument) that a sentencing judge may disregard  a jury's finding of guilt on a count when  constructing a "sentencing package," see  Woodhouse v. United States, 109 F.3d 347 (7th  Cir. 1997), that includes that count.

45
The jury found the defendants guilty of  conspiracy to assist, knowingly and willfully, in  the authorized and illegal interception and  reception of communications services offered over  a cable system and for the purpose of commercial  advantage and private financial gain. The court  cannot sentence either defendant for that crime  without assuming the verdict's truth, and the  court cannot determine the guideline range  without accepting the truth of the verdict,  whatever the sentencing judge might have found  under Fed. R. Evid. 104(a) at the conclusion of  the government's case in chief. When it is  accepted--as [it] must be accepted to impose any  sentence on the conspiracy count-- that Mr.  Norris and Mr. Gee agreed with each other and with others to assist the unlawful interception  of cable signals, the rest of the evidence  persuades the court that it is more likely than  not than [sic] all of the sales reflected in the  Norris Electronics invoices were part of that  conspiracy. They must all be considered in  determining the sentencing range.

46
(emphasis added.)

47
If the district judge concluded that it was  more likely than not that the jury included the  relevant conduct in its conspiracy conviction,  then the judge misread Edwards and Watts. The  jury could have convicted defendants of  conspiracy with the commission of only one overt  act. The district judge made the correct  sentencing determination under Edwards and Watts,  however, if he independently determined that the  government proved by a preponderance of the  evidence that all of the relevant conduct  included in his sentencing calculations were part  of the conspiracy.

48
Accordingly, at Norris's resentencing, the  district judge should make an independent  evaluation of the relevant conduct to include in  his sentence calculations. Norris's relevant  conduct includes the specific convictions that  still stand--the eleven counts of assisting  unauthorized reception of cable service. The  district judge can also include conduct that is  "part of the same course of conduct or common  scheme or plan as the offense of conviction,"  U.S.S.G. sec. 1B1.3(a)(2); accord Edwards, 523  U.S. at 514, if the district judge finds that the  government proved this other conduct by a  preponderance of the evidence.

49
E.  Loss Calculation Under U.S.S.G. sec.  2F1.1(b)(1)

50
The government appeals the district court's loss  calculations. This loss calculation issue will  resurface when the district court resentences  Norris. At defendants' sentencing, the government  argued that the district court should calculate  loss using the formula devised by the National  Cable Television Association ("NCTA"), which  computes loss based on the value of the cable  television programming to which the descramblers  afforded unauthorized access. Under this  approach, the losses attributed to Norris are  $15,176,364 and to Gee are $13,233,864.  Defendants urged the court to employ a method  used by the government in a similar case from New  Jersey, which computed loss by summing the sale  prices of the equipment sold. Under this method,  the losses attributed to Norris are $1,240,875  and to Gee are $1,041,510.

51
The district court adopted the defendants'  approach. We review the district court's loss  determinations under U.S.S.G. sec. 2F1.1(b)(1)  for clear error. See United States v. Saunders,  129 F.3d 925, 929 (7th Cir. 1997). Guideline  interpretations are questions of law, however,  which we review de novo. Id.

52
The Guidelines increase the offense level for  offenses involving fraud or deceit based on the  amount of "loss." The Guidelines suggest that

53
the loss need not be determined with precision.  The court need only make a reasonable estimate of  the loss, given the available information. This  estimate, for example may be based on the  approximate number of victims and an estimate of  the average loss to each victim, or on more  general factors, such as the nature and duration  of the fraud and the revenues generated by  similar operations. The offender's gain from  committing the fraud is an alternative method  that ordinarily will underestimate the loss.

54
U.S.S.G. sec. 2F1.1 cmt. 9. Courts may use the  gain from participation in the fraud when the  exact amount of the loss to the victim is  unknown. See United States v. Craig, 178 F.3d  891, 899 (7th Cir. 1999); see also United States  v. Andersen, 45 F.3d 217, 221 (7th Cir. 1995)  (ruling that "the defendant's gain may provide a  reasonable approximation of a victim's loss when  more precise means of measuring loss are  unavailable").

55
The district court found the NCTA calculation  unreasonable because this calculation assumes  that each purchaser used the descrambler  illegally and that each purchaser used the  descrambler to view all available premium  programming. More important, according to the  district court, the NCTA calculation assumes,  without any evidence, that had Norris not sold  descramblers, his customers would have purchased  all of the available premium channels from the  cable companies. Accordingly, the district court  opted to compute loss based on defendants' gross  revenue because a precise method of calculating  loss was unavailable. Nothing in the government's  arguments on appeal convinces us that the  district court's determination was clearly  erroneous. The government makes the same  arguments on appeal that it did before the  district court. The district court evaluated the  government's arguments but found that the  defendants' approach was the better method of  calculating loss. The government would be well  served in cases like this to include a survey or  statistical sampling to support its estimate of  the loss.

56
Accordingly, at Norris's resentencing, the  district judge can calculate the meaning of  "loss" under U.S.S.G. sec. 2F1.1 (b)(1) by using  the gross revenue that Norris derived from his  relevant conduct. Based on our above relevant  conduct analysis, the district judge may  attribute a different loss amount to Norris at  his resentencing.

F.  Departure Under U.S.S.G. sec. 5K2.0

57
Although Norris was not eligible for a  reduction in his offense level for acceptance of  responsibility under U.S.S.G. sec. 3E1.1,13  the district court granted him a two-level  downward departure for acceptance of  responsibility under sec. 5K2.0.14 The  district court found that Norris demonstrated a  "non-heartland" acceptance of responsibility. He  made early and consistent offers to the  government to determine the legality of his  business through a prompt civil declaratory  judgment action. Moreover, he immediately  discontinued his business following the verdict  against him. The government argues that the  district court had no authority to grant Norris  a departure for "quasi-acceptance of  responsibility" after denying him a reduction  under sec. 3E1.1.

58
We review a district court's departure decision  for abuse of discretion and its findings of fact  for clear error. See United States v. Wilke, 156  F.3d 749, 753 (7th Cir. 1998). We review de novo  a district court's grounds for departure. See  United States v. Bradley, 196 F.3d 762, 771 (7th  Cir. 1999). A sentencing judge has broad  discretion to depart downward when not blocked by  a specific guideline. See United States v.  Stefonek, 179 F.3d 1030, 1038 (7th Cir. 1999)  (citing Koon v. United States, 518 U.S. 81, 98-  100 (1996)), cert. denied, 120 S. Ct. 1177  (2000). The Guidelines apply to a "heartland" of  typical cases. See Koon, 518 U.S. at 94. If the  case is within the "heartland," a district judge  must impose a sentence falling within the  applicable Guideline range. See id. at 92.  However, the Guidelines "authorize[ ] district  courts to depart in cases that feature  aggravating or mitigating circumstances of a kind  not adequately taken into consideration by the  [Sentencing] Commission." Id. Here, the  Guidelines do not explicitly bar the district  court's departure. Moreover, the district judge  found many reasons why this case, and Norris's  actions, fell outside the "heartland" of the  applicable guidelines.

59
Norris consistently believed that he was  operating a legal business because his product  was ambiguous in the sense that customers could  use it for legal--as well as illegal--purposes.  He offered for more than five years to play a  lower-stakes game with the government--one in  which his ante would be his business, but not his  freedom. He invited a civil suit, seeking an  injunction, which would have prevented the sales  of any items found illegal. Early on, Norris  prevailed: counts brought under one statute were  dismissed, and the dismissal was affirmed, see  United States v. Norris, 34 F.3d 530 (7th Cir.  1994); detention was denied because it did not  appear to the court that Norris's conduct had  been shown to violate the statute; counts brought  under another statute were also dismissed, and  that dismissal was also affirmed, see United  States v. Norris, 88 F.3d 462 (7th Cir. 1996).  Even as Norris won these early battles, he  continued to suggest to the government that it  pursue the civil alternative.

60
After his conviction, Norris immediately ceased  his business, froze his inventory, offered  negotiations with the government concerning the  disposal of his inventory, and offered his full  assistance to the government with respect to  access to his inventory.

61
In the ordinary ("heartland") case, such post-  trial conduct would be unremarkable, but in the  unusual circumstances of this case, it  demonstrates a different form of acceptance of  responsibility that seems to echo the concerns  that led the drafters of the guidelines to allow  a finding of sec. 3E1.1(a) when a defendant goes  to trial to determine a statute's applicability  to his conduct. This case's circumstances are far  too unusual to have been contemplated by the  Sentencing Commission when it drafted sec. 3E1.1.

62
Norris April 9, 1999 Sentencing Mem. at 13.

63
The government argues that the district court  did not have authority to grant this departure  after denying Norris a sec. 3E1.1 departure. The  government suggests that a "quasi-acceptance of  responsibility" departure under sec. 5K2.0 is  available only to defendants who have already  received the maximum reduction under sec. 3E1.1.  The government's cited cases, however, are  unavailing.

64
In United States v. Bean, 18 F.3d 1367, 1368-69  (7th Cir. 1994), the district court allowed a  six-level downward departure for "extraordinary  acceptance of responsibility" because the  defendant had voluntarily repaid the money that  he had defrauded from a bank. We reduced the  departure to two levels because the defendant  continued to insist on his innocence even after  his conviction and because his conviction was his  third for defrauding a financial institution.  Contrary to the government's assertion, Bean does  not stand for the proposition that sec. 5K2.0  departures for acceptance of responsibility are  unavailable for defendants who do not qualify for  a sec. 3E1.1 departure. Furthermore, Bean is  clearly distinguishable from this case. Norris  did not insist on his innocence after the jury  convicted him, and he has not displayed a pattern  of fraudulent activity.

65
In United States v. Bailey, 97 F.3d 982, 986  (7th Cir. 1996), we affirmed the trial court's  denial of a sec. 3E1.1 departure. The trial court  determined that the defendant did not display  genuine remorse or contrition. Bailey does not  help the government. Bailey merely reinforces the  requirements for a sec. 3E1.1 departure; it does  not address the prerequisites for a sec. 5K2.0  departure.

66
Likewise, we easily distinguish the facts in  Stefonek from the instant case. In Stefonek, we  reversed the district court's "community service"  ground for departure because the services were  provided by the same businesses that were the  vehicles of Stefonek's multiple violations of  federal law. 179 F.3d at 1038. No such "Robin  Hood theory of sentencing" exists here. Cf. id.

67
The district court correctly applied the  applicable grounds for departure. Therefore, we  conclude that it was not clear error for the  district court to depart downward two-levels  under sec. 5K2.0.

68
G. Norris's Downward Departure for his Physical  Condition and Imposition of Home Detention

69
After reviewing more than 500 pages of medical  records, watching a videotaped deposition of  Norris's cardiologist, observing Norris at trial  and during sentencing, and listening to the in-  court testimony of both Norris and his mental  health therapist, the district court concluded  that imprisonment posed a substantial risk to  Norris's life and, therefore, departure under  U.S.S.G. sec. 5H1.4 was warranted.15 The  government contends that Norris's physical  condition was not an "extraordinary physical  impairment" within the meaning of sec. 5H1.4 and  that the Bureau of Prisons ("BOP") could provide  adequate medical care to Norris. We review a  district court's departure decision for abuse of  discretion and its findings of fact for clear  error. See Wilke, 156 F.3d at 753. We review de  novo a district court's grounds for departure.  See Bradley, 196 F.3d at 771.

70
We have developed a three-part test to  facilitate our analysis:

71
First, we must determine whether the district  court has stated adequate grounds for departure.  This is a question of law and is reviewed de  novo. Second, we must determine whether the facts  which underlie the grounds for the departure  actually exist. This determination is reviewed  using the clearly erroneous standard of review.  Third, we must determine whether the degree of  departure is linked to the structure of the  Guidelines. The district court's findings on what  degree of departure is appropriate are given  deference.

72
United States v. Hendrickson, 22 F.3d 170, 175  (7th Cir. 1994). Unlike the cases cited by the  government, the district court in this case made  particularized findings that Norris was entitled  to a departure under sec. 5H1.4. In United States  v. Sherman, 53 F.3d 782, 787 (7th Cir. 1995), we  rejected the district court's downward departure  under sec. 5H1.4 because the "judge made no legal  finding with regard to the treatment [the  defendant] was likely to receive in jail in  relation to his medical needs, nor did he rely on  a competent medical diagnosis of [the  defendant's] condition." In United States v.  Woody, 55 F.3d 1257, 1275-76 (7th Cir. 1995), we  affirmed the district court's decision not to  depart under sec. 5H1.4 because the defendant  presented "no sound factual foundation" to  support the departure. In this case, moreover,  the district court found that the BOP's  letter16 was merely a form letter trumpeting  the BOP's ability to handle medical conditions of  all kinds. Consequently, it was not an abuse of  discretion for the district court to conclude  that Norris's medical condition warranted a  downward departure.

73
The government also argues that the district  court's imposition of a nonprison sentence--  probation and home monitoring--is not available  because Norris's offense level of 21 falls in  Zone D of the sentencing table. Imprisonment  substitutes are not available for offense levels  that fall in Zone D. See U.S.S.G. sec.sec. 5B1.1  cmt. 2, 5C1.1(f) & cmt. 8, 5F1.2.17

74
The district court tried to keep Norris's  sentence consistent with the Guidelines while  also keeping him out of prison. Consequently,  instead of departing through the offense levels,  the judge departed from the restrictions of sec.  5B1.1 and sec. 5C1.1. The district court  recognized that the Guidelines do not provide for  37 months of home detention, but ruled the  Guideline's restriction

75
no impediment, because this case involves factors  not adequately considered by the Sentencing  Commission. Finally, the court believes the  sentence properly considers the structure of the  guidelines, because, among other reasons noted  thus far, the guidelines include the recognition  in U.S.S.G. sec. 5H1.4 that "in the case of a  seriously infirm defendant, home detention may be  as efficient as . . . imprisonment."

76
Norris April 9, 1999 Sentencing Mem. at 13.

77
The district court improperly departed outside  the Guidelines. Although sec. 5H1.4 allows the  use of home detention, the defendant's offense  level must be in Zone A or B to satisfy the  requirements of sec. 5B1.1(a) (probation not  allowed for Zone C or D offense levels), sec.  5C1.1(f) ("if the applicable guideline range is  in Zone D of the Sentencing Table, the minimum  term shall be satisfied by a sentence of  imprisonment"), and sec. 5F1.1 ("community  confinement may be imposed as a condition of  probation or supervised release"). Consequently,  upon resentencing, unless Norris's offense level  is in Zone A or B, the district court may not  sentence him to home detention.

III

78
For the reasons stated above, we REVERSE Jim  Gee's and William C. Norris's convictions on mail  fraud, wire fraud, and conspiracy. We AFFIRM  Norris's conviction for assisting unauthorized  reception of cable service, but we VACATE his  sentence and REMAND for resentencing consistent  with this opinion.

Notes:

1
 Norris was originally charged over six years ago  with unauthorized decryption of satellite cable  programming under 47 U.S.C. sec. 605(e)(4). The  district court granted Norris's motion to dismiss  on the ground that his alleged conduct concerned  coaxial cable rather than satellite signals. We  affirmed. See United States v. Norris, 34 F.3d  530 (7th Cir. 1994). The government next indicted  Norris with violating the second part of 47  U.S.C. sec. 605(e)(4), which by reference to 47  U.S.C. sec. 605(a) prohibits the unauthorized  interception of radio communications. The  district court also dismissed these counts,  ruling that the cable television programming that  Norris allegedly helped intercept did not  constitute radio communications, and we affirmed.  See United States v. Norris, 88 F.3d 462 (7th  Cir. 1996). After these two interlocutory appeals  by the government and two superseding  indictments, Norris and Gee came to be charged  under the present indictment on January 9, 1997.

2
 "It is clear from a reading of the indictment  that the fraud charges are not based on  misleading statements or fraudulent omissions."  Gov't's Resp. in Opp'n to Mot. to Dismiss Second  Superseding Indictment at 2.

3
 Norris first moved the district court to dismiss  the wire and mail fraud charges in 1993, well  before Gee was ever involved in this case. The  district court denied the motion, stating that  "[c]ontrary to Mr. Norris's assertions, a charge  of wire or mail fraud need not be supported by an  underlying false representation or statement."  United States v. Norris, 833 F. Supp. 1392, 1396  (N.D. Ind. 1993), aff'd, 34 F.3d 530 (7th Cir.  1994). Thereafter, in response to a superseding  indictment in 1997, in which Gee was also named  as a defendant, defendants moved for a dismissal  of the wire and mail fraud charges.

4
 The government concedes that the Neder holding  will be retroactively applied to this case.

5
 Count 1 charges that
William Norris . . . knowingly devised a scheme  and artifice to defraud cable television  companies . . . of premium and special  programming transmissions and subscription fee  revenues. The scheme and artifice to defraud  include the assembly, modification, sale and  distribution of modified cable television  converter-decoders and other decoding devices  which enabled basic cable television subscribers  to receive premium and special cable programming  without the knowledge and authorization of the  cable television companies and without payment of  the required subscription fee.
Superseding Indictment, Count 1 para. 14.
Count 2 charges that Norris bought chips from Gee  who programmed the chips and modules so that the  cable converter-decoder in which they were  installed would receive all premium cable  television programming, including Pay-Per-View,  without detection and without payment of the  required fee or subscription fee to the cable  television company.
Id. Count 2 para. 2.

6
 Count 32 of the Superseding Indictment alleges  that defendants
did combine, conspire, confederate and agree  among themselves and with other persons both  known and unknown to the Grand Jury, to . . .  violat[e] 47 U.S.C. sec. 553(a)(1), by knowingly  and willfully, for the purpose of commercial  advantage and private financial gain, assist[ ]  in intercepting and receiving certain  communications services offered over a cable  system, which was not specifically authorized by  a cable operation and otherwise not specifically  authorized by law, in that they manufactured and  distributed and caused to be manufactured and  distributed equipment intended for unauthorized  reception of premium and Pay-Per-View cable  television programming.
Superseding Indictment, Count 32 para. 2.

7
 In this regard, Norris's and Gee's case is unlike  the quintessential illegal drug case that forms  the basis for conspiracy case law in this  circuit. See, e.g., Menting, 166 F.3d at 925  (cocaine); United States v. Thomas, 150 F.3d 743,  743 (7th Cir. 1998) (crack cocaine); Pearson, 113  F.3d at 759 (cocaine); Mims, 92 F.3d at 462  (same); Lechuga, 994 F.2d at 346 (same);  Townsend, 924 F.2d at 1388 (heroin, cocaine, and  marijuana).

8
  During the trial, the district court ruled that  the government could not admit coconspirator  statements under Fed. R. Evid. 801 (d)(2)(E). The  district court found that the government had not  shown, by a preponderance of the evidence, that  a conspiracy existed between the defendants. See  generally Bourjaily v. United States, 483 U.S.  171, 175-76 (1987) (ruling that "when the  preliminary facts relevant to Rule 801(d)(2)(E)  are disputed, the offering party must prove them  by a preponderance of the evidence"). The  district court observed that:
This is not a matter of the sufficiency of the  evidence to allow Count 32 of the Indictment to  survive the motion for judgment of acquittal at  the close of the government's case. This is not  a matter of the sufficiency of the evidence for  the trier of fact to find the predicate facts to  be true. It's a question for me to decide. So I  can't just sit here and decide whether the jury  could find these things to have been proven. I  must find that these things have been proven by  a preponderance of the evidence. And in making  that determination, I weigh the evidence as  though we were at the end of a bench trial.
. . . . . . .
Sitting as a fact finder, . . . I find myself  unpersuaded that there was an agreement to assist  others in the unauthorized reception of cable  signals.
The district court did find, however, that there  was sufficient evidence to let the jury decide  whether the government had proven a conspiracy.

9
 Norris tendered the following as his proposed  Instructions Nos. 5 through 8.
A person does not violate 47 U.S.C. sec. 553 for  being engaged in the production or sale of a  device or equipment which is used for legal  purposes merely because the same device or  equipment is capable of being used for  unauthorized reception of cable service. The  particular device or equipment that is the  subject of any count brought in the Indictment  under 47 U.S.C. sec. 553 must have been provided  with the intent or specific knowledge that it  will be used for unauthorized reception of cable  service before any provider could be convicted.
Norris's Proposed Instruction No. 5.
This proposed instruction was adopted from the  Cable Communications Policy Act's legislative  history. See H.R. Rep. No. 98-934, at 84 (1984),  reprinted in 1984 U.S.C.C.A.N. 4721 ("The  Committee does not intend that manufacturers,  distributors or retailers be subject to liability  under this section if they are engaged in the  production or sale of a device or equipment which  is used for legal purposes merely because the  same device or equipment is capable of being used  for unauthorized reception of cable service, if  they do not provide the equipment with the intent  or specific knowledge that it will be used for  the unauthorized reception of cable service.").
There is no federal law making it a crime merely  to manufacture, distribute, or own a descrambler.  It is a federal crime to manufacture, distribute,  or own a descrambler only if there is an intent  to receive or assist in receiving unpurchased  programming.
Norris's Proposed Instruction No. 6.
It is not a violation of sec. 553 to use a  customer-owned descrambler to view programming  that a customer has purchased.
Norris's Proposed Instruction No. 7.
In 1988 the United States Court of Appeals for  the Seventh Circuit (the federal appellate court  having jurisdiction over federal cases brought in  Indiana, Illinois, and Wisconsin) handed down a  case entitled United States v. Gardner, 860 F.2d  1391 (7th Cir. 1988). The United States Court of  Appeals stated in that Gardner case that a person  could not be convicted of an offense under 47  U.S.C. sec. 553 if he sold so-called black boxes  (meaning nonaddressable descramblers) with the  intent that they be used for lawful purposes.
Norris's Proposed Instruction No. 8.

10
 The government argues that this court should  review Norris's rejected jury instructions for  plain error because Norris did not properly  object to the court's Instruction No. 18. "Merely  submitting an instruction is not enough. A  defendant must object to the judge's refusal on  the record and clearly state the reasons for his  objections. Otherwise, we will review a district  court's refusal of a proposed jury instruction  for plain error." Katalinich, 113 F.3d at 1482;  accord Fed. R. Crim. P. 30. The government  suggests that because Norris did not properly  object to Instruction 18, he waived his right to  object to the court's refusal to use his proposed  Instructions 5 through 8. The government's  argument is absurd. Just because Norris's  proposed instructions are related to Instruction  18 does not require Norris to object to  Instruction 18 in order to preserve his  objections to the court's declination of his  proposed instructions. Norris clearly alerted the  district court to the potential problems with the  court's instructions and the reasons for his  objections. See United States v. O'Neill, 116  F.3d 245, 247 (7th Cir. 1997); see also Tr. V-21,  V-34-35. Accordingly, we will not review Norris's  rejected instructions for plain error.

11
 Instruction 18 was adopted from our Gardner  opinion. See 860 F.2d at 1399 ("To convict under  sec. 553, the jury was not required to find that  the black boxes were sold for the sole and  specific purpose of cable piracy, nor that the  boxes were actually used illegally. Rather, the  jury only needed to find that [defendant]  intended the black boxes to be used for the  unauthorized reception of cable service when he  sold the boxes to [his customer].").

12
 See supra note 8.

13
 U.S.S.G. sec. 3E1.1 allows a two-level offense  level reduction if "the defendant clearly  demonstrates acceptance of responsibility for his  offense." This reduction does not generally  apply, however, in situations, like here, where  the defendant "puts the government to its burden  of proof at trial by denying the essential  factual elements of guilt." U.S.S.G. sec. 3E1.1  cmt. 2.

14
 U.S.S.G. sec. 5K2.0 states an offender characteristic or other circumstance  that is, in the Commission's view, "not  ordinarily relevant" in determining whether a  sentence should be outside the applicable  guideline range may be relevant to this  determination if such characteristic or  circumstance is present to an unusual degree and  distinguishes the case from the "heartland" of  cases covered by the guidelines.

15
 U.S.S.G. sec. 5H1.4 states
Physical condition or appearance, including  physique, is not ordinarily relevant in  determining whether a sentence should be outside  the applicable guideline range. However, an  extraordinary physical impairment may be a reason  to impose a sentence below the applicable  guideline range; e.g., in the case of a seriously  infirm defendant, home detention may be as  efficient as, and less costly than, imprisonment.

16
 This was the only evidence presented by the  government at Norris's sentencing in arguing  against departure.

17
 U.S.S.G. sec. 5B1.1 cmt. 2 states: "Where the  applicable guideline range is in Zone C or D of  the Sentencing Table . . ., the guidelines do not  authorize a sentence of probation."
U.S.S.G. sec. 5C1.1(f) states that "[i]f the  applicable guideline range is in Zone D of the  Sentencing Table, the minimum term shall be  satisfied by a sentence of imprisonment." Comment  8 to sec. 5C1.1(f) precludes the use of any  imprisonment substitutes where the applicable  guideline range is in Zone D.
U.S.S.G. sec. 5F1.2 states that "Home detention  may be imposed as a condition of probation or  supervised release, but only as a substitute for  imprisonment."