Court Opinion

ID: 2981550
Source: CourtListenerOpinion
Date Created: 2015-09-22 19:40:16.290311+00
Date Added: 2024-06-11T11:44:25.432426
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 12a1274n.06

                                  Nos. 11-2554, 11-2555, 11-2556
                                                                                       FILED
                          UNITED STATES COURT OF APPEALS                           Dec 11, 2012
                               FOR THE SIXTH CIRCUIT                         DEBORAH S. HUNT, Clerk

   UNITED STATES OF AMERICA,                         )   ON APPEAL FROM THE UNITED
                                                     )   STATES DISTRICT COURT FOR THE
            Plaintiff-Appellee,                      )   WESTERN DISTRICT OF MICHIGAN
                                                     )
   v.                                                )
                                                     )
   SHIFU LIN,              (No. 11-2554)             )
   KANG HE,                (No. 11-2555)             )
   ZHOU CHEN,              (No. 11-2556)             )
                                                     )
            Defendants-Appellants.                   )

   Before: COOK and WHITE, Circuit Judges; and SHARP, District Judge.*

        HELENE N. WHITE, Circuit Judge. After a joint-jury trial, Defendants Shifu Lin, Kang

He, and Zhou Chen (collectively, “Defendants”) were convicted of conspiracy to commit fraud, 18

U.S.C. § 371, access-device fraud, 18 U.S.C. § 1029(a)(2), and aggravated identity theft, 18 U.S.C.

§ 1028A(a)(1). The district court sentenced Defendants to concurrent terms of 60 months’

imprisonment and 78 months’ imprisonment for the first two convictions, respectively, and 24

months’ imprisonment for the third conviction, to be served consecutively to the sentences for the

first two convictions. Defendants appeal, claiming that there was insufficient evidence to convict

        *
       The Honorable Kevin H. Sharp, United States District Judge for the Middle District of
Tennessee, sitting by designation.

                                                1
them of aggravated identity theft, and that the court committed sentencing error in finding facts by

a preponderance of the evidence at sentencing, improperly applying a two-level sentencing

enhancement for the use of “sophisticated means,” and calculating $500 of loss for credit-card

numbers that Defendants possessed but did not use. We granted the government’s motion to

consolidate the three cases for briefing and submission. We AFFIRM.

                                                 I.

       On January 11, 2011, a loss-prevention employee from a Meijer, Inc. grocery store (“Meijer”)

contacted the Kent County Sheriff’s Department regarding a group of Asian males conducting

suspicious credit-card transactions in the Grand Rapids, Michigan area. Meijer store employees

reported that three men were repeatedly purchasing gift cards using multiple credit-card numbers and

that some of these transactions were being declined. Meijer security reported the suspects’

movement in real-time to police over the phone. Sheriff’s deputies located a car that fit the

description the Meijer employees had provided, followed it from one Meijer store to another, and

eventually arrested Defendants after observing their behavior.

       The deputies’ search of the vehicle yielded more than 100 plastic gift cards with magnetic

strips on the back, 72 of which had their magnetic strips re-encoded with stolen credit-card account

numbers. These re-encoded gift cards allowed Defendants to use the cards as cloned credit cards to

purchase new gift cards and other items. The deputies also found four laptop computers, two of

which contained evidence that Defendants were purchasing credit-card account numbers online. A

search of the laptops’ files revealed several “data dumps” — files that contain numerous credit-card

                                                 2
account numbers and, in some cases, the names of the individuals whose names were on the

accounts. Inside the laptop bags, the deputies found several Western Union wire-transfer receipts

documenting multiple wire transfers to Russia and Ukraine. The deputies also found a magnetic

strip reader/writer device hidden in the rear of the car that could re-encode the magnetic strips on the

back of the gift cards with stolen credit-card account numbers. Further, each Defendant possessed

two wallets containing gift cards that had been re-encoded with stolen credit-card numbers. Deputies

found fake identification cards in the wallets of He (“Jie Gao”) and Chen (“Chun Chen”). Deputies

also found a Western Union receipt for a transfer of funds in the name of “Chun Chen” to an

individual in Russia.

        Records and video surveillance from Meijer showed that Defendants had visited numerous

Meijer stores in the western Michigan area, purchasing gift cards and other items with stolen credit-

card numbers. The credit-card account numbers on the Meijer records matched the unauthorized

numbers found on the gift cards Defendants possessed, as well as the numbers found in the data

dumps on Defendants’ computers. When one of the credit cards was declined, Defendants would

try another credit card in a back-to-back transaction. Meijer also produced video stills of Defendants

purchasing Western Union wire transfers that were sent to Ukraine and Russia. An inspection of

Defendants’ computers revealed instant-message conversations between Defendants and unknown

individuals in Russia and Ukraine, negotiating the purchase of credit-card numbers. Defendants

were told by the sellers that the numbers had to be used within 24 hours or they would not work.

        Prior to trial, Defendants entered into stipulations with the government agreeing that the

account numbers listed in the indictment were valid credit-card numbers, possessed by actual

                                                   3
individuals who did not authorize Defendants to use their credit-card account number at any time.

At trial, the court read the stipulations to the jury and instructed that it may assume the stipulated

facts to be true. The court denied Defendants’ motion for judgment of acquittal, finding that the

combination of direct and circumstantial evidence, when viewed in the light most favorable to the

government, would allow a jury to conclude beyond a reasonable doubt that Defendants were guilty

of each charge of the indictment. Defendants presented no evidence and the jury returned a verdict

of guilty on all counts as to all three Defendants.

       The presentence report (“PSR”) calculated the total offense level for each Defendant as 30,

yielding a guideline range of 97 to 121 months under criminal history category I. To a base offense

level of 6, U.S.S.G. § 2B1.1(a)(2), 14 levels were added because the loss involved was calculated

as $857,937.74 (loss greater than $400,000 but less than $1,000,000). Id. at (b)(1)(H). The PSR

added an additional six levels because the offense involved 250 or more victims, Id. at (b)(2)(C), and

an additional two levels for the use of “sophisticated means.” Id. at (b)(10)(C). Another two levels

were added based on the possession or use of device-making equipment and production or trafficking

of unauthorized access devices. Id. at (b)(11)(A)(i) and (B)(i). This gave each Defendant a total

offense level of 30. In addition, 18 U.S.C. § 1028A(a)(1) mandates a consecutive two-year term of

imprisonment for aggravated identity theft in addition to any other term of imprisonment imposed.

       At sentencing, Defendants objected to the enhancements for more than 250 victims, and use

of sophisticated means, and to the attribution of $500 of loss per unauthorized access device

possessed. Defendants also moved for judgment of acquittal on the aggravated identity-theft

conviction. Because all three Defendants raised these objections, the court consolidated a portion

                                                  4
of the sentencing hearing to resolve the common issues. The court denied the motion for acquittal,

noting:

          [W]hile I understand that the defendants are protesting lack of knowledge that these
          numbers were assigned to individuals, I think it’s also reasonably inferable from the
          totality of the evidence here that the means in which they acquired the numbers, that
          is through the Ukraine clandestinely, the guidance from individuals they were talking
          to that these numbers had a very short life span because fraudulent use would be
          detected quickly, I think that evidence also adds to the government’s circumstantial
          case admittedly concerning the knowledge of the defendants . . .

The court sustained Defendants’ objection to the number-of-victims calculation in the pre-sentence

report1 and overruled the objections regarding the use of sophisticated means and the calculation of

the amount of loss. The resulting sentencing range was 78 to 97 months’ imprisonment for counts

one and two based on an offense level of 28.

          After the joint portion of the sentencing hearing, the court held separate hearings on each

Defendant’s 18 U.S.C. § 3553(a) arguments. The court sentenced each defendant to a term of 60

months’ imprisonment for conspiracy to commit fraud, 78 months’ imprisonment for access-device

fraud, to be served concurrently, and 24 months’ imprisonment for aggravated identity theft, to be

served consecutively to the sentences for conspiracy to commit fraud and access-device fraud.

Defendants timely appealed.

          1
         Regarding the number of victims, Defendants did not object to the 67 banks being counted
as individual victims, but objected to the assumption that each credit-card number belonged to an
individual person, and thus a separate victim, given that the government had not presented any
evidence supporting this inference. The court agreed that the government had not proved that there
were 250 victims. Accordingly, the six-level enhancement recommended by the PSR was reduced
to four levels for involving 50 or more victims. See U.S.S.G. § 2B1.1(b)(2)(B).

                                                   5
                                               II.

A. Sufficiency of the Evidence

       This court reviews a challenge to the sufficiency of the evidence de novo. United States

v. Tocco, 200 F.3d 401, 424 (6th Cir. 2000). The question on appeal is whether “after viewing

the evidence in the light most favorable to the prosecution, any rational trier of fact could have

found the essential elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443
U.S. 307, 319 (1979) (emphasis in original). Circumstantial evidence alone can sustain a

conviction and the evidence need not remove every reasonable hypothesis except that of guilt.

United States v. Stone, 748 F.2d 361, 363 (6th Cir. 1984). The elements of aggravated identity

theft are: (1) the defendant knowingly possessed a means of identification of another person

(here, credit-card numbers); (2) the defendant knew that the means of identification belonged to

another person; (3) the defendant knew that he had no lawful authority to possess the means of

identification; and (4) the defendant possessed the means of identification during and in relation

to the offense of access-device fraud. See United States v. Adkins, 372 F. App’x 647, 653 (6th

Cir. 2010).   Defendants only contest the second element, that they knew the means of

identification belonged to another person.

       In Flores-Figueroa v. United States, 556 U.S. 646 (2009), the Supreme Court held that

the offense of aggravated identity theft requires proof that the defendant knew that the means of

identification belonged to another person. Id. at 657. Defendants argue that the government did

not present any affirmative evidence that they knew that the credit-card numbers they possessed

                                                6
belonged to actual persons. Defendants argue that the government did not present any evidence

proving that they had looked at the data-dump spreadsheets containing identifying information

of the true holders of the credit-card numbers that were found on two of their computers.

Defendants suggest that they were indifferent as to the source of the credit-card account numbers,

and that this is not sufficient proof that they knowingly used a number belonging to another

person.

          However, Defendants do not contest that information identifying eleven individuals by

name in conjunction with their credit-card numbers was found on their computer. This evidence

is sufficient to support an inference that Defendants knew that at least some of the account

numbers they purchased belonged to actual persons. Additionally, Defendants were told that the

numbers had to be used within 24 hours, which the jury could view as notice that the account

numbers belonged to the persons listed and might be reported stolen after 24 hours. Given that

the evidence must be viewed in the light most favorable to the government, there was sufficient

evidence to support Defendants’ convictions of aggravated identity theft.

B. Due Process

          Defendants argue that the district court violated their constitutional rights to due process

of law and trial by jury by finding an amount of loss greater than $400,000 by a preponderance

of the evidence at sentencing. This finding increased Defendants’ offense level by 14 levels,

thereby increasing the applicable guidelines range from 15–21 months to 78–97 months.

                                                   7
       This court reviews a constitutional challenge to a sentence de novo. United States v.

Jones, 641 F.3d 706, 713 (6th Cir. 2011). As Defendants acknowledge, this court has previously

held that “judicial fact-finding in sentencing proceedings using a preponderance of the evidence

standard post-Booker does not violate either Fifth Amendment due process rights, or the Sixth

Amendment right to trial by jury.” United States v. Gates, 461 F.3d 703, 708 (6th Cir. 2006).

Therefore, we reject Defendants’ challenge.

C. Sophisticated Means

       Defendants argue that the district court erred by finding that their fraud was accomplished

through the use of sophisticated means. When reviewing a district court’s application of the

sentencing guidelines, this court reviews factual findings for clear error and mixed questions of

law and fact de novo. United States v. Tolbert, 668 F.3d 798, 800 (6th Cir. 2012). A factual

finding is clearly erroneous when this court is left with “the definite and firm conviction that a

mistake has been committed.” United States v. Lucas, 640 F.3d 168, 173 (6th Cir. 2011).

       The guidelines define “Sophisticated means” as:

       [E]specially complex or especially intricate offense conduct pertaining to the
       execution or concealment of an offense. For example, in a telemarketing scheme,
       locating the main office of the scheme in one jurisdiction but locating soliciting
       operations in another jurisdiction ordinarily indicates sophisticated means.
       Conduct such as hiding assets or transactions, or both, through the use of fictitious
       entities, corporate shells, or offshore financial accounts also ordinarily indicates
       sophisticated means.

                                                8
U.S.S.G. § 2B1.1. cmt. n.8. “A series of criminal actions may constitute sophisticated means

even if none of the offenses, standing alone, is especially complex or especially intricate.” United

States v. Masters, 216 F. App’x 524, 525 (6th Cir. 2007) (internal quotation marks omitted).

       Defendants argue that their scheme was not very complex, and was in fact quite simple,

especially when compared to other cases of access-device fraud. Defendants point to the fact that

they did not hack into any computer and simply purchased the numbers online. Re-encoding gift

cards was not difficult and the large volume of cards Defendants produced had more to do with

repeating a simple process than with advanced technique. Defendants also argue that locating

Meijer stores in the Midwest via a GPS was simple and did not reflect sophistication.

       The government argues that Defendants purchased the credit-card numbers from

individuals in Russia and Ukraine, then traveled from New York and Pennsylvania to Michigan

to use the numbers, and that this cross-jurisdictional conduct is similar to the conduct in United

States v. Erwin, 426 F. App’x 425 (6th Cir. 2011). In Erwin, the district court applied the

sophisticated-means enhancement to a conspiracy where the defendants flew across the country

to commit bank fraud. This court affirmed the application of the enhancement noting that “[t]his

kind of cross-jurisdictional conduct, for the purposes of avoiding detection, is exactly the type of

conduct described in the Guidelines definition of ‘sophisticated means.’” Id. at 436.

       In the instant case, Defendants purchased credit-card numbers over the internet from

Ukraine and Russia before encoding them on used gift cards. Next, they traveled to the Midwest,

far from their home states. They used the re-encoded gift cards to travel from Meijer store to

                                                 9
Meijer store, purchasing gift cards at self-checkout lanes, before moving on to new stores in order

to evade detection. Once re-encoded, cards could be used like cash and there was no identifying

information on the face of the card that would indicate that it contained a fraudulent credit-card

number. While it may be true that individual steps in Defendants’ conspiracy were not

complicated, given the cross-jurisdictional conduct and technical knowledge necessary to commit

the offense, the district court did not clearly err in concluding that the conspiracy as a whole

reflected the use of sophisticated means.

D. Calculation of Loss

        Defendants challenge the district court’s interpretation of the guidelines as providing for

a $500 loss amount per unauthorized access device, regardless of whether the device was actually

used.

        Section 2B1.1(b)(1) of the guidelines provides for an increase in offense level depending

on how much loss the crime at issue caused. The text of Application Note 3(F)(i) reads:

        Stolen or Counterfeit Credit Cards and Access Devices; Purloined Numbers and
        Codes. — In a case involving any counterfeit access device or unauthorized access
        device, loss includes any unauthorized charges made with the counterfeit access
        device or unauthorized access device and shall be not less than $500 per access
        device.    However, if the unauthorized access device is a means of
        telecommunications access that identifies a specific telecommunications
        instrument or telecommunications account (including an electronic serial
        number/mobile identification number (ESN/MIN) pair), and that means was only
        possessed, and not used, during the commission of the offense, loss shall be not
        less than $100 per unused means.

                                                10
U.S.S.G. § 2B1.1 cmt. n.3. Applying the greater of either the actual loss amount or $500 to each

access-device number possessed by Defendants, the district court calculated a total loss of

between $400,000 and $1 million, citing United States v. Gilmore, 431 F. App’x 428 (6th Cir.

2011), as controlling the calculation of loss. In Gilmore, the defendant challenged the calculation

of loss on the basis that the district court applied the $500 per device calculation to access devices

that the defendant possessed, but did not use. Id. at 429. This court rejected the defendant’s

argument, holding:

        The plain language of the note’s first sentence imposes two clear conditions: (1)
        loss shall include any unauthorized charges made with the counterfeit access
        device or unauthorized access device, and (2) the loss shall not be less than $500
        per access device. . . . The plain language sets a floor for calculating the loss
        attributable to each device, namely $500; it does not limit loss calculations to
        devices actually used.

Id. at 430; see also United States v. Woods, 367 F. App’x 607, 609 n.1 (6th Cir. 2010); United

States v. Little, 308 F. App’x 633, 634 (3d Cir. 2009); United States v. Camper, 337 F. App’x

631, 632 (9th Cir. 2009).

        Defendants do not dispute that Gilmore is controlling; rather they suggest that this court

revisit Gilmore. Defendants cite no authority to support their argument, but urge that this court

apply the rule of lenity. Because Defendants present no compelling reason to depart from

Gilmore, we affirm the district court’s calculation of loss.

                                                 11
                          III.

Accordingly, we AFFIRM.

                          12