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In the first case considering the issue, United States v. Pirello, a federal appellate court has ruled that the use of the Internet for posting advertisements provides a sufficient basis to enhance criminal sentencing for wire fraud. When one looks under the hood of this legal decision, however, it becomes apparent that arguments against this result are at least as strong as arguments in favor of the decision. A COMPUTER SALES SCAM In late 1999, Michael Pirello placed four advertisements on an Internet classified-ads Web site, each of which solicited buyers for computers from the general public. The advertisements posted by Pirello were part of a scheme pursuant to which Pirello would induce prospective buyers to send him money for computers that he actually never intended to deliver. Ultimately, three individuals responded and Pirello negotiated the sale of a computer to each, assuring them that computers would be delivered upon his receipt of their payments. Pirello then received more than $4,000 in checks that he deposited in his personal bank account. When the three individuals did not receive the promised computers, they contacted the FBI. Pirello admitted to the FBI that he had received some checks, but said that he did not know why they were sent to him. Pirello was charged in early 2000 with three counts of wire fraud and three counts of mail fraud. Pirello pled guilty to the wire fraud charges. At his sentencing, and over Pirello’s objection, the federal trial judge increased Pirello’s sentence two levels based on a “mass marketing” enhancement in the federal sentencing guidelines (U.S. Sentencing Guidelines � 2F1.1(b)(3)). Pirello appealed this enhancement. THE APPELLATE OPINION The 9th U.S. Circuit Court of Appeals in Seattle ruled on Pirello’s appeal in a split opinion dated June 20, 2001. Judge Stephen Trott wrote the majority opinion on behalf of himself and Judge Jerome Farris. Judge Marsha Berzon wrote a dissenting opinion. THE MAJORITY: CONDUCT CONSTITUTES ‘MASS MARKETING’ Judge Trott’s majority opinion begins by noting that no court previously had ruled on the applicability of the mass marketing enhancement in the sentencing guidelines with respect to cases involving the use of Internet advertisements to effectuate fraudulent schemes. However, given Judge Trott’s opening comment that the Internet is “a seductive playground for unscrupulous individuals bent on defrauding innocent victims,” one can quickly guess how the majority intended to rule. The majority opinion begins by analyzing the relevant note to the mass-marketing sentencing guideline which defines mass-marketing as “a plan, program, promotion, or campaign that is conducted through solicitation by telephone, mail, the Internet, or other means to induce a large number of persons to purchase goods or services. …” According to the majority, “the fact that Pirello posted several advertisements on a classified-ads Web site demonstrates that his scheme was not an isolated event, but rather a fraudulent ‘plan, program, promotion, or campaign.’ ” Moreover, “ by placing a classified ad on the Internet, Pirello was able to solicit funds instantaneously and continuously from [millions of people] worldwide.” Thus, satisfied that Pirello’s conduct constitutes “solicitation by … the Internet … to induce a large number of persons to … purchase goods,” under the sentencing guidelines, the majority concludes that Pirello is foreclosed from making “any argument” that his actions did not constitute mass-marketing under the sentencing guidelines. While the majority opinion is neat and tidy within its own four corners, points made by the dissenting opinion, at a minimum, cause one to hesitate and ponder the soundness of the majority holding in the case. THE DISSENT: NO SOLICITATION Judge Berzon minces no words by beginning her dissent by stating: “Pirello simply placed his advertisements on an Internet Web site devoted to such advertisements. Such passive placement, to my mind, does not constitute ‘solicitation by … the Internet.’ ‘Solicitation’ usually denotes more than simply advertising for funds, sales, or signatures. Instead, the term suggests some sort of one-on-one importuning.” To drive this point home, the dissent notes that which the sentencing guidelines do not include within the ambit of “solicitation.” For example, the guidelines do not include advertising on television, in newspapers and magazines or on billboards as vehicles for solicitation. As the dissent rightfully points out, these media can reach very large numbers of persons, but they “do not involve the personal approach which is more difficult to refuse … and therefore more likely to result in harm if there is fraud involved in the offer of sale.” Judge Berzon’s dissent raises a valid concern: “If newspaper classified ads and television or radio ‘infomercials’ are not ‘solicitation by … other means,’ I am at a loss to understand why digital classified ads are ‘solicitation by … [the] Internet.’” Instead, Judge Berzon would understand the term to refer to more “personal” and “direct” digital contact by way of “Internet-accessed e-mail.” THE END GAME Long story short, it never is advisable to engage in fraudulent schemes, whether on the Internet or otherwise. However, at least for now and unless and until the Supreme Court or another federal appellate court rules differently, anyone considering fraudulent schemes by way of Internet advertising should know that if caught, prosecuted and convicted, his or her criminal sentence very well may be enhanced. Eric J. Sinrod is a partner in the San Francisco office of Duane Morris, where he focuses on technology and litigation matters. His Web site is sinrodlaw.com and his firm’s site is Duane Morris.Mr. Sinrod may be reached by e-mail at [email protected]

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