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1025

Fraudulent Production, Use, or Trafficking in Telecommunications Instruments Modified or Altered to Access Telecommunications Services—18 U.S.C. § 1029(a)(5)

This Subsection (a)(5) became effective October 25, 1994, as part of the Communications Assistance for Law Enforcement Act of 1994, Pub. L. No. 103-414, § 206, 108 Stat. 4279. This first Subsection (a)(5) of 18 U.S.C. § 1029 proscribes the use or possession of altered telecommunications equipment, with the first Subsection (a)(6) following it proscribing the possession of the hardware and software needed to alter the equipment. [NOTE: For Federal jurisdiction, all 18 U.S.C. § 1029(a)(1)-(7) offenses must "affect interstate or foreign commerce."]

Legislative History

The Congress enacted this set of Subsections (a)(5) and (a)(6) (see this Manual at 1026) at 18 U.S.C. § 1029 in response to the split between the Tenth Circuit decisions in United States v. McNutt, 908 F.2d 561 (10th Cir. 1990), cert. denied, 498 U.S. 1084 (1991), and United States v. Brady, 13 F.3d 334 (10th Cir. 1993) and the Ninth Circuit decision in United States v. Bailey, 41 F.3d 413 (9th Cir. 1994), cert. denied, 115 S.Ct. 2563, 132 L.Ed.2d 815 (1995). The Tenth Circuit in McNutt held that a satellite television descrambler did not fall under the definition of an access device since there was no debit which resulted to the legitimate viewer's account. The reasoning of the Tenth Circuit in McNutt was that although the satellite television operators did suffer economic loss, the intent of Congress was to limit the application of the statute only to cases of direct monetary loss. This same reasoning was applied by the Tenth Circuit in Brady in 1993. In Brady, the court, following McNutt, held that altered or "tumbled" cellular phone numbers are not "access devices" under 18 U.S.C. § 1029 since no account is accessed. Brady, 13 F.3d at 338-40.

The Ninth Circuit in Bailey, disagreeing with the Tenth Circuit's McNutt and Brady decisions, found that the phrase "account access" in the statute should be defined to mean "access to the privileges permitted by virtue of the maintenance of an account." Bailey, 41 F.3d at 417. The Ninth Circuit held that the existence of an actual account is irrelevant as long as the user of the access device is in any way "able to obtain goods or services from which he would be otherwise excluded. Id. at 418. Similarly, other circuits had held that both assigned and unassigned account numbers are "access devices" within the meaning of 18 U.S.C. 1029(e)(1). See, e.g., United States v. Farkas, 935 F.2d 962 (8th Cir. 1991)(assigned); United States v. Taylor, 945 F.2d 1050 (8th Cir. 1991) (unassigned); United States v. Brewer, 835 F.2d 550 (5th Cir. 1987)(unassigned); United States v. Caputo, 808 F.2d 963 (2d Cir. 1987)(assigned).

Subsequent to the 1994 amendments, the Bailey case has been followed by the Sixth Circuit in United States v. Ashe, 47 F.3d 770 (6th Cir.), cert. denied, sub nom. Doughtery v. United States, 116 S.Ct. 166, 133 L.Ed.2d 108 (1995), which also involved tumbling of cellular phone numbers. In Ashe, the court specifically relied on the legislative history setting forth the purpose of the amendment

    to criminalize the use of cellular phones that are altered or "cloned" to allow free riding on the cellular phone system. Specifically, this section prohibits the use of an altered telecommunications instrument, or a scanning receiver, hardware or software, to obtain unauthorized access to telecommunications services for the purpose of defrauding the carrier. H.R. Rep. No. 827, 103d Cong., 1st Sess., 31.

Id. at 774. Also, the Eleventh Circuit recently held in United States v. Morris, 81 F.3d 131 (11th Cir. 1996), a pre-amendment case, that the need for an account access as in McNutt was still required to obtain applicability under 18 U.S.C. § 1029. However, the court specifically indicated that under the amended Section 1029 it would follow the Bailey and Ashe decisions. Morris, 81 F.3d at 134.

[cited in USAM 9-49.000]