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April 6, 2004, 9:00 AM ET, Alert No. 870.
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Supreme Court Grants Certiorari in Wire Fraud Case

4/5. The Supreme Court granted certiorari, without opinion, in Pasquantino v. U.S., No. 03-725. See, Order List [10 pages in PDF] at page 2. This case involves the scope of the federal wire fraud statute.

While the Court has agreed to hear this appeal, oral argument will not likely be held until next fall.

Canada and its Province of Ontario place much higher taxes on the sale of alcohol than the U.S. and the state of Maryland. This creates a black market in alcohol that is illegal in Canada. David and Carl Pasquinto and Arthur Hilts purchased large quantities of alcohol in Maryland, trucked it to New York, and then smuggled it across the border into Ontario hidden in cars. They then sold the alcohol in Canada, without paying the required excise taxes, in violation of Canadian law. The defendants made phone calls related to this scheme.

The present case was brought -- not in Canada -- but in federal court in the state of Maryland under U.S. law. Specifically, the defendants were charged with violation of wire fraud statute, which is codified at 18 U.S.C. § 1343.

The statute provides that "Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both."

A trial jury of the U.S. District Court (DMd) returned verdicts of guilty, and the District Court entered judgment against the defendants. The defendants appealed. A divided three judge panel of the U.S. Court of Appeals (4thCir) reversed in an opinion reported at 305 F.3d 291. However, an en banc panel of the Court of Appeals then affirmed the convictions in an opinion released on July 18, 2003, and reported at 336 F.3d 321.

This petition for writ of certiorari followed. The defendants/petitioners argue that in light of the common law revenue rule, the U.S. may not bring a wire fraud prosecution against persons who use the wires in this country to defraud a foreign government of tax revenue. The common law revenue rule is the common law doctrine that courts of one sovereign state will not enforce the final tax judgments or unadjudicated tax claims of other sovereign states.

The Solicitor General submitted a brief in which he argued that the Supreme Court should deny certiorari. He wrote that the text of the wire fraud statute "contains no exception based on the identity of the victim of the fraud or the nature of the property that is the object of the fraud. Consistent with the terms of the wire fraud statute, courts have held that the wire fraud statute applies to schemes to defraud foreign governments, foreign corporations, and foreign individuals."

This case is David Pasquantino, Carl Pasquantino, and Arthur Hilts, aka Butch v. U.S.A., Sup. Ct. No. 03-725, a petition for writ of certiorari to U.S. Court of Appeals for the 4th Circuit, App. Ct. Nos. 01-4463, 01-4464, and 01-4465. The appeal to the Court of Appeals came from the U.S. District Court for the District of Maryland, D.C. No. CR-00-202-JFM, Judge Frederick Motz presiding.

SBC and Sage Announce Agreement to Replace UNE-P

4/5. SBC Communications and Sage Telecom announced that "they have reached an historic seven-year commercial agreement for SBC to provide wholesale local phone services to Sage covering all 13 states comprising SBC's local phone territory. The agreement also contains provisions relating to data and internet services." See SBC release and substantially identical Sage release.

SBC is an incumbent local exchange carrier (ILEC), and a regional Bell operating company (RBOC). Sage is a competitive local exchange carrier (CLEC). It is the third largest CLEC in SBC's territory, with more than one-half million local service customers.

The two companies stated that "This is the first such agreement between a Bell operating company and a local competitor in the four weeks since a federal court overturned wholesale rules imposed by the FCC late last year."

Regarding unbundled network elements - platform (UNE-P), SBC and Sage stated that "The seven-year pact will replace the regulatory mandated UNE-P with a private commercial agreement. Given the proprietary nature of the agreement, most terms were not released, but the average monthly price over the life of the contract is expected to be below $25.00 per line."

They added that "SBC has offered to negotiate comparable terms and conditions with any similarly-situated competitor."

SBC and Sage did not release the text of their agreement.

On March 31, 2004, all five of the Commissioners of the Federal Communications Commission (FCC) wrote a letter to telecommunications carriers and trade associations regarding the opinion [62 pages in PDF] of the U.S. Court of Appeals (DCCir) in USTA v. FCC, vacating parts of the FCC's latest rules (contained in the triennial review order) regarding the unbundling requirements of ILECs. The letter states that the FCC will seek an extension of the Court of Appeals' stay of its vacatur. The letter also encourages the incumbent and competitive carriers, and their trade groups, to use this time to negotiate. See, letter [PDF] sent to CompTel, and statement [PDF] released by the FCC. See also, story titled "FCC to Seek Extension of Stay of DC Circuit Vacatur of TRO" in TLJ Daily E-Mail Alert No. 867, April 1, 2004.

The triennial review order (TRO) addresses the Section 251 unbundling obligations of ILECs. Unbundled network elements (UNEs) are those portions of telephone networks that the ILECs, such as SBC, must make available to competing carriers at regulated rates, such as AT&T and MCI WorldCom, seeking to provide telecommunications services.

Michael PowellFCC Chairman Michael Powell (at right) stated in a release [PDF] on April 5 that "This is an encouraging sign that companies have taken the Commission's call for negotiations to heart. And more importantly, this demonstrates that commercial, market-based agreements can be accomplished. I hope this paves the way for further negotiations and contracts -- so that America's telephone consumers have the certainty they deserve."

Similarly, FCC Commissioner Kathleen Abernathy stated in a release [PDF] that "I am extremely pleased by the announcement that SBC Communications and Sage Telecom, a UNE-P provider, have reached a commercial agreement that will govern Sage's use of SBC’s network over the next seven years. I applaud the parties for coming to the bargaining table in good faith."

She added that "This agreement illustrates that searching for compromise is a worthwhile endeavor. I hope that incumbent LECs and competitors will soon reach additional agreements that narrow the range of disputed issues and eliminate the need for continued litigation. Consumers will be the winners if companies devote their resources to competing in the marketplace, rather than in the courtroom."

USTA P/CEO Walter McCormick stated in a release that "This is proof positive that free markets can work in telecommunications as they do throughout the U.S. economy.  Just days after Chairman Powell's call, we have our first agreement. This is real-world evidence that we do not need to spend months and years in court defending the past and putting future telecom investment and job creation on hold. All it takes to move forward constructively for the country is reasonable people sitting down in good faith at the negotiating table." The USTA membership includes ILECs.

CompTel/ASCENT and the Association for Local Telecommunications Services (ALTS) released a proposed framework for negotiations.

Abernathy Addresses Telecommunications Security

4/2. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech titled "Telecommunications Security: Key Issues Affecting the Public and Private Sectors" at the 7th Annual Midwestern Telecommunications Conference. She briefly reviewed recent security related actions, and ongoing proceedings, at the FCC.

She began with the observation that "We used to worry about things like earthquakes and ice storms, and perhaps teenage computer hackers, but terrorism was not a major concern. Of course, 9-11 changed all of that -- it propelled security issues into the forefront".

Kathleen AbernathyAbernathy (at right) also stated that "the FCC’s ongoing rulemakings on broadband services and voice over IP have focused on security issues -- something that probably would not have occurred before 9-11."

One of the points that she made was that "the FCC recently revised its rules concerning the universal service subsidy mechanism for rural health care clinics, and one of our primary objectives in doing so was to ensure that regional hospitals and rural clinics are interconnected in the event of a bioterrorism incident."

This is a reference to the FCC's "Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking" in WC Docket No. 02-60, announced on November 13, 2003, and released on November 17. In the entirety of this 69 page report and order [PDF], the word "bioterrorism" appears in only one footnote. The report and order also gives brief reference to "biological" attacks, but only as one possible scenario in the broader category of natural disasters and public health emergencies.

Commission Michael Copps mentioned "bio-terrorism" in his separate statement [PDF], and Commissioners Michael Powell and Jonathan Adelstein referenced biological attacks in their statements. But, Commissioner Abernathy did not mention this issue in her separate statement [PDF].

See also, story titled "FCC Expands Universal Service Support for Rural Clinics and Telemedicine" in TLJ Daily E-Mail Alert No. 779, November 14, 2003.

Google's New Free E-Mail Service Starts Privacy Debate

4/5. Google announced on April 1 that it "is testing a preview release of Gmail -- a free search-based webmail service with a storage capacity of up to eight billion bits of information, the equivalent of 500,000 pages of email. Per user." See, Google release. The announcement has initiated discussions of the privacy consequences of its Gmail service.

On another web page Google states that "There are no pop-ups or banner ads in Gmail. Gmail does include relevant text ads that are similar to the ads appearing on the right side of Google search results pages. The matching of ads to content is a completely automated process performed by computers using the same technology that powers the Google AdSense program. This technology already places targeted ads on thousands of sites across the web by quickly analyzing the content of pages and determining which ads are most relevant to them. No humans read your email to target the ads, and no email content or other personally identifiable information is ever provided to advertisers."

While many chat room and discussion thread participants have praised the new service, and Google, some people, such as Simon Davies of Privacy International and Kevin Bankston of the Electronic Frontier Foundation, have complained about privacy implications of computer scanning of the content of e-mail in order to match ads.

Meanwhile, Rob Atkinson of the Progressive Policy Institute (PPI), wrote a essay titled "Google E-mail, What's All the Fuss About?" that defends Google's new service.

Atkinson is the Director of the PPI's Technology and New Economy Project. The PPI is a Washington DC based think tank associated with the New Democrats.

He wrote that "we shouldn't let paranoid rhetoric from privacy advocates stop this or other similar types of consumer-friendly services."

He first reviewed the benefits of free e-mail services. For example, he points out that "For some low-income Americans who access the Internet at places like libraries and community centers, free email allows them an opportunity to have a mail address without paying monthly ISP fees."

Atkinson continued that "The costs of establishing these free email services are not trivial. Companies must pay for servers and software, as well as staff to run the systems -- the anti-spam efforts alone require a small army of workers. These companies provide this expensive service at no cost to the consumer the way other media companies provide expensive services like free over-the-air TV or free neighborhood newspapers: they pay for it with advertising revenue."

"In an all too predictable response the privacy advocates are howling in protest. Oh no, companies will be reading your email!", said Atkinson. "The reality is much simpler. If companies, either ISP's or free email services, wanted to read your email they could. After all the messages go through their servers. The reality is they all have privacy policies stating very clearly they will not read their user's email nor share it with others. Google's service is no different. Their privacy policy states: ``no human reads your mail to target ads or other information without your consent.´´"

Atkinson concluded that "Those that do mind the advertising can choose another service and pay for the storage. If privacy advocates are worried about this, they have a simple choice -- don't sign up for G-mail. But it would be a shame if their paranoid rhetoric shut down Google's new service and denied that choice to the rest of us."

Also, in addition to privacy, some commenters have raised other policy issues. For example, posters to Slashdot have suggested that the huge amount of free storage could be used by some subscribers to facilitate the distribution of digital pormography.

More News

4/5. The Supreme Court denied certiorari in Skippy v. Lipton Investments, No. 03-1146, a trademark case involving Skippy peanut butter and a once famous cartoon character named Skippy. See, Order List [10 pages in PDF] at page 4.

4/1. The Dow Jones & Company announced that "American International Group Inc., Pfizer Inc., and Verizon Communications Inc. will replace AT&T Corp., Eastman Kodak Co. and International Paper Co. in the Dow Jones Industrial Average, effective with the opening of trading on April 8". See, release.

Five Indicted for Mail Fraud in Connection with FCC E-Rate Subsidy Program

4/5. The Department of Justice's (DOJ) Antitrust Division announced that a grand jury of the U.S. District Court (EDWisc) returned an indictment charging five people with conspiracy, mail fraud, and money laundering in connection with a scheme to defraud the Federal Communications Commission's (FCC) e-rate subsidy program. See, DOJ release.

The indictment charges Haider Bokhari, his wife, Kelly Bokhari, his mother, Shahida Bokhari, and his brothers Qasim Bokhari and Raza Bokhari. The government arrested all but Raza Bokhari in the U.S. The DOJ stated that he "is believed to be residing in Lahore, Pakistan".

The DOJ stated that the indictment alleges that Haider Bokhari and Qasim Bokhari submitted false invoices and other documents to the FCC's Universal Service Administrative Company (USAC), and that the USAC paid them over $1.2 million dollars for goods and services that were not provided to schools.

The indictment charges various of the defendants with conspiracy to commit mail fraud charge and mail fraud in violation of 18 U.S.C. §§ 371 and 1341, conspiracy to commit money laundering in violation of 18 U.S.C. § 1956(h), and money laundering in violation of 18 U.S.C. § 1956(a).

The e-rate program was created by the Federal Communication Commission by its Order of May 8, 1997. It is a cross subsidy program. It provides subsidies to schools, libraries, and rural health clinics for telecommunications services, internet access, and computer networking.

It is loosely based upon the Telecommunications Act of 1996. Section 254 of the Act codified the long standing practice of providing "universal service" support for telephone service in high cost and rural areas.  However, the Act also included a subsection that extended universal service support to any school, library and rural health clinic.

The subsidies are funded by charges imposed on telephone carriers, which in turn, pass these charges on to their customers.

There were numerous efforts to terminate, limit, or provide a sunset provision for, the e-rate program in 1998 and 1999. No legislation passed. However, the FCC capped the program at $2.25 Billion per year, and its first President, Ira Fishman, was replaced. There has been little effort in Congress to change the e-rate program since the 106th Congress.

The DOJ's description of the e-rate program is notable. It states that the e-rate "subsidizes the provision of Internet access and telecommunications services, as well as internal computer and communications networks". The FCC does not acknowledge that the e-rate is a subsidy program, or that it is funded by the collection of a tax on carriers. Although, individual persons, such as former FCC Commissioner Harold Furchtgott-Roth, have identified the program in terms of subsidies and taxes.

The DOJ stated that this investigation is being conducted by the Antitrust Division, FBI, IRS Criminal Investigation Division, FCC's Office of the Inspector General, and the U.S. Attorney's Office for the Eastern District of Wisconsin.

In addition, the House Commerce Committee's Subcommittee on Oversight and Investigations has been conducting an investigation of waste, fraud and abuse in the e-rate program. Moreover, the new Chairman, Rep. Joe Barton (R-TX), stated at a press conference on March 4, 2004 that the Oversight Subcommittee will hold hearings. See, story titled "Rep. Barton Plans to Examine E-Rate Subsidies" in TLJ Daily E-Mail Alert No. 850, March 5, 2004.

See also, stories titled "Reps. Tauzin & Greenwood Request GAO Report on E-Rate Waste, Fraud & Abuse As Prelude to Oversight Hearing" in TLJ Daily E-Mail Alert No. 791, December 3, 2003; "House Commerce Committee Requests Information from IBM in E-Rate Fraud Investigation" in TLJ Daily E-Mail Alert No. 698, July 15, 2003; "FCC Inspector General Reports on E-Rate Fraud" in TLJ Daily E-Mail Alert No. 449, June 12, 2002; "Reps. Tauzin & Greenwood Write Powell Re Waste Fraud & Abuse In E-Rate Program" in TLJ Daily E-Mail Alert No. 624, March 17, 2003; and "FCC Announces Order and NPRM Regarding E-Rate Subsidies" in TLJ Daily E-Mail Alert No. 648, April 24, 2003.

Washington Tech Calendar
New items are highlighted in red.
Tuesday, April 6


The House will be in recess from April 5 through April 16 for the Spring recess. It will next meet on Monday, April 19.

The Senate will meet at 10:00 AM for morning business, and at 11:00 AM to resume consideration of the motion to proceed to S 2207, the Pregnancy and Trauma Care Access Protection Act.

The Supreme Court is in recess until April 19, 2004.

Wednesday, April 7

10:00 AM. The Senate Judiciary Committee Subcommittee on Administrative Oversight and the Courts will hold a hearing on a proposal to split the Ninth Circuit. See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The Senate Appropriations Committee's Subcommittee on Transportation, Treasury and General Government will hold a hearing to examine tax law enforcement and information technology challenges at the Internal Revenue Service (IRS). Location: Room 138, Dirksen Building.

12:30 - 1:30 PM. The Center Strategic and International Studies (CSIS) will host a program on cybersecurity. The speakers will be Steve Ballmer (CEO of  Microsoft), John Hamre (P/CEO of the CSIS), Robert Holleyman (P/CEO of the Business Software Alliance). Press contact: Mark Schoeff at 202-775-3242 or or Gina Maffei at 202-775-3167 Location: CSIS, 1800 K Street, NW, B-1 conference level.

12:30 PM. Virginia Attorney General Jerry Kilgore will speak on "Technology and the Law". Location: George Mason University School of Law.

12:30 PM - 2:00 PM. The DC Bar Association's Section on Criminal Law and Individual Rights will host a brown bag lunch (with admission charge) titled "Federal Practice Series: Handling Electronic Evidence: From Authentication to Admissibility to Minimizing that Damaging E-mail". The speaker will be Adam Rosman (Zuckerman Spaeder). Prices vary. For more information, call 202 626-3463. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding its proposed rules regarding universal service subsidies for rural health clinics. Comments are due by February 23, 2004. Reply comments are due by April 7, 2004. See, notice in the Federal Register, December 24, 2003, Vol. 68, No. 247, at Pages 74538 - 74541.

Thursday, April 8

10:00 AM. The Senate Judiciary Committee will hold a hearing on several pending judicial nominations, including William Duane Benton (to be a Judge of the U.S. Court of Appeals for the 8th Circuit), Robert Bryan Harwell (District of South Carolina), George Schiavelli (Central District of California), and Curtis Gomez (Virgin Islands). See, notice. Location: Room 226, Dirksen Building.

11:00 AM. The Senate Commerce Committee will hold a business meeting. The agenda includes consideration of several non technology related bills and several nominations, including that of Theodore Kassinger to be Deputy Secretary of the Department of Commerce. Press contact: Rebecca Hanks at 202 224-2670. Location: Room 253, Russell Building.

1:30 - 3:00 PM. Federal Communications Commission (FCC) World RadioCommunication 2007 (WRC-07) Advisory Committee's Informal Working Group on Satellite Services and HAPS will meet. See, FCC notice [PDF]. Location: Leventhal Senter & Lerman, 2000 K Street, NW, 7th Floor Conference Room.

6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a continuing legal education (CLE) seminar titled "FCC's Environmental and Historic Preservation Action Plan - One Year Later". Prices vary. To register, contact Wendy Parish at Location: Wiley Rein & Fielding, 1750 K Street, NW, 10th Floor.

Sunday, April 11


Monday, April 12

The Senate will not meet from April 12 through April 16.

10:00 AM - 12:00 NOON. The American Enterprise Institute (AEI) will host a panel discussion titled "The Development of European Regulatory Agencies: What the European Union Should (or Shouldn’t) Learn from the American Experience". The speakers will be Judge Stephen Williams (U.S. Court of Appeals) and Greg Sidak (AEI). Location: AEI, 12th floor, 1150 17th St., NW.

Day one of a three day conference hosted by the National Institute of Standards and Technology (NIST), National Institutes of Health (NIH), Internet2, USENIX, and OASIS titled "Public Key Technology R&D Workshop". See, notice and conference website. The price to attend is $105. Location: NIST, Gaithersburg, MD.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding its Third Report and Order and Second Further Notice of Proposed Rulemaking pertaining to the administration of the FCC's e-rate subsidy program for schools and libraries. See, notice in the Federal Register, February 10, 2004, Vol. 69, No. 27, at Pages 6229 - 6238. This item is FCC 03-323 in Docket No. 02-6. The FCC adopted this item at its December 17, 2003 meeting. See, FCC release [PDF] describing this item. The FCC released the text of this item on December 23, 2003.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to the Department of Justice's (DOJ) petition for a rulemaking proceeding regarding surveillance of voice over internet protocol (VOIP), regulation of VOIP related technologies, the Communications Assistance for Law Enforcement Act (CALEA), and related issues. This is RM 10865. See, FCC notice (DA 04-700).

Deadline to submit comments to the Federal Trade Commission (FTC) in response to its notice in the Federal Register requesting comments regarding various regulations and reports required by the CAN-SPAM Act. Several provisions in the "Controlling the Assault of Non-Solicited Pormography and Marketing Act of 2003" (CAN-SPAM Act) instruct the FTC to write regulations implementing the Act. Other provisions require the FTC to prepare reports for the Congress. See, S 877, which is now Public Law No. 108-187. See also, story titled "FTC Announces CAN-SPAM Act Rulemaking" in TLJ Daily E-Mail Alert No. 855, March 15, 2004. The notice is published in the Federal Register, March 11, 2004, Vol. 69, No. 48, at Pages 11775-11782. See also, FTC release summarizing the notice.

Deadline to submit comments to the Copyright Office regarding its rule making proceeding "to amend its regulations governing the content and service of certain notices on the copyright owner of a musical work. The notice is served or filed by a person who intends to use a musical work to make and distribute phonorecords, including by means of digital phonorecord deliveries, under a compulsory license." See, notice in the Federal Register, March 11, 2004, Vol. 69, No. 48, at Pages 11566-11577.

The Copyright Office's interim regulations, announced on March 11, specifying notice and recordkeeping requirements for use of sound recordings under two statutory licenses under the Copyright Act, take effect. See, notice in the Federal Register, March 11, 2004, Vol. 69, No. 48, at Page 11515-11531.

People and Appointments

4/5. Rep. Amo Houghton (R-NY) will not seek re-election to the House, according to reports published by the Associated Press. The Leader, a newspaper published in Corning, New York, states that Houghton will officially announce his decision on Tuesday in Corning. Houghton is a senior member of the House Ways and Means Committee, and Chairman of its Subcommittee on Oversight. Three other Republican members of the Committee will not seek re-election to the House in November. Rep. Jennifer Dunn (R-WA), previously announced that she will retire. Rep. Mac Collins (R-GA) will run for the Senate. Rep. Scott McGinnis (R-CO) will not seek re-election.

4/5. Matthew Well was named Director of the Office of Public Affairs at the Securities and Exchange Commission (SEC). He will be the SEC's principal spokesman. He will report to the Managing Executive for External Affairs, Laura Cox, who is responsible for management of public affairs, legislative and intergovernmental affairs, and investor education at the SEC. Before joining the SEC, Well was Director of Public Affairs at the American Tort Reform Association. See, SEC release.

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