Friday, August 27, 2010

United States v. Ali: Unauthorized Sales of Software deemed Deprivation of “Money or Property” and Grounds for Wire and Mail Fraud Convictions

A district court judgment was affirmed in part and reversed in part by the 9th Circuit court. The 9th Circuit held that mail and wire fraud defendants took "money or property" from a software manufacturer by obtaining discounted software packages under false pretenses and then selling the packages indiscriminately for full price. http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/43mcrm.htm

Microsoft sold software package, Academic Edition (AE), through its Authorized Education Reseller (AER) program. According to the program, AERs could receive software at discounted prices and sell it to qualified educational users. The Microsoft AER agreement also held that if an AER violated the terms, the AER would be liable to Microsoft for the difference between Microsoft's estimated retail price and commercial versions of the software.

Mirza Ali, Sameena Ali and Keith Griffen attained AER status under false pretenses for various companies and subsequently sold AE software to unauthorized users. The companies acquired approximately $30 million of AE software and resold it using mail and wires in support of these sales. The Alis used money from these unauthorized sales to buy entities to aid the scheme, transferred money out of the country and bought real property in California.

All three defendants were found guilty of conspiracy, mail fraud and wire fraud. The Alis were additionally found guilty of promotion money laundering, concealment money laundering, exportation money laundering, and criminal forfeiture. The court of appeals held that sufficient evidence supported all of the defendants' convictions with the exception of promotion money laundering.

The 9th Circuit found that under
§§ 1341 and 1343 a right to payment is "money or property," which the Supreme Court has interpreted as including entitlement to collect money from a party for purposes of the mail and wire fraud statutes. Therefore, the defendants' argument that Microsoft's loss was only the expectation of "potential profits" was wrong because this right to payment is "property." The court also found that Microsoft was entitled to full payment for any software sold outside AE restrictions and it should still be treated as lost property "in its hand."

This case is: United States v. Ali; 9th Cir.; August 25th, 2010; 07-10529.