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United States v Kane - Oct. 2012 Magistrate Report

United States v Kane - Oct. 2012 Magistrate Report

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Published by Legal Writer
Magistrate's Report in U.S. v. Kane
Magistrate's Report in U.S. v. Kane

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Categories:Types, Business/Law
Published by: Legal Writer on Aug 02, 2013
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12345678910111213141516171819202122232425262728UNITED STATES DISTRICT COURTDISTRICT OF NEVADA* * *UNITED STATES OF AMERICA,))Plaintiff,) 2:11-cr-00022-JCM-RJJ))REPORT & RECOMMENDATIONvs. )OF UNITED STATES) MAGISTRATE JUDGE) (Motion to Dismiss (#56)JOHN KANE;)Motion to Dismiss (#57) &ANDRE NESTOR.)Motion for Joinder (#62)))Defendants. )This matter is before the Court on Defendant John Kane’s Motion to Dismiss (#56);Defendant Andre Nestor’s Motion to Dismiss (#56); and Defendants John Kane’s Motion for Joinder to Defendant Andre Nestor’s Motion to Dismiss (#62). The Court has also reviewed theGovernment’s Response (#68) and Defendants’ Replies (#71) and (#78), respectively.
On January 19, 2011, the Government filed the Indictment (#12) in this case. TheGovernment alleges that from about April 2009 to September 2009 Kane and Nestor devised away to exploit video poker machines, winning several hundred thousand dollars.Video poker machines offer different varieties of poker for customers to play. To exploitthe video gaming machines, the Government alleges that the Defendants would ask a casinoemployee to activate the “double up” feature on certain video poker machines. Essentially, the“double up” feature allows casino patrons to double their winnings or lose their bet. TheDefendants then legitimately played video poker until they obtained a winning hand of cards andcollected their proper winnings. The Government alleges that the Defendants then used a
Case 2:11-cr-00022-MMD -RJJ Document 86 Filed 10/15/12 Page 1 of 10
12345678910111213141516171819202122232425262728complex combination of game changes, bill insertions and cash outs to access previous winninghands of cards, use the “double up” feature to change the denomination in the middle of the gameto the highest denomination, and trigger a second jackpot. Because of a series of programmingerrors, the machine re-evaluated the original game at the new, higher denomination, triggering a jackpot which paid out at a higher denomination than the Defendants had initially wagered. TheGovernment does not allege that the Defendants physically tampered with the video poker machines in any way.The Defendants filed the present Motions to Dismiss (#56) (#57) moving the Court todismiss Counts 2 and 3 of the Indictment (#12), alleging computer fraud. The Defendants arecharged with violating certain provisions of the Computer Fraud and Abuse Act (CFAA).Specifically, the Government alleges that the Defendants “did knowingly and with intent todefraud access a protected computer exceeding his authorized access and by means of suchconduct furthered the intended fraud and obtained something of value, specifically, money, all inviolation of Title 18, United States Code, Sections 1030(a)(4) and (c)(3)(A).” Indictment (#12) at3-4.With a few exceptions which will be discussed further, Kane and Nestor raise the samemain arguments in each of the Motions to Dismiss. For purposes of these Motions (#56) (#57),the Defendants argue that, even accepting all of the Government’s factual allegations as true, theGovernment has failed to state a cognizable offense under the law. The Defendants assert thatthey have not violated the CFAA because: (1) a video poker machine is not a “protectedcomputer” under the statute; and (2) the Defendants’ actions did not “exceed [their] authorizedaccess” to the video poker machines.
Although these arguments are common between the motions to dismiss, each defendant asserts at
least one argument that is not echoed in his co-defendant’s motion to dismiss. In his Reply (#71), Kaneasserts that video poker machines are not even “computers,” much less “protected computers” under theCFAA. Nestor raises two unique arguments of his own. First, Nestor argues that he did not “access” the video poker machines, as that term in understood under the CFAA. Second, Nestor argues that 18 U.S.C. §1030(a)(4) is unconstitutionally vague. Kane adopts these arguments in his Motion for Joinder (#62).
- 2 -
Case 2:11-cr-00022-MMD -RJJ Document 86 Filed 10/15/12 Page 2 of 10
A motion to dismiss for failure to state an offense is governed by Rule 12(b) of theFederal Rules of Criminal Procedure. Rule 12(b)(3)(B) allows the Court to hear a claim that “theindictment or information fails to invoke the court’s jurisdiction or to state an offense.” In themuch cited
United States v. Boren
, 278 F.3d 911 (9
Cir. 2002), the Ninth Circuit addressed thecorrect analysis of such a motion.In ruling on a pre-trial motion to dismiss an indictment for failure to state an offense, thedistrict court is bound by the four corners of the indictment. On a motion to dismiss anindictment for failure to state an offense, the court must accept the truth of the allegationsin the indictment in analyzing whether a cognizable offense has been charged. Theindictment either states an offense or it doesn’t. There is no reason to conduct anevidentiary hearing.
, 278 F.3d at 914 (internal citations omitted). Thus, in order to withstand the instantMotions to Dismiss (#56) (#57) the indictment must allege that the Defendants performed actsthat, if proven, constitute a violation of the law under which they have been charged.
.An indictment need only be a “plain, concise, and definite written statement of theessential facts constituting the offense charged.” Fed.R.Crim.P. 7(c)(1). For purposes of due process, an indictment is sufficient if it states “the elements of the offense charged with sufficientclarity to apprise a defendant of the charge against him, primarily so that he can defend himself against the charge and plead double jeopardy in appropriate cases.”
United States v. Johnson
, 804F.2d 1078, 1084 (9th Cir. 1986) (citations omitted).The Defendants argue that the Indictment (#12) fails because the facts alleged, even whenaccepted as true, do not amount to a cognizable offense under the statute. Title 18 U.S.C. §1030(a)(4), the statute under which the Defendants are charged, makes it a crime if anyone:knowingly and with intent to defraud, accesses a protected computer withoutauthorization, or exceeds authorized access, and by means of such conduct furthers theintended fraud and obtains anything of value, unless the object of the fraud and the thingobtained consists only of the use of the computer and the value of such use is not morethan $5,000 in any 1-year period.
. The Defendants assert that they have not violated this statute because: (1) a video poker machine is not a “protected computer” under the statute; and (2) the Defendants’ actions did not“exceed [their] authorized access” to the video poker machines.- 3 -
Case 2:11-cr-00022-MMD -RJJ Document 86 Filed 10/15/12 Page 3 of 10

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