U.S. v. Seidlitz

Citation: United States v. Seidlitz, 589 F.2d 152 (4th Cir. 1978).

Factual Background
Optimum Systems, Inc. (“OSI”), a computer services company, was under contract to install, maintain, and operate a computer facility at Rockville, Maryland, for use by the Federal Energy Administration (“FEA”). Under the contract, persons working for FEA in various parts of the country could use keyboards at communications terminals in their offices to send instructions over telephone circuits to the computers in Rockville; the computers’ responses would be returned over telephone circuits and displayed on the sender’s computer display screen.

Seidlitz helped to prepare the software installed at the Rockville facility and was responsible for the security of the central computer system. After approximately six months as Deputy Project Director of OSI, Seidlitz resigned his job and returned to work at his own computer firm in Alexandria, Virginia.

Approximately six months later, a computer specialist employed by the FEA, and temporarily assigned to the OSI facility, detected an unauthorized intruder who had gained access to the computer system. It was determined that the intruder had gained access by telephone from outside the OSI facility. The telephone company manually traced the call to Seidlitz’ Alexandria office, but would not divulge the results of the trace except in response to a subpoena.

The following day, OSI activated a special feature of its computer system, known as the “Milten Spy Function,” which automatically records any requests made of the computer by an intruder and any computer responses to such requests. The telephone company was again asked to trace the call when it was suspected that the unauthorized person was using the computer. This trace lead once again to Seidlitz’ Alexandria office, though OSI was not so informed.

OSI then advised the FBI of the intrusions and, at the FBI’s suggestion, the telephone company conducted two additional manual traces when alerted by OSI. Both of these calls were terminated, however, before the traces had progressed beyond the telephone company’s office in Lanham, Maryland, which served 10,000 subscribers. The telephone company then installed “originating accounting identification equipment” in the Lanham office. Shortly thereafter, two calls were made to the OSI computer and were traced to Seidlitz’ Lanham residence.

The FBI then searched (with a warrant) Seidlitz’ Alexandria office, seizing, inter alia, a copy of the user’s guide to the OSI system and some forty rolls of computer paper on which OSI source code was printed. Seidlitz’ Lanham residence was also searched (with a warrant), where the officers found a portable communications terminal which contained a teleprinter for receiving written messages from the computer, as well as a notebook containing access codes previously assigned to authorized users of the OSI computers.

The indictment against Seidlitz charged him with transmitting two telephone calls in interstate commerce as part of a scheme to defraud OSI of property consisting of information from the computer system.

District Court Decision
Seidlitz filed a motion to suppress the evidence seized from his office and residence, claiming that the searches had been invalidated by the use of illegal electronic surveillance to obtain the information contained in the affidavits supporting the warrants. The district court rejected this motion, ruling, inter alia, that the information obtained by use of the “Milten Spy Function” was not covered under Section 605 of the Communication Act of 1934 and that neither Title III of the Omnibus Crime Control and Safe Streets Act of 1968 nor the fourth amendment were violated, since the information was obtained with the consent of a party to the defendant’s telephonic communications.

The court further ruled that neither Title III nor the fourth amendment were violated during the tracing of the telephone calls, since the number of the telephone from which the calls were placed was determined by a process which did not entail the interception of the “contents” of the communications.

Over defense objections, much of the challenged evidence was admitted at trial, and the telephone traces, as well as the operation of the “Milten Spy Function,” were described to the jury. In the face of this evidence, Seidlitz conceded that he had retrieved the information from the computers, but claimed to have acted only out of concern for the security of the OSI system and stated that he intended to present the printouts to OSI officials to prove to them that their security was inadequate. Seidlitz also claimed that the software system that he retrieved &mdash; WYLBUR &mdash; was not a trade secret or other property interest of OSI sufficient to qualify as “property” within in the meaning of the wire fraud statute. Seidlitz was convicted of two counts of fraud by wire.

Appellate Court Decision
On appeal, Seidlitz renewed his “illegal surveillance” claims and further argued that the evidence before the jury was insufficient to establish either his fraudulent intent or that the WYLBUR system constituted “property.” The court of appeals affirmed, holding that (1) the use of manual telephone tracers and the “Milten Spy Function” did not constitute an invalid electronic surveillance; and (2) there was sufficient evidence from which the jury could have found that the WYLBUR system was “property,” and that Seidlitz’ possessed fraudulent intent in obtaining the WYLBUR system without authorization.