United States v. Bae

Raj PagariyaCase Summary

Calculation of loss in a case of computer fraud under CFAA by a lottery ticket merchant

United States v. Soo Young Bae
250 F.3d 774
In the United States Court of Appeals for the District of Columbia Circuit
Case Number 00-3095
Before Circuit Judge Ginsburg, Circuit Judge Randolph, and Circuit Judge Tatel
Decided on May 25, 2001

Relevancy of the Case: Calculation of loss in a case of computer fraud under CFAA by a lottery ticket merchant

Statutes and Provisions Involved

  • The Computer Fraud and Abuse Act, 18 U.S.C. § 1030
  • The United States Federal Sentencing Guidelines (Section 2F1.1(b))

Relevant Facts of the Case

  • The District of Columbia Lottery Board gave a license to the defendant to operate a terminal for printing and dispensing lottery tickets for sale.
  • The defendant used the terminal to generate tickets with a face value of $525,586, for which he did not pay.
  • The total value of winning tickets amounted to $296,153. Out of this amount, he successfully obtained all but $72,000.
  • The defendant pleaded guilty to computer fraud under Section 1030. Thereafter, the District Court sentenced him to 18 months in prison.
  • The defendant challenges this sentence, arguing that the court erred in valuing the loss due to the fraud.

Prominent Arguments by the Counsels

  • The defendant’s counsel argues that market price is an inappropriate measure of loss. Fraudulently obtained goods have a low marginal cost of production.
  • The government’s counsel pointed out that measuring loss in terms of replacement costs rather than at fair market value would result in capricious sentences.

Opinion of the Bench

  • The defendant only challenges the trial court’s calculation method. He has not challenged any potentially relevant data, such as the face value of lottery tickets, his commission, and the value of winning tickets.
  • Lottery tickets have an equal probability of winning until the drawing determines the winners. A ticket’s market value always exceeds its expected payoff because it is priced at a level that reflects some of the value consumers derive from playing odds. As a result, the winning ticket’s value increases to the prize money’s value money. However, the value of losing tickets goes to zero.

Final Decision

  • A reasonable estimate of the loss is the fair market value of the lottery tickets when the defendant printed them. Thereby, the Court of Appeal affirmed the District Court’s decision.