A federal appellate court recently rejected arrguments by two criminal defendants that portions of the CAN-SPAM Act are so vague, they violate the Fifth Amendment and First Amendment. The appellate court's ruling means the defendants will spend serious time in prison and be required to repay millions of dollars in restitution.
The defendants were Matthew Simpson and Nathan Schafer. According to the indictment, they were two very busy guys. Beginning in 2003, Simpson and Schafer, along with others, set up a number of companies to rip off telephone and internet service providers. Their ventures included American Discount Telecom (ADT), a company that promulgated a method of using routing codes that made long distance or toll-free calls appear to be local calls, thus avoiding paying larger telephone service providers for use of their networks; TxLink, a wholesale dialup Internet company which stole network capacity and diverted customer payments from a company called CommPartners; camophone.com, a spoofing service that allowed customers to disguise the number they were calling from, which allowed spoofed calls to be routed locally through toll-free lines ,thereby avoiding paying fees for the calls ; ColoExchange , a colocation company that Simpson used to engage in both lease fraud and insurance fraud; Aston Technology, a company that Michael Faulkner, a co-conspirator, pretended to control to obtain network capacity without paying for it; and Union Datacom (UDC), Premier Voice, Lone Star Power, lncavox, and several other corporate entities that entered into contracts for commercial telecommunications services, leases, and other agreements for goods and services, which were not paid for. The companies were then abandoned or renamed by the co-conspirators to avoid the debts.
Simpson and Schafer provided false identity information and postal addresses; provided false credit histories, bills, invoices, financial statements, and credit references; and used assumed identities in applications and contracts in order to hide their association with the shell corporate entities and with each other. These guys may have been c rooks, but they were enterprising.
The two were convicted under Section 1037(a)(2) of the CAN-SPAM Act, which authorizes prison time for individuals who "relay or retransmit multiple commercial electronic mail messages, with the intent to deceive or mislead recipients, or any Internet access service, as to the origin of such messages.”
Simpson argued that the statutory provision was vague and overly broad. In his view, that defect constituted a violation of his Fifth Amendment right to Due Process and his First Amendment right to engage in "commercial speech.” But the Fifth Circuit disagreed.
In the court's view, the statue was sufficiently clear about what it prohibited - e mail messages sent with an intent to deceive. No real ambiguity there. And no due process problem.
As for the First Amendment argu ment, the court agreed that commercial speech is entitled to First Amendment protection. But only if that speech is neither false nor misleading. And the CAN-SPAM act expressly excludes political or charitable speech, so it is not ove rly broad. Simpson's First Amendment rights were restricted only after a finding that the speech was false and misleading. There 's no First Amendment protection at that point.
Simpson was sentenced to 20 years in prison and Schafer got 9 years. The restitution award exc eeded $20 million. No word if the unluc ky s pammers will as k the Supreme Court to review this . But they will have plenty of time on their hands to work on the appeal.