Wednesday, March 30, 2011

Tanning, Computers and Restitution

Black’s Law Dictionary defines restitution as “full or partial compensation paid by a criminal to a victim”. Black’s Law Dictionary (9th 3d. 2009).

As a legal encyclopedia notes, unlike damages in civil cases, restitution “ordered by a court pursuant to statutes governing such orders is . . . considered to be a criminal penalty imposed as punishment for a crime and is part of the criminal sentence imposed by the sentencing court.” 24 Corpus Juris Secundum, Criminal Law § 2475. And as this encyclopedia also explains, restitution “is statutorily limited to the `victim’ of the crime for which a defendant is convicted.” 24 Corpus Juris Secundum, Criminal Law § 2475.

This post is about a case in which restitution for a computer-related crime was ordered and then became an issue on appeal.

The case is State v. Nelson, __ N.W.2d __, 2011 WL 978937 (Minnesota Court of Appeals 2011), and arose as a result of Heather Marie Nelson’s employment with “a Mankato tanning salon.” State v. Nelson, supra. More precisely, on August 20, 2006,

C.F., the owner of the tanning salon, discovered one of her employees was tanning for free after her work shifts ended. The tanning salon used a computer software program to record client tanning sessions and to track cash flow related to client accounts. The employee, Leita Ann Baker, had not recorded her after-hours tanning sessions on the computer program. Baker was immediately fired by C.F.

After conducting an extensive investigation of employee time records and tanning logs, C.F. discovered that three other employees, including [Heather Marie Nelson], Sarah Maree Pierce, and Jessica Marie Lynn, had also been taking free tans and giving them to others. In order to accomplish this, they created fictitious tanning accounts, added tanning packages or other `add-ons’ to those accounts or existing accounts and later deleted the accounts or the add-ons, manipulated the computer software to award free tans, rang up tans at no charge, and engaged in other similar conduct. According to C.F., she lost $7,700 in revenue as a result of the employees' conduct.

State v. Nelson, supra. On September 20, 2006, C.F. fired Nelson. State v. Nelson, supra. Nearly three years later, she was charged with

one count of felony theft-by-swindle under Minnesota Statutes § 609.52, subd. 2(4) (value exceeding $2,500) for her conduct occurring between February 4, 2006, and August 4, 2006, and one count of misdemeanor theft under Minnesota Statutes § 609.52, subd. 2(4) (value not to exceed $250) for her conduct occurring between August 5, 2006, and September 30, 2006. The state alleged that [Nelson] stole services worth $2,873 between February 5, 2006, and August 4, 2006, and stole services worth $156 between August 5, 2006, and the end of September 2006.

State v. Nelson, supra.

The charges against Nelson differed from the usual theft charges. Traditional theft crimes make it a crime to take someone else’s personal property (e.g., money, purse, jewels, laptop, etc.) from them without their consent. (Robbery crimes are a special class of theft offenses that target using force to take the property without consent.)

The statutes under which Nelson was charged target a different, more recent crime: the theft of services. As Wikipedia notes, theft of services is “the legal term for a crime which is committed when a person obtains valuable services – as opposed to goods, by deception, force, threat or other unlawful means, i.e., without lawfully compensating the provider of said services.” As I explained in an article I published a few years ago, the theft of services crime is a relatively new crime:

The Model Penal Code, which dates back to the early 1960's and has influenced many state criminal codes, defines the offense of theft of services. Under the Model Penal Code, a person commits theft of services if he or she obtains services `which he knows are available only for compensation’ without paying for them. Services include `labor, professional service, transportation, telephone or other public service, accommodation in hotels, restaurants or elsewhere, admission to exhibitions, use of vehicles or other movable property’.

Susan W. Brenner, Is There Such a Thing as “Virtual Crime”?, 4 Cal. Crim. L. Rev. 1, ¶ 43 (2001).

Getting back to the Nelson case, she moved to dismiss the “felony theft by swindle count because the complaint was not filed within three years of the commission of the offense as required by” Minnesota Statutes § 678.26(k). State v. Nelson, supra. This statute defines the statute of limitations for bringing charges of felony theft by swindle; under the statute, a felony theft charge involving the theft of an amount less than $35,000 has to be filed within three years after the commission of the offense).

The court dismissed the felony count against Nelson on December 22, 2010, after which she pled guilty to the “remaining misdemeanor theft count.” State v. Nelson, supra. Nelson’s plea agreement stated that “between August 5, 2006, and September 30, 2006, she `tanned at the business while still on the clock’” and committed her to “`to pay restitution’ and to allow the court to `determine the amount of restitution.’” State v. Nelson, supra. C.F. then

submitted an affidavit of restitution that stated a total net loss of $24,412, which included $690 for new software, $700 for a new computer hard drive and tower, $7,668 for the value of stolen tanning services, $2,604 for employee hours to reconstruct and verify the thefts by cross-referencing daily reports to customer accounts and tanning packages, and $12,750 in `personal hours’ related to the thefts.

[Nelson] submitted an affidavit in opposition . . ., arguing that [C.F.] had offered evidence that during the viable charging period, she had stolen only one tan, on September 16, 2009, valued at $26.

C.F. testified at the restitution hearing. . . . that although the tanning salon’s computer was not broken or damaged by [Nelson’s] conduct, she needed to replace the computer and software to regain control of the business. She also explained how she documented the amounts of the thefts and the time required to verify those amounts. [Nelson] did not testify . . . nor did she offer evidence on her ability to pay restitution.

State v. Nelson, supra.

The judge ordered Nelson to “pay restitution of $19,412, which was the total amount claimed by C.F., less $5,000 she received in insurance proceeds.” State v. Nelson, supra. The judge said Nelson “`and codefendants should be jointly and severally liable for restitution to [C.F.]’”, which I find puzzling. State v. Nelson, supra. According to this opinion, when the judge dismissed the felony count against Nelson he also “dismissed all criminal charges against [her] three former coworkers” because the charges weren’t brought within the statute of limitations. State v. Nelson, supra.

Nelson challenged the amount of restitution on appeal. In ruling on her challenge, the Court of Appeals noted that “a loss claimed as an item of restitution by a crime victim must have some factual relationship to the crime committed – a compensable loss must be `directly caused by the conduct for which the defendant was convicted.’” State v. Nelson, supra (quoting State v. Latimer, 604 N.W. 2d 103 (Minnesota Court of Appeals 1999)). Nelson argued that the “amount of the restitution award” was “impermissibly inflated” because the judge “erroneously ordered her to pay restitution for conduct for which she was not responsible.” State v. Nelson, supra. The Court of Appeals agreed:

[T]he court . . . erred by including as restitution numerous items of loss that were not directly caused by [Nelson’s] conduct. [She] pleaded guilty to misdemeanor theft for conduct occurring between August 5, 2006, and September 30, 2006. However, the bulk of the losses attributable to her conduct for which the court ordered restitution occurred before this period. . . .

State v. Nelson, supra.

The Court of Appeals held that including losses in the restitution award that “were attributable to [Nelson’s] conduct that occurred before the charging period” was error. State v. Nelson, supra. It also found that the trial judge erred in other respects:

[The] award of restitution `to replace the computer and programs and to account for the theft of services’ was also erroneous because it did not constitute an economic loss for purposes of restitution. . . . [T]o be compensable as restitution, an economic loss must be `sustained by the victim as a result of the offense.’ Minnesota Statutes § 611A.045, subd. 1(a)(1).

C.F. admitted . . . that none of the employees broke or damaged her computer or software system; she claimed only that they bypassed the software to conduct their crimes. Because [Nelson] did not damage C.F.'s computer, the court's determination that `[C.F.] was compelled to replace the computer and the programs’ is unsupported by the evidence. Any deficiencies in the original computer and its software were unrelated to [Nelson’s] crime.

Finally, the total amount of time C.F. claimed for her own investigation of all the conduct involving [Nelson] and her three former coworkers was 1,647 hours. This . . . would constitute more than 41 weeks of full-time employment. Under any reasonable measure, this amount of investigative time was excessive, and it failed to identify the portion of that time that pertained to [Nelson’s] offense. As such, [C.F.] failed to meet its burden to establish that this item of loss was caused by conduct for which [Nelson] pleaded guilty.

State v. Nelson, supra.

And the Court of Appeals noted that after she pled guilty to the misdemeanor charge, Nelson “asserted, in conjunction with the restitution hearing, that the value of her stolen tan was $26”, but her guilty plea “was predicated on a theft that the state valued at $156”. State v. Nelson, supra. It also noted that “at oral argument before this court she conceded that she was responsible for at least this amount in restitution and had the ability to pay it.” State v. Nelson, supra. The court therefore affirmed the trial judge’s decision to award restitution but reduced the award to $156. State v. Nelson, supra.

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