United States v. Channon (Matthew)
881 F.3d 806 (2018)
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Rule of Law:
Electronically stored information presented as spreadsheets can be admitted as 'originals' if they accurately reflect data from an underlying database and are either machine-generated non-hearsay or fall under the business records exception. However, criminal forfeiture money judgments must strictly adhere to traceability to the offense or comply with substitute-asset provisions under 21 U.S.C. § 853(p).
Facts:
- Matthew and Brandi Channon used fictitious names and addresses to open rewards accounts, known as MaxPerks accounts, at OfficeMax.
- The Channons used these fraudulent accounts to obtain over $100,000 in OfficeMax products and rewards.
- They created variations of a few email addresses (e.g., teechur123.45678@gmail.com) which OfficeMax recognized as unique but gmail did not, allowing them to claim purchases by other customers and generate undeserved rewards.
- The Channons also used various fraudulent accounts to sell over 27,000 used ink cartridges to OfficeMax, receiving $3 in rewards for each after purchasing them for an average of $.32.
- Over a 21-month period, the Channons redeemed a total of $105,191 in OfficeMax rewards through their scheme.
- Steven Gardner, an OfficeMax fraud investigator, discovered the scheme after noticing an unusually high number of online adjustments across several different accounts.
- OfficeMax daily sent data it collected to a third party, SHC Direct, which would consolidate the data into user-friendly Excel spreadsheets (Files 1 and 2) for OfficeMax's use without altering the raw data.
Procedural Posture:
- Matthew and Brandi Channon were charged and subsequently convicted by a jury in the United States District Court for the District of New Mexico for wire fraud and conspiracy to commit wire fraud.
- Prior to trial, the Channons objected to the admission of summary exhibits derived from OfficeMax's computer records, arguing they were not originals and were hearsay.
- The district court rejected the Channons' arguments, finding that the spreadsheets were originals under Federal Rule of Evidence 1001(d) and business records, and thus admissible.
- After the Channons' convictions, the government moved for entry of an order of forfeiture.
- The district court entered a money judgment of forfeiture, jointly and severally, against Matthew and Brandi Channon in the amount of $105,191.
- Matthew Channon and Brandi Channon, as Defendants-Appellants, appealed the district court's decision regarding the admission of exhibits and the money judgment of forfeiture to the United States Court of Appeals for the Tenth Circuit.
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Issue:
1. Did the district court abuse its discretion by admitting summary exhibits derived from OfficeMax's computer records, specifically Excel spreadsheets, as 'originals' or admissible under a hearsay exception, when they accurately reflected the underlying database and were machine-generated or business records? 2. Did the government meet its burden to prove that the amount forfeited was traceable to the wire fraud offense, or did the district court's money judgment of forfeiture improperly fail to conform to substitute-asset requirements?
Opinions:
Majority - Kelly, Circuit Judge
1. No, the district court did not abuse its discretion by admitting the summary exhibits because the Excel spreadsheets were properly found to be 'originals' under Federal Rule of Evidence 1001(d) and were either machine-generated non-hearsay or admissible business records under Rule 803(6). Rule 1006 permits summary exhibits to prove the content of voluminous writings if the underlying information is admissible and the originals or duplicates are available. Rule 1001(d) defines an 'original' of electronically stored information as 'any printout — or other output readable by sight — if it accurately reflects the information.' The district court's finding that Files 1 and 2 accurately reflected the database information, based on testimony from government witnesses and the process described by a former SHC manager, was supported by the record and thus not clearly erroneous. Since the spreadsheets were considered originals and provided to the Defendants, the objection to access to the full database failed. Regarding hearsay, the Excel spreadsheets contained machine-generated transaction records, which were produced by machines and therefore fall outside the purview of Rule 801 because the 'declarant' is not a person. Alternatively, even if considered hearsay, the records would fall under the business records exception (Rule 803(6)) as they were prepared by OfficeMax and transferred daily to SHC in the normal course of business. The presentation of these business records in a different form (spreadsheet from a database) for trial is permissible. 2. Yes, the government failed to meet its burden to prove the amount forfeited was traceable to the wire fraud offense. The government conceded that a remand was necessary to conform the money judgment to the requirements of 21 U.S.C. § 853(p), the substitute-asset provision. Forfeiture under 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461 requires property to be 'traceable to the violation,' and Honeycutt v. United States clarified that § 853(p) provides the only method for the forfeiture of untainted property. Therefore, the case was remanded for further proceedings on the money judgment of forfeiture.
Analysis:
This case significantly reinforces the admissibility of electronic evidence, particularly data summarized from large databases, under the Federal Rules of Evidence. It clarifies that spreadsheets accurately reflecting underlying data can be deemed 'originals' and that machine-generated records are often non-hearsay or fall within the business records exception, thus streamlining the evidentiary process for digital information. The decision provides crucial guidance for cases involving complex financial transactions and schemes where digital records are central to the prosecution. Furthermore, it underscores the strict requirements for criminal forfeiture, emphasizing the need for the government to establish clear traceability of assets to the crime or to properly invoke the substitute-asset provisions.
