Subject: Re: Chain letter
From: [email-masked] (Bill Dunn)
Date: 30 Jan 94 01:33:56 GMT
Newsgroups: news.admin.misc

[email-masked] (Carlo Graziani) writes:

>Hello, net.

>Someone posted a chain mail letter (reproduced below) to soc.culture.italian
>today.  It is a classic pyramid scheme, of the type that is illegal if sent
>by U.S. mail, thinly disguised as a "mail order buisness" opportunity.
>Judging from the letter, I would guess that it was posted to 9 other
>USENET groups as well, although I could find no other examples in the
>groups that I read (and a couple more selected at random).

>I'm not sure what to do about this.  Is it illegal?  Is it technically
>fraud?  It sure seems like an abuse of USENET.  Advice welcome.

>Carlo Graziani

>******************** Scam follows *********************************
..."Dave Rhodes letter" deleted

Here's what my research shows... FWIW, I've found that sending a full 
copy to the postmaster at the offender's site results in near 
instantaneous action.  If done soon enough the posts have occasionally 
been cancelled.  The 10 or so that I've seen are almost certainly 
cluelessness in action, but they are still a nuisance.  

----semi FAQ follows----
November 24, 1993 			RE:  Illegal use of the 'net 
[Minor revision: January 3, 1994] 	By:  William G. Dunn 

Permission is granted to use any or all of this posting, with or without
acknowledgement.  If you use my name, you must include all of the posting,
verbatim, including this permission and the disclaimer. 

DISCLAIMER:  NOT PREPARED OR REVIEWED BY AN ATTORNEY

Several questionable schemes, such as MAKE.MONEY.FAST, have recently made
their way onto the 'net.  A common approach is the pyramid (or Ponzi)
scheme, such as a chain letter.  In these schemes, typically, the
originators and early participants are paid from the cash flow of those
they recruit to participate in the scheme.  The last ones recruited find
there is no one left to recruit, or pay, and the cash flow stops.  Ponzi
made millions on a $150 investment in the 6 months between Dec 1919 and
May 1920 before his scheme broke down.  It was simplicity itself:  give
him money, in 90 days he would give you your money back + 50%, plus 10% to
the recruiter.  In 1923 the Supreme Court determined that this was fraud
(Cunningham v Brown 44 SCt 424) -- and since then such pyramid schemes
have been known colloquially as Ponzi schemes. 

But these are not the only, or even the most common, types of fraud.  
Basically any type of scheme offering financial or other rewards (eg. 
green cards, residence visas, marriages, land, work-at-home, clean-up- 
your-credit, etc.) have the potential for fraud.  As the 
representations of profitability and/or effort required become more 
and more inaccurate they cross the line into material 
misrepresentation -- and the scheme begins to look and smell like 
fraud.  

I've concluded that "use of the 'net" "to defraud" probably violates
several United States Federal criminal statutes, including the "mail
fraud" statute 18 USC 1341.  In addition to these (and probably other --
one attorney reminded me of the possible applicability of the RICO
statutes) US Federal statutes there are probably US state laws, such as
the Uniform Deceptive Trade Practices Act, and maybe foreign laws that are
relevant as well. 

(As an aside, some of the US fraud laws were modeled on a 17th C 
English law, 29 Charles II 1676, An Act for the Prevention of Frauds 
and Perjuries -- which was apparently repealed by the Law Reform Act 
of 1954.)

[Several 'netters have said that these kinds of schemes are illegal in 
their countries, too:  Australia, Canada, several European countries.  
Any more non-USers know the law in their country?]

Participation, in the United States, in such "use of the 'net" could 
result in prosecution of all those involved in "furthering" the 
fraudulent scheme and in confiscation of certain of their assets.  
Depending on the scope and size of the scheme, widescale prosecution 
and/or confiscation seem highly unlikely, but I wanted to lay out my 
reasoning and research for others to think about and challenge.

Terms:

"to defraud" -- "The words 'to defraud' have the common understanding 
of wronging one in his or her property rights by dishonest methods or 
schemes, and usually signify the deprivation of something of value by 
trick, deceit, chicane, or over reaching." (62 AmJur2d POST OFFICE 
Section 140)  There doesn't seem to be any specific legal definition of 
fraud but there seems to be a general agreement that fraud includes at 
least:  a willful intent to deceive another so as to induce them to 
part with their property.

"mail fraud" -- "Essentially, the offense of mail fraud consists of 
the use of the mails in executing, or attempting to execute, the 
scheme to defraud;  it is not the scheme itself. . . .  Persons 
charged with a mail fraud violation need not have sent anything 
through the mails themselves.  It is only necessary that they cause 
the mails to be used." (Ibid., Sections 141, 144)

"use of the 'net" -- means basically sending, receiving, transmitting 
any message in whatever form by radio or telephone, INCLUDING all 
intermediate routings.

"furthering" -- Many people could be charged.  For instance, all those 
who knowingly transmit the fraudulent scheme by reposting or mail or 
....  The mail and wire fraud statutes seem VERY general on this, and 
could conceivably be used to charge those acting as common carriers 
whose only involvement in the scheme is to forward the illegal scheme.  
While this poses the biggest threat to the 'net, it also seems, to me, 
to be the most far-fetched.  [Anyone know what the the statutory 
exemption from prosecution is for common carriers and whether it is 
available to all who act as such, or only to a specific class of 
carriers or entities?]

This is all standard stuff, available in most libraries, so as Scoop 
Nisker might have said - if you don't like these facts, go out and 
make some of your own!

NEXT STEPS:  Somebody, preferably an attorney able to balance these 
amateur-selected factoids against the "real" world of legal practice, 
could do the 'net a service by offering a cogent analysis of the 
application of these and other applicable laws to net use.

Some questions --

1.  Who on the 'net bears responsibility for content (of mail, usenet 
postings, net services): originator only? originator and provider, 
originator, provider and all intermediaries?

2.  How real are these legal risks?  To whom?

3.  What are the options for dealing with the offenders?  Others have 
suggested, in rough order of activism: ignoring offenders, 
bozofilter/KILLFILE offenders, stuffing offenders' mailboxes, flaming 
offenders, posting counter propaganda (the approach of this posting), 
notifying sys admins at offender site (at least one contrite student 
recently related his experience at getting his account lifted by his 
admin as a result of MAKE.MONEY.FAST), notifying offender's employer, 
notifying the local Postal Inspector, filing a complaint with X (X == 
police, state district attorney, US Attorney, consumer affairs office, 
???).  

Without exception, notifying the postmaster at the offending site has, in
my experience, resulted in an IMMEDIATE (usually less than an hour,
depending on the time of day) response thanking me for bringing the
offending message to their attention.  In most cases the messages appear
to have been posted out of cluelessness, or as a joke -- responses
recognizing this seem to get better reactions from the system
administrators. 

4.  What are the other risks:  political, legislative, marketing, ?  
Given the climate of the times, there seems to be an unusual amount of 
plasticity even in something as amorphous as the 'net.  This whole 
construct could go a lot of different ways -- more anarchy and 
experimentation, more regulation and standardization, both at once, 
???.  Given the behavior of the established guardians of the public 
weal in the Jackson Games, Bell South, and other such situations, it 
does not seem unreasonable that these same folks would react in 
similar ways to even more public displays of questionable behavior.  
The immediate reaction might be prosecutorial, but the longer-term 
reaction would likely be restrictive legislation, registration, 
licensing, etc.

So, what do you think?

Following are excerpts from the US Code relating to mail and wire 
fraud.

****************************
*                          *
*   18 United States Code  *
*                          *
*********************************************************************

Section 1341 Frauds and swindles.

  Whoever, having devised or intending to devise any scheme or 
artifice to defraud, or for obtaining money or property by means of 
false or fraudulent pretenses, representations, or promises, or to 
sell, dispose of, loan, exchange, alter, give away, distribute, 
supply, or furnish or procure for unlawful use any counterfeit or 
spurious coin, obligation, security, or other article, or anything 
represented to be or intimated or held out to be such counterfeit or 
spurious article, for the purpose of executing such scheme or artifice 
or attempting so to do, places in any post office or authorized 
depository for mail matter, any matter or thing whatever to be sent or 
delivered by the Postal Service, or takes or receives therefrom, any 
such matter or thing, or knowingly causes to be delivered by mail 
according to direction thereon, or at the place at which it is 
directed to be delivered by the person to whom it is addressed, any 
such matter or thing, shall be fined not more than $1,000 or 
imprisoned not more than five years, or both.

Section 1342 Fictitious name or address

  Whoever, for the purpose of conducting, promoting, or carrying on by 
means of the Postal Service, any scheme or device mentioned in section 
1341 of the title or any other unlawful business, uses or assumes, or 
requests to be addressed by, any fictitious, false, or assumed title, 
name, or address or name other than his own proper name, or takes or 
receives from any post office or authorized depository of mail matter, 
any letter, postal card, package, or other mail matter addressed to 
any such fictitious, false, or assumed title, name, or address, or 
name other than his own proper name, shall be fined not more than 
$1,000 or imprisoned not more than five years, or both.

Section 1343 Fraud by wire, radio, or television

  Whoever, having devised or intending to devise any scheme or 
artifice to defraud, or for obtaining money or property by means of 
false or fraudulent pretenses, representations, or promises, transmits 
or causes to be transmitted by means of wire, radio, or television 
communication in interstate or foreign commerce, any writings, signs, 
signals, pictures, or sounds for the purpose of executing such scheme 
or artifice, shall be fined not more than $1,000 or imprisoned not 
more than five years, or both.

Section 1344 Bank fraud

Whoever knowingly executes, or attempts to execute, a scheme or 
artifice--

    (1) to defraud a financial institution; or

    (2) to obtain any of the moneys, funds, credits, assets,
        securities, or other property owned by, or under the custody
        or control of, a financial institution, by means of false or
        fraudulent pretenses, representations, or promises;

shall be fined not more than $1,000,000 or imprisoned not more than 30 
years, or both.

Section 1345 Injunctions against fraud

(a)(1) If a person is--

     (A) violating or about to violate this chapter [18 USC Sections 1341 et
        seq.] or section 287, 371 (insofar as such violation involves
        a conspiracy to defraud the United States or any agency
        thereof), or 1001 of this title; or

     (B) committing or about to commit a banking law violation (as
        defined in section 3322(d) of this title),

      the Attorney General may commence a civil action in any Federal
      court to enjoin such violation.

   (2) If a person is alienating or disposing of property or intends
      to alienate or dispose of property, obtained as a result of a
      banking law violation (as defined in section 3322(d) of this
      title) or property which is traceable to such violation, the
      Attorney General may commence a civil action in any Federal
      court--

      (A) to enjoin such alienation or disposition of property; or

      (B) for a restraining order to--

       (i) prohibit any person from withdrawing, transferring,
          removing, dissipating, or disposing of any such property or
          property of equivalent value; and,

      (ii) appoint a temporary receiver to administer such restraining
          order.

   (3) A permanent or temporary injunction or restraining order shall
      be granted without bond.

(b) The court shall proceed as soon as practicable to the hearing and
determination of such an action, and may, at any time before final
determination, enter such a restraining order or prohibition, or take 
such other action, as is warranted to prevent a continuing and 
substantial injury to the United States or to any person or class of 
persons for whose protection the action is brought.  A proceeding 
under this section is governed by the Federal Rules of Civil 
Procedure, except that, if an indictment has been returned against the 
respondent, discovery is governed by the Federal Rules of Criminal 
Procedure.

Section 1346 Definition of "scheme or artifice to defraud"

  For the purposes of this chapter [18 USC Sections 1341 et. seq.], the term 
"scheme or artifice to defraud" includes a scheme or artifice to 
deprive another of the intangible right of honest services.

*********************************************************************
*
* Re: prohibited mailings and mail fraud orders, see also---
*
* 39 USC 3000 et seq., especially 3005 and 3007.
* 39 CFR 111, 952
* Domestic Mail Manual, Section C (available at all post offices)
* 28 Fed Proc L Ed POSTAL SERVICE Section 63:367 Mail Fraud
* US Postal Service (202) 268-2000, or your friendly local Postal
* Inspector
*********************************************************************

-- 
William G. Dunn    [email-masked], [email-masked]