These cases are to be associated with and are supportive of the Statement that I presented in behalf of the Bell System to the Subcommittee on Courts, Civil Liberties, and the Administration of Justice of the House of Representatives Committee on the Judiciary on February 18, 1975. Should you have any questions with respect to the foregoing, I shall be pleased to discuss them with you. Sincerely, Enclosure. H. W. WILLIAM CAMING, Attorney. CITATIONS OF REPRESENTATIVE JUDICIAL DECISIONS UPHOLDING THE LEGALITY OF THE METHODS EMPLOYED BY ASSOCIATED OPERATING COMPANIES OF THE BELL SYSTEM TO GATHEER EVIDENCE (INCLUDING LIMITED RECORDING), FOR PROSECUTORY AND BILLING PURPOSES, OF THE COMMISSION OF ELECTRONIC TOLL FRAUD THROUGH THE USE OF SO-CALLED BLUE AND BLACK BOXES OR OTHER ELECTRONIC DEVICES United States v. Sugden, 226 F. 2d 281 (9th Cir. 1955), aff'd per curiam, 351 U.S. 916 (1956) United States v. Beckley, 259 F. Supp. 567 (N.D. Ga. 1965) United States v. Hanna, 260 F. Supp. 430 (S.D. Fla. 1966), aff'd upon reh., 404 United States v. Kane, 450 F. 2d 77 (5th Cir. 1971), cert. denied, 405 U.S. 934 (1972) Nolan v. United States, 423 F. 2d 1031 (10th Cir. 1970), cert. denied, 400 U.S. 848 (1970) Bubis v. United States, 384 F. 2d 643 (9th Cir. 1967) United States v. McDaniel, unreported Memorandum Decision (9th Cir. 1974), copy of which is attached, distinguishing Bubis supra. United States v. Baxter, 492 F. 2d 150, 166-67 (9th Cir. 1973) Katz v. United States, 389 U.S. 347, 352 (1967) Burdeau v. McDowell, 256 U.S. 465 (1921) United States v. Shah, 371 F. Supp. 1170 (W.D. Pa. 1974) United States v. Freeman, 373 F. Supp. 50 (S. D.Ind. 1974) United States v. DeLeeuw, 368 F. Supp. 426 (E.D. Wisc. 1974) United States v. Jaworski, 343 F. Supp. 406 (D. Minn. 1972) People v. Garber, 275 Cal. App. 2d 119, 80 Cal. Rptr. 214 (Ct. App. 1st Dist. 1969), ⚫ cert. denied, 402 U.S. 981 (1971) THE LIBRARY OF CONGRESS, CONGRESSIONAL RESEARCH SERVICE, Washington, D.C., March 3, 1975. To: House Judiciary Committee, Attention: Bruce Lehman. This memorandum is in response to your request and our subsequent telephone conversation wherein you requested a legal memorandum discussing the legality of telephone company monitoring for anti-fraud purposes as disclosed by a St. Louis Post-Dispatch article of February 2, 1975. A. THE TELEPHONE COMPANY'S MONITORING According to the newspaper article and testimony of Mr. H. W. William Caming, attorney for American Telephone and Telegraph Company, before the Subcommittee on Courts, Civil Liberties and the Administration of Justice on February 18, 1975, the telephone company monitored nearly thirty million long-distance phone calls during the six year period from 1964 to 1970. During this period of time the phone company monitored only outgoing, direct distance dialed calls in five cities. In each of these locations several trunk lines were selected out of a large number. Scanners would then pick up a call and look at it with logic equipment in order to determine if the call had the proper direct current supervisory signals. This supervisory signal goes to and activates the company's billing equipment, and if there is a voice conversation without this signal there is a strong indication of a possible fraudulent long-distance call. The phone company attorney stated that these calls were selected by the equipment randomly. The scanning was done at random, "but it was specific selection on designated logic principles of the particular call." When there was a preliminary indication to the mechanical equipment that there was an illegally placed call, the call would be transferred to a tape-recorder. As reported in the newspaper, the recorder would record a segment or the entire content of the call. Approximately 1.5 million of these calls were recorded and sent to a central location to be analyzed by listening to the conversation. However, fewer than 25,000 of these calls were considered to be indicative of fraud, and during the first four years of this activity about 500 calls were confirmed as fraudulent. Thus it seems that a large number of nonfraudulent calls were monitored and recorded over a long period of time by the phone company. B. THE LAW During the period that the phone company was conducting its monitoring operation, two federal statutes governed wiretapping and electronic surveillance. Section 605 of title 47 was passed by Congress in 1934 and read as follows prior to June, 1968: "No person receiving or assisting in receiving, or transmitting, or assisting in transmitting, any interstate or foreign communication by wire or radio shall divulge or publish the existence, contents, substance, purport, effect, or meaning thereof, except through authorized channels of transmission or reception, to any person other than the addressee, his agent, or attorney, or to a person employed or authorized to forward such communication to its destination, or to proper accounting or distributing officers of the various communicating centers over which the communication may be passed, or to the master of a ship under whom he is serving, or in response to a subpena issued by a court of competent jurisdiction, or on demand of other lawful authority; and no person not being authorized by the sender shall intercept any communication and divulge or publish the existence, contents, substance, purport, effect, or meaning of such intercepted communication to any person; and no person not being entitled thereto shall receive or assist in receiving any interstate or foreign communication by wire or radio and use the same or any information therein contained for his own benefit or for the benefit of another not entitled thereto; and no person having received such intercepted communication or having become acquainted with the contents, substance, purport, effect, or meaning of the same or any part thereof, knowing that such information was so obtained, shall divulge or publish the existence, contents, substance, purport, effect, or meaning of the same or any part thereof, or use the same or any information therein contained for his own benefit or for the benefit of another not entitled thereto : Provided, That this section shall not apply to the receiving, divulging, publishing, or utilizing the contents of any radio communication broadcast, or transmitted by amateurs or others for the use of the general public, or relating to ships in distress." In June, 1968, Congress passed the Omnibus Crime Control and Safe Streets Act of 1968, 82 Stat. 197 (1968). Title III of that Act, 18 U.S.C. §§ 2510-2520, generally made it a federal crime to intercept or attempt to intercept any wire or oral communication or to disclose or attempt to disclose or use information obtained by an unlawful interception. Several exceptions to this prohibition were given in the statute including one that allows law enforcement officials to secure a court order approving interceptions. Another exception is found in 18 U.S.C. § 2511 (2) (a) which states: "It shall not be unlawful under this chapter for an operator or a switchboard, or an officer, employee, or agent of any communication common carrier, whose facilities are used in the transmission of a wire communication, to intercept, disclose, or use that communication in the normal course of his employment while engaged in any activity which is a necessary incident to the rendition of his service or to the protection of the rights or property of the carrier of such communication: Provided, That said communication common carriers shall not utilize service observing a random monitoring except for mechanical or service quality control checks." Title III also amended Section 605 so that the prohibition of that section became subject to 18 U.S.C. §§ 2510-2520. The statutory language in section 605 does not grant an exception for communication carriers or their employees. However, such an exception has been created by judicial interpretation. One of the most significant cases on this point is United States v. Sugden, 226 2d 281 (9th Cir. 1955), aff'd per curiam, 351 U.S. 916 (1956). In Sugden, the defendant was indicted for conspiracy to violate the immigration laws. Part of the evidence was obtained by a Federal Communications Commission employee, who intercepted radio communications broadcast over a licensed radio station by unlicensed operators. The defendant moved to suppress the evidence, and the trial court was of the opinion that the evidence was obtained in violation of Section 605 and granted the motion to suppress. On appeal the United States Court of Appeals reversed. The appellate opinion starts by making an interesting distinction: "The government must concede that if the facts were the same save that [the government agent] had tapped the Sugden's telephone line and obtained the same information without the Sugden's consent as he did by monitoring the air waves, then the trial court's rulings were correct. 226 F. 2d at 284." The court went on to say that the purpose of Section 605 was to protect the means of communication, and the court held that this purpose would not support an application of that section to an unlicensed operator. It seemed implicit in the Act, the court said, that agents of the F.C.C. could make interceptions in order to enforce the Federal Communication Act. "Therefore, we hold that as to private radio communications, . . . the voice must be legally on the air; otherwise one who hears, . . . may make full disclosure. Giving the one who broadcasts without authority any protection under Section 605 could not tend to protect the means of communications. 226 F. 2d at 285." The Sugden case was affirmed per curiam by the United States Supreme Court with 3 Justices dissenting. However, the distinction made by the Ninth Circuit between the protection given to a licensed operator and the protection given to an unlicensed operator by Section 605 has been criticized. Note, 44 California L. Rev. 603, 606 (1956); Note, 42 Virginia L. Rev. 400, 401 (1956). Also, the Sugden court seemed to ignore the language in Nardone v. United States, 302 U.S. 379, 382 (1937), that 66 the plain words of § 605 forbid anyone, unless authorized by the sender, to intercept a telephone message, and direct in equally clear language that 'no person' shall divulge or publish the message to any person.' The Supreme Court in Nardone interpreted the phrase "no person" to include federal officers, and the Court went on to say that "Congress may have thought it less important that some offenders should go unwhipped of justice than that officers should resort to methods . . . destructive of personal liberty." 379 U.S. at 383. If Section 605 applies to federal law enforcement officers it would also seem to apply to communications carriers, although the Nardome court did not discuss this point. Since the Supreme Court did not issue an opinion when it affirmed Sugden the law is not clear. Three federal courts of appeal have given the telephone company an exception to Section 605, however. Nolan v. United States, 423 F. 2d 1031 (7th Cir. 1969), cert, denied, 400 U.S. 848 (1970); Hanna v. United States, 404 F. 2d 405 (5th Cir. 1968), cert. denied, 394 U.S. 1015 (1969); Brandon v. United States, 382 F. 2d 607 (10th Cir. 1967); Bubis v. United States, 384 F. 2d 643 (9th Cir. 1967). In Bubis, the telephone company was investigating a situation in which a device was being used to enable the caller to circumvent the company's recordkeeping equipment so as to avoid long distance charges. As a result of information obtained by keeping a record of the member and duration of telephone calls made, the phone company connected automatic monitoring equipment to Bubis' telephone line. This equipment monitored all of his incoming and outgoing telephone calls over a three month period and tape-recorded the conversations of all such calls. The company notified the government that some of the recorded conversations revealed gambling information and the tapes were subpoenaed. Bubis was convicted and appealed on the grounds that the district court erred in denying his motion to suppress the evidence obtained through the recordings. The Ninth Circuit Court of Appeals said that: "To apply the literal language [of § 605] to the foregoing circumstances, would, in our view, reach an absurd result, contrary to common sense and reasonable business practices. . . . It would mean that communications systems are powerless to take reasonable measures to protect themselves and their properties against the improper and illegal use of their facilities. We do not believe that in the enacement of Section 605, or in any of the provisions of Title 47, Congress intended to deprive communications systems of their fundamental right to take reasonable measures to protect themselves and their properties against the illegal acts of a trespasser. "When a subscriber of a telephone system uses the system's facilities in a manner which reasonably justifies the telephone company's belief that he is violating his subscription rights, then he must be deemed to have consented to the company's monitoring of his calls to an extent reasonably necessary for the company's investigation. 384 F. 2d at 647." A similar interpretation of Section 605 is found in Brandon v. United States, supra, and United States v. Beckley, 259 F. Supp. 567 (N.D. Ga. 1965). The Bubis court went on to hold that the monitoring and tape-recording in the instant case had continued for such a length of time, after ample evidence of illegal use had been secured, that it was unreasonable and unnecessary. "To sanction such practices on the part of the telephone company would tend to emasculate the protection of privacy Section 605 was intended to protect." 384 F. 2d at 648. The Hanna decision is a curious one. Hanna was charged with violation of the federal wire fraud statute and the interstate gambling laws. Most of the evidence consisted of tape recordings which resulted from the monitoring of Hanna's telephone lines by the telephone company. The company had detected an unusual condition on a certain telephone line in Miami, and this condition was such as to indicate that a device was used to circumvent the company's toll equipment. The suspected telephone number was subscribed to by Hanna. A phone company engineer confirmed the use of a "blue box" on Hanna's line, and a company employee attached a tape recorder to the line in order to record the electronic signals emanating from the "blue box." The recorder operated only during the first 35-45 seconds of all telephone calls placed with the "blue box" during a 3 week period. The defendant asked the trial court to suppress the evidence. This court refused, reading into Section 605 “an implied right to monitor under certain conditions." 260 F. Supp. 430, 433 (S.D. Fla. 1966). On appeal, the United States Court of Appeals for the Fifth Circuit reversed the lower court in its first opinion published at 393 F. 2d 700. The majority relied primarily on Nardone, supra, and Bubis, supra, for the proposition that Section 605 did not imply a right to monitor by the phone company. The court also rejected the suggestion that, by his illegal use of the telephone company facilities, Hanna impliedly authorized the interception of any communication. After rehearing the case, the Fifth Circuit issud its second opinion reported at 404 F. 2d 405. This later opinion affirmed the lower court and was necessary, the court explained, because the original opinion was in error as to the facts and the law. In its second opinion, the court found that recording limited parts of telephone conversations was necessary for the telephone company to comply with. the duties imposed by 47 U.S.C. § 220 and 26 U.S.C. § 4251. The Fifth Circuit also felt bound by the Sugden case. "It must, therefore, be conceded that when the use of the communication facility itself is illegal, section 605 has no application, at least insofar as concerns the person guilty of such illegal users [sic, uses]. Whatever we might otherwise think, this Court is bound by the Sugden decision. 404 F. 2d at 408" (emphasis added). However, the court failed to distinguish Nardone, the case relied on by the court in the first Hanna opinion. The Hanna decision was appealed to the United States Supreme Court, but certiorari was denied. 394 U.S. 1015 (1969). Justices Fortas and Douglas dissented. They would have granted certiorari to resolve the area of conflict between Bubis and Hanna. By this time Congress had passed Section 2511(2) (a) of Title 18, and Justice Fortas wrote that it ". . . is by no means clear that the new statute would authorize this kind of conduct if a similar case occurred today." In Nolan, supra, the defendant attempted to suppress tape recordings obtained by the telephone company as part of an investigation of illegal use of its long distance lines. The Tenth Circuit held that the evidence was obtained legally under Section 605. As to the senders of illegal calls, the Nolan court said that Section 605 ". . . was not intended as a refuge for the wrongdoer who uses the telephone in a scheme to violate the wire fraud statute." 423 F. 2d at 1031 (citing Brandon and Sugden). With regard to the recipients of illegal calls, the court relied on Hanna for the argument that the telephone company has the right to monitor its lines in order to fulfill its statutory duty to detect toll fraud. The court also pointed out an alternative theory that there was an implied exception to the second clause of Section 605. Of course, the fact that the Supreme Court denied the petition of certiorari in Nolan does not mean that the Court approved this decision. It should be noted that in Hanna, Brandon, Beckley, and Nolan the defendants were using the telephone illegally, and the telephone company made tape recordings only of the illegal calls. None of these courts had to consider whether the taping of an innocent phone call would be legal under Section 605, although the Bubis opinion seems to say that it would not. In each of these cases the phone company had evidence that a specific phone line was the source of fraudulent calls prior to any tape-recordings. Also, none of these cases had to discuss the legality of random monitoring by the phone company. Thus it does not seem clear that under Section 605 the phone company had the legal right to randomly monitor all outgoing calls, tape-record all those calls that appeared to be fraudulent, including the entire conversation, and then listen to the conversations to determine if they were indeed fraudulent. In 1968 Congress passed Section 2511 (2) (a). This section declared that it would not be unlawful for a communication common carrier employee to intercept a communication in the normal course of his employment while engaged in an activity necessary for the protection of the rights or property of the carrier. However, the statute also provides that the carriers shall not utilize "service observing or random monitoring" except for mechanical or service control checks. The legislative history of this section does little to explain what is meant by random monitoring. There is no House Report and the Senate Report says: "Paragraph (2) (a) provides that it shall not be unlawful for any operator of a switchboard or employees of a common carrier to intercept, disclose, or use wire communications in the normal course of their employment while engaged in any activity which is a necessary incident to the rendition of his service or the protection of the rights or property of the carrier. It is intended to reflect existing law (United States v. Beckley, 259 F. Supp. 567 (D.C. Ga. 1965)). Paragraph (2) (a) further provides that communication common carriers shall not utilize service observing or random monitoring except for mechanical or service quality control checks. Service observing is the principal quality control procedure used by these carriers for maintaining and improving the quality of telephone service. Such observing is done by employees known as service observers, and this provision was inserted to insure that service observing will not be used for any purpose other than mechanical and service quality control. S. Rept. No. 1097 at 93, 90th Cong. 2d Sess. (1968)." Beckley was not a "blue box" or "black box" case. It involved a conspiracy to defraud the telephone company by an employee of the company and others. The court simply said, without citing any authority, that, "Section 605 does not prohibit the telephone company from monitoring its own lines." 259 F. Supp. at 571. One author has interpreted Section 2511(2)(a) to mean that the monitoring must be random and it must be done to determine mechanical or service quality in the case of a communication common carrier. "No monitoring for criminal misuse as such would be acceptable under this provision." J. George, Constitutional Limitations on Evidence in Criminal Cases 158 (1973 ed.). After diligent research no reported federal appellate court cases that interpret Section 2511(2)(a) could be found. Three federal district court cases involving this section have been reported. In United States v. Deleeuw, 368 F. Supp. 426 (E.D. Wisc. 1974), the telephone company connected a dialed number recorder to the defendant's telephone line. In addition, the company recorded a one minute conversation of the defendant whenever the mechanism was activated by a "blue box" frequency. The defendant was indicted for fraud, and on his motion to suppress the evidence the court held that ". . . the action taken by the . company in attaching a . . . detector to the defandant subscriber's line, which device recorded . . . the conversations had on such line in only those instances where a blue box' frequency was actually applied thereto, constituted the type of nonrandom monitoring for the protection of property which is sanctioned by 18 U.S.C. § 2511(a)(i)." 368 F. Supp. at 428. ... On the basis of an analysis of a computer printout it was suspected the defendant Shah may have been using a "blue box." The phone company monitored Shah's line and recorded the beginning portion of any conversation when the "blue box" was used. Shah was charged with violating the wire fraud statute, and |