DONALD C. RANDOLPH, ESQ., California State Bar Number: 62468 RANDOLPH & LEVANAS A Professional Corporation 1717 Fourth Street, Third Floor Santa Monica, California 90401-3319 Telephone: 310/395-7900 Attorneys for Defendant KEVIN DAVID MITNICK UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA _________________________________ UNITED STATES OF AMERICA, ) CASE NO. CR 96-881-MRP ) DEFENSE CONSOLIDATED Plaintiff, ) MOTION FOR SANCTIONS AND ) FOR RECONSIDERATION OF v. ) MOTION FOR DISCOVERY AND ) APPLICATION FOR EXPERT KEVIN DAVID MITNICK, et. al, ) FEES BASED UPON NEW FACTS ) ) DATE: June 7, 1999 Defendants. ) TIME: 1:30 p.m. ) COURT: 12 TO ALEJANDRO MAYORKAS, UNITED STATES ATTORNEY, AND TO HIS ASSISTANTS, DAVID SCHINDLER AND CHRISTOPHER PAINTER: KEVIN DAVID MITNICK, by and through his attorney of record, Donald C. Randolph, hereby moves this Court to reconsider its ruling with respect to his Motion for Discovery and Application for Expert Fees relevant to the issue of restitution. This motion is based upon the emergence of new facts since the Court's previous ruling on this matter as required by Local Rule 7.16. This Motion for Reconsideration is based upon Mr. Mitnick's original Motion for Discovery of loss amounts, the attached Memorandum of Points and Authorities, the attached Exhibits, and any oral and documentary evidence which may be presented at hearing on this matter. DATED: May 28, 1999 Respectfully submitted, RANDOLPH & LEVANAS By: ______________________________ Donald C. Randolph Attorneys for Defendant KEVIN DAVID MITNICK MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION On or about May 10, 1999, this Court denied defendant Mitnick's Motion for Discovery relating to the amount of restitution, if any, which should be imposed by this Court. On May 21, 1999, this Court denied defendant Mitnick's Application for Expert Fees relevant to the issue of restitution. Since deciding these issues, new material facts have emerged which merit this Court's reconsideration. Specifically, the defense is aware that the government and Probation Office are in possession of discovery, to which the defense has no access, relating to the alleged amount of loss suffered by the victim companies. Additionally, one victim company has announced it is making its source code available to the public for no more than $100.00 while the government has claimed in excess of $80 million loss because Mr. Mitnick obtained an unauthorized copy of an earlier version of the same software. By this motion, the defense requests the following: 1. The immediate disclosure by the prosecution of all discovery as requested in the defendant's prior motion for discovery filed April 19, 1999; 2. the disclosure of all documentation of the government's initial requests for discovery of victim company losses during 1994-1996; 3. sanctions for the government's failure to provide discovery including, but not limited to, prohibiting the government from relying upon any discovery withheld by the government to date; 4. an evidentiary hearing; 5. approval of funds necessary for a defense expert on the issue of restitution. II. STATEMENT OF FACTS On February 15, 1995, defendant Kevin Mitnick was arrested in North Carolina. In February and March 1995, the government apparently solicited and received correspondence from victim companies regarding the amount of loss allegedly suffered as a result of Mr. Mitnick's conduct in the instant offense. These letters generally describe the loss amounts attributable to Mr. Mitnick in terms of the research and development costs of software Mr. Mitnick allegedly accessed. Exhibit A. As evidenced herein, these highly inflammatory yet entirely irrelevant figures were then used by the government to vilify Mr. Mitnick in the media and exaggerate the severity of the allegations before the Court. In September, 1996, Mr. Mitnick was indicted on the instant charges. The indictment alleged that Mr. Mitnick Aobtained, or attempted to obtain, "proprietary software worth millions of dollars" from the victim companies. See Indictment at 10, &26. Seeking prosecutorial advantage in subsequent pleadings, the government alleged that Mr. Mitnick caused losses in excess of $80 million. See infra, Section III.B. In March 1999, Mr. Mitnick pleaded guilty to certain counts of the indictment. On April 14, 1999, pursuant to a defense request, the prosecution disclosed discovery consisting of six letters prepared by the victim companies which estimated the value of the software Mr. Mitnick was alleged to have accessed, as discussed above. Exhibit A. The defense now believes that this disclosure essentially constituted the totality of discovery in the government's possession on this issue at that time. This discovery reveals that the loss estimates "in excess of $80 million" alleged by the government to have been caused by Mr. Mitnick are, in actuality, estimated values of the total research and development costs associated with the software in question. The victim letters fail to reflect losses actually attributable to Mr. Mitnick as a result of his unauthorized access to the victims' software. In early May, 1999, responses by some victim companies to media inquiries demonstrate that, in 1995, the victim companies apparently provided to the government the dollar amounts for the estimated value of the software, rather than the losses actually suffered, because this was the information that was specifically requested by the government. An attorney who actually wrote one such letter for victim company Fujitsu stated: "These are the losses within the parameters that the FBI provided. . . We came up with these numbers based upon what we were asked for." Exhibit B. A representative of another of the victim companies noted: "Rather than assessing damage done, the letter simply assessed the value of the property involved in the case. There's a difference." See Exhibit B. The prosecution was obviously aware that the total research and development costs of the software in question is hardly a measure of legitimate damages for the purposes of loss or restitution under the circumstances of this case, especially where Mr. Mitnick was never alleged to have disclosed unauthorized copies of the software to third parties, and the victims were not permanently, or even temporarily, deprived of the use of their software, or its associated value. Nonetheless, the government repeatedly claimed that Mr. Mitnick caused losses in excess of $80 million, and used these grossly inflated figures to its advantage. On May 10, 1999, the Probation Office disclosed the presentence report. In its report, the Probation Office calculated the amount of loss suffered by the victim companies based upon information provided by the prosecution which the defense has never been provided. While acknowledging that calculating the amount of loss in this case is a complex matter, the Probation Office's calculations are dramatically lower than the $80+ million figures proffered by the government. Nonetheless, the defense cannot properly respond even to these figures considering that it has been provided no information with which to verify or challenge them. In May 1999, victim company Sun Microsystems announced that the source code for the current version of its Solaris operating system (an earlier version of which Mr. Mitnick allegedly obtained without authorization) will be made available for free to educational institutions, and at a cost of $100 to other subscribers. This figure is in stark contrast to the $80+ million in losses/lost value attributed to Mr. Mitnick by the government. At one point, in the interests of expediency, defense counsel stated its willingness to protect all loss- related information as if it were subject to a protective order until such time as the Court was able to determine whether and to what extent a protective order for this information may be necessary. Exhibit C. Nonetheless, after further consideration, defense counsel has concluded that no good cause exists for the confidentiality of this information, and it would be inappropriate to restrict the defendant's ability to confer and participate with counsel under these circumstances. Exhibit D. To date, the government has refused to disclose the information absent unreasonable restrictions. Exhibit E. On May 25, 1999, the Probation Office stated that it refused to disclose discovery relating to loss to the defense. Exhibit F. III. ARGUMENT 1. The Government is in Exclusive Possession of Discoverable Materials After the Court's denial of Mr. Mitnick's request for discovery relating to the amount of loss suffered by the victim companies in this case, the government has informed the defense that it is in possession of additional discoverable materials. See Exhibit E. Without any legal justification, the government refuses to disclose this information to the defense unless the defense agrees to maintain it in complete secrecy. Moreover, the Probation Office has recommended the imposition of restitution based upon data relating to the amount of loss suffered by the victims to which the defense has not been privy. The defense respectfully requests that this Court reconsider its denial of the Motion for Discovery and order the government to produce all discoverable materials relating to the amount of loss suffered by the victim companies in this case. 2. The Government is Attempting to Cover Up its Own Misconduct by Conditioning Disclosure of Discoverable Material on the Defendant's Silence. Throughout the course of these proceedings, the government has engaged in a systematic abuse of power by proffering highly inflammatory, yet entirely meritless allegations relating to the amount of damage caused by Mr. Mitnick through his criminal conduct. Upon his arrest, government representatives called Mr. Mitnick "a computer terrorist" and alleged that he "had access to corporate trade secrets worth billions of dollars." Exhibit G. On September 26, 1996 the government charged Mr. Kevin Mitnick in the instant indictment and alleged in a press release that he "stole millions of dollars worth of proprietary software." Exhibit H. Since that time, the government has alleged, both before the courts and the media, that Mr. Mitnick caused "in excess of $80 million" in damages to the victim companies. These baseless allegations have been bandied about in a concerted effort to inflame both the courts and public opinion in a manner intended to materially affect the outcome of this litigation. The prosecution's actions in this regard are inexcusable. Now, after years of withholding information related to the amount of loss suffered by the victim companies altogether, the government seeks to bury the truth of its inflated allegations by refusing to disclose any information to the defense unless the defense agrees to maintain this information in secrecy. The government has not proffered, nor can it proffer, any justifiable reason why any of this information should be maintained in secret. The government accuses the defense of attempting to harass the victim companies by disclosing information regarding loss figures which were solicited by the government. Exhibit E. In reality, the prosecution's main concern is to spare itself the embarrassment and criticism which will likely follow from the public exposure of its own misconduct. The defense's only interest in this matter is to expose the truth. To the extent that this truth is uncomfortable or embarrassing to either the government or the victim companies, the defendant cannot be held to blame. 3. The Government has No Authority to Withhold the Discovery In Question The government has completely disregarded the appropriate procedure in seeking to protect this information. Rule 16 requires that the government make a sufficient showing to the Court in order to modify its discovery obligations. Fed.R.Crim.P. 16(d)(1). Instead, the government has stripped the Court of this authority and simply designated on its own which materials it wishes to disclose and which it will not. The government has no authority to condition compliance with its constitutional and statutory discovery obligations on the defendant's willingness to enter into a code of silence. The defense does not and will not volunteer to further the government's agenda by entering into a confidentiality agreement in order to receive evidence to which it is already legally entitled. As a sanction for the government's refusal to comply with its discovery obligations, the defense respectfully requests that this Court refuse to consider any discovery within the government's possession which, as of this date, has not been produced to defense. Fed.R.Crim.P. 16(d)(2). 4. This Court Should Order the Government to Openly Disclose All Discoverable Materials to the Defense. As noted by the Probation Office, placing a value on the loss resulting from the unauthorized use of intellectual property such as computer source code is somewhat complex. PSR & 152. What is plainly obvious, however, is that Mr. Mitnick's conduct clearly did not deprive the victim companies of all use and value associated with their software. The government's efforts in soliciting inflated and entirely irrelevant research and development costs for the purposes of bolstering its prosecution of Mr. Mitnick are akin to manufacturing evidence. On April 14, 1999 the government produced six letters from victim companies which estimated the research and development costs for the software obtained by Mr. Mitnick without authorization. It appears from similarities in each of the letters that the government, through either the prosecutors or their agents, directed the victim companies to provide information regarding the research and development costs of the software allegedly compromised by Mr. Mitnick. This scenario is further bolstered by recent comments made by a representative of at least one of the victim companies which demonstrate that the victims were prompted to provide estimates of the research and development costs of the software Mr. Mitnick was accused of copying, rather than actual loss estimates. Exhibit B. This Court should order the government to disclose all information and communications made between the government and the victim companies which resulted in the loss estimates they provided. E. This Court Should Reconsider its Denial of Mr. Mitnick's Application for Expert Fees Relevant to Restitution. As evidenced above, wildly varying loss figures have been proffered by the government and the Probation Office for the purposes of determining the appropriate amount of restitution, if any, which should be imposed by this Court. The government has alleged losses exceeding $80 million while the Probation Office has calculated the loss at just over $1 million. Meanwhile, at least one of the victim companies is now publicly offering the current version software Mr. Mitnick obtained without authorization for a mere $100.00. Given the disparity between the possible loss calculations, the defense requires an expert in this field in order to competently represent Mr. Mitnick on the issue of restitution. /// /// /// /// III. CONCLUSION For all the foregoing reasons, this Court should order the government to openly produce all discoverable materials to the defense, without qualification. DATE: May 28, 1999 Respectfully submitted, RANDOLPH & LEVANAS By: ________________________ Donald C. Randolph Attorneys for Defendant KEVIN DAVID MITNICK One letter was dated September, 1996. As of May 10, 1999, the Probation Office made a conditional finding that the total potential loss in this case is $1,143,129.00. Mr. Mitnick is unwilling to voluntarily agree to non-disclosure of this information absent a showing of cause by the government and a specific Court order as required by Fed.R.Crim.P. 16. The highest upward sentencing adjustment contemplated by the Sentencing Guidelines is for losses in excess of $80 million. U.S.S.G. 2F1.1. For example, in its opposition to Mr. Mitnick's Application for Bail before the Court of Appeals for the Ninth Circuit, the government argued that Mr. Mitnick's pretrial detention was not approaching the length of his potential sentence if convicted, arguing as follows: "Even if defendant were to plead guilty and received a three level reduction in his offense level for acceptance of responsibility, he would face a guideline range of 70-105 months, depending on his criminal history, based upon a loss in excess of $80 million. . ." (emphasis added). Exhibit I. The defense is informed that at least one victim company, Sun Microsystems, is now making more recent versions of the source code Mr. Mitnick is accused of stealing available for free to educational institutions and at a cost of $100.00 to other subscribers. Exhibit J. Given this fact, it is hard to conceive how the government could argue that the unauthorized disclosure of this data to a single individual deprived the company of the total research and development costs associated with the software. In fact, the confidentiality of this information now appears to have little, if any, value to Sun. A representative of victim company Sun Microsystems, recently remarked on the renewed vitality which has been brought to the software industry as a result of the recent trends towards marketing "open source" programs. These programs make the source code available to the public to analyze and/or modify. According to one of Sun's chief technology officers, "increased sharing of technology will accelerate the adoption of open computing and further fuel innovation in the software development community, creating benefits for both customers and developers." Exhibit K.