1 IN THE CIRCUIT COURT OF THE STATE OF OREGON 2 FOR THE COUNTY OF WASHINGTON 3 4 STATE OF OREGON, ) ) 5 Plaintiff, ) ) 6 vs. ) No. C940322CR ) 7 RANDAL LEE SCHWARTZ, ) ) 8 Defendant. ) 9 10 11 TRANSCRIPT OF PROCEEDINGS 12 13 BE IT REMEMBERED THAT on the 11th 14 day of September, 1995, the above-entitled matter 15 came on for Hearing before the HONORABLE ALAN C. 16 BONEBRAKE, a Circuit Court Judge. 17 18 APPEARANCES 19 MR. THOMAS J. TINTERA Deputy District Attorney 20 Representing the Plaintiff 21 MR. MARC SUSSMAN Attorney at Law 22 Representing the Defendant 23 24 25 1 WITNESS INDEX 2 3 FOR THE STATE: Direct Cross ReD ReX 4 5 John Woodard 4 6 7 FOR THE DEFENDANT: 8 9 James Deibele 8 10 Cindy Scheel 11 18 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 MORNING SESSION 2 BEGINNING AT 9:15 A.M. 3 SEPTEMBER 11, 1995 4 5 MR. TINTERA: State of Oregon v. 6 Randal Lee Schwartz, case number C940322CR. 7 Defendant is not in custody. He's appearing here 8 with his counsel, Marc Sussman. 9 THE COURT: Mr. Sussman, ready to 10 proceed? 11 MR. SUSSMAN: Yes, we are, Your 12 Honor. 13 THE COURT: Does either party wish 14 to call witnesses or produce evidence in this 15 hearing? 16 MR. TINTERA: Yes, Your Honor. 17 THE COURT: Both sides? 18 MR. SUSSMAN: Yes, Your Honor. 19 THE COURT: Let's start with the 20 State then. Call your first witness. 21 MR. TINTERA: John Woodard. 22 23 24 25 4 1 JOHN WOODARD 2 called as a witness on behalf of the Plaintiff, 3 having been first duly sworn under oath, was 4 examined and testified as follows: 5 6 THE CLERK: State your full name and 7 spell it for the record, please. 8 THE WITNESS: John Woodard. 9 W-o-o-d-a-r-d. 10 11 DIRECT EXAMINATION 12 13 BY MR. TINTERA: 14 Q Mr. Woodard, how are you employed? 15 A I'm employed by Intel Corporation as a 16 counsel resident here in Hillsboro, Oregon. 17 Q So you're an attorney for Intel? 18 A Yes. 19 Q And are you familiar with the facts of 20 the criminal case against Randal Schwartz? 21 A I am. 22 Q And have you also involved yourself in 23 knowing what Intel has done in response or because 24 of the actions of Mr. Schwartz? 25 A Yes, I am. 5 1 Q And could you tell me if Intel, as the 2 victim in this case, has resorted to consulting 3 with outside counsel in regard to the actions of 4 Mr. Schwartz? 5 A Yes, we did. 6 Q And for what purpose was that done? 7 A Originally to ascertain whether or not 8 there were any Oregon laws that would come in to 9 play based on what little we knew at the time and 10 then to advise us as to what our rights were under 11 the Oregon laws, and eventually to advise us when 12 we had the hearing to offer some of the information 13 that was requested. 14 Q And that would be in regard to the 15 protective order? 16 A Yes. 17 Q Do you know if there is a separation in 18 regard to -- well, were you billed for these 19 services? 20 A Yes, we were. 21 Q And was there a separation in regard to 22 what actions you were billed for? In other words, 23 is there a separation with regard to protective 24 order and things done in regard to whether a crime 25 had been committed or -- 6 1 A That would have been separated by the 2 time if nothing else. There was a couple bills in 3 December and January, I think, which dealt 4 initially with the crime and -- 5 Q Of what year? 6 A I'd have to pull them out of records 7 retention. I can't remember. I can't remember the 8 year. 9 Q Could you tell me the amounts in regard 10 to the bills, legal services that were incurred 11 because of Mr. Schwartz' actions? 12 A I think the total was 6,900 something. I 13 gave you the numbers, but I don't have them 14 memorized. 15 Q Do you have notes here in the courtroom? 16 A Yes. 17 Q Could you get those so -- 18 A The top piece of yellow paper with my pad 19 there. May I? 20 THE COURT: You may. 21 THE WITNESS: $9,635.75. 22 MR. TINTERA: Those are the only 23 questions I have. 24 THE COURT: Mr. Sussman. 25 MR. SUSSMAN: I have no questions. 7 1 THE COURT: Thank you. You may step 2 down. 3 MR. TINTERA: The other witness, by 4 Exhibit, I have is State's Exhibit 1, which I would 5 offer at this time. 6 MR. SUSSMAN: I have no objection. 7 THE COURT: No. 1 is received. 8 MR. TINTERA: Those are the only 9 witnesses that I have, Your Honor. 10 THE COURT: Okay. Mr. Sussman. 11 MR. SUSSMAN: Like to call James 12 Deibele. 13 14 JAMES DEIBELE 15 called as a witness on behalf of the Defendant, 16 having been first duly sworn under oath, was 17 examined and testified as follows: 18 19 THE CLERK: State your full name and 20 spell it for the record, please. 21 THE WITNESS: James Deibele. 22 D-e-i-b-e-l-e. 23 24 25 8 1 DIRECT EXAMINATION 2 3 BY MR. SUSSMAN: 4 Q Mr. Deibele, you've testified before the 5 court. You're still the owner and operator of 6 Teleport? 7 A Teleport, yes. 8 Q And we've asked you to come to the court 9 today to tell the court about a community service 10 project that has been brought to my attention that 11 Mr. Schwartz could provide. 12 I was wondering if you could 13 describe the service that is being provided, 14 specifically to start off with Tri-Met and what 15 Mr. Schwartz could be doing by way of a community 16 service project to assist in that. 17 A Eight months ago, Teleport hired a 18 non-profits coordinator. The purpose of this 19 position was to encourage non-profits and 20 government institutions to make information 21 available over the Internet to the public. One of 22 those governmental organizations is Tri-Met, who 23 has made their bus schedules, the Max schedule, 24 various other pieces of information available over 25 the Internet. This was a fairly lengthy project. 9 1 It took several of my employees about a month to 2 put up. 3 Because of Mr. Schwartz' skill with 4 the net and with Perl, we think that he could be a 5 very valuable asset in helping other organizations 6 to put their information up for the public. 7 Q Now, when you say -- Are there any other 8 organizations that you specifically want to put 9 information on the Internet, as Tri-Met has done, 10 that Mr. Schwartz would be able to help by 11 providing services? 12 A Yes. We have a rather long list of 13 government bodies and non-profit institutions that 14 have an account with us that are interested in 15 doing this. The problem is, it takes time to -- 16 its like any publishing process. There is the time 17 involved in gathering the information and making it 18 available, and Mr. Schwartz' particular skill would 19 be in making that information readily available. 20 Q So the demand at this point, by the 21 government is non-profit and government agencies, 22 is way beyond your staff's capacity to do this at 23 this time? 24 A Right. 25 Q Just to make sure we're clear, can you 10 1 describe exactly what is it that shows up or what 2 is the information that becomes available, and 3 let's stay with Tri-Met? 4 A What we've done for Tri-Met is, anybody 5 can call our phone number and enter Tri-Met and 6 they will be given a menu whereby they can select 7 information about fares, about disabled services, 8 any of the information that Tri-Met provided us. 9 Q Do you have any specific -- Specifically 10 what other government agencies or non-profits are 11 waiting to be able to put that kind of service on 12 line? 13 A City of Portland has some. Multnomah 14 County, we're working with them and with OMSI. 15 Some of the -- State Environmental Quality, 16 Department of Fish and Wildlife and there is others 17 beyond that that would like to take advantage of 18 this. 19 Q Sounds like it's the kind of thing that 20 can take about as many hours as somebody would have 21 available then? 22 A Correct. 23 MR. SUSSMAN: Thank you. I have 24 nothing further. 25 MR. TINTERA: No questions. 11 1 THE COURT: Thank you. You may step 2 down. 3 Call your next witness. 4 MR. SUSSMAN: Cindy Scheel. 5 6 CINDY SCHEEL 7 called as a witness on behalf of the Defendant, 8 having been first duly sworn under oath, was 9 examined and testified as follows: 10 11 THE CLERK: State your full name and 12 spell it for the record, please. 13 THE WITNESS: My name is Cindy 14 Scheel. C-i-n-d-y. S-c-h-e-e-l. 15 16 DIRECT EXAMINATION 17 18 BY MR. SUSSMAN: 19 Q Miss Scheel, what is your occupation? 20 A I'm the development director for a 21 private school called Christ the King. 22 Q And do you know Randal Schwartz? 23 A I've known Randal for over two years. 24 Q And what does the development director 25 do? 12 1 A The short answer is, I raise money for 2 non-profits. 3 Q You and I had a conversation about a week 4 ago about a community service type project growing 5 out of a need that you identified that your school 6 and actually some other private schools that you 7 work with had. 8 A Yes. 9 Q Would you tell the judge a little bit 10 about what is it that you do for the other schools? 11 Then please explain what this project is that you 12 approached me about. 13 A In regard to what I do with the other 14 schools, I suppose you would say I'm one of the 15 non-profits beyond number. I have created, if you 16 will, a calendar of special events and fund raisers 17 which happen for non-profits of all types in the 18 City of Portland. This was built out of a need 19 because as a non-profit, of course, we have no 20 money to purchase these services to have them done. 21 Specifically, I work with a group of private 22 schools, almost all of which are in a very 23 developmental stage where they have no paid staff 24 to be able to raise money for themselves, no paid 25 staff to get access to a number of things. 13 1 That kind of leads into what we had 2 discussed about the project. 3 Q And would you describe this project that 4 you told me about? 5 A Yes. Specifically what I think would be 6 the best use of Mr. Schwartz' talents in this 7 regard would be to be able to take a look at one of 8 the number one needs for many non-profits, but 9 specifically schools which never have enough money, 10 is technology. 11 The school that I work for 12 specifically, we have virtually no budget for this 13 sort of thing and it's cost us in many ways. The 14 project would involve several steps, the first of 15 which would be to take a look at the existing 16 resources of the school, see if they are 17 appropriate, work with the economy we have which is 18 developing a five-year master plan and build. 19 Q By the technology, you're referring to 20 computers for the students? 21 A Computers for the students as well as 22 staff. It is the No. 1 goal of the school to be 23 able to upgrade that. However, we don't have the 24 financial resources to be able to hire a consultant 25 to say what's right for us. In fact, that's cost 14 1 us quite heavily for a school of our size in a 2 mistake that we made last year purchasing a bundle 3 of hardware and software which is totally 4 incompatible with what we have. Had we had some 5 expertise looking at that, we would not have run 6 into that. So the first step again would be to 7 assay the situation to see what we have, to meet 8 with faculty and staff to see what they want. 9 Unfortunately, while we have 10 excellent teachers, 90 percent of them, this is not 11 an exaggeration, don't know the difference between 12 IBM and MacIntosh and aren't capable of saying this 13 is what I need for my class and transferring into 14 hardware and software, et cetera. So his talents 15 would be most valuable. 16 Q Would it require training, too? 17 A It would require training at least on the 18 part of the staff. There are several teachers 19 attempting to teach computer classes who are 20 perhaps not as qualified as they might be. 21 Another area which would be most 22 useful, which is directly why I come into play 23 since my job is to raise money and this is a main 24 goal, I do that in a large way through writing 25 grants. I do not possess the technical capability 15 1 to know what hardware-software configurations we 2 need. While I can write a fairly compelling grant, 3 I don't have the technical capability to make sure 4 that it's accurate and appropriate and that is 5 something that would be of great use. 6 And a third portion, too, -- I'm 7 running out of numbers. Fourth would be perhaps 8 ongoing, making sure that we're always in the right 9 direction of those. 10 Q You mentioned to me that one of the 11 things that, one of the goals of this project is to 12 upgrade the technology and have these academic 13 resources available for academic purposes for the 14 school was also to have access to information 15 that's available on the Internet. 16 A Yes. 17 Q And where would Mr. Schwartz come into 18 play and somebody with his skills, how would he be 19 able to assist in that? 20 A I think in a number of ways. It is 21 something that we will do. Unfortunately, because 22 we are a grade school and a private grade school, 23 it's extraordinarily important that the 24 information, the appropriate information be given 25 to the appropriate level. For example, myself, I 16 1 need to access a wide variety to find out, for 2 example, what kind of funding is available. 3 Teachers would need to access a very large variety 4 to look at. But students at the elementary age, 5 there is a great deal on the Internet we would not 6 want them to see. So there are perhaps things that 7 he could create. I believe he's called them 8 firewalls or limited access to computers that would 9 allow students to get at information which is 10 appropriate, help them with their homework, help 11 them find Tri-Met, whatever, yet allow the school 12 to continue in our mission to give them appropriate 13 training. 14 Q And in assessing this kind of program 15 from basically start to finish, doing the 16 consulting in terms of the technology, advising you 17 on the grant writing, briefing teachers and then 18 doing the Internet, these are things that you say 19 could easily take 40 to 60 hours of time for any 20 one school? 21 A I should think so. And the comment about 22 any one school, I've sort of, by default, become a 23 coordinator for many private schools in the area 24 since none of them have a budget to do this. We've 25 banded together and we do share all of our 17 1 information. I work with a group of 12 private 2 schools in the Portland and Salem area which are 3 all grade schools that all have the exact same 4 needs. Should a program like this be created, it 5 would have sort of a ripple effect in that it would 6 be shared with all the other schools. We obviously 7 don't charge for these sorts of things, so it would 8 have an impact not just on the school of 150 kids, 9 but on 12 schools, so literally thousands of 10 children and staff. 11 Q And have you ever spoken with 12 Mr. Schwartz about in terms of his having the 13 skills fitting this particular need? 14 A Yes. Because we have several levels, it 15 would take someone with a fair amount of expertise 16 and I believe he has that and could do it fairly 17 quickly and easily. 18 MR. SUSSMAN: Thank you. I have 19 nothing further. 20 THE COURT: Mr. Tintera. 21 22 23 24 25 18 1 CROSS-EXAMINATION 2 3 BY MR. TINTERA: 4 Q Could you tell me a little more about 5 these private elementary schools. 6 A Yes. In regard to what, the group? 7 Q The names, the groups. 8 A I've been in non-profit fund raising 9 about 16 years now. Most of that has been with the 10 schools. The chronic problem is there is no money. 11 Q Not that. You mentioned that you are 12 involved with 12 private elementary schools. Tell 13 me about those. 14 A Certainly. The majority are in the 15 Portland area. There are eight in the Portland 16 area, four in Salem. 17 Q What are their names? 18 A I don't have the list. I can certainly 19 get that for you. 20 Q You don't know their names? 21 A I could probably list all 12. Four in 22 Salem are done through the Marist group, which is 23 actually what it's called, and four separate grade 24 schools. I don't know the individual grade 25 schools. One development director, whom I've met, 19 1 handles them. In Portland there is Holy Cross, 2 Holy Redeemer, St. John's Baptist, and John Fisher, 3 St. Cecilia's. There are three more. I will try 4 to come up with their names. I certainly have a 5 list of that. These are schools with which I've 6 had quite some dealing in putting together, for 7 example, a calendar of special events and as these 8 conversations have grown, we've all discovered we 9 have the same needs. 10 Q The names seem to take on somewhat of a 11 religious connotation; is that fair? 12 A Is it fair? They are private schools. 13 All of these schools are 501 C3 organizations which 14 means they are not run by the church but generally 15 other organizations have state funding readily 16 available to them, which is why the need for us is 17 specifically great. We don't get tax dollars. 18 Q The names seem to imply a religious 19 direction; is that accurate? 20 A Many of them are, that's true. However, 21 all of these schools by charter, they are handled 22 through the archdioceses of Portland. However, it 23 is written into each schools charter that religion 24 is not a factor in accepting students. In fact, 25 the average breakdown is 60/40 or 70/30 in Salem as 20 1 far as Catholic versus non-Catholic. It is not a 2 consideration to accept a student. 3 Q You said something about the 4 archdioceses. What? 5 A Our charter is through that archdioceses 6 of Portland. 503 regulations come through the 7 archdioceses. It's a bundle exemption, if you 8 will. We are all registered non-profits. Each 9 individual school may not have one on file, but it 10 is umbrellaed (sic) through the archdioceses. 11 That's where that comes from. 12 MR. TINTERA: I don't have any other 13 questions. 14 THE COURT: Redirect? 15 MR. SUSSMAN: Nothing further. 16 THE COURT: Thank you. You may step 17 down. 18 Call your next witness. 19 MR. SUSSMAN: I have no other 20 witnesses. 21 THE COURT: Arguments. Statements. 22 Mr. Tintera. 23 MR. TINTERA: Thank you, Your Honor. 24 Your Honor, I made an outline of various things 25 that need to be addressed in the sentencing of 21 1 Mr. Schwartz. The first one is computer crime is 2 an unclassified crime. Needs to be classified by 3 the court for the proper sentencing and as 4 unclassified, I would liken it to if you look at 5 the current structure for the sentencing guidelines 6 for some direction, what I look at is the amount of 7 restitution and liken this by analogy somewhat to 8 the theft statutes, if restitution is greater than 9 $50,000. 10 I would classify these crimes as a 11 Category 5, which would be a two-year probationary 12 term. Also, after that categorization is made, the 13 question becomes criminal history. It is the 14 State's position that each crime being a separate 15 crime advances after conviction and sentencing, 16 advances criminal history scale. 17 Mr. Schwartz would start as an I and 18 I would suggest that would be for Count 1 and after 19 sentencing on Count 1, we proceed to Count 2. He 20 would then be a G, having had one felony 21 conviction. And after sentencing on Count 2, we 22 proceed to Count 3 and he would then be an F having 23 two felony convictions. Although for all intents 24 and purposes, it does not change the probationary 25 term, it changes an amount of custody units once 22 1 the F category is reached. 2 In regard to merger, there are 3 separate timeframes in each of these counts. There 4 are separate elements that were instructed to the 5 jury and proved beyond a reasonable doubt to the 6 jury and I've read briefly -- well, I've read it. 7 I haven't had time to digest the memo by counsel 8 that was given to me this morning and my notes 9 about that is, he's essentially saying since they 10 are in the same statutory category, that they are 11 one crime. That's just not correct. 12 There are separate elements that 13 have been proven. I analogize it to Burglary in 14 the First Degree. If you had a burglary where a 15 person entered the dwelling with an intent to 16 commit the crime of theft and the intent to commit 17 the crime of criminal mischief, in other words, 18 they were going to steal and trash the place, those 19 would be two separate crimes. 20 In this case, we have the crime of 21 entering the computer system with the intent to 22 commit the theft of the password file as one 23 separate crime and then taking the one step 24 further. Once he had the password file, then he 25 runs a crack program to steal the individual 23 1 passwords. Those are two separate events proven 2 beyond a reasonable doubt and two separate crimes 3 and both for conviction and sentencing purposes. 4 As far as restitution, the 5 restitution -- I'd refer the court to State v. 6 Lindsley, L-i-n-d-s-l-e-y, 106 OrAp 459 which dealt 7 with restitution out of Multnomah County involving 8 computer crime involving a telephone system, and on 9 Page 462, the Court of Appeals states, 10 "Investigation of defendant's computer system 11 break-in required expertise and specialized 12 technology. The defendant caused damage to the 13 system because he retrieved and used valid 14 passwords which had to be replaced." 15 As the State explained, "because 16 computer crime cannot effectively be investigated 17 or countered without diverting substantial 18 resources within the victim corporation, the 19 consumption of those resources is a damage directly 20 attributable to the defendant's criminal 21 activities. The investigatory expenses qualify as 22 peculiar damages, 137.103 Sub 2." 23 So in State's Exhibit No. 1, those 24 are exactly the expenses incurred by Intel in 25 regard to the damage and action of Mr. Schwartz in 24 1 the crimes that he has been convicted of. 2 In regard to the recovery of 3 attorney's fees, I refer the court to State v. 4 Mahoney, 115 OrAp 440, 1992 case. That involves a 5 case of sexual harassment where the victim employed 6 private counsel before criminal charges were 7 brought to determine what would be the proper 8 course of activity and then requested recovery of 9 attorney's fees as a result of the criminal 10 conviction that later occurred. The case states, 11 "There is little question but that the attorney's 12 fees were incurred because of defendant's criminal 13 activities," Page 443. 14 The evidence produced by Mr. Woodard 15 is the action that Intel took to consult outside 16 counsel in regard to Mr. Schwartz' activities were 17 exactly on point with State v. Mahoney and are 18 recoverable as restitution. 19 So we have special damages in regard 20 to the investigation and correction of 21 Mr. Schwartz' criminal activity in the sum of 22 64,717 and recovery, and also requesting attorneys 23 fees in the sum of $9,635.75. 24 The court has been provided a packet 25 of letters in favor of the defendant. What the 25 1 court is not aware of is that these, in regard to 2 the petition requests, is that there was a specific 3 announcement on the Internet with regard to the 4 petition for Mr. Schwartz. There was specific 5 instructions given to people in regard to what to 6 put in the petition and what not to put in the 7 petition. They were specifically instructed not to 8 vent any frustration, reading from the instructions 9 now, vent any frustration over Intel, the 10 convictions or the general state of the legal 11 system. To leave those comments out. 12 There has been a discussion on the 13 Internet about this particular case. It's 14 continuing now. It's not quite as active as it was 15 after the case. The content of it was that 16 Mr. Schwartz was hired to do security functions for 17 Intel and why was he convicted of this? What's 18 wrong with Oregon? There were some people that 19 correctly saw the facts that Mr. Schwartz was not 20 doing security work in the area that he was 21 involved in, criminally entering Intel Corporation. 22 Mr. Schwartz has continually refused 23 to accept responsibility for his actions. His 24 response on the Internet to the convictions, which 25 was downloaded on August 16 of 1995, was that he 26 1 refuses this theft. He was convicted of two counts 2 of theft. He puts that in quotes. He basically 3 says none of these acts were based on malicious 4 intent. He's refused to accept, this is on his own 5 news page, he's refused to accept responsibility 6 for his actions and continues to refuse to accept 7 responsibility for his actions. 8 When asked about if this was a 9 technical area and why would you go in front of 12 10 jurors, which one of Mr. Schwartz' friends referred 11 to as simpletons, which I object to, those jurors 12 worked very hard on a very complex case and to 13 refer to them as simpletons and that Mr. Schwartz 14 did not get a fair trial because of that, is just 15 not true. 16 THE COURT: Did they make reference 17 to the judge in that, too? 18 MR. TINTERA: I'm getting to that, 19 Your Honor. There is, actually, now that you 20 mention it, as well as a couple references to 21 myself, believe it or not. 22 Anyway, when there was discussion on 23 this about the Internet about why it was -- 24 Mr. Schwartz would interject his thoughts on this 25 discussion group now and then, but when there was 27 1 discussion about why it was that he went for a jury 2 of 12 as opposed to court trial, this was his 3 response. This is from Mr. Schwartz. "Some facts 4 that may not be evidence. One, Intel is the 5 largest employer in the State. Two, judges are 6 elected by the people here. Three, a judgment in 7 my favor, no matter how motivated or justified, 8 might be seen as an action against Intel. Four, 9 Intel has a fairly effective internal notification 10 system, both formal and informal." 11 Then he goes on to say, "I'm not 12 saying that I have evidence that a judge, knowing 13 he is elected by the people and Intel makes up a 14 good portion of those people, he might somehow 15 never rule against Intel for fear of not having a 16 job after the next election. No, I'm not saying 17 that at all." 18 In other words, he blames all of 19 this on Intel, Your Honor. He has refused to 20 accept any responsibility. He feels that the 21 judicial system is influenced by Intel. I assume 22 that he feels that the prosecution was influenced 23 by Intel and that, I guess, the jury, too, was 24 influenced by Intel. 25 But the fact of the matter is, and I 28 1 think Your Honor, as an experienced trial judge, 2 has reached the same conclusion, the facts of the 3 matter are that he violated Intel's policies by 4 placing the Gate program and was convicted of that. 5 He violated the trust that Intel placed in him by 6 cracking passwords and using someone else's 7 password to steal the supercomputer division 8 password file and then steal after that by running 9 the crack program. 10 That's exactly what he was convicted 11 of and that's what he's done and he refuses to 12 accept responsibility for his actions, which is why 13 I'm recommending that he go to jail. That's 14 exactly why. If he would show some degree of 15 sorrow or something to indicate that he's accepted 16 responsibility for his actions and recognize what 17 he's done is wrong, perhaps my recommendation would 18 be different. But he does not do that. He will 19 not do that. And he sits there today thinking he's 20 done nothing wrong and that he is a victim of the 21 criminal justice system. 22 Intel is the victim of his actions. 23 That's the only victim here in this courtroom. To 24 emphasize to Mr. Schwartz that what he has done is 25 wrong, it is criminal and it is a felony, I'm 29 1 suggesting that the court incarcerate Mr. Schwartz 2 and that he do it today. 3 As far as the length of 4 incarceration, I'll leave that to Your Honor's 5 discretion. 6 THE COURT: I have a question, 7 Mr. Tintera. This has to do with how we rank this 8 offense. If this had been a ranked offense under 9 the sentencing guidelines and you had chosen to 10 make this a crime seriousness 6, you would have 11 needed to allege in the indictment or the special 12 facts that involved damage of over $50,000, 13 wouldn't you? 14 MR. TINTERA: Yes. I thought of 15 that. Since it's unclassified, I think the 16 court -- there would have been no basis for me to 17 submit to the jury a special instruction as to 18 damage. There is some contention that there is no 19 basis under a Theft 1 where you allege over 50,000, 20 but I believe that's the accepted practice. There 21 would have been no way for me to do that. I think 22 we look to the court -- the court looks to the 23 sentencing guidelines as a guide, but that all the 24 elements of proof are not required. I thought 25 about that. I don't think I could have put a 30 1 separate element of the "State further alleges that 2 the damage caused by the defendant's activity is 3 $50,000 or greater." I don't believe I could have 4 properly pled that in the indictment. But I think 5 the court can look at the general sentencing 6 guidelines scheme to determine where this crime as 7 an unranked crime would fall. 8 THE COURT: There is no particular 9 case law on that point, though, is there? 10 MR. TINTERA: There is not. 11 THE COURT: Thank you. Mr. Sussman. 12 MR. SUSSMAN: Thank you, Your Honor. 13 First with respect to classification, the 14 guidelines, as you know, classified -- I believe 15 this case has to be, computer crimes, has to be 16 ranked sort of with reference by analogy to 17 property crimes and the property crimes division 18 are based on the amount of loss, either property 19 damaged or the amount stolen. The problem we have 20 in this case is that there was really no clear 21 evidence through the trial and there is no evidence 22 before the court today of what the value is of the 23 property that was the subject of the theft in this 24 particular case and the restitution amount is not a 25 proper -- I submit it is not a proper bench mark 31 1 because even -- For instance, we look at the case 2 of State v. Lindsley upon which the State has 3 relied for restitution argument. That was a case 4 based on a restitution figure where the challenge 5 was over investigation expenses incurred and 6 investigation expenses are not necessarily the 7 value, is not the same as the value of property, 8 either lost or stolen. It's a comparison of apples 9 and oranges. 10 The court is without any reference 11 in terms of the value of the property and if there 12 is no proof of the value of the property, if it has 13 any outside value, then the court should classify 14 this as a Category 2. Presumptively, it becomes a 15 Category 2 because there is no other proof of any 16 value higher than that. 17 I agree, however, it's classified, 18 it's a presumptive probation sentence and I would 19 then move on to the discussion of the next major 20 issue which, I think, will have -- may have some 21 effect on the question of sentencing on Counts 2 22 and 3, which is the merger question. 23 The key things that makes this case 24 unusual is that what we have in Counts 2 and 3 are 25 violations of identical statutes and what 32 1 distinguishes this case from the cases where you 2 have a single victim, but you could have multiple 3 convictions entered for violations of a statute, is 4 that you have first different statutory sections 5 can support the conviction on multiple counts and 6 that we have in Count 1 versus Counts 2 and 3. But 7 what distinguishes Counts 2 and 3 is that both of 8 those are based on a violation of the same statute 9 and the cases discussing merger, including the most 10 recent case which I found, which I mention in this 11 memo, was State v. Bonnie, which was decided in 12 April, 135 OrAp 314. This dealt with the 13 discussion of where you had cases that the 14 violations were for separate sections, different 15 statutes and if there were sections within a 16 statute, then for the different elements would be 17 based upon those different sections and the best 18 way to describe that would be if we are talking 19 about a theft statute and we had a count that was 20 based on theft by receiving or theft by deception 21 in the same case against the same victim, those 22 might not merge. 23 In the case that we refer to in the 24 memorandum where you involve the kidnapping 25 statute, it allowed -- they didn't merge because 33 1 there were different subsections of the kidnapping 2 statute which were pled and which were violated. 3 The felony murder cases discussing merger which 4 said the cases do not merge involve sections where 5 the felony murder listed the allegation, listed 6 separate subsections, different felonies within the 7 statute and that provides the legislative intent, 8 according to those cases, to allow separate 9 punishment. 10 But the statutory comparison 11 required by the case here is if you look at the 12 statute that is pled and violated, here the 13 statutes in Counts 2 and 3 and the statutory 14 section are identical. 15 The State's analogy is, I would use 16 the State's analogy of a burglary case but say that 17 the State's interpretation is wrong in this regard. 18 While the burglary and the theft might not merge 19 under current law, I would submit that the court, 20 if it was pled that there was the intent to commit 21 theft of a toaster oven and theft of the bread, 22 that those two would merge because you're simply -- 23 it's still the same section and it's not a 24 violation of a different type of act such as 25 designated in the felony murder statutes or the 34 1 kidnapping statute, different specific conduct 2 which are specifically listed in the statute. 3 THE COURT: If he broke into the 4 apartment and stole the toaster, then got out on 5 the street and said 'I have a toaster but don't 6 have any bread. I'll get some bread', wouldn't 7 that be two burglaries in that case? 8 MR. SUSSMAN: Well, that would be. 9 If you have the theft, once he's in, and then you 10 have the theft of the toaster and then the theft of 11 the bread and then the theft of the television, all 12 within the course of that burglary, then those 13 would merge. 14 THE COURT: I'm trying to recall the 15 evidence in this case and seems to me, as I recall, 16 correct me if I am wrong, but the evidence was that 17 first the defendant accessed the password file at 18 the super computer division, I don't recall all the 19 technical language, but somehow after that, he 20 transferred or copied it into his work station and 21 after he did that, then he instituted, took another 22 step and instituted this cracking program to try to 23 get the passwords out of it. That sounds like two 24 separate burglaries to me. 25 MR. SUSSMAN: But what was pled 35 1 first was the theft of a password and then the 2 password file and it wasn't two separate incidents 3 of the password file from SSD, and the password 4 that was the subject of the theft for which he was 5 convicted was the password that was used to access 6 the SSD password file. It was, in effect, the 7 point of entry to, if we are using the burglary 8 analogy, to get into the SSD password file to copy 9 that. Part of that same transaction. So for those 10 reasons, we argue that Counts 2 and 3 would merge. 11 With respect to restitution, first I 12 would indicate that Mr. Schwartz understands, and 13 our position is that this is a case where 14 restitution is called for, restitution is 15 appropriate. Our objection, which I flush out in 16 my letter to the court -- my objection to the court 17 today is that the State has not adequately provided 18 a record to the court, proven to the court what are 19 recoverable costs for restitution purposes. 20 All of the attorney's fees that were 21 cited by Mr. Woodard was a lump sum, part of which 22 were attributed to consultation at the beginning of 23 the case, but a large portion of that we were told 24 was due to consultation about what to turn over by 25 way of in response to the requested protective 36 1 order. Those are equivalent to litigation costs. 2 I would submit the initial consultation in this 3 case was under litigation costs which, under State 4 v. O'Brien and Samuel v. Frohnmeyer 95 OrAp 561 and 5 O'Brien at 96 OrAp 498 are not recoverable as 6 restitution expenses. 7 THE COURT: Those litigation 8 expenses are costs of a State, though, that they 9 were trying to recoup? 10 MR. SUSSMAN: In State v. O'Brien, 11 that involved a case where it said, the reference 12 that I have is "attorney's fees are not considered 13 damages when they are sought in the same action in 14 which the services are rendered. They may be 15 damages when sought in a separate action. The 16 victim could have recovered attorney's fees in a 17 breach of contract action." This is not a breach 18 of -- in terms of -- but said if recovered in that 19 action, they would not have been considered 20 damages, is what the court was holding in that 21 case. So, therefore, under 137.103 Sub 2 22 attorney's fees are not special damages recoverable 23 in a civil action arising out of the facts or 24 events constituting the defendant's criminal 25 conduct. 37 1 So we submit that the fees in this 2 case, particularly we know that some of that was 3 based on providing evidence or responding to a 4 subpoena for evidence that was necessary during the 5 course of the case, are not kinds of costs which 6 are recoverable and which shouldn't be attributable 7 for restitution purposes. 8 Now, going to the next group of 9 items listed as restitution, what I have a problem 10 with and I submit to the court is inadequate, even 11 under State v. Lindsley, we do not know from this 12 list or any list presented to the court what are 13 proper investigation expenses or expenses that are 14 specifically incurred because of the need to 15 respond to the criminal conduct for which 16 Mr. Schwartz was convicted. 17 Lindsley is slightly distinguishable 18 and notable in this regard. The case doesn't talk 19 about that a lot, but that was a case in which an 20 outside hacker broke into Pacific Northwest Bell's 21 system, took passwords and used those in order to 22 run up long distance charges. In that particular 23 case, the argument -- unsuccessful argument -- by 24 the defense was only the long distance charges 25 should have been required as restitution, not the 38 1 time it was required to investigate how did this 2 break-in take place, by somebody from the outside, 3 and investigation expenses associated with that. 4 In this particular case, we have a 5 mixture of things. If there were additional 6 expenses, and I would submit additional expenses 7 over and beyond what was normally required of the 8 employees of those that are listed on this list, we 9 know from trial testimony that many of them are on 10 a salary and were performing normal duties in 11 disabling Mr. Schwartz' passwords, changing the 12 passwords that had been discovered, that were the 13 kinds of things that they would normally do and not 14 only would not be considered necessary 15 investigation but were actually the very, the 16 problems that were being pointed out here. Those 17 are things that the company needed to do regardless 18 of Mr. Schwartz' activities. 19 But there is a certain level at 20 which some of that is the routine salary work of 21 the company. Some of it would -- if it required 22 changes, for instance, in operating the systems, 23 class changes in, or if there was overtime paid for 24 the investigation to right after this occurred, 25 perhaps there would be a basis for the restitution 39 1 there. But we don't have any evidence of how that 2 breaks down and what those, what those necessary 3 investigation expenses were that were directly 4 attributable to this and were not part of the 5 normal work of the employees which would not be 6 recoverable under State v. Heath, which was 7 distinguished in State v. Lindsley. 8 So I would suggest that some of the 9 expenses that are before the court, and the way 10 this is broken down, we have no way of knowing 11 which are specifically attributable to the 12 investigation of Mr. Schwartz' activities and we 13 could only speculate about that and there isn't 14 enough evidence for the court to do that, to impose 15 the entire amount of restitution that is being 16 asked here. 17 I want to make some comments about 18 the discussion on the Internet and about 19 Mr. Schwartz' views on this matter and how he has 20 conducted himself and represented himself both on 21 the Internet and, I think, throughout this case. 22 The State's correct in that this 23 particular case generated a great deal of 24 discussion on the Internet. Many of the comments 25 that were hostile towards Intel that were referred 40 1 to and may have been inappropriate were things that 2 were neither invited by Mr. Schwartz and, for that 3 matter, were actively discouraged by Mr. Schwartz 4 in his own communication with the Internet. 5 I think one of the things that 6 perhaps is most revealing about Mr. Schwartz' 7 attitude through this, his attitude about his 8 approach to the case is the way he has dealt with 9 Intel in the discussion with the Internet is 10 reflected in one of the letters that I would like 11 to -- that was attached to my packet of materials 12 that I would really like to direct your attention 13 to. 14 If we look at the numbered pages 15 that were attached to the petition, beginning at 16 Page 46, at the very bottom, and I know in the 17 large number of materials that sometimes things 18 gets lost, and you may have had the opportunity to 19 look at this already. I think this letter in 20 particular is not only exemplary of the kind of 21 things that, the kind of responses we've been 22 getting, but also is very revealing about the kind 23 of communication that would occur with 24 Mr. Schwartz. 25 This is a letter from Michael West, 41 1 a 40-year-old scientist with a Ph.D. working for 2 DuPont for the last 13 years. As he indicates, 3 while he's never met Mr. Schwartz, he's familiar 4 with his work in Perl and his postings in the 5 Internet. 6 Skipping the paragraphs talking 7 about his comments on Mr. Schwartz' personal skills 8 and his intelligence and attributes there, I would 9 particularly address your attention to the 10 paragraph beginning, "I currently use Perl both at 11 work for data manipulation and in my own business, 12 West Web, where I provide consulting and 13 world-wide-web on home-site creation and 14 maintenance services for business clients. Without 15 Mr. Schwartz' two fine volumes, I never would have 16 been able to start my own business. I recognize 17 that having been convicted of crimes is a quite 18 serious matter, but I also recognize that to my 19 experience, Mr. Schwartz is repentant and already 20 rehabilitated, and recognizes and acknowledges his 21 errors. He feels remorse that it has been his own 22 actions that have gotten into a quite serious 23 predicament, and I think he is worried sick over 24 the possible consequences of his errors. Of course 25 as would true for nearly anyone, he hopes to 42 1 correct the situation without ruining his own life, 2 and I think the productive nature of his own life 3 is now held in the wise hands of a judge deciding 4 his punishment." 5 This is based on the postings going 6 backed and forth with Mr. Schwartz on the Internet. 7 This is not only characteristic of much of the 8 support shown to Mr. Schwartz, but also is one that 9 reflects the attitude and the response that 10 Mr. Schwartz has made through the Internet. 11 In his postings in response to 12 inquiries, he, that have been brought to my 13 attention, including the most recent one posted in 14 there, he continues to say that he does not blame 15 Intel. That he relates that it was his own error 16 in judgment and not seeing things, not seeing 17 things, but seeing things in a focused way with 18 kind of blinders to what was Intel's interest and 19 may have been opposed to his own interests and 20 motives to get certain things accomplished, to push 21 the envelope and push the end of what he was trying 22 to do were responsible for the predicament that he 23 has found himself in and ultimately was the reasons 24 why he is here before the court convicted of this. 25 As has been reflected in this these 43 1 letters, he is a person who has given selflessly of 2 his time to this community and it is consistent 3 with his statements in the trial and the response 4 that you get in the letter and something that I 5 believe, from having dealt with this man now for 6 the last two years, wholeheartedly that this is a 7 person who has been convicted because of errors in 8 judgment. Perhaps an overdose of the certain 9 self-confidence, even calling it luberous of being 10 able to say 'I can do this. See what I can do', 11 without regard to what it meant to Intel. 12 But his actions were not done with a 13 malicious intent to harm the company, that would be 14 indicated by the State's comments. And certainly 15 would not, and with the kind of intent that would 16 justify a jail sentence if it were truly evident in 17 Mr. Schwartz' case. 18 I think one of the things very 19 telling about this is that the initial response by 20 Intel, one that's understandable, is that when they 21 saw Mr. Schwartz' activities had cracked passwords 22 at SSD and saw some of the passwords that were 23 compromised that involved Mr. Massey, the vice 24 president, and Justin Rattner, one of the chief 25 architects and engineers for SSD, that Intel became 44 1 very concerned about whether or not some very 2 valuable and sensitive information in their files 3 had been compromised and being taken and being 4 used. 5 That is perfectly understandable. 6 The fact of the matter is that, I think we heard 7 from some of the witnesses that that was certainly 8 initially a very serious concern. People didn't 9 know what he was up to and if there were other 10 things there. That was why it was necessary and 11 why it was so important to seize Mr. Schwartz' 12 personal computers at home to look at all the 13 information that was in those files to see if he 14 had taken information of that nature which would 15 have been a really profoundly serious abuse of his 16 trust and position there. 17 I feel comfortable in saying to the 18 court -- not only was there no evidence produced 19 about that at trial because they couldn't find 20 anything, but I feel very comfortable in 21 representing to the court that information wasn't 22 found because that was never Mr. Schwartz' purpose. 23 He didn't do that. It was something that early on 24 in the case when it appeared to be a concern, he 25 was polygraphed on and passed on those issues about 45 1 not having gone into those files and looked at that 2 information. 3 The basis of his activity was what 4 was there on the surface to be experimenting 5 around, exploring around and seeing what he could 6 find out and what he could do with these programs 7 and using those passwords in systems where he 8 shouldn't have been at that time in hoping to show 9 that he was valuable, that he could get some 10 benefits from this. 11 These were the things that, as the 12 State argued so ably before the jury, were the 13 benefits of personal gain that became the subject 14 of the theft and it was not anything more deeply 15 rooted in any kind of or in a desire to do damage 16 to Intel, and it is in that context that 17 Mr. Schwartz' remarks, or his statement that he 18 perceived that his conduct was one of some serious 19 mistakes in judgment and not understanding what the 20 bounds were, should be viewed and I think 21 reasonably reflect the specific nature of the 22 offense in this case. He is not the kind of 23 outside hacker that the statutes were intended to 24 protect against. 25 The record that you have before you 46 1 shows that is very much the case. If you need some 2 additional evidence of that, you have some 3 indication in those letters, for instance, of the 4 way that Internet works. That you have kind of -- 5 you do have kind of two communities. You have a 6 black hat and white hat community. The black hat 7 being the people who are looking and kind of revel 8 in their ability to break into systems to see what 9 they can do on there and the postings and who 10 subscribes to those bulletin boards and use that, 11 and that is very different from the ones that is 12 reflected here and Mr. Schwartz has been involved 13 in. 14 He's been involved in the community 15 that has typically been one of helping each other 16 out, not providing information to assist people in 17 the illegal kinds of hacking and that has been done 18 to further the benefit of this community as a 19 whole. 20 And it's in that spirit that we 21 present to you that our position that the most 22 appropriate sanctions in this case would be, aside 23 from the impact, of course, that now his being a 24 convicted felon whose reputation in a large portion 25 of the community, his access to employment in 47 1 important areas of the computer world where he had 2 built up his livelihood has been limited. 3 The fact that he had hoped to 4 continue to have, before this all happened, a long 5 association with Intel which, of course, is the 6 major -- one of the major players in this field and 7 that was lost. That those are significant 8 punishments. And he is somebody whose response 9 since then has been to say on the Internet -- and 10 my dealings with him and dealing with people he has 11 communicated with is -- what can be done? What can 12 I do to see that I don't do anything like this 13 again and other people in my position don't find 14 themselves in that kind of position. Not to say I 15 want to go after Intel, not to say that the system, 16 that the system is wrong. 17 That has been the focus of what I've 18 been hearing and I think what a lot -- and a large 19 portion of his responses to the communication has 20 been, rather than engage in villification or to 21 become part of a black hat community in the 22 computer world. 23 I would suggest the most appropriate 24 form of punishment would be a substantial period of 25 community service. I recognize under the 48 1 guidelines that 16 hours of community service is 2 the equivalent of one sanction unit. That a 3 requirement that Mr. Schwartz pay that restitution, 4 which the court find -- which there is a factual 5 basis for finding. That it is, that it has been 6 proven that it's related to, that it is the product 7 of his criminal activity only, and that a period 8 of, I suggested in my letter, I believe, 480 hours 9 of community service, which would be the equivalent 10 of 30 sanction units, would be minimally an 11 appropriate sanction in this particular case. 12 Mr. Schwartz can do, as you have a 13 glimpse of from the witnesses before you who were 14 here today, the capacity to do a great deal of good 15 for this community by applying those skills that he 16 has to non-profit organizations or to assisting 17 schools, non-profit organizations in the community 18 that would not be able to afford to do things with 19 computers or have access to the Internet and 20 service the community in a way that is truly 21 remarkable. 22 The final thing I want to say is 23 that I think that you can solicit requests for 24 letters. For about 15 years, from the time I've 25 been practicing law, I've had the time to do 49 1 sentencing hearings where you've asked people to 2 write letters to say things about your client so 3 you can have something good to say about your 4 client at the time of sentencing, but this response 5 that you've had, we've had for Mr. Schwartz is 6 singular and I suspect in the court's experience is 7 probably also singular in that the nature of the 8 outpouring of support from the wide variety of 9 people, in whose credentials and background, from 10 people who are very highly recognized to just 11 people who are interested users of the Internet, 12 who were in some way touched in a positive way by 13 this individual from throughout the United States 14 and all over the world, it reflects really the 15 nature of the person who is before you for 16 sentencing and I ask the court to consider that as 17 evidence of the kind of person who is here, not 18 somebody who is an indifferent, remorseless and 19 self-centered felon, but somebody who has violated 20 the laws, criminal laws of this state because of 21 his crossing the lines by using those skills, 22 things that were his great asset, being in this 23 case his Achilles heel, but not necessarily 24 indicative of somebody who is truly a criminal and 25 deserving of a jail sentence or that kind of 50 1 sanction. 2 I think he has taken very much to 3 heart the lesson of this and will try to serve the 4 community well in the future. 5 THE COURT: Mr. Schwartz, what would 6 you like to say? 7 THE DEFENDANT: Your Honor, there 8 hasn't been a day that's gone by since November 9 1st, 1993, that I haven't reflected on the actions 10 in 1993 that led up to me being here today. 11 Most important thing that I see is 12 that while I didn't intend any harm, what I was 13 doing has harmed a great deal. I lost business 14 because of the accusation. I lost business because 15 of the conviction now. I traded my childhood to 16 get into my career and now my career is being taken 17 away from me and that's not going to go away today, 18 either. 19 I'm sorry. I didn't mean any harm 20 and I've been working very hard to make sure that I 21 understood what went into this so that I could tell 22 people what to avoid, what not to do. 23 THE COURT: You don't mind if I 24 interact with you here a little bit, do you? 25 THE DEFENDANT: Please. 51 1 THE COURT: When you say you didn't 2 mean any harm, I've not heard during any of this 3 case of any information that you obtained that you 4 used for your own personal gain. You didn't sell 5 it, didn't give it to somebody else and although 6 you did, I've heard that you, I don't recall the 7 exact computer jargon, but that you developed 8 somehow the ability to access into Intel from the 9 outside. No one else, apparently, discovered it 10 and used it that anybody knows about. So in that 11 respect, the secrets of Intel, apparently, weren't 12 obtained by anybody else. When you say no harm, 13 that's what you mean, isn't it? 14 THE DEFENDANT: I might mean more 15 than that. I know that's a piece of it. 16 THE COURT: Do you agree that Intel 17 or anybody else, mom and pop grocery that have a 18 computer, anybody, ought to be able to set their 19 own limits and tell other people, you don't go 20 beyond these limits? 21 THE DEFENDANT: Yes, I agree. 22 THE COURT: And Intel did that in 23 this case, didn't they? 24 THE DEFENDANT: Yes. 25 THE COURT: And you went beyond 52 1 those limits, didn't you? 2 THE DEFENDANT: I could argue not 3 knowingly. I think that's probably -- 4 THE COURT: Well, the jury found 5 that you did it knowingly. 6 THE DEFENDANT: Yeah, well -- 7 THE COURT: They said you knew you 8 weren't supposed to do it, but you did it anyway. 9 THE DEFENDANT: Obviously, a 10 different understanding, and very clear that I was 11 going past the limits, now, in retrospect. 12 THE COURT: And you had known it on 13 at least two prior occasions. You had been 14 chastised for it. Wasn't there one at Tektronix 15 and wasn't there one with an incident with the book 16 publisher and they were all shocked and surprised 17 initially and they then talked with you and then it 18 was just glossed over? 19 THE DEFENDANT: Yeah. 20 THE COURT: You should have learned 21 then that when an owner sets limits, a businessman, 22 a corporation, whether it's big Intel or little mom 23 and pop grocer, whatever, it's their business and 24 they have the right to set those limits, don't 25 they? 53 1 THE DEFENDANT: Yes. 2 THE COURT: And they have the right 3 to expect that other people won't violate them, 4 don't they? 5 THE DEFENDANT: Yeah, they have the 6 right. 7 THE COURT: Have I interrupted your 8 train of thought? That's what this case is all 9 about. This is not the worst case that Intel could 10 imagine could result from somebody doing what you 11 did, but they are damned scared about it because it 12 could have ended up a lot worse than it did. They 13 don't want to have a reputation out in the 14 community that people can do this and get away with 15 it. 16 THE DEFENDANT: I understand. 17 THE COURT: And they have a 18 legitimate purpose in trying to protect the 19 information that they develop, don't they? 20 THE DEFENDANT: Uh-huh. 21 THE COURT: It's very valuable, 22 isn't it? 23 THE DEFENDANT: Uh-huh. One of the 24 things I was hired to do was make sure that people 25 don't get at their secrets. 54 1 THE COURT: Well, at one point you 2 may have been, but you weren't at this time, were 3 you, not with the super computer division? 4 THE DEFENDANT: No. 5 THE COURT: I learned things that I 6 never knew, either, but at this time -- Do you need 7 help in answering these questions? 8 THE DEFENDANT: Well, no. 9 THE COURT: That's okay. I expect 10 counsel will assist clients from time to time, but 11 the point is, you didn't have the right. You 12 didn't have the duty to protect, to be looking out 13 for Intel's interest in their super computer 14 division when you did this, did you? 15 THE DEFENDANT: I did not have the 16 right. 17 THE COURT: And if you did have 18 that, it was somewhere else. If you did. I don't 19 know that you did. That's what this case is all 20 about. Has to do with limits being set by someone, 21 a business owner, big or little, doesn't make any 22 difference, expecting that employees, that includes 23 you, even though you may have been a private 24 contractor, aren't going to go beyond those lines. 25 THE DEFENDANT: I understand that 55 1 now clearly. Mr. Tintera brought out one of the 2 messages that were on my mailing list to my group 3 of interested individuals. I think if you were to 4 look at the whole, the transmission on that mailing 5 list, you would see that repeatedly as soon as it 6 started coming up to Intel bashing, I said, "No, 7 you're missing the point here. Intel is not the 8 blame, in that I did action that resulted in my 9 being here." 10 THE COURT: Well, I don't make much 11 of that anyway, frankly. Most of the people that 12 probably responded didn't know what the facts were 13 of the case anyway. They are friends of yours or 14 acquaintances or somebody that may have known of 15 you through the Internet or wherever. I don't know 16 that it makes much difference. 17 I'll say that although reading 18 letters from supporters is interesting, too, I 19 don't give a lot of weight to that, either. 20 Frankly, a lot of the times the supporters don't 21 know a lot about the case, either. Isn't uncommon 22 for me to see letters supportive of defendants to 23 say things in letters that are absolutely not true. 24 A jury found to the contrary. I 25 read them and take them into account and, if 56 1 anything, I draw from yourself the inference, that 2 probably I already knew, that you are pretty well 3 respected in the computer community. You have 4 been. And you still are probably. Probably still 5 have a lot of supporters, but that's what I draw 6 from that. You're well thought of. 7 What else do you want to say? But 8 you should have known better. 9 THE DEFENDANT: Yeah, I should have 10 known better. 11 THE COURT: It's a terrible way to 12 learn a lesson, isn't it? Been awfully expensive, 13 hasn't it? 14 THE DEFENDANT: Extremely expensive. 15 THE COURT: That's one of the things 16 that I wrote down here when you made one of the 17 comments that you did, I interrupted you, but, 18 frankly, what happened to Tektronix previously and 19 what happened to the publishing company, I think 20 those people did you a disservice because slowly 21 over a period of time, you were taught a lesson and 22 the lesson that you were taught was that you could 23 do this and nobody was going to get too excited. I 24 mean you could do it and they'd get excited and you 25 could explain it and everything would be all right, 57 1 and you went into this situation here at Intel with 2 those two prior experiences and that feeling that 3 well, you know, I shouldn't have been doing this or 4 do this, but it's okay and it wasn't, right? 5 THE DEFENDANT: That's right. 6 THE COURT: What else do you want to 7 say? 8 THE DEFENDANT: I think that's about 9 it. 10 THE COURT: One of the things that 11 we talked about at the very beginning of the case, 12 before we started picking the jury, because there 13 was some discussion about the possibility of the 14 plea agreement, was that there was no actual harm, 15 and when I say no actual harm, I mean there wasn't 16 actually a theft and misappropriation of 17 technology, data, that sort of thing, secrets of 18 Intel. Obviously, they have been harmed in the 19 sense that this has cost them money in order to 20 correct matters and investigate matters and that 21 sort of thing. 22 Judges are like everyone else and 23 when I first saw this case, like almost any other 24 case, you have a mental impression of what it's 25 about. When I first saw the indictment here, the 58 1 mental impression I had was somehow, you accessed 2 Intel's information and secrets and you sold it, 3 did something, some sort of computer sabotage or 4 theft of secrets, that sort of thing. 5 Early on, I was advised by 6 Mr. Tintera that there was not information -- that 7 they did not have information that you had actually 8 done that; is that correct, Mr. Tintera? 9 MR. TINTERA: We couldn't prove 10 that, Your Honor, that's right. 11 THE COURT: You had suspicion but 12 you couldn't prove that. That's what's important 13 in a criminal case, what you can actually prove. 14 I've not heard anything that changes my mind on 15 that. 16 You're a real bright guy. You were 17 taught the wrong lessons. Maybe somebody in the 18 computer industry ought to teach a class on ethics. 19 Anything else? 20 THE DEFENDANT: No. 21 THE COURT: I'm concerned about 22 these restitution amounts, not that I don't think 23 some form of restitution is appropriate, but 24 Mr. Sussman's objected, Mr. Tintera, on the grounds 25 that he doesn't think you've adequately proved the 59 1 amounts of restitution and the defense having done 2 that, the only way to resolve that is with some 3 further proceedings for evidence to be shown what, 4 for instance, the legal fees and what the time was 5 spent for all these various people that were 6 involved and that is, was the money, was the time 7 spent? 8 You've got down here time and 9 material, so I assume it's for salary. I don't 10 know what the materials are, but used specifically 11 as a result of this case. But I don't know that, 12 so we're going to have to do that. It's a sizable 13 amount so I think we ought to take the time at a 14 future hearing to resolve that if the parties can't 15 agree to something else. 16 There will be restitution in this 17 case. I'm just not certain of the amount yet. 18 Mr. Tintera, anything else the State 19 wants to say? 20 MR. TINTERA: Just a couple things, 21 Judge. Mr. Schwartz has indicated to you right now 22 that the only thing he's tried to do during the 23 course of these events over the last two years is 24 just try to figure out how to make things -- how 25 other people cannot get into this situation. What 60 1 he doesn't point out to you is that before the 2 verdict was rendered, shortly before the end of the 3 trial, he mentioned to Intel employees how, after 4 the end of the trial, anticipating a verdict in his 5 favor, he was going to sue Intel because of these 6 allegations and that was never brought out and 7 that, in my mind, is not necessarily a contrite 8 person who has learned the error of their ways and 9 wants to help others not get in this situation. 10 I think that's appropriate for the 11 court to look at that. Since we're having a 12 restitution hearing, Judge, I'll reserve my 13 comments in regard to restitution until that 14 particular time. 15 THE COURT: All right. Well, I have 16 some decisions to make. First of all, I have to 17 decide the crime seriousness category and I know a 18 case has been made that Intel has lost 60, $70,000, 19 something in that range, as a result of the 20 defendant's actions. These are uncategorized 21 criminal offenses. They don't have a crime 22 seriousness on the crime seriousness scale. For 23 the life of me, I don't know why the legislature 24 doesn't assign them crime seriousness criteria or 25 numbers when they adopt these statutes. Just 61 1 leaves more doubt and more questions. They could 2 have easily done it in this case. I guess they 3 decided not to. I guess they're more interested in 4 adjourning than completing their work. I don't 5 know. 6 Nevertheless, in the situations 7 involved here, I exercise my discretion and believe 8 that these offenses -- first of all, they are Class 9 C felonies and they are crime seriousness 2 on the 10 scale. That doesn't mean that I'm going to 11 sentence each of them as crime seriousness 2, 12 though, because I thought of this possibility 13 previously and I've considered it again today and, 14 frankly, we know that there are some absurdities 15 that are drafted or that exist as a result of the 16 sentencing guidelines and that is, frankly, I can 17 place a defendant on probation for longer on a 18 misdemeanor than I can for a felony because of the 19 guidelines, so I'm going to designate one of these 20 counts as a misdemeanor because that gives me the 21 possibility of extending probation up to five 22 years. Whereas, if it's on a felony under the 23 guidelines, I think on these, I'm stuck at 18 24 months, which is certainly insufficient. 25 So what I am going to do in this 62 1 case and so that you understand what I'm going to 2 do, and neither counsel has addressed this, but 3 because there is going -- I have an idea there is 4 going to be a sizable amount of restitution and a 5 lot of community service work to do and because I'd 6 like to be able to monitor the defendant's conduct 7 for longer than 18 months, I'm going to take Count 8 1, it is a class C felony, but I'm going to 9 designate it as a misdemeanor to start with. 10 Having done that, I'm going to place 11 the defendant on probation for a period of five 12 years. The conditions of his probation will be 13 first that he obey all the general conditions of 14 probation required by Oregon law. Among those are 15 conditions that you must obey all laws. There are 16 others, too. You will have a chance to review 17 those with your probation officer. 18 Other special conditions of 19 probation will be while on probation, I am going to 20 require as a special condition of probation that 21 you not be employed by anyone, either an employee, 22 in the technical sense or even as an independent 23 contractor, without first advising them of the fact 24 of these convictions. You must tell them up front. 25 You have a lot of talents and my 63 1 assumption is people will want to hire you anyway, 2 but they'll know in advance what happened here and 3 be able to discuss that with you and take 4 precautions to be sure this sort of thing doesn't 5 happen in the future. 6 I'm going to require in this case 7 that you pay restitution to the victims in an 8 amount to be determined at a future hearing. 9 I am going to require in this case 10 that you serve 90 days in the Washington County 11 Jail, but I'm going to take advantage of the 12 ability that I have to defer the start-up date for 13 that and I'm going to have you begin your jail 14 sentence on September 1st, 1998, about three years 15 from now. You can write that on your calendar. 16 Unless I do something else, you're going to serve 17 90 days in jail starting on that date. 18 And as I do when I sentence people 19 like this, occasionally, I leave it to you and your 20 attorney to advise me and your probation officer, 21 if appropriate, 60 days or so in advance of that 22 date and if you think a case can be made at that 23 time for me to suspend that jail sentence or modify 24 the conditions of probation to not make you serve 25 it, I'll consider that. As it stands now, you've 64 1 got that jail sentence to start on that date and if 2 you want me to review your conduct between now and 3 that time, which is about three years from now, you 4 can start today and you can start building the kind 5 of record today that you would want to present to 6 me in three years. Do you understand that? 7 THE DEFENDANT: I understand that. 8 THE COURT: Those are the conditions 9 of probation on that case. There is a unitary 10 assessment on the misdemeanor of $54 for various 11 fees and costs that you have to pay as well. That 12 will be considered along with the other financial 13 obligations that you have and you can pay that off 14 in monthly installments in amounts to be -- you can 15 work that out with your probation officer. That's 16 Count 1. 17 With regard to Counts 2 and 3, there 18 is the issue of merger. I'm of the opinion that 19 they don't merge and the basis of that is, I 20 understand, Mr. Sussman, you have a very fine memo 21 here and there may be some question on that, but 22 I'm of the opinion that Counts 2 and 3 allege 23 separate acts and the evidence in this case was 24 that they were separate acts and as a matter of 25 fact, the dates alleged are different. One alleges 65 1 and incident November 1st, 1993, and the other 2 October 25th, 1993, so we have different acts, a 3 little over a week apart, and they are separate 4 crimes and although they do allege violations of 5 the same statute, 164.377, Subsection 4, they are 6 separate incidents and separate crimes and I'm 7 going to sentence separately. 8 Count 2 then is the charge of 9 knowingly accessing a computer unlawfully and for 10 the purpose of committing theft of the SSD password 11 file. On that, defendant has previously been 12 convicted now of one misdemeanor. That doesn't 13 change his criminal history score. Puts him in the 14 I category, I believe. Still in the I category. 15 You continue to go to the H category unless you've 16 had -- 17 MR. TINTERA: I believe he would be 18 an H. 19 THE COURT: He is an H. I read that 20 language again. Puts him in the H category. For 21 the record, so you understand, these last two 22 counts are going to be sentenced as felonies. He's 23 an H, 2H. The presumed sentence there is a period 24 of two years probation -- 18 months probation, I'm 25 sorry, with 90 over 30 on the custody units. On 66 1 that offense, I'm placing the defendant on formal 2 probation. Again, he's to comply with the general 3 conditions of probation required by Oregon law. 4 Special conditions of probation will be, again, the 5 condition that he not be employed by anyone as a, 6 technically, employee or independent contractor 7 without first advising them of the fact and 8 existence of this conviction. 9 I'm going to require in this case 10 that he perform -- have him perform the community 11 service work in the total amount he suggested, 480 12 hours community service work. That's to be 13 completed prior to the expiration of your 14 probation. 15 Going to require you to pay 16 restitution in an amount to be determined at a 17 future date and time. There is a $40 one-time fee 18 he has to pay for the supervision on the community 19 service work. And there is a $94 unitary 20 assessment for various fees and costs. All of his 21 financial obligations are to be paid according to a 22 schedule to be set by your probation officer. 23 And on Count 3, it's the same 24 sentence, all concurrent, which means you don't 25 have to perform 960 hours community service. Same 67 1 community service work time and same amounts of 2 restitution. It will be a new unitary assessment 3 of $94. Again, all of your financial obligations 4 will be paid according to a schedule to be set by 5 the probation department. 6 I think the sentence that I've 7 imposed here, Mr. Schwartz, fits what you did. Had 8 you actually -- had there been evidence that you 9 actually used the information, stole the 10 information for some personal gain or communicated 11 to someone else for their personal gain that 12 actually in that respect damaged someone else, I 13 would have been much more harsh. 14 What I'm sentencing you for is what 15 you did and that is, you went into areas of the 16 super computer division, their password files and 17 running the crack program to obtain the passwords 18 and got information and you were in areas you were 19 not supposed to be in. They had set limits. You 20 had done this on prior occasions. You should not 21 have done it, but, as a matter of fact, at least at 22 this point, I've seen no evidence that you used 23 that information, as I said, for any form of 24 personal gain or anyone else's. 25 It's appropriate for you, the 68 1 sentence, I think, that I've imposed, and I also 2 believe it does send a message and there ought to 3 be a message sent to other people, and I hope 4 you're a part of that, to tell people what the 5 limits are and that employers, businesses have the 6 right to set limits. 7 This field is new and developing and 8 I expect at times when these sorts of safeguards 9 are set up, there is a challenge to see if you can 10 get through into areas that you are not authorized 11 to be in, but people ought to be aware that there 12 is going to be a consequence if they do that. You 13 are now, I know, and I hope you tell others. 14 Are there any questions on what I 15 have done? 16 MR. TINTERA: Count 3 has a criminal 17 history scale of G? 18 THE COURT: That's correct. 19 Anything else? 20 MR. SUSSMAN: No, Your Honor. I 21 would think that the community service projects 22 that we have presented to the court are worthy ones 23 and worth your consideration. 24 THE COURT: I want you to talk to 25 the probation department. Ordinarily, I don't pass 69 1 judgment on proposed community service projects. 2 Like to have him talk to the probation department 3 to see if that seems to be in line with what they 4 would approve, and if it is, I don't have a problem 5 with that. I think he has unique skills and I'd 6 rather have him doing something on computers rather 7 than raking leaves or picking up cans along the 8 road. I think his service would be more helpful to 9 others in the community if we could use his 10 computer skills. If that sort of project is 11 appropriate, I'll let the probation department 12 decide that. If there is an issue involved in 13 that, I'll get involved. Anything else? 14 MR. SUSSMAN: No, Your Honor. Thank 15 you. 16 MR. TINTERA: No, Judge. 17 THE COURT: There is a monthly 18 probation feet of $50 I forgot to mention, but 19 that's automatic. 20 Thank you. What's the important 21 date that you have to remember in the future, 22 Mr. Schwartz? 23 THE DEFENDANT: September 1st, 1998. 24 THE COURT: Why is that? 25 THE DEFENDANT: That's when my 90 70 1 days begins unless you decide otherwise. 2 MR. TINTERA: Do you want to set a 3 time for restitution hearing or let docketing do 4 it? 5 THE COURT: Work with Lynda to try 6 to get a date and time set so you can present the 7 information and I can make a decision on that. You 8 can work with Lynda on that. Thank you. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 71 1 STATE OF OREGON ) ) ss. 2 County of Washington ) 3 4 5 I, Frank R. Rosales, CSR, the 6 undersigned, do hereby certify that on the date so 7 stated in the before-captioned matter, I was an 8 Official Court Reporter for the Twentieth Judicial 9 District of the State of Oregon and that as such, I 10 did make a record by means of Stenotype of the 11 before-captioned matter and that the foregoing 12 transcript is a true and accurate record of said 13 proceedings. 14 DATED this 15th day of January, 15 1997. 16 17 18 ____________________________ 19 Frank R. Rosales, CSR Official Court Reporter 20 21 22 23 24 25