Wisconsin Supreme Court ponders definition of electricity

Listen to this article

State prosecutors seek to prove conspiracy to commit felony theft by fraud

In prison, a regular phone call to a friend or spouse outside the thick walls of detention can be the difference between serving time without hope for the future and finishing a sentence with the twinkle of something worthwhile at the end.

But in the case of inmate Matthew Steffes, phone privileges were used to carry out a plan to set up numerous “burn out” phone lines for prisoner use, allegedly costing SBC Communications thousands of dollars in unpaid phone bills.

Although the proven facts of this Wisconsin Supreme Court case might seem to create a virtually open and shut appeal, in State v. Matthew R. Steffes, 2011 AP 691, tough questions about the nature of false representation, the definition of “electricity” and jury instructions have now brought this appeal to the state’s highest court.

Case history

In 2009, a jury found Steffes guilty of two counts of conspiracy to commit felony theft and sentenced him to two concurrent two-year terms, with 30 months extended supervision, to be served consecutively to another sentence he was already serving. He also was ordered to pay $28,061 to SBC as restitution.

Both the trial and appellate courts denied relief to Steffes’ claims of insufficient evidence. Steffes contended that the state failed to prove a key element of the crime, the state gerrymandered the statutory definition of the word “electricity” to help prove its case and that key jury instructions were erroneous as a matter of law.

Starting almost seven years before that, Steffes had been cellmates with Joshua Howard at Wisconsin’s Dodge facility, and again later at the Waupun Correction Institution.

Sometime in 2003, Steffes’ sister Rheanan Hoffman and another outside contact, Angela Berger, agreed to help set up “burn out” phone lines. Both women had children fathered by Howard.

The prison’s Central Billing Service keeps close track of all outgoing collect phone calls, court records indicate. If any one number is called too much or the set dollar figure limit is exceeded, all calls to that number are blocked until the balance is paid.

If nobody pays, the line is “burned” and deactivated permanently.

“Burn out” lines give prisoners a continuing line of access to the outside world, according to witness testimony. When the unpaid bill on a “burn out” line gets cut off, the bill typically goes unpaid and another number and line is used.

To set up burn out lines, Rheanan Hoffman convinced a relative to falsely use his own address to set up “Nick’s Heating and Cooling” and Berger talked her co-worker into allowing “Douyette Typing Service” to be fictitiously run out of her home.

Additional burn lines were set up using the names and information of unsuspecting patients from a local health clinic. Their basic information had been stolen by a clinic employee who was a friend of Rheanan Hoffman.

Over an 18-month period in 2002 and 2003, Steffes made 322 phone calls totaling 6,562 minutes on the “burn out” lines, leaving an unpaid phone balance of more than $25,000.

Steffes admitted using the phones but said that he was “only a beneficiary” of the scheme, which was actually set up by his sister and cellmate Joshua Howard. Joshua Howard had already pled guilty and was serving time.

Court records showed overwhelming evidence that Rheanan Hoffman and Berger had given false information to set up SBC phone accounts.

The arguments

But Steffes contends that Wis. Stat. 943.20(1)(d) takes more: someone in the conspiracy must make an actual false promise or representation to pay that induced SBC to provide phone services.

Although there is evidence that the woman who set up this scheme used fake business names and phony contact names, there is no evidence that the woman made a promise to pay for phone service,” Steffes said.

Steffes in part relied on a 1973 Wisconsin Supreme Court case, Schneider v. State, 60 Wis.2d 765, where a defendant had used a false purchase order from another business to obtain store credit and purchase merchandise. In its ruling, the Schneider court explained that the use of a fake business name “was not the essence of the fraudulent scheme” but merely circumstantial evidence.

The state responded that Rheanan Hoffman in 2003 told a DOJ investigator and others that she never intended to pay for the phone services, and only later testified in court that she intended to pay “sometime down the road.”

Additionally, the statutory language of Wis. Stat. 943.20(1)(d), which states that “false representation includes a promise made with intent not to perform,” actually suggests by definition that an express promise is just one form of false representation.

That distinction, coupled with legislative history that the state alleged further supports this interpretation of “false promise” should guide the court in denying Steffes relief on this ground.

To be convicted of conspiracy to commit felony theft by fraud, the state had to show Steffes, or someone in his conspiracy, conspired to steal ‘tangible property” valued at more than $2,500. Anything less would likely be misdemeanor theft.

By statute, however, “services” are not tangible property. So the state’s charge was based on the allegation that Steffes and his co-conspirators were responsible for the “theft” of that electricity necessary, “applied electricity,” in part to keep those phone lines in operation and run the telephone exchange for SBC, and not the services provided.

In order to prove theft of “applied electricity,” an AT&T (previously SBC) group manager testified about the extent of electrical power used to power system equipment, which was used to deliver phone services to paying customers.

To look at the statutory definitions of “tangible property” and “electricity” this way, Steffes responded, would mean that this form of “applied electricity” could include every service industry that relies on electricity. Steffes argued that it would be difficult to find any service industry that didn’t rely on some form of electrical energy to provide its service.

The state countered that “electricity” as defined in Wis. Stat. 943.20(2)(b) encompasses electricity used for phone lines. The defendant stole an “applied” form of this electricity that was used to power the phone lines, the state argued.

Oral arguments were held Feb. 12 and a decision is expected later this term.