Kilbride and Schaffer were convicted in 2007 on conspiracy, fraud, money laundering and obscenity charges in connection with a $2-million business that sent out millions of email messages embedded with hardcore pornographic images.
They were sentenced to five years in federal prison and ordered to pay $1.3 million, but were released on bail pending an appeal of the convictions. The judgment is one of the first successful prosecutions under the CAN-SPAM Act.
The Justice Department said they registered their domains under the name of a "fictitious employee at a shell corporation" and that the two had set up shop in the Republic of Mauritius — both CAN-SPAM violations. They also are alleged to have used overseas banks to launder and hide money from the IRS.
The appeal challenges the lower court’s instructions to the jury on obscenity charges that allowed the jury to consider evidence from jurisdictions outside their own community.
Industry attorney Greg Piccionelli of Piccionelli & Sarno said the appeal seeks to redefine “the Miller test,” or the application of local community standards to determine whether materials are obscene. It is “outdated and simply cannot be applied to Internet communications,” he told XBIZ in July.
The judge’s application of the test at trial created an “unprecedented hybrid instruction that combined local and non-local community standards,” Piccionelli added.
Gary Jay Kaufman of the Kaufman Law Group said the appeal also argues that the court erroneously allowed the government to bring in witnesses from all over the country and testify that they were “offended” by the images.
“The fact that lay witnesses were permitted to testify as to their opinion of the images was truly unbelievable and by itself constitutes grounds for reversal; their opinions were completely irrelevant,” Kaufman said.