State v. Nagel, 12525
| Decision Date | 14 June 1979 |
| Docket Number | No. 12525,12525 |
| Parties | Blue Sky L. Rep. P 71,520 STATE of South Dakota, Plaintiff and Respondent, v. Dayo D. NAGEL, Defendant and Appellant. |
| Court | South Dakota Supreme Court |
James E. McMahon, Asst. Atty. Gen., Pierre, Thomas J. Welk, Asst. Atty. Gen., Pierre, for plaintiff and respondent; Mark V. Meierhenry, Atty. Gen., Pierre, on brief.
John J. Burnett, Rapid City, for defendant and appellant.
Appellant appeals from his conviction of the following crimes:
I. Conspiracy with Donald Samuelson to willfully and unlawfully engage in a practice and course of business in the sale and purchase of securities which worked and tended to work a fraud upon the stockholders of Dakota National Life Insurance Company and others during the months of September and October, 1977 (violation of SDCL 47-31-128);
II. Selling an unregistered security allegedly committed on October 18, 1977 (violation of SDCL 47-31-9);
III. Acting as a securities agent without registration allegedly committed on October 18, 1977 (violation of SDCL 47-31-124).
The facts are long and detailed, but of necessity by reason of the nature of the charges, must here be set out in full.
Prior to any activity in the State of South Dakota, Rainbow Sales International, Inc. (Rainbow Sales), had been incorporated in the State of North Dakota. The corporate headquarters for Rainbow Sales was stated to be Horace, North Dakota (advertised as Fargo's fastest growing suburb). As a matter of fact, Horace, North Dakota, had a population of only four hundred people and is approximately fifteen miles from the city of Fargo, North Dakota. The post office address of Rainbow Sales was listed as a post office box number at the Horace, North Dakota, post office.
The testimony of Cecelia Grunewalt, Director of the Division of Securities in the State of South Dakota, revealed that on October 4, 1977, a certificate of authority to do business in South Dakota was issued to Rainbow Sales, with Lawrence Bihlmeyer, an attorney officing in Rapid City, South Dakota, named as registered agent. Further, the records of the Division of Securities revealed that Rainbow Sales was not licensed to sell securities in South Dakota; that no license had ever been issued to appellant as a security agent; and that Donald Samuelson, employer of appellant, also was not licensed as a security agent in South Dakota.
Initially, it ought to be here observed that the dates of the various happenings that led to the arrest and conviction of appellant are of vital importance in the understanding of the claimed unlawful activity of appellant.
It appears that Donald Samuelson and appellant came to the Rapid City area in the early part of September, 1977. On September 16, 1977, Samuelson telephoned and asked Lyle Beaton, Agency Director for Dakota National Life Insurance Company (Dakota National), to meet him at the Imperial 400 Lounge in Rapid City. Mr. Beaton, accompanied by his wife, and Donald Swanson, a sales representative for Dakota National, and his wife, went to the Imperial 400 Lounge, where they met Donald Samuelson, his wife Val, and the appellant. Appellant was introduced by Samuelson as one of his salesmen. Appellant said very little at this meeting. Samuelson explained that he was working for Rainbow Sales, purchasing motels and other investment properties. Beaton and Samuelson had earlier worked together as insurance salesmen in North Dakota, and that was the basis for their acquaintance with each other. Beaton did not know appellant prior to the meeting. Beaton owned the Ranch House Motel in Rapid City, and it was agreed Samuelson would try to find a buyer for the motel. In return, Beaton promised to assist Samuelson by providing him with the names of stockholders in Dakota National. Samuelson indicated that he was interested in purchasing stock in Dakota National in order to raise $50,000.00 to exercise an option to buy the Lake Bruin Motel in Louisiana. To pay for the stock Samuelson would give a promissory note for the value of the stock, plus a cash payment of $3.00 per share by the stockholder, which cash would be matched by Rainbow Sales. The note was to bear interest at twelve percent per year, and due in five years.
On September 19, 1977, Beaton accompanied Samuelson to Batesland, South Dakota, appellant not being present, where Samuelson showed one Max Deckert a pitch book containing a picture of the Lake Bruin Motel, as well as Beaton's motel. No stock was exchanged at this time. Samuelson indicated to Deckert that Beaton had money invested in Rainbow Sales, which was not true.
On September 22, 1977, Swanson and Samuelson went to Deckert's farm, appellant not being present, and at this time Deckert gave Samuelson 500 shares of Dakota National stock and a check for $100.00. Samuelson gave Deckert a receipt for $1,500.00.
On September 26, 1977, Walter Dale Miller, President of Dakota National, told Swanson and Beaton to immediately discontinue associating with Samuelson, or lose their jobs. Beaton thereupon went to Samuelson, told him to leave town, and also advised that they had discussed going to see the Attorney General. Beaton bought back Max Deckert's stock and also paid Samuelson's motel bill.
On October 3, 1977, appellant contacted Richard Olson, a salesman for Dakota National, and asked him to join him for lunch. At the luncheon meeting, appellant asked Olson for a list of stockholders in Dakota National. Appellant explained that he wished to call on the stockholders to advise that he had a good investment opportunity for them. Olson refused to furnish the list. Olson inquired of appellant if he was familiar with Rainbow Sales. Appellant denied any knowledge thereof. Appellant also denied knowing Samuelson or Beaton. This conversation was reported to the Attorney General.
On October 7, 1977, appellant and Samuelson went to the ranch owned by brothers Irwin and Hollis Young, near Philip, South Dakota. Samuelson talked with Hollis about his stock in Dakota National (Irwin had only an annuity with the company). Samuelson said he wanted to buy Hollis' stock in order to use it as security to purchase the Ranch House Motel in Rapid City and the Lake Bruin Motel in Louisiana. Samuelson said he was representing Rainbow Sales. Irwin gave Samuelson a check for $3,000.00 to invest for him. Irwin received a receipt from Samuelson, who promised to deliver a promissory note in that sum at twelve percent interest. Although Samuelson did most of the talking, appellant informed Irwin and Hollis that he had just returned from Louisiana, where he had stayed at the Lake Bruin Motel and that his purpose there was to look into the possibility of purchasing it. Appellant said it was a good piece of property for investment, since it was doing an excellent business. Appellant accompanied Hollis to Philip, South Dakota, where Hollis had his Dakota National stock in the safe deposit box at the bank. Appellant suggested he and Hollis wait for Samuelson at the hotel in Philip. Hollis gave Samuelson 216 shares of stock, plus $300.00 cash. Samuelson gave a receipt and promised a promissory note from Rainbow Sales.
On October 10, 1977, Swanson received a call from Samuelson and was asked to meet Samuelson at Roman's Ron Devu. Besides Swanson and Samuelson, Val Samuelson and appellant were also present. Samuelson told Swanson he wanted him to work for Rainbow Sales. Swanson questioned the legality of Samuelson's operations. Samuelson first advised Swanson that everything was legal but later admitted it was possible they might get arrested for a misdemeanor. Attempts were made by Val Samuelson to get attorney Lawrence Bihlmeyer to the meeting, but were not successful. Appellant insisted that Bihlmeyer had advised that what they were doing was legal, but that even if it was illegal, "the most they could get busted for was a misdemeanor." Appellant further claimed Bihlmeyer was a good attorney and would take good care of them. Appellant and Samuelson showed several one hundred dollar bills to Swanson. Appellant told Swanson there was plenty of money to be made. Swanson told Val that Beaton had given Samuelson's pitch book to the Attorney General.
On October 12, 1977, Beaton and Swanson met with the Attorney General's office and it was decided that an investigation of Rainbow Sales should be commenced. George O'Clock, a retired F.B.I. agent, was contacted, as well as Thomas Timmons, to assist by listening to sales presentations. Walter Dale Miller, President of Dakota National, was asked to issue stock certificates of Dakota National to these individuals. Swanson was to advise Samuelson that he would go to work for him in order to assist in the investigation. O'Clock assumed the identity of Kenneth Forney, who with his wife owned stock in Dakota National.
On October 14, 1977, Swanson met Samuelson at Roman's Ron Devu. Val Samuelson and attorney Lawrence Bihlmeyer were present also. Appellant was not present at this meeting. Bihlmeyer advised Swanson he was attorney for Rainbow Sales, and that in his opinion Samuelson's operation was legal, but that if it was not, the most they could be held for was a misdemeanor.
On October 15, 1977, Samuelson having directed Swanson to set up meetings with Dakota National stockholders, and Swanson having been directed by the Attorney General's office to comply with the request, a meeting with Thomas Timmons and George O'Clock (posing as Kenneth Forney) was arranged. Samuelson (without appellant) met Timmons as prearranged and offered Timmons $3.00 per share for his stock, if Timmons placed matching cash in that amount, and in return Rainbow Sales would match the cash and issue its promissory note to Timmons for the total amount of the stock, plus cash payment, bearing interest at twelve percent. Timmons stated he did not have that much cash immediately available, so a later...
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