State v. Andresen

Decision Date29 May 2001
Docket Number(SC 16437)
Citation773 A.2d 328,256 Conn. 313
PartiesSTATE OF CONNECTICUT v. CONSTANCE ANDRESEN
CourtConnecticut Supreme Court

Sullivan, C. J., and Norcott, Katz, Palmer and Vertefeuille, JS. Ethan Levin-Epstein, with whom, on the brief, was Monika Lahiri Escoriaza, for the appellant (defendant).

Robert M. Spector, deputy assistant state's attorney, with whom were John F. Blawie, senior assistant state's attorney, and, on the brief, Eugene J. Callahan, state's attorney, and Kevin Russo, deputy assistant state's attorney, for the appellee (state).

Opinion

KATZ, J.

The primary issue in this appeal is whether a defendant charged with selling unregistered securities under the criminal provisions of the Connecticut Uniform Securities Act (CUSA), now General Statutes §§ 36b-2 to 36b-33,1 has the burden of persuasion on the issue of whether the securities were exempt from registration. The defendant, Constance Andresen,2 was convicted of five counts of selling unregistered securities in violation of General Statutes (Rev. to 1995) § 36b-16.3 On appeal, the defendant concedes that the securities were not registered, but contends that there was insufficient evidence presented by the state to prove that the securities were not exempt from registration.4 The defendant claims that the trial court improperly placed on her the burden of proving that the securities were exempt, and that, by shifting the burden of proving this exemption to her, the trial court deprived her of her constitutional right to due process under the federal and state constitutions.5 The defendant also contends that the trial court improperly admitted into evidence a cease and desist order that had been issued against her by the state department of banking (department) in 1985, and improperly permitted testimony concerning that order. Finally, the defendant claims that her reasonable reliance on the advice of counsel precluded a conviction for selling unregistered securities. We disagree with the defendant and affirm the judgment of the trial court.

The record contains the following relevant facts. In early 1972, John Andresen and two associates formed a research and development company called Microbyx Corporation (Microbyx), which they incorporated in Delaware. Microbyx developed a specialized tamponlike device for collecting cells from menstrual fluid that, potentially, could be utilized for the early detection of cervical and endometrial cancers. Microbyx had planned to market the device as an easier and more reliable means of obtaining cell samples for cancer screening than the Pap smear test. To date, Microbyx has never marketed the device, never turned a profit, and has no employees, other than two officers.

The defendant married John Andresen in 1976 and began serving as corporate secretary and chief financial officer of Microbyx in 1984. Although the defendant had not become involved officially with Microbyx in a managerial capacity until that time, she had engaged in activities relating to its financing in 1981. After joining Microbyx, the defendant devoted the bulk of her time to the company and she and her husband conducted almost all of the business from their home in New Canaan. Sarles Associates, Inc. (Sarles Associates), an investment management and advising company that the defendant's husband had formed and controlled, provided management services to Microbyx. Beginning in 1984, Microbyx paid Sarles Associates monthly fees ranging from $8000 to $15,000.

In 1983, after receiving a complaint from an investor who had purchased securities from the company, the department began investigating Microbyx. The department discovered that Microbyx securities were not registered in Connecticut and promptly issued to the defendant and her husband a cease and desist order to prohibit further sales. The defendant and her husband requested a hearing on the cease and desist order, which was held on March 9, 1984. As a result of the hearing, the department issued findings of fact and conclusions of law, and ordered that the original cease and desist order enter permanently against the defendant and her husband.6

In 1987, Microbyx filed an application with the department to register its securities by coordination.7 The department requested that Microbyx provide a list of all of those people who had invested in the company prior to 1987 and explain on which exemption from registration it had relied in selling those securities. Microbyx withdrew the application shortly thereafter.

In 1993, Microbyx filed another application with the department to register securities by qualification.8 The department then issued subpoenas to Microbyx, the defendant and her husband. On April 13, 1994, the defendant testified before the department regarding her possible sale of unregistered Microbyx securities between 1991 and 1993. After turning over to the department records of prior sales, Microbyx attempted to withdraw its second application. The department did not permit the withdrawal,9 and instead initiated a further investigation that culminated in criminal charges against the defendant.

From 1990 to 1993, approximately ninety investors purchased securities from Microbyx, with the defendant or her husband listed on the stock certificates as the seller. At trial, several investors testified that the defendant and her husband had solicited their stock purchases and had represented to them that Microbyx had a patented, market-ready device approved by the federal Food and Drug Administration that would lead to a public offering of Microbyx stock and returns on their investments. Many were novice investors, and some were given unpaid management positions with Microbyx after they had purchased the securities. The investors were not informed of the cease and desist order, nor were they informed that the device collected cell samples that were of little use in diagnosing cancer.

Between 1990 and 1994, investors poured $1.3 million into Microbyx while the company spent only $35,000 on research and development for the cell collection device. More than $1 million was funneled to the defendant and her husband either directly or indirectly through Sarles Associates.

The state charged the defendant in 1995 with five counts of securities fraud in violation of General Statutes (Rev. to 1995) § 36b-4 (2),10 and five counts of selling unregistered securities in violation of § 36b-16.11 A trial to the court began on August 3, 1999, and continued through August 6, 1999. The trial court, Hiller, J., found the defendant guilty on the five counts of selling unregistered securities and acquitted her of all charges involving securities fraud. The defendant received a total sentence of ten years incarceration, suspended after two years, five years of probation and a fine of $10,000.12 From the judgment of conviction, the defendant appealed to the Appellate Court, and we transferred the appeal to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.

Before addressing the defendant's claims, we note that state securities laws, or "blue sky laws,"13 are remedial statutes. See Connecticut National Bank v. Giacomi, 242 Conn. 17, 67, 699 A.2d 101 (1997); see also Securities & Exchange Commission v. C. M. Joiner Leasing Corp., 320 U.S. 344, 353, 64 S. Ct. 120, 88 L. Ed. 88 (1943) (noting that state securities laws have "dominating purpose to prevent and punish fraudulent floating of securities"); Connecticut National Bank v. Giacomi, 233 Conn. 304, 320, 659 A.2d 1166 (1995) (noting that state securities laws contain antifraud provisions, require registration of brokers and sellers of securities and registration of securities themselves); People v. Landes, 84 N.Y.2d 655, 660, 645 N.E.2d 716, 621 N.Y.S.2d 283 (1994) ("purpose of [New York securities] statute is remedial: to protect the public from fraudulent exploitation in the offering and sale of securities"). "In 1977, the Connecticut legislature formally adopted the Uniform Securities Act (Uniform Act)." Connecticut National Bank v. Giacomi, supra, 233 Conn. 319. Although this court has had occasion to address civil liability under the Uniform Act; see id.; and has interpreted the criminal portions of the prior Connecticut Securities Act; see State v. Kreminski, 178 Conn. 145, 147-53, 422 A.2d 294 (1979); this case requires us to address, as a matter of first impression, the criminal provisions of CUSA that prohibit the sale of unregistered securities.

I

The defendant contends that the state failed to provide sufficient evidence to support a conviction for selling unregistered securities under § 36b-16. The defendant claims that the evidence at trial "clearly established that the transactions at issue were exempt from registration under the private placement exemption...." See General Statutes (Rev. to 1995) § 36b21 (b) (9).14 The defendant contends that this issue "was properly preserved for appeal by [a] motion to set aside the verdict made by the defendant at the close of evidence." Our review of the record shows that no such motion was filed. Moreover, the defendant has neither requested review of her claim as plain error; Practice Book § 60-5;15 nor has she sought review under State v. Golding, 213 Conn. 233, 239-40, 567 A.2d 823 (1989) (establishing requirements for appellate review of unpreserved claims). Consequently, we decline to review this claim because it was neither raised sufficiently at trial nor properly preserved for appeal.16

Ghant v. Commissioner of Correction, 255 Conn. 1, 17, 761 A.2d 740 (2000) (inappropriate to engage in level of review not requested).

II

The primary issue in this appeal is whether the trial court properly placed the burden of proving an exemption from registration on the defendant. The defendant contends that, because the trial court shifted the burden to her to prove that the securities or transactions were...

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