Barron v. State
| Decision Date | 27 November 1989 |
| Docket Number | No. 18837,18837 |
| Parties | Barbara Lynch BARRON, Carol Lynn Tomlinson, Appellants, v. The STATE of Nevada, Respondent. |
| Court | Nevada Supreme Court |
Lawrence J. Semenza, Reno, for appellant Barron.
Lawrence D. Wishart, and Hager, Oakes & Mausert, Reno, for appellant Tomlinson.
Brian McKay, Atty. Gen., Carson City, Mills Lane, Dist. Atty., David Thompson and Gary H. Hatlestad, Deputy Dist. Attys., Reno, for respondent.
Appellants Barbara Lynch Barron and Carol Lynn Tomlinson were convicted of multiple counts of embezzlement and obtaining money under false pretenses, and one count of racketeering arising out of their conduct as loan brokers at the failed mortgage brokerage firm of Lemons and Associates. Appellants submit: (1) that the district court erred by not properly instructing the jury; (2) that improper jury
instructions resulted in parallel convictions for embezzlement and obtaining money by false pretenses; and (3) that the district attorney engaged in such numerous instances of prosecutorial misconduct as to mandate reversal with prejudice. We hold: (1) that the jury was adequately instructed; (2) that the appellants could be convicted of both embezzlement and obtaining money by false pretenses involving the same investor; and (3) that the prosecutorial misconduct that occurred does not mandate reversal of this case.
Appellants Barbara Lynch Barron (Barron) and Carol Lynn Tomlinson (Tomlinson) were employed at the mortgage brokerage firm of Lemons and Associates (L & A). L & A began business in 1977 as a small mortgage brokerage firm. In less than eight years L & A expanded from a small firm on Washington Street in Reno, to a multi-state, multi-function financial conglomerate, with offices in Reno, Las Vegas, Phoenix, Scottsdale, Tucson, and Boise.
While L & A held itself out as a mortgage broker, it is clear from the manner of business conducted by L & A that the operation was distinct from that of a traditional mortgage broker. A traditional mortgage broker acts as a middleman between the lender and a borrower, making its profit by taking a commission from the amount of the loan. Once the "brokering" has been done, the lender and borrower deal face to face. The borrower's name appears on the deed of trust taken back by the lender, with the risk of foreclosure or declining value falling on the lender. L & A was different in that L & A itself would fund the loan from internal sources, and would receive additional money from investors to maintain internal funds. The loans were made prior to the receipt of the investments and without obtaining commitments for participating investments as a predicate to the issuance of loans. Investors placed their money with L & A, for which they received interest payments (18% per annum or more) within thirty days. They continued to receive interest payments regardless of loan performance, and received repayment of principal, regardless of whether principal had been paid to L & A. Barron and Tomlinson touted the risk-free character of investing with L & A, and in several cases took the life savings of those who invested.
By no later than 1982, L & A was experiencing financial difficulty. This was due to the number of nonperforming loans in L & A's portfolio. There was testimony that L & A had made several loans to "preferred customers" who were not expected to be able to repay any portion of the loans. The preferred loans totalled close to ten million dollars. L & A was unable to continue to pay 18% interest and to repay principal to investors, and simultaneously carry millions of dollars worth of bad loans.
By late 1982, L & A was operating a "Ponzi" or "Pyramid" scheme. L & A began to use the funds contributed by new investors to pay the previous investors. Additionally, L & A would over-assign investors into deeds of trust, selling greater than 100% of the value of the trust deed, as a regular policy. As an example of over-assignment, Tomlinson induced investor R.J. to invest $5,000 on August 31, 1983, with L & A to be secured by trust deed No. 456. The total value of the property securing trust deed No. 456 was $198,000. Tomlinson had assigned $199,000 worth of investment to No. 456 by September 9, 1982. By the time Tomlinson accepted R.J.'s investment, however, the level of investment assigned to trust deed No. 456 was already $298,884.
L & A's investment counselors would sell full or fractionalized interests in loans represented as secured by deeds of trust. From 1984 on, there were only three investment counselors in the Reno office--Gary Hill, who subsequently pleaded guilty to criminal charges arising out of his activities with L & A, and the appellants, Barron and Tomlinson.
In 1984 and 1985, the appellants counseled the vast majority of the Reno branch investors. The evidence introduced at trial showed that appellants knew the investments By 1983 the policy of over-assigning loans was the rule and not the exception in the Reno branch. As a result, appellant Barron instructed office employees to set up a double filing system--the pink and green file system--for present and future investment. The green file contained the paperwork for investors who had purchased up to 100% of the face value of the loan. The pink file was the overflow file, containing the paperwork of the oversold investments. In 1984, when state examiners requested to see the information on a particular file, they were only given the green file to review. Barron's testimony strongly suggested that the purpose of the dual filing system was to mislead the state examiners.
made through the Reno branch office were extraordinarily risky, yet they made no mention of this fact when soliciting investors. The evidence clearly demonstrated that appellants knowingly and regularly over-assigned by 400%, and sometimes more, loans secured by underlying trust deeds. By the time L & A went bankrupt early in 1985, at least 50% of all loans from the Reno branch were over-assigned. A report completed shortly before [105 Nev. 771] L & A closed its doors revealed that over-assignment of loans at the Reno branch had become an eleven million dollar problem.
When L & A went bankrupt on April 10, 1985, 898 investors from the Reno branch discovered the true value of their investments. The bankruptcy estate showed a $26 million loss, of which only one-half was recoverable, resulting in a total loss to the investors of $13 million.
Barbara Barron was convicted of 14 counts of embezzlement or obtaining money under false pretenses, and one count of racketeering, and was sentenced to six years in the Nevada State Prison on each count to be served concurrently, with a $4,000 fine on each count. Carol Tomlinson was convicted of 20 counts of embezzlement or obtaining money under false pretenses, and one count of racketeering, and was sentenced on each count of embezzlement and obtaining money under false pretenses to three years in the Nevada State Prison to be served concurrently, with a $2,000 fine on each count. Tomlinson received a five-year suspended sentence for the racketeering conviction, with a $2,000 fine.
During trial, District Attorney Mills Lane made numerous remarks which appellants cite as prosecutorial misconduct. Mr. Lane made several objections to witnesses' testimony as being hearsay, stating in his objection that, if the defendants wished, they could produce that evidence or the hearsay declarant. Mr. Lane even made direct reference to the appellants' ability to testify. On cross-examination, one of the defense attorneys asked Alma Walsh, an investor, who testified as a witness in the State's case-in-chief, what Tomlinson said to her about the strength and security of L & A. Mr. Lane objected to this question:
The question was what Ms. Tomlinson said. Tell me what Ms. Tomlinson said. That is hearsay. If Miss Tomlinson has something to say, she can say it, not through this witness.
(Emphasis added). Later in the State's case-in-chief, a defense attorney asked Mary DeLa Cruz, Barron's secretary, when Barron told her that there was a problem with the financial stability of L & A. Mr. Lane again objected:
Your Honor, if it please the Court, we haven't objected, but counsel knows statements--if Miss Barron has got something to say, there's a way for her to say it. You don't get in through defense what Miss Barron says through this witness. That's hearsay.
(Emphasis added.) The court instructed Mr. Lane to phrase his objections in legal terms and to refrain from other comments and arguments.
During closing argument Mr. Lane made statements that the appellants assert were improper because they expressed the prosecuting attorney's personal opinion and were disparaging of the appellants' case.
Mr. Lane: I suggest to you, ladies and gentlemen, these people tried to hustle you just like they hustled those investors.
Mr. Wishart: Objection, Your Honor, that's improper argument.
Mr. Lane: I don't think it is improper argument. I will say it again. They tried to hustle you.
Mr. Semenza: May we have a rule and admonition.
The Court: You may proceed.
Mr. Lane: They tried to hustle you, just like they tried to hustle those victims....
Mr. Lane's rhetoric continued:
Mr. Lane: Let me tell you something, based upon the facts in this case, and the evidence which was testified to by those victims, and the people that work there, we talked for 30 days thereabouts, about real estate. And based upon the facts, if you accept what Barbara Barron and Carol Tomlinson told you, I got some ocean front property for you in Tonopah.
Mr. Wishart: Objection, improper argument.
Mr. Semenza: Join in that, Your Honor.
The Court: Let's move on from that Mr. Lane.
(Emphasis added.) Mr. Lane, however, insisted on repeating the substance of this statement a short time later:
Mr. Lane: Well, I submit to you, if you believe that, based upon the evidence, I got...
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