Bayhi v. State, CR-90-1908
| Decision Date | 09 July 1993 |
| Docket Number | CR-90-1908 |
| Citation | 629 So.2d 782 |
| Parties | Astrid M. BAYHI and Cyril Harold Bayhi v. STATE. |
| Court | Alabama Court of Criminal Appeals |
The original opinion issued on May 28, 1993, in this case is withdrawn, and this opinion is substituted therefor. Astrid M. Bayhi, Cyril H. Bayhi, Jr., 1 and Phillip H. Newman 2 were jointly indicted in 25 indictments, each containing 5 separate counts, for (1) selling or offering to sell securities without first having registered as a salesperson with the Securities Commission of Alabama, in violation of § 8-6-3, Code of Alabama 1975; (2) selling or offering to sell unregistered securities, in violation of § 8-6-4; (3) employing a device, scheme or artifice in offering to sell or in selling a security, in violation of § 8-6-17(a)(1); (4) making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, in connection with the offer to sell or the sale of a security, in violation of § 8-6-17(a)(2); and (5) engaging in an act, practice, or course of business that operates or would operate as a fraud or deceit upon a person, in violation of § 8-6-17(a)(3).
Eleven of the indictments concern the unlawful sales or registration of stocks, and fourteen concern the unlawful sales or registration of promissory notes. As to the indictments concerning the stock: Count I avers that Astrid, Cyril, and Newman, without first registering as salespersons with the Securities Commission of Alabama, sold or offered to sell common stock of Industrial Medical Specialists, Inc. (hereinafter "IMSI"), d/b/a Newman First Aid (hereinafter "NFA") and New Health Group (hereinafter "NHG"), in violation of § 8-6-3. Count II avers that Astrid, Cyril, and Newman sold or offered to sell the unregistered common stock of IMSI, in violation of § 8-6-4. Count III avers that Astrid, Cyril, and Newman, in connection with the sale or offer to sell stock, employed a device, scheme, or artifice to defraud investors by misrepresenting the use of the proceeds from the stock sales, by misrepresenting the capitalization and long-term debt of IMSI, by misrepresenting the anticipated increase in value of the stock, and by misrepresenting that the prospectus was complete and correct in all material respects and that it fairly presented the financial condition of the corporation, in violation of § 8-6-17(a)(1). Count IV avers that Astrid, Cyril, and Newman, in connection with the sale or offer to sell stock, made untrue or misleading statements to investors by misrepresenting or omitting to state certain facts regarding the appreciation in value of the stock, the fixed dividend rate, the use to be made of the proceeds from the stock sales, and the anticipated rate of increase in the value of the stock, and by failing to disclose that, because they were attempting to convert promissory notes to common stock, the purpose of the stock offering would fail, in violation of § 8-6-17(a)(2). Count V avers that Astrid, Cyril, and Newman, in connection with the sale or offer to sell stock, engaged in an act, practice, or course of business that operated or would have operated as a fraud or deceit upon investors, in violation of § 8-6-17(a)(3), by failing to inform them of a petition in bankruptcy previously filed by Newman; by failing to inform them that the interim balance sheet of IMSI dated October 31, 1989, and distributed along with the prospectus did not fairly represent the true financial condition of IMSI; by failing to inform them that if all the promissory notes were converted to common stock, the actual proceeds from the stock offering would be so reduced as to nullify the stated purpose of the stock sales; by misrepresenting to them that the financial statements attached to the prospectus were complete and correct and that all material fairly represented the financial condition of IMSI on the date the financial statement was issued; by misrepresenting to them that the stock offering would generate $980,000 for IMSI; by misrepresenting to them that the proceeds would be used to expand the business; and by failing to inform them that more shares of the common stock of IMSI had been sold than had been authorized.
As to the indictments concerning the promissory notes: Count I avers that Astrid, Cyril, and Newman, without first having been registered as salespersons, sold or offered to sell a security defined as an investment contract or certificate of interest or participation in a profit-sharing agreement in the form of promissory notes issued by Phillip H. Newman, Phillip H. Newman d/b/a NFA, Phillip H. Newman d/b/a NFA and NHG, or IMSI d/b/a NFA and NHG, in violation of § 8-6-3. Count II avers that Astrid, Cyril, and Newman sold or offered to sell promissory notes without those notes being registered, in violation of § 8-6-4. Count III avers that Astrid, Cyril, and Newman, in connection with the sale or offer to sell securities, employed a device, scheme, or artifice to defraud investors, in violation of § 8-6-17(a)(1), specifically by misrepresenting that the return on the investment on a two-year promissory note would be 100%; by misrepresenting that, in the event of default, the entire balance due on the notes would be payable at the election of the investor and that IMSI would pay all costs of collecting and providing security for the notes; by misrepresenting that IMSI was offering one million shares of common stock for sale at $1.00 per share and that the proceeds would be used to expand the business; by misrepresenting that investors could convert their promissory notes to common stock at $1.00 per share; and by misrepresenting that the value of the stock would increase to $3.00 per share in two years. Count IV avers that Astrid, Cyril, and Newman, in connection with the sale or offer to sell securities, made untrue or misleading statements to investors, in violation of § 8-6-17(a)(2), specifically by failing to inform them that Newman had previously filed a petition in bankruptcy under Chapter 7, Title 11, U.S.Code; by failing to inform them that Astrid, Cyril, and Newman were in the process of filing petitions in bankruptcy under Chapter 7, wherein the investors would be named as unsecured creditors, by misrepresenting that the corporation would pay 100% return on the investment on two-year promissory notes; by misrepresenting that, in the event of default, the entire balance due on the notes would be payable at the election of the investors; by misrepresenting that IMSI was offering one million shares of common stock at $1.00 per share and that the proceeds were to be used to expand the business; by misrepresenting that investors could convert their promissory notes to common stock in IMSI at $1.00 per share; and by misrepresenting that the value of the stock would rise to $3.00 within two years. Count V avers that Astrid, Cyril, and Newman, in connection with the sale or offer to sell securities, engaged in an act, practice, or course of business that operated or would operate as a fraud or deceit upon investors, in violation of § 8-6-17(a)(3), specifically by misrepresenting that the return on the investment on two-year promissory notes would be 100%; by misrepresenting that, in the event of default, the entire balance due on the notes would be payable at the election of the investors and that the corporation would pay all costs of collecting and providing security for the notes; by misrepresenting that the proceeds from the sale would be used to expand the business; by failing to inform the investors that Newman had previously filed a petition in bankruptcy and that Astrid, Cyril, and Newman were in the process of filing petitions in bankruptcy; and by failing to inform them that IMSI was indebted in excess of $1,000,000 to holders of promissory notes.
The Bayhis were tried jointly before a jury. Astrid was convicted on all 125 counts. Cyril was convicted on 70 counts--all 5 counts of each of the 11 indictments involving stock and Counts III, IV, and V of five of the indictments involving promissory notes. The trial court had granted Cyril's motion for a judgment of acquittal on Counts I and II of the 14 indictments involving promissory notes, and the jury found him not guilty on Counts III, IV, and V of the remaining 9 indictments involving promissory notes. Astrid was sentenced to five years' imprisonment on each count, and Cyril to three years' on each count. The sentences were ordered to be served concurrently. In addition (on one count only), Astrid was fined $2,000 and Cyril $1,000. Astrid was ordered to pay $252,043.67 and Cyril to pay $115,606.50 in restitution.
Astrid and Cyril appeal, both raising the same four issues. Their first three issues question the sufficiency of the evidence to support their convictions for selling or offering to sell unregistered securities, (§ 8-6-4), for selling or offering to sell securities without first registering as a securities salesperson (§ 8-6-3), and for defrauding investors by committing acts prohibited by § 8-6-17(a)(1), (2), and (3). In their fourth issue, they contend that the trial court erred in allowing into evidence collateral stock transactions not charged in the indictments.
The state's evidence discloses that Newman founded a first-aid supply business as a sole proprietorship in 1984, which operated under the name of "Newman First Aid." In 1986, Newman changed the name of the business to "Newman Health Group" and expanded its business activities from the sale and service of first-aid supplies to...
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