Cook v. State

• Decision Date: 20 December 1991
• Docket Number: No. 05-90-01203-CR,05-90-01203-CR
• Citation: 824 S.W.2d 634
• Parties: William Robert COOK, Appellant, v. The STATE of Texas, Appellee.
• Court: Texas Court of Appeals

Page 634

824 S.W.2d 634

William Robert COOK, Appellant, v. The STATE of Texas, Appellee.

No. 05-90-01203-CR.

Court of Appeals of Texas,

Dallas.

Dec. 20, 1991.

Fred L. Tinsley, Dallas, for appellant.

Patricia Poppoff Noble, Dallas, for appellee.

Before STEWART, LAGARDE, and WHITTINGTON, JJ.

OPINION

WHITTINGTON, Justice.

William Robert Cook was convicted of violation of the State Securities Act by committing fraud in the sale of a security. A jury found him guilty of the offense, and the court assessed punishment at confinement for twenty years and a $10,000 fine. Cook challenges his conviction in ten points of error. He contends the evidence is insufficient to support the conviction, and the trial court erred in overruling his motion to quash the indictment and his objections to the jury charge; in relying on the enhancement paragraph for sentencing purposes; and in cumulating this sentence with the sentence in a federal case against him. We affirm the judgment of the trial court.

FACTS

Cook owned a mining company, Oreo Mines, Inc., (Oreo) which purchased gold ore from another company, Chemex, and sold interests in the ore to outside investors. A third company, Orex, Inc., mined the ore. Oreo provided potential investors with a sales brochure introducing Oreo and Orex and their management teams, describing the process used to mine the ore, and explaining the particulars of the investment venture. The brochure included a map of the area to be mined, an assay report, a gold ore purchase agreement with Oreo, and a mining agreement with Orex. Also included was a warranty that the ore purchased contained "a sufficient quantity of recoverable gold to reasonably justify the BUYER'S purchase." The trial court instructed the jury that an investment contract is a security within the meaning of Texas Securities laws.

Oreo sold contracts to over 400 investors, raising between $4.5 and $5 million. Chemex received approximately fifty percent of the proceeds based on its contract to provide gold ore for Oreo. Orex received some amount which was not specifically determined. Cook received over $200,000. The jury found Cook guilty of paragraph two of the five paragraph indictment, finding that he committed fraud in the sale of a security by intentionally failing to disclose to the investor that he had a prior federal securities conviction.

THE INDICTMENT

In point of error one, Cook alleges the trial court erred in overruling his motion to quash the indictment. He contends the indictment did not set forth facts sufficient to constitute an offense. Cook claims it was necessary that the State allege and prove that he "knowingly failed to disclose a material fact that under [the] circumstances should have been made in order to prevent another statement from being misleading." As this allegation was not included, he contends, the indictment is defective in that it omits an element of the offense.

This argument is based on the erroneous assumption that Cook was indicted for a violation of section C(3) of article 581-29, the Texas Securities Act. Cook, however, was indicted under section C(1), which provides as follows:

C. In connection with the sale, offering for sale or delivery of, the purchase offer to purchase, invitation of offers to purchase, invitations of offers to sell, or dealing in any other manner in any security or securities ... directly or indirectly:

(1) engage in any fraud or fraudulent practice.

TEX.REV.CIV.STAT.ANN. art. 581-29(C)(1) (Vernon Supp.1991). Paragraph two of the indictment specifically alleges that Cook committed fraud by intentionally failing to disclose a prior conviction which is a material fact, for the purpose of inducing the investor, Floyd Elkins, to purchase the security. Article 581-4(F) defines fraud and fraudulent practice for purposes of the Securities Act. Included in that definition is "an intentional failure to disclose a material fact." TEX.REV.CIV.STAT.ANN. art. 581-4(F) (Vernon 1964). This is the theory under which Cook was charged and convicted. It was not necessary to allege the elements of article 581-29(C)(3). Hawkins v. State, 656 S.W.2d 70, 72 (Tex.Crim.App.1983); Morgan v. State, 644 S.W.2d 766, 771 (Tex.App.--Dallas 1982, no pet.). We overrule point of error one.

In his second point of error, Cook contends that the trial court erred in overruling his motion to quash the indictment, as the indictment fails to allege a culpable mental state. The indictment alleges that Cook "did sell to Floyd Elkins a security." Cook argues that the indictment should have alleged that he intentionally, knowingly, or recklessly sold a security. He explains that where offenses are defined and conduct prescribed outside the Penal Code, such as the Texas securities law, and where such offenses do not require or dispense with the requirement of a culpable mental state, section 6.02 of the Penal Code applies. TEX.PENAL CODE ANN. § 6.02 (Vernon 1974). To support his argument, Cook cites Koah v. State, 604 S.W.2d 156 (Tex.Crim.App. [Panel Op.] 1980). In that case the court upheld as proper an indictment that alleged the appellant intentionally sold unregistered securities. Id. at 160. We do not find Koah to be controlling here.

As stated above, the indictment alleged Cook committed fraud in the sale of a security by intentionally failing to disclose a material fact. The statute specifically states that an intentional failure to disclose a material fact constitutes fraud. The purpose of the Securities Act is to require sellers of securities to be truthful and provide investors with all material facts. Bridwell v. State, 761 S.W.2d 401, 405 (Tex.App.--Dallas 1988), aff'd, 804 S.W.2d 900 (Tex.Crim.App.1991). The State must prove a culpable mental state only as it relates to the action prohibited by the statute. See United States v. Brown, 578 F.2d 1280, 1284 (9th Cir.), cert. denied, 439 U.S. 928, 99 S.Ct. 315, 58 L.Ed.2d 322 (1978). In Koah, the prohibited conduct was the sale of unregistered securities, therefore, the culpable mental state must be in conjunction with the sale. In the instant case, the prohibited conduct is the fraud, i.e., the failure to disclose a material fact. Therefore, the culpable mental state must be in conjunction with the fraud. The indictment properly alleged specific intent as it relates to the action constituting the fraudulent conduct by alleging an intentional failure to disclose. We overrule point of error two.

JURY CHARGE

In his third point, Cook asserts that the trial court erred in overruling his objections to the jury charge which did not require the jury to find he sold securities knowingly or intentionally, thus permitting the jury to convict him of conduct that did not constitute an offense.

The jury charge must correspond to the allegations in the indictment. Jackson v. State, 633 S.W.2d 897, 899 (Tex.Crim.App.1982). Here, the jury was instructed that it was to find Cook guilty as charged in paragraph two of the indictment if it found that he sold a security to Floyd Elkins and in doing so failed to disclose that he had been convicted of federal securities fraud in 1978. The jury was instructed that it is "unlawful for any person to directly or indirectly engage in any fraud or fraudulent practice in connection with the sale ... [of] any security." The instructions included the statement that the term "security" includes an investment contract, and it defined the terms "investment contract," "sale," "fraud," and "material fact." It also defined the mental states "knowingly" and "intentionally." The charge set out all the necessary elements of the offense and incorporated the allegations of the indictment. The charge was correct as given. See Benson v. State, 661 S.W.2d 708, 713-14 (Tex.Crim.App.1982) (on reh'g), cert. denied, 467 U.S. 1219, 104 S.Ct. 2667, 81 L.Ed.2d 372 (1984). We overrule point of error three.

In his eighth point, Cook alleges the trial court erred in overruling his objection to the charge and refusing to limit the definition of the culpable mental state to the result of his conduct. The Penal Code delineates three "conduct elements" which may be involved in an offense: 1) the nature of the conduct, 2) the result of the conduct, and 3) the circumstances surrounding the conduct. TEX.PENAL CODE ANN. § 6.03 (Vernon 1974); McQueen v. State, 781 S.W.2d 600, 603 (Tex.Crim.App.1989). An offense may contain any one or more of these "conduct elements" which alone or in combination form the overall behavior which the legislature has intended to criminalize, and it is those essential "conduct elements" to which a culpable mental state must apply. McQueen, 781 S.W.2d at 603. Cook contends that a violation of the Securities Act is a result-oriented crime and, therefore, the jury charge should have limited the definition of the required mental state to the result of his conduct. The complained of portion of the charge is as follows:

A person acts knowingly, or with knowledge, with respect to the nature of his conduct or to circumstances surrounding his conduct when he is aware of the nature of his conduct or that the circumstances exist. A person acts knowingly, or with knowledge, with respect to a result of his conduct when he is aware that his conduct is reasonably certain to cause the result.

A person acts intentionally, or with intent, with respect to the nature of his conduct or to a result of his conduct when it is his conscious objective or desire to engage in the conduct or cause the result.

Under the charge as given, the jury was allowed to find Cook guilty if it found he possessed the mens rea with respect to any of the three conduct elements.

We disagree that a violation of the Securities Act is a result-oriented crime. The section of the statute under which Cook was convicted states:

Any person who shall:

C. In connection with the sale, offering for sale or delivery of, the purchase, offer to purchase, invitation of...