People v. Baker

Decision Date07 November 2019
Docket NumberCourt of Appeals No. 16CA1545
Citation487 P.3d 1194
Parties The PEOPLE of the State of Colorado, Plaintiff-Appellee, v. Karl Christopher BAKER, Defendant-Appellant.
CourtColorado Court of Appeals

Philip J. Weiser, Attorney General, Brittany L. Limes, Assistant Attorney General, Denver, Colorado, for Plaintiff-Appellee

Megan A. Ring, Colorado State Public Defender, Rachel K. Mercer, Deputy State Public Defender, Denver, Colorado, for Defendant-Appellant

Opinion by JUDGE J. JONES

¶ 1 Defendant, Karl Christopher Baker, appeals the judgment of conviction entered on jury verdicts finding him guilty of three counts of securities fraud (fraud in the sale of a security); three counts of theft ($20,000 or more); and one count of filing a false tax return. Because we conclude that the prosecution's expert witness on securities impermissibly testified to conclusions solely within the jury's province, we reverse Baker's securities fraud and theft convictions and remand for a new trial on those counts. We affirm the conviction for filing a false tax return.

I. Background

¶ 2 Baker and his business partner formed Aviara Capital Partners, LLC (Aviara), in late 2009, planning to buy a controlling interest in a bank, purchase the bank's distressed assets (mostly loans secured by real estate), and then sell those assets at a profit when the real estate market improved.

¶ 3 To fund this plan, Aviara needed investors. Baker sought out potential investors, including four people named as victims in this case: Donna and Lyal Taylor, Dr. Alan Ng, and Stanley Douglas. According to the indictment, each chose to invest in Aviara after Baker allegedly told them the following:

1. Their investments would go toward buying a distressed bank.
2. "Class A" investors — larger, corporate investors — were already lined up.
3. The amount of their investment that they could lose was capped. (The Taylors alleged that Baker said they could lose $30,000 at most. Douglas said that he was told he could lose no more than 25% of his investment. Ng understood that, in a worst case scenario, he wouldn't make a profit.)
4. Baker wouldn't take a salary until Aviara was up and running or profitable.
5. Aviara would hold their money in escrow.
6. They would get their principal back quickly (within a year according to Ng and Douglas; within three to four months according to the Taylors).

Donna Taylor also alleged that Baker told her his mother was going to invest in Aviara.1

¶ 4 After the People indicated that Lillian Alves, the Deputy Commissioner for the Colorado Division of Securities, would testify at trial, defense counsel filed a motion in limine to exclude her testimony, arguing (among other things) that her proposed testimony would usurp the jury's role as fact finder, would include determinations the jurors could make themselves, wouldn't be helpful, would misstate the law, and would serve "only to bolster and re-state the charges, which of course are not evidence." The district court denied that motion.

¶ 5 At trial, each investor testified that Baker had told them that larger investors were about to jump in, there would be a limit on their potential losses, Baker wasn't taking a salary, and Aviara would hold their investments in escrow. The Taylors and Douglas also testified that Baker told them that all, or at least some, of their investment would go directly toward purchasing the bank. And both the Taylors and Ng testified that Baker told them they would get their principal back quickly.

¶ 6 After the court qualified Alves as an expert in securities law, she testified about the Colorado Securities Act and its registration requirements, that securities law requires "full and fair disclosure," that Baker had an obligation to truthfully disclose material facts, and that the shares of Aviara that Baker sold were securities. She also testified at length about what statements or omissions Baker had made to the investors, and whether those statements and omissions were material.

And she concluded that the things Baker said would happen never occurred. Defense counsel repeatedly objected to this testimony.

¶ 7 Baker didn't testify, but defense counsel vigorously attacked the investors' credibility, arguing that the statements attributed to Baker didn't make any sense, particularly in light of the comprehensive documents Baker had provided to the investors, which didn't include such statements.

¶ 8 A jury found Baker guilty of the charges noted above, but acquitted him of one count of securities fraud.

II. Discussion

¶ 9 Baker contends that the district court erred by (1) allowing Alves's testimony; and (2) allowing the prosecution to present evidence that he falsely told Donna Taylor that Aviara would register the securities it was selling, when the indictment didn't contain any such allegation. He also contends that, in the event we affirm, his theft conviction for taking $50,000 from Ng should be reduced from a class 3 felony to a class 4 felony.

¶ 10 We agree with Baker that some of Alves's testimony crossed the line between permissible and impermissible expert testimony. Because the court's error in allowing the impermissible testimony wasn't harmless, we reverse Baker's securities fraud and theft convictions. But we conclude that Alves's improper testimony didn't taint the conviction for filing a false tax return. Given the possibility that the issue may arise in the event of a new trial, we also briefly address Baker's contention that evidence that he told Donna Taylor he would register the securities impermissibly varied from the charges in the indictment.

A. Alves's Expert Testimony

¶ 11 Baker challenges Alves's expert testimony on eight related and largely overlapping grounds, including that her testimony wasn't helpful, was speculative, misstated the law, and usurped the functions of the judge and jury. We agree with Baker that parts of Alves's testimony usurped the jury's role.

1. Standard of Review

¶ 12 A trial court has broad discretion to determine the admissibility of expert testimony, and we won't overturn its rulings allowing such testimony absent a showing of an abuse of that discretion. People v. Pahl , 169 P.3d 169, 182 (Colo. App. 2006). A trial court abuses its discretion if its decision is manifestly arbitrary, unreasonable, or unfair, or if it misapprehends or misapplies the law. People v. Thompson , 2017 COA 56, ¶ 91, 413 P.3d 306.

¶ 13 Baker preserved his argument that Alves's testimony usurped the function of the jury. Because this argument is preserved, we will determine whether any error requires reversal by applying the harmless error test. Hagos v. People , 2012 CO 63, ¶ 12, 288 P.3d 116. Under that test, we reverse only if the error "substantially influenced the verdict or affected the fairness of the trial proceedings." Id. (quoting Tevlin v. People , 715 P.2d 338, 342 (Colo. 1986) ). To determine if that occurred, we look to whether the People have shown that there is "no reasonable possibility that [the error] contributed to the defendant's conviction." Pernell v. People , 2018 CO 13, ¶ 22, 411 P.3d 669 ; see James v. People , 2018 CO 72, ¶¶ 18-19, 426 P.3d 336 (the prosecution must show that any error was harmless). But see People v. Rock , 2017 CO 84, ¶ 22, 402 P.3d 472 (articulating the harmless error test as whether "there is a reasonably probability that it contributed to the defendant's conviction") (emphasis added); People v. Roman , 2017 CO 70, ¶ 13 n.1, 398 P.3d 134 (noting that the Colorado Supreme Court has used "reasonable probability" and "reasonable possibility" interchangeably to describe the harmless error test).2

2. Applicable Law

¶ 14 The Colorado Rules of Evidence govern the admissibility of expert testimony. A witness may offer expert testimony if she has "scientific, technical, or other specialized knowledge" that "will assist the trier of fact to understand the evidence or to determine a fact in issue," and she is "qualified as an expert [based on that] knowledge, skill, experience, training, or education." CRE 702. "Testimony in the form of an opinion or inference" isn't objectionable merely because it embraces an ultimate issue to be decided by the fact finder, CRE 704, but an expert witness can't tell the jury what result to reach or form conclusions for the jurors that they are competent to reach on their own. People v. McFee , 2016 COA 97, ¶¶ 76-77, 412 P.3d 848. Such impermissible testimony may include applying the law to the facts to reach a conclusion. United States v. Duncan , 42 F.3d 97, 101 (2d Cir. 1994) ("Generally, the use of expert testimony is not permitted if it will ‘usurp ... the role of the jury in applying [the] law to the facts before it.’ " (quoting United States v. Bilzerian , 926 F.2d 1285, 1294 (2d Cir. 1991) )); cf. People v. Lawrence , 2019 COA 84, ¶¶ 30-34, 487 P.3d 1066 (expert's testimony on materiality didn't usurp the jury's role where expert only "provide[d] general testimony about when facts might be considered material" and "gave no opinion as to whether [the defendant] committed any of the crimes charged").

¶ 15 In securities fraud cases, expert testimony on whether a particular transaction involved a security is acceptable under certain circumstances, as is testimony on the meaning of materiality and whether certain types of statements or omissions could be considered material. See, e.g. , Lawrence , ¶¶ 30-34 (expert properly testified about what qualifies as a security, that the contract in question was a security, when a sale of a security is fraudulent, and what facts "might be material"); Pahl , 169 P.3d at 182 (testimony that a transaction involved a security and that the defendant's alleged omissions were material didn't usurp the jury's role); People v. Prendergast , 87 P.3d 175, 181 (Colo. App. 2003) (the trial court didn't err in allowing an expert to define materiality and to describe securities transactions as "seller beware"); People v. Rivera , 56...

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    ...result to reach or form conclusions for the jurors that they are competent to reach on their own," People v. Baker , 2019 COA 165, ¶ 14, 487 P.3d 1194, aff'd , 2021 CO 29, 485 P.3d 1100 ; see also Venalonzo , ¶ 32 (The danger in admitting testimony that a child victim is truthful "lies in t......

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