People v. Hoover

• Decision Date: 16 November 2006
• Docket Number: No. 04CA1794.,04CA1794.
• Citation: 165 P.3d 784
• Parties: The PEOPLE of the State of Colorado, Plaintiff-Appellee, v. William HOOVER, Defendant-Appellant.
• Court: Colorado Court of Appeals

165 P.3d 784

The PEOPLE of the State of Colorado, Plaintiff-Appellee, v. William HOOVER, Defendant-Appellant.

No. 04CA1794.

Colorado Court of Appeals, Division IV.

November 16, 2006.

Certiorari Denied August 27, 2007.

John W. Suthers, Attorney General, Mathew D. Grove, Assistant Attorney General, Denver, Colorado, for Plaintiff-Appellee.

Hoffman Reilly Pozner & Williamson, L.L.P., Marcus Lock, Sean Connelly, Denver, Colorado, for Defendant-Appellant.

Opinion by Judge LOEB.

Defendant, William Hoover, appeals the judgment of conviction entered on jury verdicts finding him guilty of securities fraud, theft, and violating the Colorado Organized Crime Control Act (COCCA). He also appeals the sentences imposed. We affirm.

Defendant, a businessman and investment advisor, was indicted on twenty-two counts of securities fraud, class three felonies, pursuant to §§ 11-51-501(1) and -603(1), C.R.S. 2006, and twenty-five counts of theft, class three felonies, pursuant to § 18-4-401(1)(a), (1)(b) and (2)(d), C.R.S.2006, all allegedly committed against twenty-five victims. The counts in the indictment were separated according to the victims' names, and for most of the victims, alleged counts of both securities fraud and theft. Defendant was also indicted on one count of violating COCCA, a class two felony, pursuant to § 18-17-104(3), C.R.S.2006.

All forty-eight counts in the indictment related to several investment vehicles and partnerships that defendant managed over a number of years. The majority of the charges against defendant were connected to one or both of his primary investment schemes, the Agency Account of The Will Hoover Company, Inc. (WHCO), and Bird Ventures LLC.

Between 1999 and 2003, defendant collected investments in the Agency Account by promising investors that their money would be held in a federally insured account in the Fleet Bank of Boston, accruing high annual fixed returns beyond what the investors could obtain on their own. However, defendant never deposited the money with Fleet Bank, and, indeed, no such account existed. Although defendant sent the victims account statements from WHCO purportedly reflecting their invested principal and accrued interest, the evidence at trial showed that funds invested by the victims in the Agency Account were converted to defendant's personal use or used by him to pay his debts owed to earlier investors.

Between 2000 and 2003, defendant also solicited investments in Bird Ventures LLC, a company he founded with five other individuals for the purpose of acquiring a thirty-five percent ownership interest in another company which provided consulting services to major oil companies. Defendant, who was the manager of Bird Ventures, sold convertible debentures in that entity to outside investors without the required authorization from sixty-seven percent of the members of the LLC. He then used the money he raised to pay his personal business expenses and to reimburse other investors, and he also converted a portion of the invested funds to his personal use.

The securities fraud charges arose primarily from defendant's misrepresentations and omissions to make disclosures to investors in the Agency Account and Bird Ventures. The evidence at trial showed that defendant failed to inform investors that his business interests were in financial trouble; that he planned to use invested money to pay off other investors and personal debts; that the Internal Revenue Service had tax liens against him; and that he had been sued by a business associate and investor, who obtained a judgment against him. The evidence also showed that defendant misrepresented to Agency Account investors that he was depositing their money in a Fleet Bank of Boston account, when no such account existed. With respect to the Bird Ventures convertible debentures, the evidence showed, inter alia, that defendant failed to inform outside investors that he lacked the requisite authority to encumber that company with debt.

In sum, the evidence at trial showed that, over a period of several years, defendant defrauded dozens of investors and converted over fifteen million dollars from them.

Defendant and WHCO eventually filed for Chapter 11 bankruptcy reorganization, and then converted the bankruptcy to a Chapter 7 liquidation.

After a two-week trial, a jury convicted defendant of twenty-two counts of securities fraud, twenty-one counts of theft, and one count of organized crime under COCCA. Accordingly, with respect to each of defendant's twenty-five victims, as set forth in the indictment, there was at least one conviction for either securities fraud or theft, and for many of the victims, there was a conviction for both crimes.

The trial court sentenced defendant to four years in prison for each of the securities fraud and theft convictions. For each victim, where defendant had been convicted of both theft and securities fraud, the trial court sentenced defendant to four years for the theft charge, to be served consecutively with all other sentences, and four years for the securities fraud charge, to be served concurrently with the corresponding theft charge. For three victims, defendant was charged and convicted only of theft, and the court sentenced defendant to four years for each such charge, to be served consecutively. For four victims, where defendant was convicted only of a securities fraud charge, the court sentenced defendant to four years for each such charge, to be served consecutively. Ultimately, the trial court aggregated all twenty-one of the theft convictions and four of the securities fraud convictions consecutively, for a total sentence of one hundred years. The court imposed all the remaining sentences concurrently, including a twenty-four year sentence for the COCCA conviction. This appeal followed.

I. Securities Fraud — Evidentiary Issues

Defendant contends that his convictions for securities fraud must be reversed because the trial court erred in excluding certain evidence on hearsay grounds. Specifically, defendant contends that the trial court impermissibly infringed upon his constitutional right to present a defense, by prohibiting him from testifying about his attorney's advice on four separate matters. We disagree.

We review a trial court's evidentiary rulings for abuse of discretion. A trial court abuses its discretion only when its ruling is manifestly arbitrary, unreasonable, or unfair. People v. Stewart, 55 P.3d 107, 122 (Colo. 2002); People v. Veren, 140 P.3d 131, 136 (Colo.App.2005). Absent an abuse of discretion, we will not disturb a trial court's evidentiary rulings on appeal. People v. Ibarra, 849 P.2d 33, 38 (Colo.1993); People v. Veren, supra.

Hearsay is a statement other than the one made by declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted. CRE 801(c); People v. Scearce, 87 P.3d 228, 233 (Colo.App.2003). Where a statement is offered, not to prove the truth of the matter asserted, but for some other reason, such as to show defendant's state of mind, it is admissible as non-hearsay. People v. Mossmann, 17 P.3d 165, 168 (Colo.App.2000). However, the out of court statement must still be relevant to be admissible. People v. Scearce, supra.

Few rights are more fundamental than the right of the accused to put before the jury evidence that might influence the determination of guilt. People v. Scearce, supra. Because improper exclusion of nonhearsay evidence affects a defendant's fundamental right to present exculpatory evidence, any error in doing so is of constitutional dimension, and reversal is required unless we are persuaded beyond a reasonable doubt that it did not contribute to defendant's conviction. People v. Scearce, supra, 87 P.3d at 234. "In making this assessment, we ask `not whether, in a trial that occurred without the error, a guilty verdict would surely have been rendered, but whether the guilty verdict actually rendered in this trial was surely unattributable to the error.'" People v. Scearce, supra (quoting People v. Welsh, 58 P.3d 1065, 1072 (Colo.App.2002)). If a reasonable possibility exists that the error contributed to the verdict, then the error is not harmless. People v. Scearce, supra.

A. Advice Regarding Whether Bird Ventures Debentures Were a Security

Defendant first contends that the trial court erred by not permitting him to testify as to his lawyer's advice regarding whether the Bird Ventures convertible debentures were securities. We disagree.

The required mental state for securities fraud is "willfully." People v. Blair, 195 Colo. 462, 579 P.2d 1133 (1978); see § 11-51-603(1) (any person who willfully violates the provisions of § 11-51-501, C.R.S.2006, the securities fraud statute, commits a class 3 felony). This requires that an actor be "aware that his conduct is of such nature or that such circumstance exists." Section 18-1-501(6), C.R.S.2006; see People v. Pahl, ___ P.3d ___, 2006 WL 3040920 (Colo.App. No. 01CA2020, Aug. 24, 2006).

However, "federal and state authority is uniform in concluding that proof of knowledge that an investment is a security is not required to convict a defendant for `willful' securities fraud." People v. Rivera, 56 P.3d 1155, 1163 (Colo.App.2002). In Rivera, a division of this court concluded "that the General Assembly did not intend to apply the culpable mental state of willfulness to the security element." People v. Rivera, supra; see United States v. Brown, 578 F.2d 1280, 1284 (9th Cir.1978)("government is required to prove specific intent only as it relates to the action constituting the fraudulent, misleading or deceitful conduct, but not as to the knowledge that the instrument used is a security").

Here, the record reflects the following interaction at trial:

Defense Counsel: Tell me about Bird. Did you think Bird was a secured—

Defendant: Absolutely not. Harvey, in my records somewhere, I have a lot [of] documentation...