Smith v. State

• Decision Date: 22 September 2015
• Docket Number: No. 24A01–1501–CR–1.,24A01–1501–CR–1.
• Citation: 44 N.E.3d 82
• Parties: Jerry A. SMITH, Appellant–Defendant, v. STATE of Indiana, Appellee–Plaintiff.
• Court: Indiana Appellate Court

44 N.E.3d 82

Jerry A. SMITH, Appellant–Defendant

v.STATE of Indiana, Appellee–Plaintiff.

No. 24A01–1501–CR–1.

Court of Appeals of Indiana.

Sept. 22, 2015.

Robert W. Hammerle, Victoria L. Bailey, Indianapolis, IN, Attorneys for Appellant.

Gregory F. Zoeller, Attorney General of Indiana, Ellen H. Meilaender, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.

BARNES

, Judge.

Case Summary

[1] Jerry Smith appeals his forty-year sentence and order of restitution following his convictions for five counts of Class C felony conducting business as a broker-dealer without registering with the Indiana Secretary of State. We reverse and remand.

Issues

[2] The issues we address are:

I. whether the trial court properly ordered Smith to pay $410,189.16 in restitution to the five victims; and

II. whether Smith's forty-year sentence violates statutory limits on sentences for a single episode of criminal conduct.

Facts

We described the facts in Smith's first appeal in this matter as follows:

Between 2004 and 2010, Smith and Jasen Snelling (“Snelling”) ran a Ponzi scheme out of CityFund Advisory (“CityFund”) and Dunhill Investment Advisors Ltd. (“Dunhill”). Central Registration Depository records showed that Snelling was listed as the President of CityFund, and Smith was listed as the Secretary/Treasurer. CityFund's investment advisor license with the U.S. Securities and Exchange Commission (“SEC”) was withdrawn in 2004, and Dunhill's registered trust with the SEC was withdrawn in 2002. Smith has not been registered to sell securities since May of 2008 and was never registered to sell securities through CityFund or Dunhill. Of the securities sold through CityFund and Dunhill, none were registered as required by law.

In December, 2011, the Franklin County Prosecutor's Office filed a twenty-five count information against Smith related to this Ponzi scheme. Four victims, who were Indiana residents, were identified in the charges. Smith and Snelling told the victims that they were involved in day trading, were licensed to sell securities, and promised unusually high returns on the investments.

A sealed federal indictment was filed against Smith by the United States Attorney's Office for the Southern District of Ohio on June 4, 2012. The federal indictment charged Smith with conspiracy to commit mail and wire fraud, obstruction, and tax evasion. The indictment generally alleged that between 2003 and 2011, in the Southern District of Ohio and elsewhere, Smith and Snelling conspired to commit mail fraud and wire fraud by using the U.S. Mail and interstate wire communications to execute a scheme to defraud investors in CityFund and Dunhill and to obtain money from investors by means of false and fraudulent promises and representations.

Smith and Snelling were alleged to have told investors that they were involved in day trading, all investments were liquidated to cash at the close of each day, and that this strategy guaranteed profits of 10–15%. Smith and Snelling held themselves out as being licensed to sell securities. Those representations were false because neither was licensed to sell securities nor were the firms licensed brokerage firms, and the investors' money was never invested in anything or used in day trading; instead, it was used to enrich Smith and Snelling. Smith and Snelling prepared and sent to investors, through both the mail and electronic mail, falsified quarterly statements for Dunhill and CityFund purporting to show positive account balances and fictitious earnings, all as part of the scheme. A total of approximately seventy-two investors in Ohio, Kentucky, and Indiana collectively lost over $8,900,000.00 in this investment scheme.

Smith entered a guilty plea to the three federal charges against him on June 12, 2012. Smith signed an agreed statement of facts acknowledging the Ponzi day trading scheme in which he and Snelling falsely represented that they were licensed to sell securities when they were not and the investors' money was never invested. Smith acknowledged that he and Snelling performed the specific overt acts set forth in the indictment. After pleading guilty in federal court, Smith filed a motion to dismiss the Franklin County charges, contending that the State's prosecution was barred by Indiana Code section 35–41–4–5

, our statutory double jeopardy provision pertaining to prosecution by dual sovereigns. The Franklin Circuit Court dismissed Counts 11 through 25 setting out the charges alleging that Smith committed securities fraud and securities fraud involving a victim over sixty years of age on the basis that the conduct alleged was the same or substantially the same as the conduct alleged in the federal indictment to which Smith pleaded guilty. However, the trial court denied Smith's motion to dismiss Counts 1 through 10 setting out the charges alleging that Smith engaged in unlawful acts related to the offer or sale of a security and alleging Smith's failure to comply with the requirement of broker-dealer registration.

Smith v. State, 993 N.E.2d 1185, 1187–88 (Ind.Ct.App.2013)

, trans. denied.

[4] On appeal, this court held the trial court erred in failing to dismiss counts 1 through 5 of the information, which had alleged that Smith violated Indiana Code Section 23–19–3–1

by selling securities that had not been registered with the Indiana Secretary of State. Id. at 1190. However, we held that Smith could face prosecution under counts 6 through 10 for engaging in business as a broker-dealer without having registered as a broker-dealer. Id. at 1190–91.

[5] On remand following the appeal, Smith elected to plead guilty to the remaining counts of the information, with sentencing left to the trial court. At the sentencing hearing, counsel for Smith noted that he had already been ordered to pay restitution to the Indiana victims of the Ponzi scheme in the federal proceeding and requested that Smith not be ordered to pay restitution twice. Counsel did not object to the State's introduction of evidence related to restitution amounts for the Indiana victims. The trial court imposed maximum sentences of eight years for each conviction, to be served consecutively for a total term of forty years, with twenty years suspended to probation. It also ordered Smith to pay a total of $410,189.16 in restitution to the victims. Smith now appeals.

Analysis

I. Restitution

[6] We first address Smith's claim that the trial court erred in ordering him to pay restitution to the Indiana victims of the Ponzi scheme. Initially, the State claims Smith waived this argument by failing to object to the imposition of restitution. We acknowledge the existence of authority holding, “Generally, failure to object to an award of restitution constitutes waiver of a challenge to the award on appeal, unless a defendant argues that the award was fundamentally erroneous and in excess of statutory authority.” Morris v. State, 2 N.E.3d 7, 9 (Ind.Ct.App.2013)

(citing Lohmiller v. State, 884 N.E.2d 903, 915–16 (Ind.Ct.App.2008) ). Nevertheless, a number of cases have emphasized this court's preference for reviewing a trial court's restitution order even absent an objection by the defendant, unless a defendant has affirmatively agreed to the imposition of restitution. See, e.g.,

C.H. v. State, 15 N.E.3d 1086, 1096 (Ind.Ct.App.2014), trans. denied. In Iltzsch v. State, 972 N.E.2d 409, 412 (Ind.Ct.App.2012), this court held that we should review unobjected-to restitution orders based upon our duty to bring illegal sentences into compliance with the law. Our supreme court granted transfer in this case but summarily affirmed this portion of our opinion. Iltzsch v. State, 981 N.E.2d 55, 57 (Ind.2013). We elect to review the restitution order against Smith, even if he did not clearly object to the order.

[7] We review a trial court's order of restitution for an abuse of discretion. Bickford v. State, 25 N.E.3d 1275, 1279 (Ind.Ct.App.2015)

, trans. denied. The purpose of restitution is to impress upon a defendant the magnitude of the loss he or she has caused, as well as to vindicate the rights of society. Id. A victim entitled to restitution is one who has suffered injury, harm, or loss as a direct and immediate result of the criminal acts of a defendant. Id. Restitution awards generally should not cover crimes to which a defendant does not plead guilty or is not convicted of, and for which the defendant does not explicitly agree to pay restitution. Morris, 2 N.E.3d at 9 (citing Polen v. State, 578 N.E.2d 755, 756–57 (Ind.Ct.App.1991), trans. denied ); see also

James v. State, 868 N.E.2d 543, 549 (Ind.Ct.App.2007).

[8] Here, Smith pled guilty to five counts of failing to register as a broker-dealer. The statute in question states, “It is unlawful for a person to transact business in Indiana as a broker-dealer or agent unless the person is registered under this article as a broker-dealer or is exempt from registration as a broker-dealer....” Ind.Code § 23–19–4–1(a)

.¹ Prior to July 1, 2014, a knowing violation of this provision was a Class C felony. I.C. § 23–19–5–8.² In Smith's first appeal, we addressed whether this crime was the same as the offenses to which he had pled guilty in federal court for purposes of the statutory double jeopardy protection found in Indiana Code Section 35–41–4–5. We noted, “Both the federal indictment and the state charges arise from the overarching Ponzi scheme involving numerous victims in multiple states who were harmed by the actions of Smith and Snelling.” Smith, 993 N.E.2d at 1190

. Additionally, we observed that the federal court's judgment ordered Smith to pay restitution of $5 million, which specifically included restitution to the Indiana victims named in the state charges.

[9] We ultimately held with respect to the statutory double jeopardy question:

The counts allege that Smith knowingly transacted business as a broker-dealer without being registered as such with the Indiana Secretary of State, Securities Division, as

...