State v. Baumann
| Decision Date | 26 March 1980 |
| Docket Number | No. 4879,4879 |
| Citation | 125 Ariz. 404,610 P.2d 38 |
| Parties | STATE of Arizona, Appellee, v. Marcus T. BAUMANN, Appellant. |
| Court | Arizona Supreme Court |
On November 2, 1978, appellant was convicted on ten counts of securities fraud in violation of A.R.S. § 44-1991, seven counts of sale of unregistered securities in violation of A.R.S. § 44-1841, seven counts of sale of securities by an unregistered dealer in violation of A.R.S. § 44-1842, and one count of conspiracy in violation of A.R.S. § 13-331(B).
We take jurisdiction pursuant to 17A A.R.S., Supreme Court Rules, rule 47(e) (5).
The pertinent facts as disclosed by the record indicate that Minnesota Title and Trust Company acted as trustee for its land trust 816 which involved property owned by Charlie Hall as first beneficiary (seller) and Western Land Sales 1 as the second beneficiary (buyer). Through a series of assignments, World of Real Estate, Limited, became holder of the second beneficiary's possessory interest. World of Real Estate, Limited, purported to be a land development company whose sole shareholder was appellant.
In order for World of Real Estate, Limited, to convey legal title to the Charlie Hall property, it would be necessary to satisfy the terms and conditions of the trust, thereby enabling the trustee to release the property from the trust. The basic terms of release required that the second beneficiary pay a price of $700 per acre for contiguous 10-acre parcels. Because subdividing the property in compliance with the terms of the trust proved to be economically unfeasible, appellant and his business associates, Albert P. Rotola 2 and Allen J. Besbris 3 devised a scheme purporting to convey title to the Charlie Hall property.
Appellant, his business companions, and their salesmen 4 used friends, close family members, and neighbors to fabricate mortgage packages supposedly created by the legitimate sale of lots in the Charlie Hall property. The acquaintances, neighbors, and relatives acted as lot buyers executing a package of paper which consisted of a purchase and sale agreement, a warranty deed, a purchase money note, and a mortgage. The paper was further embellished by a substantial down payment and monthly payments at a high interest rate which were never paid by the sham lot buyer. In fact, the individual salesman expressly assured the people masquerading as lot buyers that the down payment need not be made and that few if any of the monthly installments need ever be made. In return for the mythical obligation represented by these mortgage packages, appellant, through World of Real Estate, Limited, conveyed title by warranty deed to the sham lot buyers. These mortgage packages were then transferred from World of Real Estate, Limited, as land developer, to Bankers' Finance and Holding Company, a mortgage broker, whose sole shareholder was appellant, for the purpose of selling the packages to investors. This device of raising capital by creating or acquiring specious mortgages and selling them to innocent investors is known as fenceposting.
The investors, and real victims of the scheme, were for the most part elderly retired people who spent part of the year Bankers' supported the bad paper until the cost of that paper produced serious cash flow problems for the Bankers' organization. At that time appellant and his salesmen sold short-term corporate notes, secured by fenceposted mortgages, to raise money to support the Bankers' operation.
residing in Arizona. These investors risked sums of money which constituted their life savings or retirement security in hope of adding to their fixed retirement incomes. In buying these mortgage packages the investors took with recourse against Bankers' Finance and Holding Company so that should the lot buyer ever default on the mortgage the investor could look to Bankers' for satisfaction of the obligation.
The corporate promissory notes were redeemable in nine months at 10% and 12% interest. The investor received, as security for the corporate notes, mortgage packages on land with value supposedly equal to or greater than the face value of the corporate note. 5 Additionally, investors were assured that not only would they get the 10% or 12% interest on the corporate note but, during the term of the note, the investors expected to get the monthly payments on the mortgage as well.
The property supporting the mortgages used to secure the corporate notes was remote, desolate land acquired through tax sales, repossessions, and defaults, which in fact had a value considerably less than that represented on the face of the documents. When it became apparent that Bankers' would default on the corporate notes, the sham lot buyers executed deeds in lieu of foreclosure in favor of the investors.
During the six months that appellant and his cohorts worked this scheme, at least ten investors risked and lost almost $100,000. The investors received either worthless arid desert land or nothing at all as a return on their investment.
The appellant received concurrent nine- to ten-year sentences on the securities fraud counts, concurrent three- to four-year sentences on the unregistered securities counts, concurrent three- to four-year sentences on the unregistered dealer counts, and a three- to four-year sentence on the conspiracy count. The sentence for the conspiracy, unregistered securities, and unregistered dealer counts were to run concurrently with the sentence received for appellant's federal mail fraud convictions 6 and consecutively to the sentence imposed for the securities fraud counts.
Appellant challenges the indictment handed down by the state grand jury on a number of grounds: (1) the grand jury heard only hearsay evidence and was denied exculpatory evidence; (2) the assistant attorney general improperly gave legal advice and subtly persuaded the grand jury to return the indictment; and (3) the indictment was improperly remanded and thereafter should have been dismissed.
Appellant's claim that an indictment may not be returned on hearsay evidence finds no support in the law of Arizona. See State ex rel. Preimsberg v. Rosenblatt, 112 Ariz. 461, 543 P.2d 773 (1976); State ex rel. Berger v. Myers, 108 Ariz. 248, 495 P.2d 844 (1972); State v. Cousino, 18 Ariz.App. 158, 500 P.2d 1146 (1972). Appellant's reliance on People v. Backus, 23 Cal.3d 360, 152 Cal.Rptr. 710, 590 P.2d 837 (1979), is misplaced because the reasoning in that case turns on a California statute which has no Arizona counterpart.
The contention that a grand jury must consider all exculpatory evidence misreads the grand jury's primary function of determining whether probable cause exists to believe that a crime has been committed and that the individual being investigated was the one who committed it. A.R.S. § 21-413; 17 A.R.S. Rules of Criminal Procedure, rule 12.1(d)(4). Any more would Having examined the transcript, we find no merit in the claim that the assistant attorney general improperly advised the grand jury or persuaded it to return an indictment. A.R.S. § 21-408(A); Marston's, Inc. v. Strand, supra ; State v. Hocker, 113 Ariz. 450, 556 P.2d 784 (1976), overruled on other grounds, State v. Jarzab, 123 Ariz. 308, 599 P.2d 761 (1979); State v. Good, 10 Ariz.App. 556, 460 P.2d 662 (1969).
put grand juries in the business of holding minitrials. Marston's, Inc. v. Strand, 114 Ariz. 260, 560 P.2d 778 (1977); State v. Horner, 112 Ariz. 432, 543 P.2d 118 (1975); State v. Bell, 589 P.2d 517 (Hawaii 1978). Moreover, a review of the record of the trial indicates that no such clearly exculpatory evidence was available.
The state grand jury originally returned a 112-count indictment against appellant and three others. 7 Count 112 of the original indictment was the conspiracy count which, while legally sufficient on its face, was remanded for a new finding of probable cause because the assistant attorney general failed to explain the overt act requirement of the Arizona laws of conspiracy. The trial judge felt that since the erroneous legal opinion could have misled the grand jury on the conspiracy count only, it was unnecessary to send the entire indictment back for a new finding of probable cause on all counts. The trial judge remanded Count 112 and expressly indicated by his order that the court did not intend to sever any defendant or any count. Further, the court ordered that if the grand jury did find probable cause existed after reconsidering the evidence in light of a correct statement of the law, the proposed Count 112 should be assigned the same cause number as the previously returned 111 counts.
The state grand jury returned what it called a "Superseding Indictment" and enumerated as "Count I" an indictment identical to the one which was returned as Count 112 previously. In addition, the grand jury returned a list of overt acts not included in the original indictment. The trial court subsequently ordered the indictment to be identified as Count 112 of the original indictment.
Appellant argues that Rule 12.9, Arizona Rules of Criminal Procedure, does not authorize the trial judge to remand only a part of an indictment. Appellant contends that if a new finding of probable cause is required, the entire indictment must be reconsidered. We cannot agree.
The duty of a grand jury is to decide whether probable cause exists and that probable cause determination may only be challenged by a motion alleging the defendant was denied a substantial procedural right or that an insufficient number of grand jurors concurred in the indictment, 17 A.R.S. Rules of Criminal Procedure, rule 12.9. Here, appellant received a valid determination of probable...
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...issue (exempt security) has not yet been addressed by a California court. However, the Supreme Court of Arizona in State v. Baumann, 125 Ariz. 404, 610 P.2d 38, 46, was confronted with Arizona Revised Statute section 44-2033, which placed the burden of proving securities were exempt from re......
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