State v. Dumke, WD

• Decision Date: 04 April 1995
• Docket Number: No. WD,WD
• Citation: 901 S.W.2d 100
• Parties: Blue Sky L. Rep. P 74,129 STATE of Missouri, Respondent, v. John DUMKE, Appellant. 49208.
• Court: Missouri Court of Appeals

Page 100

901 S.W.2d 100

Blue Sky L. Rep. P 74,129

STATE of Missouri, Respondent, v. John DUMKE, Appellant.

No. WD 49208.

Missouri Court of Appeals Western District.

April 4, 1995.

Motion for Rehearing and/or Transfer to

Supreme Court Denied May 30, 1995.

Application to Transfer Denied

July 25, 1995.

Thomas J. Stephens, IV, Grant City, for appellant.

Jeremiah W. (Jay) Nixon, Atty. Gen., Douglas M. Ommen, Asst. Atty. Gen., Jefferson City, for respondent.

Before HANNA, P.J., and BRECKENRIDGE and SMART, JJ.

SMART, Judge.

John Dumke appeals from his conviction for selling unregistered securities, § 409.301, RSMo 1994 ¹, and for transacting business as a unregistered security agent, § 409.201. He was sentenced to consecutive terms of six years imprisonment and fined $100,000 for each offense. He presents five points on appeal, contending the trial court erred by: (1) giving an instruction in which the term "willfully" is allegedly defined erroneously; (2) excluding evidence as to securities registration exemptions filed in other jurisdictions and excluding evidence as to legal advice provided by his attorney; (3) admitting irrelevant, immaterial and prejudicial evidence; (4) refusing to grant a mistrial based upon prejudicial comments made by the prosecutor; and (5) refusing to grant a mistrial or, in the alternative, refusing to grant appellant's motion for judgment of acquittal because appellant was denied a fair trial and his constitutional right to due process.

The judgment is affirmed.

On January 31, 1990, Jewell and Ethel Maize attended a Living Trust Seminar in St. Joseph, Missouri. In addition to information concerning living trusts, information about investment opportunities was presented at the seminar. Dumke was a presenter at this seminar. Dumke was a partner in a financial planning company, Professional Protection Plans (PPP), doing business in Nebraska, Iowa, Missouri and Kansas.

The next day, February 1, 1990, Dumke called upon Mr. and Mrs. Maize. After a discussion about investments, Mr. and Mrs. Maize gave Dumke checks totalling $25,000 to invest in PPP. In return they were given a yellow paper receipt which was later replaced by a gray "corporate funding agreement" serving as a receipt. Additional amounts of money were given by Mr. and Mrs. Maize to Dumke on April 3, 1990 ($30,000), May 21, 1990 ($15,000) and May 30, 1990 ($30,000). Thus, Mr. and Mrs. Maize invested a total of $100,000 in PPP. They were given a "corporate funding agreement" signed by Dumke reflecting their total investment.

In early 1990, Mary Hosmer, an enforcement attorney in the Securities Division of the Missouri Secretary of State's Office, received information from the State of Nebraska indicating that PPP might be selling securities in Missouri. Upon investigation, Ms. Hosmer determined that neither Dumke nor PPP were registered in Missouri. She sent a target letter, dated May 3, 1990, to PPP requesting information about the company's claimed exemption in light of its unregistered status. In reply PPP's attorney, Gary Hoffman, erroneously claimed an exemption under § 409.402(b)(9), which sets out numerous exemptions to the registration requirements. Dumke did not register as a securities agent with the State of Missouri, nor was PPP registered as a security.

In his first point, Dumke claims that the trial court erred in giving Instruction No. 5, containing a definition of the term "willfully" which reads:

A "willful" act or omission may be described as an intentional act or omission to perform an act in that the person was aware of what he was doing or failing to do. Proof of evil motive, intent to violate the law, or knowledge that the law was being violated is not required.

Dumke contends that this definition was erroneous because: (1) it eradicates the difference between willful and non-willful violations; (2) it unjustifiably dispenses with mens rea; (3) it conflicts with the definition of the term used by the Supreme Court; and (4) it finds no support in legislative history.

Dumke was convicted for transacting business as an unregistered security agent, § 409.201(a), and for selling unregistered securities, § 409.301. Section 409.201(a) provides:

It is unlawful for any person to transact business in this state as a broker-dealer unless he is registered as a broker-dealer under this act; it is unlawful for any person to transact business in this state as an agent unless he is registered as an agent under this act.

Section 409.301 provides: "It is unlawful for any person to offer or sell any security in this state unless (1) it is registered under this act or (2) the security or transaction is exempted under section 409.402." The penalty for violating these statutes is established in § 409.410(a), which provides that, "[a]ny person who willfully violates any provision of this act ... shall upon conviction be fined not more than five hundred thousand dollars or imprisoned not more than ten years, or both." (Emphasis added).

The essence of Dumke's argument is that the state's interpretation of the word "willfully" is incompatible with its usage in other areas of criminal law. He contends that a defendant must have the mens rea before a violation of the statute can be found. Specifically, he points to § 562.016(1), which provides that, "a person is not guilty of an offense unless he acts with a culpable mental state, that is, unless he acts purposely or knowingly or recklessly or with criminal negligence...." Dumke contends that a mistake of law or fact and good-faith reliance upon advice of counsel should be valid defenses insofar as they negate the mental state required for conviction. Dumke's argument may be logically cogent in view of the frequent usage of the word "willful" in other contexts, but the argument is completely unsupported in the context of securities law.

There is no definition of the word "willfully" in Chapter 409, nor is such a definition found in other areas of the criminal code. We must turn elsewhere to obtain such a definition. Chapter 409 was adopted from the Uniform Securities Act. "[I]n construing uniform and model acts enacted by the General Assembly, we must assume it did so with the intention of adopting the accompanying interpretations placed thereon by the drafters of the model or uniform act." John Deere Co. v. Jeff De Witt Auction Co., 690 S.W.2d 511, 514 (Mo.App.1985).

A definition of the word "willfully" can be gleaned from looking at the Official Comment to Chapter 409, the criminal provision of the Uniform Securities Act, which states: "On the meaning of 'willfully' see the comment under § 204(a)(2)(B)." The section referred to is a civil enforcement section which authorizes a securities officer to revoke, suspend or withdraw a registration. The section refers to such authority being exercised when a securities seller has "willfully violated or willfully failed to comply" with any provision of the securities act.

The Official Comment notes:

Clause (B): As the federal courts and the SEC have construed the term "willfully" in § 15(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 780(b), all that is required is proof that the person acted intentionally in the sense that he was aware of what he was doing. Proof of evil motive or intent to violate the law, or knowledge that the law was being violated, is not required. The principal function of the word "willfully" is thus to serve as a legislative hint of self-restraint to the Administrator. (Emphasis added).

Although § 409.204(a)(2)(B) applies to administrative sanctions for violation of the act, it is apparent that the same standard is applicable to criminal prosecutions. See State v. Russell, 119 N.J.Super. 344, 291 A.2d 583, 586 (1972).

There is no Missouri case law directly on point. However, when construing uniform acts, it must be remembered that the fundamental purpose of a uniform law is "to eliminate uncertainty and provide plain and certain the controlling rules of law." State ex rel. Tri-City Constr. Co. v. Marsh, 668 S.W.2d 148, 151 (Mo.App.1984). It is fitting, therefore, to turn to our sister jurisdictions and examine their solutions to the problem.

The primary purpose of the securities laws is to protect those who purchase securities. Garbo v. Hilleary Franchise Sys., Inc., 479 S.W.2d 491, 499 (Mo.App.1972); See also Dunn v. Bemor Petroleum, Inc., 680 S.W.2d 304, 306 (Mo.App.1984). This purpose is reflected in cases from other jurisdictions. See, e.g., State v. Kreminski, 178 Conn. 145, 422 A.2d 294 (1979); People v. Mitchell, 175 Mich.App. 83, 437 N.W.2d 304 (1989); State v. Jacobs, 55 Or.App. 406, 637 P.2d 1377 (1981); State v. Nagel, 279 N.W.2d 911 (S.D.1979). A definition of "willful" requiring proof of an evil motive, or of awareness that he was violating the law, would make enforcement difficult and would hinder this purpose. The court in Nagel pointed out that, "[t]he statute is remedial in nature, and was passed to protect the inexperienced, confiding, and credulous investor, and save him from his own foolish cupidity." State v. Nagel, 279 N.W.2d at 915 (quoting State v. Martin, 85 S.D. 587, 594, 187 N.W.2d 576, 580 (1971)). A construction of the statute which is sympathetic to the investor is urged in order for its purpose to be accomplished. Id.

The overwhelming weight of authority uses the word "willful" to describe nothing more than an act done intentionally. See, e.g., United States v. Schwartz, 464 F.2d 499 (2nd Cir.1972) cert. den., 409 U.S. 1009, 93 S.Ct. 443, 34 L.Ed.2d 302 (1972); Buffo v. State, 415 So.2d 1158 (Ala.1982); People v. Feno, 154 Cal.App.3d 719, 201 Cal.Rptr. 513 (1984); People v. Morrow, 682 P.2d 1201 (Colo.App.1983); State v. Hodge, 204 Kan. 98, 460 P.2d 596 (1969); State v. Fries, 214 Neb. 874, 337 N.W.2d 398 (1983). We find this authority persuasive and hold that "willful," as specifically applied to Chapter 409, means only that the act in question is...