State v. Fries

• Decision Date: 22 July 1983
• Docket Number: No. 82-226,82-226
• Citation: 214 Neb. 874,337 N.W.2d 398
• Parties: , Blue Sky L. Rep. P 71,837 STATE of Nebraska, Appellee, v. Alan W. FRIES, Jr., Appellant.
• Court: Nebraska Supreme Court

Page 398

337 N.W.2d 398

214 Neb. 874, Blue Sky L. Rep. P 71,837

STATE of Nebraska, Appellee, v. Alan W. FRIES, Jr., Appellant.

No. 82-226.

Supreme Court of Nebraska.

July 22, 1983.

Syllabus by the Court

1. Evidence. The determination of the admissibility of evidence rests within the sound discretion of the trial court.

2. Fraud. When fraud is alleged, a broad and liberal latitude should be given the party alleging it in establishing every fact and circumstance connected with its alleged perpetration.

3. Notice. Generally, a notice is regarded in law as actual when the person sought to be affected by it knows of the existence of the particular fact in question.

4. Notice. Proof of mailing a notice is prima facie proof that it was received.

5. Criminal Law: Collateral Evidence. Proof of collateral matters which do not render the defendant's criminal activity less criminal are not relevant.

6. Records: Appeal and Error. Evidence which does not appear in the record can not be considered by this court on appeal.

7. Criminal Law: Securities Regulation. The State is not required to prove lack of an exemption as an element of the offense of unlawful sale of unregistered securities.

8. Criminal Law: Securities Regulation. The defendant bears the burden of proof as to a claim of exemption.

9. Criminal Law: Securities Regulation. Proof of a specific intent, evil motive, or knowledge that the law was being violated is not required to sustain a criminal conviction under the Securities Act of Nebraska.

10. Securities Regulation. The registration of an agent is not effective during any period when he is not associated with a registered broker-dealer or issuer-dealer.

11. Sentences: Appeal and Error. A sentence imposed within statutory limits will not be disturbed on appeal in the absence of an abuse of discretion.

Thomas M. Kenney, Douglas County Public Defender, and Stanley A. Krieger, Omaha, for appellant.

Paul L. Douglas, Atty. Gen., and Ralph H. Gillan, Lincoln, for appellee.

KRIVOSHA, C.J., BOSLAUGH, McCOWN, WHITE, HASTINGS, CAPORALE and SHANAHAN, JJ.

BOSLAUGH, Justice.

The defendant, Alan W. Fries, Jr., was found guilty of 27 counts of violating the laws of Nebraska regulating the registration and sale of securities. He was sentenced to imprisonment for 16 months to 5 years on each count, the sentences on the first three counts to run consecutively. On the remaining counts the sentences run concurrently with the sentence on count III.

The charges were based on nine separate transactions in which the defendant sold capital stock which was not registered. The transactions took place between March 17, 1977, and September 28, 1978. One transaction involved the sale of stock in Solar America, Inc. The other eight transactions involved the sale of stock in Energy Company of America, Inc. Nine counts alleged the defendant sold unregistered securities in violation of Neb.Rev.Stat. §§ 8-1104 and 8-1117 (Reissue 1977); nine counts alleged the sales were made by the defendant when he was not registered as an agent of the issuer-dealer as required by Neb.Rev.Stat. §§ 8-1103 and 8-1117 (Reissue 1977); and nine counts alleged that the defendant made false representations or failed to disclose material facts in violation of Neb.Rev.Stat. §§ 8-1102(1)(b) and 8-1117 (Reissue 1977).

The record shows that in July 1976 the state Department of Banking and Finance learned that the defendant was selling unregistered securities. The defendant was then contacted by the department, and as a result of meetings with the department, the capital stock of Solar America, Inc., was registered, the corporation was qualified as an issuer-dealer, and the defendant was registered as an agent for the issuer-dealer. The registration order was issued on September 3, 1976.

In the months which followed the registration, the department received inquiries regarding representations made by the defendant about Solar America and its stock. Following an investigation, the department concluded that the defendant was making material, false statements regarding the company to investors. On February 21, 1977, the department issued a stop order prohibiting Solar America from selling its securities, and revoked its registration. The effect of the order was to prohibit the defendant from selling the securities. Barry Lake, legal counsel for the department, testified that the order was sent to the defendant by certified mail and that the stop order was discussed with the defendant on numerous occasions after its issuance. The stop order was never lifted.

Due to the misrepresentations that had been made, the department required the company to make a rescission offer. The defendant complied with this requirement, at least in part, but the department was unable to determine whether all stockholders were notified of the offer.

In late 1978 the department began receiving inquiries about a company named Energy Company of America, Inc. An investigation revealed that the defendant was selling the capital stock of this company. The stock had never been registered, the company was not qualified as an issuer-dealer, and the defendant was not registered as its agent. A cease and desist order was issued on June 21, 1979, ordering the defendant to stop selling securities in Solar America and Energy Company of America.

The nine investors who had purchased unregistered stock from the defendant testified in detail concerning the transactions and the representations made by the defendant. Other witnesses testified concerning the facts which established the representations were false. Solar America, Inc., was dissolved for nonpayment of corporation tax on August 2, 1977; Energy Company of America, Inc., was dissolved for nonpayment of corporation tax on August 2, 1979.

As a part of its investigation, the department subpoenaed bank records relating to the corporations and the defendant and his wife. Cash disbursement schedules were then prepared from the information obtained from the bank records. This evidence showed that over $100,000 of the proceeds from the sale of the stock went into personal accounts of the defendant and his wife.

The defendant assigns as error the admission into evidence of the subpoenas and the bank records obtained as a result of the subpoenas. The defendant also alleges error in the admission of the cash disbursement schedules prepared by the department from these records. The thrust of the defendant's argument is that these exhibits were prejudicial because they did not tend to show the true financial picture of the corporation.

The determination of the admissibility of evidence rests within the sound discretion of the trial court. State v. Martin, 198 Neb. 811, 255 N.W.2d 844 (1977). In New Omaha Thompson-Houston Electric Co. v. Rombold, 73 Neb. 259, 270, 102 N.W. 475, 479 (1905), aff'd 73 Neb. 272, 106 N.W. 213, we said: "[I]t is a universal rule that when fraud is alleged a broad and liberal latitude should be given the party alleging it in establishing every fact and circumstance connected with its alleged perpetration. The mental and physical condition of the party, all representations and inducements held out to him by the adverse party, should be carefully examined into, and all testimony directly connected with the transaction should be admitted."

The exhibits were admissible because they tended to prove that certain representations about the companies' financial status made by the defendant were made with knowledge that they were false. In Dosek v. United States, 405 F.2d 405 (8th Cir.1968), cert. denied 395 U.S. 943, 89 S.Ct. 2014, 23 L.Ed.2d 461 (1969), a prosecution for the fraudulent sale of securities by mail, the court faced a similar issue. The court said at 409: "Ralph DeWald, the Count IV victim of a fraudulent stock sale, after purchasing Securities Investors stock subsequently loaned defendant $8,000 evidenced by a note, Exhibit 74. The check disbursing the proceeds of the loan is Exhibit 73. Such exhibits and testimony relating thereto were received in evidence over defendant's objection based on relevancy and materiality. After hearing from counsel extensively, the testimony was admitted. The record includes a letter from the defendant and DeWald's testimony that the loan was made for the purpose of aiding Securities Investors to purchase an insurance company, and that the loan proceeds were not used for that purpose. Acquisition of insurance companies was represented by the defendant to be one of the prime objectives of Securities Investors. The evidence relating to the loan has a bearing on the scope and extent of the fraudulent scheme. In Hartzell v. United States, 8 Cir., 72 F.2d 569, 584, a mail fraud case, we held:

" 'In prosecutions of this character, great latitude is allowed in the introduction in evidence of attending circumstances. Smith v. United States (C.C.A. 8) 267 F. 665. "The competency of a collateral fact to be used as the basis of legitimate argument is not to be determined by the conclusiveness of the inferences it may afford in reference to the litigated fact. It is enough if these may tend, even in a slight degree to elucidate the inquiry, or to assist, though remotely, to a determination probably founded in truth." Williamson v. United States, 207 U.S. 425, 28 S.Ct. 163, 172, 52 L.Ed. 278. False statements outside the scheme charged are competent to show the defendant's fraudulent intent. Busch v. United States (C.C.A. 8) 52 F.2d 79; United States v. Sprinkle (C.C.A. 2) 57 F.2d 968; Vause v. United States (C.C.A. 2) 53 F.2d 346. The evidence admissible to establish the scheme and the intent may be extensive in scope and rests largely within the discretion of the trial judge. These admissions tended to show the nature of the scheme, the falsity of the representations, and the knowledge and intent of the defendant.'

"To like effect, see Llanos v. United States, 9 Cir., 206 F.2d...