State v. Himes

• Decision Date: 24 March 2015
• Docket Number: No. DA 14–0034.,DA 14–0034.
• Citation: 2015 MT 91,378 Mont. 419,345 P.3d 297
• Parties: STATE of Montana, Plaintiff and Appellee, v. Harris HIMES, Defendant and Appellant.
• Court: Montana Supreme Court

378 Mont. 419

345 P.3d 297

2015 MT 91

STATE of Montana, Plaintiff and Appellee

v.Harris HIMES, Defendant and Appellant.

No. DA 14–0034.

Supreme Court of Montana.

Submitted on Briefs Nov. 6, 2014.

Decided March 24, 2015.

For Appellant: Matthew G. Monforton, Monforton Law Offices, PLLC; Bozeman, Montana.

For Appellee: Timothy C. Fox, Montana Attorney General, Tammy A. Hinderman, Assistant Attorney General; Helena, Montana, Jesse Laslovich, Brett O'Neil, Special Deputy Attorneys General; Helena, Montana, William Fulbright, Ravalli County Attorney; Hamilton, Montana.

Opinion

Justice JAMES JEREMIAH SHEA delivered the Opinion of the Court.

¶ 1 Harris Himes appeals the judgment of the Twenty–First Judicial District Court, Ravalli County, sentencing him to three concurrent ten-year sentences with the Department of Corrections, with all but 90 days suspended, plus restitution and court costs, upon his convictions for three felonies: 1) failure to register as a securities salesperson; 2) failure to register a security; and 3) fraudulent practices. We affirm in part, reverse in part, and remand with instructions.

¶ 2 We restate the issues on appeal as follows:

1. Whether “security” was adequately defined for the jury.

2. Whether the State provided sufficient evidence to prove Himes sold a security.

3. Whether the mens rea rule set forth in § 45–2–104, MCA, requires a mental state other than “willfully” in order to sustain a conviction for a felony.

4. Whether the District Court's instruction on the mental state “willfully” created a strict liability offense, and therefore the ten-year sentence for that offense violates due process.

5. Whether the District Court erred by giving a jury instruction for fraudulent practices that incorporated an Administrative Rule of Montana, thereby creating a different evidentiary standard for the crime of fraudulent practices than that required by statute.

6. Whether Himes was properly sentenced in the following respects:

a. Whether the District Court abused its discretion in giving Himes a suspended sentence rather than his requested deferred sentence.b. Whether the District Court's determination of the restitution award was clearly erroneous.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 Geoffrey Serata and Harris Himes met at Himes' ministry, Big Sky Christian Center, in Hamilton, Montana, in 2003. Serata is a disabled veteran. Himes is a retired attorney who owns and serves as senior minister at Big Sky Christian Center. Over a period of years, Serata became involved in Himes' ministry. Serata considered Himes a close friend and confidant.

¶ 4 Due to his disability, Serata has rarely maintained steady employment. He works odd jobs including electrical work, logging, and equipment operation. His income also includes social security disability and VA disability. When Serata met Himes, he had very little in savings and had no investments. Serata has little experience with investing and limited knowledge on the subject.

¶ 5 In late 2007, Serata learned that he was going to receive a distribution from his grandfather's trust, which he believed would total approximately $150,000. In December 2007, Serata contacted Himes and asked for advice about how to find a risk-free investment opportunity for his inheritance. Himes and Serata met in January of 2008 to discuss the matter. After initially suggesting an attorney and accountant to Serata, Himes asked if Serata was interested in investing in “the Lord's work.” Himes began to explain many investment opportunities to Serata, all of which were intended to produce income to build churches and related facilities. Among the investment opportunities Himes discussed with Serata was a company called Duratherm.

¶ 6 Himes told Serata that Duratherm was a solar-panel production company which was close to starting production. According to Himes, Duratherm had a factory, the necessary equipment, and buyers set to purchase the solar panels. Himes stated that the last piece Duratherm needed to begin full-scale production was a glue machine, which would cost approximately $150,000. Serata was interested in the venture, and he and Himes discussed the matter over the next three months. Himes assisted Serata in setting up a corporation sole¹ for his inheritance, which they named “Image of Truth.”

¶ 7 In late March 2008, Serata met with Himes and James “Jeb” Bryant to further discuss Duratherm. Bryant was a friend of Himes and fellow pastor. At this meeting, Bryant presented a PowerPoint presentation explaining Duratherm's Mexico-based production capabilities. Himes and Bryant, who each held an interest in the company, offered Serata a six-percent interest in Duratherm, and they began referring to Serata as their partner. At the meeting, Serata verbally agreed to invest in Duratherm. There was no written agreement. The meeting concluded with prayer, hugs, and handshakes.

¶ 8 After the meeting with Bryant, Serata began requesting a written contract to memorialize his investment, and information about Duratherm's expected production capacity. In an e-mail dated May 28, 2008, Bryant wrote that Serata could conservatively expect to receive a 24 percent, or $36,000, per year rate of return on his investment.

¶ 9 On June 6, 2008, Serata made a wire transfer of $150,000 to Harris Bank in Illinois, at the instruction of Himes and Bryant. The beneficiary on the wire transfer was listed as Monarch Beach Properties, which Serata understood was the parent or “umbrella” company of Duratherm. Shortly thereafter, Himes prepared a “Subscription Agreement” outlining Serata's interest in Duratherm. The document contained the heading: “DURATHERM BUILDING SYSTEMS INC.” The subscriber was listed as Serata's corporation sole, “Image of Truth,” and included the following description of Serata's interest:

This Subscription and Agreement, shall constitute the guarantee of issuance of a share or shares in DBS. Each share controls POINT ZERO ZERO TWO (.002) percent of the company and all ore values. It also guarantees that the subscriber shall receive POINT ZERO ZERO TWO (.002) percent royalties of the mine's defined net profits. The Subscriber is also guaranteed THREE THOUSAND (3000) shares; therefore, should the company go public and or sell, the subscriber shall be paid SIX (6) percent of the total stock trade of net sales price of any and all assets after any debt and taxes are paid.

On the last page of the Subscription Agreement, Serata's interest was listed as “POINT EIGHT THREE PERCENT (6%) [sic] ownership in DBS, LLC.” Himes assured Serata that the Subscription Agreement was a temporary document, and Serata could back out at any time. Serata admitted that he did not read this document prior to signing it, but he trusted Himes as a man of God, and he understood that the document was not a binding contract.

¶ 10 Serata traveled to Mexico in the summer of 2008, believing he would be assisting with Duratherm's operations. Serata first met Bryant in Texas where Serata helped find vehicles to travel to Mexico. While in Texas, they purchased a glue machine for seven or eight thousand dollars. Serata then traveled to Mexico City and eventually Puerto Escondido, Mexico, the reported location of Duratherm's operations.

¶ 11 When Serata arrived in Puerto Escondido, he discovered that there was no factory ready to produce solar panels. The property they visited was a working ranch, owned and operated by friends of Bryant, consisting of mainly agricultural buildings for produce production and storage. At trial, Serata testified that what had been described as a factory ready for production was in fact a “shell of a structure,” which he later discovered was not even owned by Duratherm. Still wanting to assist with the venture, however, Serata remained in Mexico for over three weeks, doing basic building maintenance. Throughout the trip, Bryant insisted that lawyers in Mexico were handling the paperwork for Duratherm, but Serata was never invited to meet with any of the Mexican lawyers regarding his investment.

¶ 12 During the trip to Mexico and after his return to Montana, Serata was concerned about his investment in Duratherm and made many attempts to contact Himes and Bryant regarding the conditions of the Mexico property. In an e-mail dated August 17, 2008, Serata requested a statement from Bryant outlining Duratherm's assets, the names of the other partners, their percentage of ownership and type of investment, the relationship between Duratherm and Monarch Beach Properties LLC, Monarch Beach Cloisters, and other related business matters. Bryant replied by outlining the general ownership of Duratherm, with 39% being owned by Monarch Beach,² and stating, “ We do have [p]aperwork at the [l]awyers in Mexico and bringing on a new owner means an entirely new filing.”

¶ 13 On August 22, 2008, Serata e-mailed Himes explaining that he felt betrayed. Serata stated Himes led him to believe his investment would purchase a glue machine for Duratherm to begin production. Serata asked to be bought out of his investment in Duratherm. On September 16, 2008, Himes replied to Serata's e-mail, stating, “I never suggested that you invest your money in Duratherm.” Himes insisted that Serata was aware that Duratherm was a “start-up venture,” and that Serata was never offered a partnership.

¶ 14 Serata reported the events to the Ravalli County Sheriff's office. Believing it was a securities-related case, the Sherriff's office referred the case to the Office of the Commissioner of Securities and Insurance of the State Auditor's Office.

¶ 15 Deputy Securities Commissioner, Lynne Egan, investigated Serata's case. Egan's investigation found that neither Duratherm Building Systems, Inc., nor Monarch Beach was registered to be sold as securities in the state of Montana, the other 49 states, or with the Securities and Exchange Commission. She also found that Himes was not registered to offer or sell securities in Montana.

¶ 16 Egan also investigated Serata's...