State v. Hornbeck

• Decision Date: 17 January 2008
• Docket Number: No. 26,308.,26,308.
• Parties: STATE of New Mexico, Plaintiff-Appellee, v. Gene Russell HORNBECK, Defendant-Appellant.
• Court: Court of Appeals of New Mexico

178 P.3d 847

2008 NMCA 039

STATE of New Mexico, Plaintiff-Appellee, v. Gene Russell HORNBECK, Defendant-Appellant.

No. 26,308.

Court of Appeals of New Mexico.

January 17, 2008.

Gary K. King, Attorney General, Santa Fe, NM, Joel Jacobsen, Assistant Attorney General, Albuquerque, NM, for Appellee.

Gary C. Mitchell, P.C., Gary C. Mitchell, Ruidoso, NM, for Appellant.

OPINION

KENNEDY, Judge.

{1} Defendant appeals his convictions for embezzlement, fraud, securities fraud, and sale of unregistered securities. Defendant's arguments on appeal are that (1) his convictions for fraud, securities fraud, and embezzlement violate double jeopardy; (2) the district court erred in allowing evidence outside of the four corners of the promissory note (3) the district court erred in refusing his motions for directed verdict; (4) the evidence was insufficient to support his convictions; and (5) the district court erred in refusing his requested jury instructions relating to embezzlement, fraud, and exemptions.

{2} We take this opportunity to pick up an exposed thread from our case of State v. Mercer, 2005-NMCA-023, 137 N.M. 36, 106 P.3d 1283, in which we held that convictions on both alternative charges of fraud and embezzlement offended double jeopardy and could not stand. Id. ¶ 29. The holding in the case was correct: While alternative charges are proper, Defendant cannot be convicted of both fraud and embezzlement. Double jeopardy does not, however, account for the fact that in a situation such as this, convictions for both cannot stand because the crimes are mutually exclusive of each other. We therefore affirm Defendant's convictions for fraud, securities fraud, and the sale of unregistered securities, and reverse Defendant's conviction for embezzlement.

FACTS

{3} Between 1993 and 1999, Defendant was a stockbroker who managed investments for Potash Company of America's Retirees Trust (PCA), a trust created in bankruptcy court to pay medical expenses for retired employees of the defunct Potash Company of America. PCA Board members placed great trust and confidence in Defendant, relying on his advice and letting him make decisions on behalf of the Board. In 1999, Defendant left his brokerage firm, Merrill Lynch, and stopped managing PCA's investments. Board member George Bartlett believed that the PCA trust was losing a good part of its portfolio's value by losing Defendant's expertise and, consistent with this belief, the trust's portfolio began losing money.

{4} In 2001, Defendant informed Board members that he was opening a broker-dealer office for Financial Networks. Board members told Defendant about their recent losses and Defendant replied, "I think we can stop the bleeding." Board members moved most of PCA's portfolio from Merrill Lynch to Financial Networks, and Defendant did stop the losses. After two or three months, the Board gave Defendant $600,000 in exchange for a promissory note.

{5} The parties dispute the intent of the promissory note. Defendant asserts that the promissory note was a personal loan to Defendant with the requirement that he pay back the $600,000 with the interest rate of fifteen percent per annum. The State, conversely, successfully argued to the jury that the promissory note was a security with Defendant representing that he would invest all of the $600,000 on behalf of PCA with a company called Trend Traders. Upon his receipt of the $600,000, Defendant deposited it into his personal account and used some of the money to pay his personal bills. The Board never received back any of the principal amount of the $600,000 and received only some of the interest payments. Defendant was charged as noted and convicted. We discuss further facts in conjunction with the relevant issues.

DISCUSSION

Defendant's Convictions for Embezzlement and Fraud Are Mutually Exclusive

{6} Defendant argues that his convictions for embezzlement and fraud as charged in Counts I and II violate the prohibition against double jeopardy. Defendant argues that although the State was authorized to charge embezzlement and fraud in the alternative, that he cannot be convicted for both crimes because each conviction "was for the same incident, occurring on the same dates, involving the same monies, and involving the same alleged victim."

{7} In support of his argument that he was punished for both crimes when his actions support a conviction for one, Defendant cites to Mercer. Mercer holds that the State is authorized to charge embezzlement and fraud in the alternative, but that convictions for both alternatives violate the prohibition against double jeopardy. Id. The holding in Mercer relates to the double jeopardy prohibition against multiple punishments based on the same offense. See generally Swafford v. State, 112 N.M. 3, 7, 810 P.2d 1223, 1227 (1991).

{8} The State argues that Defendant's reliance on Mercer alone, without any specific reference to Swafford, precludes any double jeopardy issue from properly being before this Court. We disagree. Mercer plainly holds that convictions for both fraud and embezzlement violate double jeopardy. For this reason, Defendant's specific reference to Mercer without citation to Swafford is sufficient to alert this Court to his double jeopardy complaint. State v. Gomez, 1997-NMSC-006, ¶ 30, 122 N.M. 777, 932 P.2d 1 (assertion of the legal principle and development of the facts are generally the only requirement to assert a claim on appeal).

{9} The State asserts that Mercer is inapplicable because Mercer relates to a proceeding when the defendant has been charged in the alternative in one count with embezzlement and fraud, rather than by separate counts, as in this case. Ironically, given the State's argument that the defense has not briefed double jeopardy by only citing Mercer, we conclude that Swafford's double jeopardy analysis is not a useful model, but we stand by our result in Mercer that convictions for both fraud and embezzlement cannot stand. The issue is simply whether his conviction on both offenses is allowed by law. We hold it was not.

{10} Mercer's convictions on both alternatives were reversed owing to the improper exclusion of evidence, and we did not address her other issues, including the double jeopardy argument, in any real depth. We did talk about the extent to which the evidence established Mercer's fraudulent intent in acquiring money and, to bolster the existence of that fraudulent intent, spoke of how she used the money she received. We did not talk about the relevance of how she acquired the money, or the process of entrustment and conversion in the context of her using the money. Our ruling was simply that if the jury "again convicts Defendant of alternatives on any count, one alternative conviction must be vacated." Id. ¶ 29. Unfortunately, we used the term "double jeopardy" while describing the conflict in that case between fraud and embezzlement, and our opinion neither fairly met nor resolved the reason that Mercer could only be convicted of one or the other crime. We now conclude that though the crimes can be properly charged in the alternative, Defendant's convictions for both fraud and embezzlement cannot stand because they are legally mutually exclusive of each other.

{11} The State maintains that Defendant's act of fraud was complete on June 20, 2001, when the PCA gave him the $600,000, based on his fraudulent conduct, practices, or representations and that Defendant's subsequent act of embezzlement was complete when he converted the $600,000 to his own use by depositing it in his personal account and writing checks to cover his personal expenses. In addition to relying on the same evidence to prove both the completion of the fraud as well as the entrustment of the embezzlement, the State also relied on the same circumstantial evidence to show the requisite fraudulent intent for the respective crimes. For both crimes, the State relied on Defendant's conduct, prior to June of 2001, of approaching Board members and telling them that if they gave him $600,000, he would invest it on the Trust's behalf in an account with Trend Traders, with a promise of excellent returns. The State similarly relied on evidence that Defendant repeatedly told board members that the full $600,000 was invested with Trend Traders and that Defendant had already netted a $70,000 gain, when in fact Defendant knew that he had either spent or nearly lost all of the $600,000.

{12} By focusing on the manner in which Defendant obtained the $600,000, it becomes apparent that Defendant correctly asserts that while alternative charges would have been permissible, separate convictions were not. In particular, a comparison of the elements reveals that a key distinction between the two crimes is in the manner of acquiring of the property at issue. Fraud requires a finding that the property was acquired unlawfully, by deception, based on words or conduct that misrepresented a fact. See State v. Jones, 73 N.M. 459, 465, 389 P.2d 398, 402 (1964) (providing that in a prosecution for obtaining of money under false pretenses, the State must show that the victim relied on the false representation and surrendered her money to the defendant based on the false representation). Fraud begins with fraudulent intent, and is complete at the point when a person receives the property. State v. Schifani, 92 N.M. 127, 131, 584 P.2d 174, 178 (Ct.App.1978). Embezzlement begins at the point where Defendant comes into the lawful possession of another's property, and ends when it is fraudulently converted to his use. State v. Archie, 1997-NMCA-058 ¶ 6, 123 N.M. 503, 505, 943 P.2d 537, 539. Tendering of $600,000 to defendant arguably completed the fraud and constituted the first act in the embezzlement. Defendant's act of fraud was not complete before the embezzlement began, resulting in the fraud and embezzlement being part of the same criminal transaction. The overlap of one element —...