State v. Irons

• Decision Date: 20 February 1998
• Docket Number: No. S-96-1120,S-96-1120
• Citation: State v. Irons, 254 Neb. 18, 574 N.W.2d 144 (Neb. 1998)
• Parties: STATE of Nebraska, Appellee, v. Jack G. IRONS, Appellant.
• Court: Nebraska Supreme Court

Page 144

574 N.W.2d 144

254 Neb. 18

STATE of Nebraska, Appellee, v. Jack G. IRONS, Appellant.

No. S-96-1120.

Supreme Court of Nebraska.

Feb. 20, 1998.

Syllabus by the Court

1. Statutes: Judgments: Appeal and Error. Statutory interpretation is a matter of law, in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the decision made by the courts below.

2. Constitutional Law: Statutes: Appeal and Error. A challenge to the constitutionality of a statute presents a question of law, which must be determined by the Nebraska Supreme Court independently from the conclusion reached by the trial court.

3. Securities Regulation: Convictions: Intent: Proof. A specific intent need not be proved to sustain a conviction under the fraud provisions of the Uniform Securities Act.

4. Securities Regulation: Convictions: Intent: Proof. To sustain a conviction under either the fraud or registration provisions of the Uniform Securities Act, specific intent need not be proved, and the term "willful" may mean no more than that the actor was aware of what he was doing.

5. Securities Regulation: Words and Phrases. The factors that define an investment contract are whether there is (1) an investment (2) in a common enterprise (3) with a reasonable expectation of profits (4) to be derived from the entrepreneurial or managerial efforts of others.

6. Securities Regulation. In interpreting the Securities Act of Nebraska, Neb.Rev.Stat. § 8-1122 (Reissue 1997) encourages reference to federal law and the law of other states that have adopted the Uniform Securities Act.

7. Constitutional Law: Statutes: Standing. To have standing to assert a claim of vagueness, a defendant must not have engaged in conduct which is clearly prohibited by the questioned statute and cannot maintain that the statute is vague when applied to the conduct of others.

8. Constitutional Law: Statutes. The test for determining whether a statute is vague is whether it forbids or requires the doing of an act in terms so vague that persons of common intelligence must necessarily guess at its meaning and may differ as to its application.

9. Constitutional Law: Statutes. A statute will not be deemed vague if it uses ordinary terms which find adequate interpretation in common usage and understanding.

10. Statutes. A person of ordinary intelligence must have a reasonable opportunity to know what is prohibited by a statute or what conduct will render him liable for punishment.

11. Criminal Law: Prosecuting Attorneys. A prosecutor is free to choose under which statute to prosecute so long as the selection is not deliberately based on any unjustifiable standard such as race, religion, or other arbitrary classification.

12. Sentences: Appeal and Error. It is the duty of an appellate court to disturb a sentence on appeal which was within the statutory limits only if the sentence imposed was an abuse of judicial discretion.

13. Trial: Words and Phrases. Judicial abuse of discretion means that the reasons or rulings of the trial judge are clearly untenable, unfairly depriving a litigant of a substantial right and denying a just result in matters submitted for disposition.

Robert B. Creager, of Anderson, Creager & Wittstruck, P.C., Lincoln, for appellant.

Don Stenberg, Attorney General, and Mark D. Starr, Lincoln, for appellee.

WHITE, C.J., and CAPORALE, WRIGHT, CONNOLLY, GERRARD, STEPHAN, and McCORMACK, JJ.

WRIGHT, Justice.

NATURE OF CASE

Jack G. Irons was charged with the sale of unregistered securities, in violation of Neb.Rev.Stat. § 8-1104 (Reissue 1991). Irons moved to quash the information, alleging that § 8-1104 is unconstitutional. A jury was waived, and after making findings of fact and conclusions of law, the district court found Irons guilty. Irons was sentenced to 1 to 3 years' imprisonment.

SCOPE OF REVIEW

Statutory interpretation is a matter of law, in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the decision made by the courts below. State v. Schultz, 252 Neb. 746, 566 N.W.2d 739 (1997).

A challenge to the constitutionality of a statute presents a question of law, which must be determined by the Nebraska Supreme Court independently from the conclusion reached by the trial court. State v. Sommerfeld, 251 Neb. 876, 560 N.W.2d 420 (1997).

FACTS

The "Friends Network" (Network) was a variation of pyramid sales wherein the participants made "gifts" to other participants above them in the pyramid. A participant had to recruit others to join the pyramid in order to progress to a place in the pyramid where that participant would receive gifts. Once a participant had received $12,000 in gifts, the pyramid would split. The participant was then required to leave the first pyramid and start again at the bottom of a new pyramid if he or she so chose. Each participant was required to bring at least one additional person into the Network, although the participants were asked to bring in more than one.

Irons was a participant in the Network, having made gifts to other participants. Irons also acted as a manager of various gifting lists. He contracted with other participants to manage their participation and charged a $1,000 fee to anyone who reached the top of the gifting list and received gifts.

Maria Christian testified that she first met Irons through Rick Carson, a business acquaintance who was a participant in the Network. Carson took Christian to Irons' office, where Irons explained the Network to her. According to Christian, Irons told her that he had learned of the Network through one of the women in his office, was impressed by it, and had inquired about the possibility of his managing the Network. Christian stated she understood that the $1,500 she would give to Irons was not going to him but to an individual at the top of the list.

Christian testified that she knew from the presentation and the literature that in order to receive gifts through the Network, she would have to actively recruit other participants to fill the bottom row of the chart. However, Irons told her that if she had difficulty in getting participants, two women in his office would be available to make telephone calls. Irons gave Christian a business card, assuring her that he would meet with her prospective recruits at any time to help her progress in the Network. Irons explained to Christian that either he or one of the women in his office would contact her periodically to inform her of her status in the Network. When Christian questioned Irons about the legality of the Network, he responded that the authorities in another state had challenged it and that its legality had been established. Christian eventually declined to participate in the Network.

Chad Schmidt testified that he participated in the Network at the solicitation of a coworker, Andy Rinquest. Irons managed Rinquest's list and told Schmidt that the more people he could recruit, the faster he would move up toward the top of the pyramid. However, Irons suggested that if Schmidt had trouble finding recruits, others on the list would have a motive to help him fill in the slots. Irons told Schmidt he gave no guarantees about moving up, but suggested that others might be willing to buy out Schmidt's slot if he was having difficulty recruiting. Schmidt said he knew that his $1,500 gift went to Carson, not Irons, and that he understood that Irons would collect his $1,000 fee only if Schmidt moved to the top of the list and Schmidt received gifts. Irons gave Schmidt his business card and directed Schmidt to check in with him every couple of days in order to get an update on the Network.

In addition to the preliminary hearing testimony which was offered at trial with the consent of the parties, the State offered evidence from an undercover police officer who had been assigned to investigate the matter. This officer and another officer had a conversation with Irons in which Irons disclosed that once the person at the top of the pyramid received his or her $12,000, Irons would take $1,000 from the total for his operating expenses. The officer said that he was led to understand that the investors on the bottom tier were responsible for bringing in at least one additional person and that the more they brought in, the more quickly he would progress through the Network.

The officer had taped his conversations with Irons, and during the first conversation, Irons indicated that 300 people were involved at the time and that the Network had been going for only a week or so. Irons told the undercover officers that he was trying to manage the Network at his business, assigning spots and keeping track of participants' progress up the charts. When asked whether the Network was legal, Irons explained that it was not a pyramid. Irons distinguished the Network from a pyramid scheme on the basis that a pyramid goes on indefinitely, whereas once the top person in this Network reaches payout, the scheme begins anew.

The officers returned to Irons' business on the afternoon of July 29, 1994, and were told by Irons that he had decided to stop taking the $1,000 fee and was going to turn over the responsibility for maintaining the lists to the person at the top of each list. After giving Irons $1,500 for participation, one of the officers informed Irons of his real identity, to which Irons responded: "Yeah[,] I know exactly where you're from."

Irons was convicted under § 8-1104 of offering for sale or selling an unregistered security. He appeals his conviction and sentence. We affirm.

ASSIGNMENTS OF ERROR

Irons makes five assignments of error: (1) The district court erred in concluding that guilty knowledge or intent to deceive or harm was not an element of the criminal offense of selling unregistered securities; (2) the evidence was insufficient to support a finding that Irons was guilty beyond a...