State v. Moore

• Decision Date: 30 April 2015
• Docket Number: No. 20130422–CA.,20130422–CA.
• Citation: 349 P.3d 797,2015 UT App 112
• Parties: STATE of Utah, Plaintiff and Appellee, v. Shawn H. MOORE, Defendant and Appellant.
• Court: Utah Court of Appeals

349 P.3d 797

2015 UT App 112

STATE of Utah, Plaintiff and Appellee

v.Shawn H. MOORE, Defendant and Appellant.

No. 20130422–CA.

Court of Appeals of Utah.

April 30, 2015.

Lori J. Seppi and John B. Plimpton, Attorneys for Appellant.

Sean D. Reyes and Karen A. Klucznik, Salt Lake City, Attorneys for Appellee.

Judge JAMES Z. DAVIS authored this Opinion, in which Judges J. FREDERIC VOROS JR. and JOHN A. PEARCE concurred as to Part I and concurred in the result.

Opinion

DAVIS, Judge:

¶ 1 Shawn H. Moore appeals from his convictions of four counts of securities fraud, four counts of sale by an unlicensed agent, and one count of pattern of unlawful activity. We agree with Moore's argument that the jury instructions defining the “willfulness” mens rea for the securities fraud charges and the sale by an unlicensed agent charges were incomplete and misstated the law. Accordingly, we reverse all of Moore's convictions and remand for further proceedings in accordance with this opinion.

BACKGROUND

¶ 2 Moore's convictions arise from investments various clients made in VesCor Capital, Inc. while Moore worked there. The details of the investments and Moore's relationship to the investments, however, are not central to our determination on appeal. Suffice it to say, counts one through eight against Moore represent the securities fraud charges and unlicensed agent charges and arise from four specific investments made by four different VesCor clients between December 2003 and January 2006. Count nine, the pattern of unlawful activity charge, alleges counts one through eight as predicate offenses and alleges three additional investments occurring in August 2001 and March and June 2003 (the time-barred investments) as predicate offenses. The State did not bring separate securities fraud and unlicensed agent charges against Moore for these additional investments because they fell outside of the statute of limitations.

¶ 3 Moore's primary argument on appeal is that the jury instructions defining the “willfulness” element of counts one through eight were incorrect and misleading. Moore also argues that Brian Glen Lloyd, a practicing attorney who testified for the State as a securities expert, impermissibly provided legal conclusions in his testimony. Additionally, Moore challenges the trial court's restitution order, arguing that the court failed to consider the mandatory statutory factors in calculating court-ordered restitution and that the court's requiring Moore to pay restitution for the time-barred investments was improper because those investments did not form a basis for his securities fraud or unlicensed agent convictions.

ISSUES AND STANDARDS OF REVIEW

¶ 4 “Generally, [w]hether a jury instruction correctly states the law presents a question of law which we review for correctness.” State v. Cruz, 2005 UT 45, ¶ 16, 122 P.3d 543 (alteration in original) (citation and internal quotation marks omitted). “[W]e look at the jury instructions in their entirety and will affirm when the instructions taken as a whole fairly instruct the jury on the law applicable to the case.” State v. Maestas, 2012 UT 46, ¶ 148, 299 P.3d 892 (citation and internal quotation marks omitted).

¶ 5 Because we agree with Moore that the “willfulness” jury instructions were erroneous, we need not decide the other issues raised on appeal. This decision nonetheless addresses Moore's arguments to the extent that doing so may offer guidance for the trial court on remand.¹ See Armed Forces Ins. Exch. v. Harrison,

2003 UT 14, ¶ 38, 70 P.3d 35 (“[I]n the interest of judicial economy, a brief discussion of these issues is appropriate as guidance for the trial court on remand.” (citation and internal quotation marks omitted)).

ANALYSIS

I. The Willfulness Jury Instruction

¶ 6 Moore's defense at trial focused on the willfulness element in both the securities fraud charges and the sale by an unlicensed agent charges. As charged, the securities fraud statute makes it unlawful for

any person, in connection with the offer, sale, or purchase of any security, directly or indirectly to:

...

(2) make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or

(3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

Utah Code Ann. § 61–1–1 (LexisNexis 2011). The sale by an unlicensed agent charges required the State to prove that Moore transacted “business in this state as a broker-dealer or agent” without a license. Id. § 61–1–3(1). These sections “govern both civil and criminal liability.” State v. Larsen, 865 P.2d 1355, 1358 (Utah 1993). “To ascertain the elements of a criminal violation,” we must read this section “in conjunction with section 61–1–21, which specifies the requisite mental state and penalties for a criminal violation.” Id. Here, the mens rea required for both the securities fraud and unlicensed agent offenses is willfulness. See Utah Code Ann. § 61–1–21 (LexisNexis 2011).

¶ 7 A showing of willfulness, therefore, was required as to each of the nine charges against Moore. For counts one through eight, the jury was required to directly find that Moore acted willfully in relation to the specific elements of each charge. With count nine, the pattern of unlawful activity charge, the jury was required to find that Moore engaged in “at least three episodes of unlawful activity,” which could include “the activity alleged in counts one through eight.” See id. § 76–10–1602(2) (Supp.2014) (defining “pattern of unlawful activity”); id. § 76–10–1603 (2012). In other words, Moore's conviction on count nine depended upon the jury's verdict for counts one through eight. The jury could also determine that the time-barred investments constituted two of the “at least three episodes of unlawful activity” necessary for a conviction on count nine. But for the jury to rely on any of the time-barred investments in reaching its verdict on count nine, it was instructed that it had to determine whether Moore “willfully” omitted or made untrue statements of material fact or “willfully” sold securities without a license with regard to those particular investments. Accordingly, the mens rea of willfulness pervaded the trial, and Moore's convictions on all nine counts depended on the jury's understanding and application of that concept.

¶ 8 Jury instructions 23, 43, and 50 address the mens rea required to sustain Moore's convictions. Moore argues that Instruction 50 was “legally incorrect” and that “Instructions 23 and 43, when read together, were incomplete and misleading.” We address each argument in turn.

A. Instruction 50

¶ 9 Instruction 50 states,

In securities law, salespeople are under a duty to investigate.

A salesperson cannot deliberately ignore that which he has a duty to know and recklessly state facts about matters of which he is ignorant. A salesperson cannot recommend a security unless there is an adequate and reasonable basis for such recommendation. By his recommendation he implies that a reasonable investigation has been made and that his recommendationrests on the conclusions based on such investigation.

Where the salesperson lacks essential information about a security, he should disclose this as well as the risks which arise from his lack of information. A salesperson may not rely blindly upon the issuer of the security for information concerning a company.

Moore argues that Instruction 50 imposed criminal liability for behavior that amounted to recklessness and directed the jury that “it had to convict” him of securities fraud if it found that he failed to satisfy a “ ‘duty to investigate’ or ‘duty to know.’ ” We agree.

¶ 10 Instruction 50 has essentially supplanted the actual elements of the securities fraud charges against Moore. Nowhere in the applicable statutory framework is there any language akin to Instruction 50 imposing criminal liability for acts amounting to willful blindness or a violation of a duty to know. See State v. Johnson, 2009 UT App 382, ¶ 42, 224 P.3d 720 (“[T]he plain language of section 61–1–1(2)... makes no mention of an affirmative duty to disclose in the absence of a prior [, misleading] statement.”). Moreover, section 61–1–21 unambiguously reserves criminal liability for “willful” violations of the Utah Uniform Securities Act and decidedly does not allow criminal prosecution of an individual who, as Instruction 50 provides, “recklessly state[s] facts about matters of which he is ignorant.” (Emphasis added.) See Utah Code Ann. § 61–1–21. Indeed, the use of the word “recklessly” in Instruction 50 is a clear indicator that the instruction is not appropriate in this criminal case. See Larsen, 865 P.2d at 1358 (“The plain language of section 61–1–21 requires that to be liable for a criminal violation of section 61–1–1(2), the defendant must have acted ‘willfully’ in misstating or omitting material facts.”).

¶ 11 Hanly v. Securities & Exchange Commission, 415 F.2d 589 (2d Cir.1969), the source of the language incorporated into Instruction 50, supports our conclusion. There, the Second Circuit Court of Appeals indicated that a violation of a “duty to know” would not be sufficient to sustain even a civil action for a securities violation. Id. at 595–96. Hanly involved an appeal from an administrative proceeding initiated by the Securities and Exchange Commission (SEC), in which the SEC “barred” five securities salesmen “from further association with any broker or dealer” for having made “materially misleading” representations in the offer and sale of a particular stock. Id. at 592, 595. In its review of the SEC's decision, the Second Circuit recognized that the “petitioners have not been criminally charged, nor have they been sued for damages by their customers”; rather, the SEC initiated “private proceedings,” at the close of which it revoked “each petitioner's...