State v. Mueller
| Decision Date | 28 March 1996 |
| Docket Number | 93-3228-CR,Nos. 93-3227-C,s. 93-3227-C |
| Citation | 549 N.W.2d 455,201 Wis.2d 121 |
| Parties | , Blue Sky L. Rep. P 74,113, RICO Bus.Disp.Guide 9013 STATE of Wisconsin, Plaintiff-Respondent, v. Mark W. MUELLER, Defendant-Appellant. d STATE of Wisconsin, Plaintiff-Respondent, v. James I. STOPPLE, Defendant-Appellant.d |
| Court | Wisconsin Court of Appeals |
For the defendants-appellants the cause was submitted on the brief of James Geis of James Geis Law Office of Chicago, IL; Stephen H. Hurley of Hurley, Burish & Milliken, Madison; John W. Markson of Bell, Metzner, Gierhart & Moore of Madison.
For the plaintiff-respondent the cause was submitted on the brief of James E. Doyle, Attorney General, with Roy Korte, Assistant Attorney General.
Before GARTZKE, P.J., and DYKMAN and SUNDBY, JJ.
Defendants Mark W. Mueller and James I. Stopple appeal from judgments of conviction against them under the Wisconsin Organized Crime Control Act (WOCCA), §§ 946.80 to 946.88, STATS. Each defendant was convicted on one count of pattern racketeering activity, §§ 946.83(3) and 946.82(2), STATS., for eighteen predicate violations of securities fraud under § 551.41(2) and (3), STATS.
The issues are: (1) whether the statute of limitations bars this prosecution because warrants for defendants' arrests were signed but never executed, the information was not timely filed and the defendants appeared voluntarily at the initial appearance; (2) whether to prove defendants "wilfully" violated state securities laws, the State must establish that they acted with intent to defraud or knowingly violated the securities law; (3) whether WOCCA requires knowledge or intent beyond that required for the predicate offenses that constitute racketeering activity; and (4) whether the jury could find from the evidence that the notes the defendants issued on behalf of their corporation were securities and that the defendants replaced corporate assets with less valuable assets.
We decide all issues against the defendants and therefore affirm the judgments of conviction.
In 1979 the defendants formed Diversified Agricultural Services (DAS), a Wisconsin corporation. DAS purchased three subsidiaries from Keefe & Associates ("Keefe") for $1.8 million. FLS, a farm auction business, was one such subsidiary. Keefe had owed FLS $3.6 million. FLS forgave $1 million of the debt as part of its acquisition by DAS, and Keefe transferred to FLS $2.6 million in accounts receivable at their book value. FLS then transferred those receivables to DAS, and FLS then showed in its books the $2.6 million balance due it from DAS. By 1985 DAS owed FLS $1.5 million on the debt. In 1985 the defendants transferred DAS receivables to FLS in exchange for cancellation of the DAS debt to FLS.
By some time in 1981, defendants had acquired a majority interest in DAS. Mueller was the president and Stopple the vice-president of both DAS and FLS, and they were directors of both companies. While they were not involved in the day-to-day operation of the business of FLS, they were directly involved in its overall operation and controlled its finances.
FLS offered its farm-auction customers an opportunity to defer their income tax on gains realized from the sale of their properties. To accomplish tax deferment, customers sold their farm properties to FLS, taking part of the sale price in cash and the balance In 1985 FLS wrote to its auction customers who held its installment notes, offering to renew its notes as "an opportunity to invest in our company." It offered commissions to employees who "generated" its non-guaranteed installment notes.
in FLS's unsecured installment notes. FLS marketed these notes to its farm auction customers as investments and offered higher interest rates than those available at local banks. Beginning in 1983, FLS offered investors the option of buying either unsecured notes or bank-guaranteed notes. Investors usually took [201 Wis.2d 127] unguaranteed notes. Those notes paid more interest than the bank-guaranteed notes.
FLS operated at a loss in 1982 through 1985. The State presented evidence that between 1981 and 1985 FLS issued or renewed forty-six of its installment sales notes and paid off twenty-one notes. In January 1986 FLS filed bankruptcy, and could not pay $1.5 million on its unsecured notes.
The State subsequently charged each defendant with one count of racketeering under WOCCA, alleging that they had engaged in eighteen predicate acts of securities fraud in violation of § 551.41(2) and (3), STATS. The State alleged that in seventeen instances defendants failed to state material facts relating to FLS's ability to pay its unsecured notes. For an eighteenth predicate act, the State alleged that defendants violated Wisconsin securities laws by transferring worthless accounts receivable to FLS in exchange for forgiveness of DAS's debt to FLS just eight months before FLS went bankrupt.
Nine farmers testified that through May 1985 they had acquired, in total, seventeen unsecured notes from FLS in exchange for the sale of their farm properties. Defendant Mueller acknowledged that he had not told or directed FLS employees to disclose to customers that FLS was highly leveraged, that it had operated at a loss every year since 1981, that the notes were risky investments, that FLS had delinquent accounts receivable, that its net worth depended on its good will, and that certain long-standing FLS employees had resigned as directors in January 1985.
The jury heard testimony that in 1985 DAS transferred worthless receivables to FLS in exchange for cancellation of the DAS debt of about $1.5 million to FLS.
Section 939.74(1), STATS., provides in material part:
[P]rosecution for a felony must be commenced within 6 years.... Within the meaning of this section, a prosecution has commenced when a warrant or summons is issued, an indictment is found, or an information is filed.
The defendants' WOCCA violations terminated on May 27, 1985. Defendants contend that the State did not timely commence the felony prosecutions against them. They assert that this prosecution was not commenced within six years and no warrant issued and the information was not filed within the six-year limitation. We conclude that the felony prosecutions were commenced on February 26, 1991, and therefore the actions were brought within six years.
Because the facts are undisputed, the proper application of § 939.74(1), STATS., is an issue of law which we decide without deference to the trial court's opinion. State v. Pham, 137 Wis.2d 31, 33-34, 403 N.W.2d 35, 36 (1987).
On February 26, 1991, the same day the State filed the criminal complaints with the clerk of court, the circuit court judge signed warrants for defendants' arrests and the prosecutor received the warrants. The court found that the warrants were never delivered to law enforcement to be served and instead were placed in the prosecutor's files. The warrants were never filed because, the court found, the defendants' counsel arranged for them to appear voluntarily for an initial appearance on February 26, 1991. The State filed the informations on June 12, 1991.
Defendants contend that because they voluntarily appeared, the warrants should never have issued and therefore issuance of the warrants did not commence the felony prosecutions under § 939.74(1), STATS. Defendants base their argument on § 968.04(1)(a), STATS., which provides in relevant part: "When an accused ... appears voluntarily before a judge, no warrant shall be issued and the complaint shall be filed forthwith with a judge." We reject the defendants' argument. The record does not show that the warrants issued after the defendants had voluntarily appeared. The fact is the warrants had issued, and that commenced the prosecution under § 939.74(1).
The eighteen predicate acts for the WOCCA charge are securities fraud charges against defendants for violations of § 551.41(2) and (3), STATS. Chapter 551, STATS., is the Wisconsin Uniform Securities...
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