Wheeler v. State
|659 P.2d 1241
|04 March 1983
|Blue Sky L. Rep. P 71,810 Cletus R. WHEELER, Appellant, v. STATE of Alaska, Appellee.
|Court of Appeals of Alaska
Robert D. Buckalew and Paul L. Davis, Boyko & Davis, and Elizabeth I. Johnson, Anchorage, for appellant.
Timothy J. Petumenos and W.H. Hawley, Asst. Attys. Gen., Office of Sp. Prosecutions and Appeals, Anchorage, and Wilson L. Condon, Atty. Gen., Juneau, for appellee.
Before BRYNER, C.J., and COATS and SINGLETON, JJ.
Judgment of conviction was entered against Cletus R. Wheeler following a jury trial for three counts of selling unregistered securities and three counts of fraudulent sale of securities. 1 Wheeler subsequently filed this appeal, in which he raises a number of issues. Upon consideration of Wheeler's arguments and review of the appellate record, we conclude that no error was committed; we therefore affirm.
Our disposition of Wheeler's claims first requires a review of the evidence concerning the transactions for which Wheeler was convicted. Wheeler's convictions arose from a business investment sales scheme planned and organized by him. The scheme involved sale in Anchorage of a program for acquiring and operating vending machines that dispensed snacks and candy bars. Wheeler conducted the scheme purporting to act as an officer of Spectrum Marketing, Inc. (Spectrum), a corporation based in Denver, Colorado, where Wheeler resided. According to Wheeler's testimony at trial, Spectrum had an agreement with a Colorado manufacturer named Vend-A-Matic to purchase vending machines for $395 each. Wheeler planned to sell the machines through Spectrum for $1,095 each. Wheeler developed a package of promotional materials, business documents and contracts, and he recruited an acquaintance and former business associate, Daniel Rhoades, as a sales agent for Spectrum. 2
Having completed plans for Spectrum's sales campaign, Wheeler placed an advertisement in the classified section of the Anchorage Times on September 11, 1978. The advertisement appeared in the following form:
BUSINESS OPPORTUNITY POTENTIAL HERSHEY BAR'S (sic) ------------------- MR. GOODBAR REESE'S ----------- ------- RALLY KIT KAT ----- -------
Dispensed through ultra modern equipment. No
investment required. Applicant must be a permanent
resident available to start business immediately.
Sun., Mon., Tues. Only
Rhoades went to Anchorage in order to respond to inquiries from prospective investors. The name "Simmons" used in the advertisement was apparently an alias placed in the advertisement by Wheeler at Rhoades' request; however, once in Anchorage, Rhoades primarily dealt with potential investors using his true name.
Not long after Spectrum's advertisement was published, Rhoades received a number of inquiries from interested people. On September 13 and 14, 1978, four investors signed contracts with Rhoades for purchase of a total of 110 vending machines; they paid a total of $20,500 to Spectrum as initial deposits on machines that they ordered. 3
A nearly identical sales presentation was made by Rhoades to each customer. Rhoades offered two alternative plans for investment: plan A and plan B. Under plan A, "outside" investors were to provide capital for the purchase of new vending machines; machines would be placed by Spectrum in locations around Anchorage. Local purchasers were to pay no cash for the machines, but would be required to maintain, repair and stock them. Plan A required local purchasers to post a $3,000 performance bond. During the first year of operation under plan A, all profits from machines tended by a local purchaser were to be divided equally between the local purchaser and the outside investor. In the second year of the plan, the outside investor was to receive 70% of total receipts and the local purchaser would get 30%. Local purchasers were to acquire title to vending machines in which they invested after the first two years of the machines' operation.
Notably, Spectrum never intended to actually use plan A. According to Rhoades' testimony at trial, plan A was part of a "bait and switch" sales tactic. Rhoades and Wheeler would attempt to switch investors interested in plan A over to plan B. If this could not be accomplished, it was understood by Rhoades and Wheeler that some pretext would ultimately be used to make plan A unavailable.
Different terms were offered potential investors under Spectrum's plan B, the package that Wheeler and Rhoades actually intended to sell and in fact did sell in Alaska. Plan B involved direct sales of vending machines; a minimum purchase of ten machines was required. Investors under plan B were expected to pay an initial deposit of approximately 20% of the total purchase price before Spectrum would place an order for the machines. Thus, on its surface, plan B was structured to have the attributes of a simple commercial transaction.
Yet, as indicated in Spectrum's newspaper advertisement, plan B entailed substantially more than a straightforward commercial sale of vending machines. Rhoades told each of his Anchorage investors that all machines ordered under plan B would be stocked with candy or snacks; he further led investors to believe either that future supplies of candy at a price of 12 1/2 cents per bar would be arranged by Spectrum or that Spectrum itself would act as supplier of candies at that price. According to Rhoades' sales presentation, Spectrum was to provide the services of experienced "locators," who would arrange for machines to be placed in desirable, high traffic locations around Anchorage. Rhoades told each purchaser that Spectrum's locators either already had negotiated or soon would negotiate location agreements with owners of the premises where the machines were to be placed; Rhoades assured investors that these location agreements would call for payment of only 3 1/2 cents per bar of candy to location owners. Thus, Rhoades led investors to believe that Spectrum could assure profits of nineteen cents for each thirty-five-cent candy bar sold. Rhoades expressly told each investor that, by conservative estimate, the locations provided by Spectrum would result in average daily sales of thirty-five units per machine. By simple mathematical computation, Rhoades demonstrated to his customers that annual earnings for ten machines would thus total slightly more than $24,000.
Other significant inducements were offered by Rhoades to garner investors for Spectrum's plan B. Rhoades assured each investor that Spectrum would give him exclusive rights to the Anchorage territory, and each was led to believe that, after an initial 20% cash deposit had been made, Spectrum was capable of financing the balance of the purchase price. 4 As part of the plan B package, Rhoades also expressly promised investors that they would be eligible to participate in an "expansion" program, the terms of which would allow them to purchase as many new machines from Spectrum as they desired after one year of operations. Spectrum committed itself to financing future investments under the expansion program at an annual rate of 8%, simple interest, over a six-year period. Spectrum further agreed to provide locations, on terms similar to those applicable to orginally purchased machines, for any vending machines purchased under the expansion program. Finally, plan B included a guarantee whereby Spectrum represented that it expected the minimum first-year income from each machine, after expenses (cost of candy and location fees), to be 110% of the initial purchase price. Spectrum guaranteed to pay investors the difference between the 110% figure and the amount actually received by investors in the event income fell below the minimum level expected. Significantly, the 110% income guarantee applied only as long as an investor agreed not to alter the location of any machine without securing prior written approval from Spectrum.
Key documentary evidence relating to Spectrum's sales in Alaska was also admitted at trial, and it corroborated, to a large extent, the testimony concerning Rhoades' verbal representations as to the broad scope of Spectrum's plan B offering. These documents were also highly probative of Wheeler's knowledge of the various inducements used by Rhoades to convince prospective investors to place an order.
Of the various documents, the most prominent were "sales agreements," which were preprinted contracts on Spectrum letterhead. Each investor, in conjunction with Rhoades, executed a sales agreement. The number of vending machines involved in each transaction, together with their purchase price, was filled in by Rhoades. As executed, the agreements obligated Spectrum to secure desirable locations for the machines that were sold. Originally, each agreement included a clause stating:
COMPANY agrees to secure initial locations for the placement of the above described equipment. It is expressly understood and agreed that COMPANY has not agreed to secure any specific location or locations. COMPANY will utilize its best efforts to secure desirable locations, but assumes no responsibility for the success or profitability of any location or number of locations. BUYER represents that COMPANY has not agreed to grant any exclusive territory or guarantee the gross or net receipts of any individual...
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State v. Markham
...enterprise. These transactions involved a bill of sale, lease and service agreement similar to those in Howey. See also Wheeler v. State, 659 P.2d 1241 (Alaska App.1983) (vending machine sales); Rose v. Dobras, 128 Ariz. 209, 624 P.2d 887 (Ct.App.1981) (orchard leases coupled with managemen......