State of Utah v. Shepherd
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IN THE UTAH COURT OF APPEALS
----ooOoo----
State of Utah,
Plaintiff and Appellee,
v.
H. Ted Shepherd,
Defendant and Appellant.
OPINION
(For Official Publication)
Case No. 981098-CA
F I L E D
October 21, 1999
1999 UT App 305
-----
Eighth District, Vernal Department
The Honorable A. Lynn Payne
Attorneys:
Theodore E. Kanell, Salt
Lake City, for Appellant
Jan Graham, Kris C. Leonard,
and Robert K. Hunt, Salt Lake City, for Appellee
-----
Before Judges Wilkins, Billings, and Orme.
BILLINGS, Judge:
¶1.
Defendant H. Ted Shepherd
appeals from his convictions on seven counts of violating the Utah Uniform
Securities Act (the Act) and a restitution order based on the convictions.
We affirm his convictions on all counts. We reverse and remand the restitution
order.
BACKGROUND
¶2.
"In reviewing a jury verdict,
we view the evidence and all reasonable inferences drawn therefrom in a
light most favorable to the verdict. We recite the facts accordingly."
State
v. Hamilton, 827 P.2d 232, 233-34 (Utah 1992) (citations omitted).
¶3.
Defendant was the president
and primary stockholder of Northlake Industries (Northlake), owning ninety-five
percent of the stock. He claimed Northlake had a new technology to economically
produce fuel from oil shale, coal, and tar sand. In 1991 and 1992, Defendant
undertook to sell some of his Northlake stock to local residents of the
Vernal area. He sold the stock through other company officers and longtime
Vernal residents, Byron Merrell and Wallace Church.
¶4.
In 1991, Defendant told
Merrell that he needed four or five people to invest in Northlake to provide
money pending a merger with Uintah Basin Land and Minerals. Merrell organized
a meeting that five or ten local residents attended. At the meeting, also
attended by Defendant, Merrell showed a video produced by Northlake demonstrating
the production process and showing a previously abandoned production facility.
The video emphasized that the facility was in very good condition and ready
to operate on short notice, with accessible source minerals nearby. The
video created the impression that Northlake was operating, was profitable,
and had access to the shown facility. No disclosure of the risks of the
investment were made, nor was any literature regarding Northlake provided.
¶5.
Additional similar meetings
were held to encourage investment in Northlake. Church, who invested after
the first meeting, also began selling stock to local residents. He offered
Northlake stock to business clients at his insurance agency in Vernal,
as well as to friends, neighbors, family, and other locals. He also
offered stock to people referred to him by Defendant, including three of
the victims in this action. Church had no restrictions on with whom
he could talk about the investment opportunity. Church passed on
to potential investors the information Defendant had given him. He
told people that Northlake was going to merge with another company and
go public. He did not provide literature about Northlake, nor did
he mention risks or limitations to facility access, nor did he explain
how investment proceeds would
be used.
¶6.
Based on the material omissions
and misleading information provided to investors and the indiscriminate
marketing of the securities, Defendant was charged with one count of acting
as a securities broker-dealer without a license in violation of Utah Code
Ann. § 61-1-3(1) (1997),(1) one count
of selling an unregistered security in violation of Utah Code Ann. §
61-1-7 (1997),(2) and five counts of securities
fraud in violation of Utah Code Ann. § 61-1-1 (1997).(3)
After trial, the jury convicted Defendant on all counts. As part of the
sentence, the court ordered Defendant to pay double restitution. Defendant
now appeals his convictions and the restitution order.
ANALYSIS
I. Void for Vagueness
¶7.
Defendant argues that his
convictions for selling securities without a license and selling unregistered
securities should be overturned because the Act under which he was convicted
is unconstitutionally vague as applied to him. Under section 61-1-7, it
is unlawful to offer or sell an unregistered security unless "the security
or transaction is exempted under Section 61-1-14." Utah Code Ann. §
61-1-7 (1997). Among the exemptions listed in section 61-1-14 are "transactions
not involving a public offering."
Id. § 61-1-14(n). Defendant
asserts that because the term "public offering" is not specifically defined
in the Act, he could not know whether his conduct was exempt under the
Act. He contends the Act is thus unconstitutionally vague.
¶8.
"When reviewing the constitutionality
of a statute, we must presume that the statute is constitutional." State
v. Krueger, 975 P.2d 489, 495 (Utah Ct. App. 1999). The challenger
bears the burden of demonstrating the unconstitutionality of a statute.
See
Greenwood v. City of North Salt Lake, 817 P.2d 816, 819 (Utah 1991).
Furthermore, unconstitutionality of a statute must be shown beyond a reasonable
doubt.
SeeKrueger, 975 P.2d at 495. Appellate courts review constitutional
challenges for correctness. See id.
¶9.
A statute "will be held
unconstitutionally vague only if the terms of the law are so ambiguous
that persons of ordinary intelligence are unable to determine whether their
acts conform to the law." Elks Lodges 719 & 2021 v. Department of
Alcoholic Beverage Control, 905 P.2d 1189, 1202 (Utah 1995) (citations
omitted). A challenger of the application of a law to their own conduct
"must demonstrate either that the [statute] does not provide them adequate
notice or that the [statute] could be arbitrarily enforced against [him]."
Greenwood,
817 P.2d at 820.
¶10.
Defendant contends that
because the term "public offering" is not defined in the statute, he was
not provided adequate notice to guide his conduct. However, the failure
to define a statutory term is not necessarily fatal to a statute. SeeState
v. Owens, 638 P.2d 1182, 1184 (Utah 1981) (upholding constitutionality
of statute when term "gross deviation" was not defined);
Krueger,
975 P.2d at 496 (noting adequate notice of prohibited conduct even when
statute failed to define term "delinquent"); Salt Lake City v. Lopez, 935 P.2d 1259, 1265 (Utah Ct. App. 1997) (holding failure to define "emotional
distress" in statute "does not render the statute unconstitutionally vague").
Though statutes must contain sufficient certainty to permit conformance
to law, "neither absolute exactitude of expression nor complete precision
of meaning can be expected." Owens, 638 P.2d at 1183. "The
determinative factor is whether there is a reasonable degree of common
understanding of what is encompassed within the
general terms of prohibition."
Id.
¶11.
The term "public offering"
within a securities context provides a "reasonable degree of common understanding"
sufficient to avoid constitutional difficulties. The Act provides that
those terms not specifically defined in the statute be assigned the "meaning
commonly accepted in the business community," thereby providing context
for the term "public offering." Utah Code Ann. § 61-1-13(27) (Supp.
1999). Furthermore, the Act explicitly permits the construction of its
terms to be coordinated with federal interpretations of related federal
regulations.
See id. § 61-1-27 (1997). The meaning of the term
"public offering" in the federal securities context has been settled for
many years, thereby providing the business community with a common understanding
of what is encompassed within the exemption.
¶12.
The United States Supreme
Court defined the private offering exemption in SEC v. Ralston Purina
Co., 346 U.S. 119, 73 S. Ct. 981 (1953). In Ralston Purina,
a company sold stock to "key employees" without registering the offering.
See
id. at 120-21, 73 S. Ct. at 982. The company argued the sales were
exempt because they did not involve a public offering, but rather were
limited to only certain employees in a range of employment positions.
See
id. at 121-22, 73 S. Ct. at 983.
¶13.
The Court rejected a numerical
benchmark for determining what is a public offering, and instead looked
to the purpose of the securities act in molding a definition.
The design of the
statute is to protect investors by promoting full disclosure of information
thought necessary to an informed investment decision. The natural way to
interpret the private offering exemption is in light of the statutory purpose.
Since exempt transactions are those as to which "there is no practical
need for [the bill's] application," the applicability of [the exemption]
should turn on whether the particular class of persons affected needs the
protection of the Act. An offering to those who are shown to be able to
fend for themselves is a transaction "not involving any public offering."
Id. at 124-25, 73 S. Ct. at 984 (footnote omitted) (first alteration in original).
¶14.
The key inquiry is whether
a potential investor would be in a position to "have access to the same
kind of information that the Act would make available in the form of a
registration statement."
Id. at 125-26, 73 S. Ct. at 985. Thus,
the definition of "public offering" involves evaluating the class of investor
and investors' access to information.
¶15.
In light of the judicial
interpretation of the statutory term "public offering," the term is definite
enough to provide adequate notice of proscribed conduct "when measured
by common understanding and commercial practice." State v. Taubman,
606 N.E.2d 962, 968 (Ohio Ct. App. 1992). Any initial uncertainty regarding
the term was cured by "the judicial gloss placed on the legislation by
the Supreme Court."
United States v. Crosby, 294 F.2d 928, 952 (2d
Cir. 1961) (holding securities statute constitutional in light of judicial
interpretation of term public offering), cert. denied, 368 U.S. 984, 82 S. Ct. 599 (1962).
¶16.
Defendant argues that, because
no prior Utah case has explicitly adopted the federal interpretive gloss,
the Utah statute is unconstitutionally vague. We disagree. The business
community has had an operable definition of public offering for over forty
years. When a businessperson operates in a highly regulated arena such
as the sale of securities, he must make certain that he is complying with
all technical requirements.
¶17.
Furthermore, administrative
guidance regarding the exemption was available to Defendant. Pursuant to
section 61-1-25, Defendant could have requested an interpretive opinion
from the Division of Securities (the Division) to aid him in determining
whether the transactions were exempt. See Utah Code Ann. §
61-1-25(5) (1997) ("The division in its discretion may honor requests from
interested persons for interpretative opinions."). Moreover, the Division
has promulgated administrative rules that provide guidance regarding the
private offering exemption and a safe harbor for those who act pursuant
to the rule. See Utah Code Admin. P. R177-14-2n (1990) (current
version at Utah Code Admin. P. R164-14-2n (1996)). While the statute places
the burden of showing qualification for an exemption on the claimant, see
Utah Code Ann. § 61-1-14.5 (1997), these administrative mechanisms
aid in that determination.
¶18.
The Utah Supreme Court has
noted the value of administrative remedies in clarifying statutory language.
See
Greenwood, 817 P.2d at 820. In Greenwood, dog owners challenged
the constitutionality of a city ordinance imposing restraints on "vicious
dogs," alleging the ordinance was vague. See id. at 817. The court
acknowledged "the ordinance could have been written more clearly," but
noted that any dog owner unclear about the scope of the law could request
an administrative determination, thus clarifying the law's application.
Id. at 820. Similarly, Defendant could have asked for an interpretive
opinion or taken advantage of a safe harbor provision designed to protect
those who, in good faith, believe their transactions to be exempt.
¶19.
Accordingly, we conclude
Defendant had sufficient notice of the conduct proscribed by the Act, and
the Act was constitutional as applied to him.
II. Jury Instructions
¶20.
Next, Defendant asserts
that the jury instruction regarding the exemption for transactions not
involving a public offering was erroneous. An assertion on appeal that
a jury instruction incorrectly stated the law presents a question of law
which we review for correctness. SeeState v. Tinoco, 860 P.2d 988,
989-90 (Utah Ct. App. 1993).
¶21.
Defendant asserts
that the jury instruction regarding the private offering exemption was
incomplete and incorrect. Jury instruction number 28 provided:
The defendant has
raised a defense to the charge of failure to register a security. He claims
that the sales were part of a non-public offering under the provisions
of the Utah Securities Act.
The State must prove beyond
a reasonable doubt that this exemption is not available to the defendant.
You may consider any factor which you believe is relevant in deciding this
issue, among those you may consider are the manner in which Northlake stock
was offered and the size of the Northlake stock offering.
¶22.
We agree that this instruction
is incomplete in defining when a transaction is exempt because it is not
a public offering. It does not identify the critical inquiry of whether
investors have access to information required by a registration nor whether
the investors need the protection of the Act.
¶23.
Though less than
complete, the instruction was not totally inaccurate. In fact, the instruction
given was more favorable to Defendant than a complete instruction would
have been. Even if we find error in the jury instruction, "we will not
reverse [a] defendant's conviction unless that error is harmful." Tinoco,
860 P.2d at 990. For an error to be harmful, there must be "a reasonable
probability the error affected the outcome" of the case. Id. Defendant
has not shown how the omission in this jury instruction negatively impacted
the outcome of this case. Any error in the private offering instruction
was harmless.
III. Insufficient Evidence
¶24.
Defendant further asserts
that the evidence was insufficient to support his convictions on five counts
of securities fraud. He argues the state failed to prove specific elements
of the crimes charged beyond a reasonable doubt.
¶25.
The burden is heavy on a
defendant challenging the sufficiency of the evidence. SeeState v. Vessey,
967 P.2d 960, 966 (Utah Ct. App. 1998). Defendant "must first marshal all
the evidence supporting the jury's verdict and then demonstrate how this
evidence, even viewed in the most favorable light, is insufficient to support
the verdict."
State v. Strain, 885 P.2d 810, 819 (Utah Ct. App.
1994). Defendant utterly fails to carry his burden. He merely recites his
own version of the facts, and presents none of the evidence supporting
the convictions. Because he has not marshaled the evidence, we will not
consider this argument further.
See State v. Scheel, 823 P.2d 470, 473 (Utah Ct. App. 1991).
IV. Jury Questions
¶26.
Defendant also contends
his right to due process was violated because the trial court permitted
jurors to ask questions. He asserts this process resulted in premature
jury deliberations. However, his assertions are conclusory statements without
factual or legal support.
¶27.
Rule 24 of the Utah Rules
of Appellate Procedure provides briefing standards. A requirement of an
appellate brief is that the "argument shall contain the contentions and
reasons of the appellant with respect to the issues presented . . . with
citations to the authorities, statutes, and parts of the record relied
on." Utah R. App. P. 24(a)(9). "Implicitly, rule 24(a)(9) requires not
just bald citation to authority but development of that authority and reasoned
analysis based on that authority."
State v. Thomas, 961 P.2d 299,
305 (Utah 1998). Defendant's brief fails to cite relevant legal authority
or provide any meaningful analysis regarding the issue of jury questions.
"This court has routinely declined to consider arguments which are not
adequately briefed on appeal." Burns v. Summerhays, 927 P.2d 197,
199 (Utah Ct. App. 1996) (citation omitted). Because the briefing on this
issue is inadequate, we decline to consider the merits.
V. Peremptory Challenges
¶28.
Defendant alleges the prosecution
illegally discriminated in jury selection by using all four peremptory
challenges to strike white male jurors, thus violating his right to a fair
trial. Striking potential jurors solely on the basis of race or gender
violates constitutional equal protection principles. See J.E.B.
v. Alabama, 511 U.S. 127, 146, 114 S. Ct. 1419, 1430 (1994) (holding
exercise of peremptory challenges based on gender unconstitutional); Batson
v. Kentucky, 476 U.S. 79, 93-94, 106 S. Ct. 1712, 1721 (1986) (holding
use of peremptory challenges to strike racial minority jurors unconstitutional).
"To successfully attack a peremptory challenge, a defendant must 'establish
a prima facie case of purposeful discrimination in selection of the . .
. jury.'" State v. Alvarez, 872 P.2d 450, 455 (Utah 1994) (quoting
Batson,
476 U.S. at 96, 106 S. Ct. at 1723).
¶29.
"To establish a prima facie
case, a defendant must demonstrate facts and circumstances that raise the
'necessary inference of purposeful discrimination.'" Id. (quoting
Batson,
476 U.S. at 96, 106 S. Ct. at 1723). In Utah, the elements necessary to
establish a prima facie case include: "(1) as complete a record as possible,
(2) a showing that persons excluded belong to a cognizable group . . .
and (3) a showing that there exists 'a strong likelihood that such persons
are being challenged because of their group association rather than because
of any specific bias." Id. at 456 (citations omitted).
¶30.
Defendant asserts he has
established a prima facie case of discrimination because the prosecution
used all four peremptory challenges to strike white male jurors. While
"[n]umerical evidence alone may be sufficient to establish a pattern of
peremptory strikes against minority jurors,"
id. at 457, numerical
evidence alone does not necessarily establish a prima facie case. See
id. at 458. Moreover, "[t]he 'mere fact that the subject of the peremptory
strike is a minority member does not alone raise the inference of discriminatory
intent.'" Id. (quoting
State v. Cantu, 750 P.2d 591, 597
(1988)). "[A]s a general rule, a 'defendant who requests a prima facie
finding of purposeful discrimination is obligated to develop [some] record
beyond numbers, in support of the asserted violation.'" Id. at 457
(quoting United States v. Brown, 941 F.2d 656, 659 (8th Cir. 1991))
(alteration in original).
¶31.
Defendant has failed to
establish a prima facie case of discrimination. He has provided no information
regarding the composition of the venire that would give context for the
number of peremptory challenges. Thus, even his numerical argument fails
to establish a pattern of strikes, absent information about the gender
make up of the venire. He also does not demonstrate, nor even argue, that
the prosecutor made discriminatory comments or asked discriminatory questions
in dismissing the potential jurors. We conclude Defendant failed to make
the required showing.(4)
VI. Restitution
¶32.
Finally, Defendant asserts,
and the State concedes, that the trial court erred in ordering him to pay
double restitution. Though courts at one time had authority to order double
restitution, the statute in effect at the time of Defendant's restitution
hearing provided no such authority. Compare Utah Code Ann. §
76-3-201(4)(a)(i) (1995) (when a crime results in pecuniary damages, "the
court shall order that the defendant make restitution up to double the
amount of pecuniary damages"),
with Utah Code Ann. § 76-3-201
(4)(a)(i) (Supp. 1999) (when pecuniary damages result, "the court shall
order that the defendant make restitution to victims of crime"). The trial
court plainly acted beyond the scope of its statutory authority in ordering
Defendant to pay double restitution. Thus we reverse and remand for entry
of an order of simple restitution.
CONCLUSION
¶33.
First, we conclude that
the Utah Securities Act is constitutional as applied to Defendant because
the term public offering has a long established meaning within the business
community, and is thus not unconstitutionally vague. Second, we conclude
that any error in the private offering exemption jury instruction was harmless.
Third, we conclude that Defendant failed to establish a prima facie case
of discrimination for the purpose of challenging the prosecution's peremptory
challenges in jury selection. Finally, we remand for entry of an order
of simple restitution.
______________________________
Judith M. Billings, Judge
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I CONCUR:
______________________________
Michael J. Wilkins,
Presiding Judge
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I CONCUR, EXCEPT THAT AS
TO SECTIONS III AND IV, I CONCUR ONLY IN THE RESULT:
______________________________
Gregory K. Orme, Judge
1. "It is unlawful for any person to transact business in this state as a broker-dealer or agent unless the person is licensed under this chapter." Utah Code Ann. § 61-1-3(1) (1997).
2. "It is unlawful for any person to offer or sell any security in this state unless it is registered under this chapter or the security or transaction is exempted under Section 61-1-14." Utah Code Ann. § 61-1-7 (1997).
3. Section 61-1-1 provides: It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly to: (1) employ any device, scheme, or artifice to defraud;
(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 (1997).
4. Though the trial court based its conclusion on the erroneous assumption that white males are not a protected, cognizable group, we may affirm on any proper basis. See State v. South, 924 P.2d 354, 357 (Utah 1996).
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