State v. Morley ( 2019 )

No. 120,017
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
STATE OF KANSAS,
Appellant,
v.
RONALD D. MORLEY,
Appellee.
SYLLABUS BY THE COURT
1.
A sentencing court is required to impose the presumptive sentence provided by the
Kansas Sentencing Guidelines Act, K.S.A. 2018 Supp. 21-6815(a), unless the court finds
substantial and compelling reasons to impose a departure sentence.
2.
A substantial and compelling reason to depart downward from a presumptive
sentence is a mitigating factor. Although K.S.A. 2018 Supp. 21-6815(c)(1)(A)-(E)
provides a list of potential mitigating factors, the list is nonexclusive, and a sentencing
court may rely on nonstatutory factors to depart if they are consistent with the principles
underlying the Kansas Sentencing Guidelines Act.
3.
A defendant's acceptance of responsibility may be a valid nonstatutory mitigating
factor in support of a departure sentence.
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4.
If a sentencing court determines that a departure sentence is warranted, it must
state on the record at the time of sentencing the substantial and compelling reasons for
the departure and make findings of fact regarding those mitigating factors. K.S.A. 2018
Supp. 21-6815(a); K.S.A. 2018 Supp. 21-6817(a)(4).
5.
An appellate court's standard of review for departure decisions depends on the
issue presented. When we consider whether the record supports an articulated mitigating
factor for a departure sentence, we review for substantial competent evidence. Substantial
competent evidence is evidence possessing both relevance and substance that a
reasonable person could accept as being adequate to support a conclusion.
6.
When the record supports a valid, articulated mitigating factor, an appellate court
applies an abuse of discretion standard to determine whether the mitigating factor
constituted a substantial and compelling reason to depart in the particular case.
7.
Whether the factors relied upon by the sentencing court constitute substantial and
compelling reasons for departure from the sentencing guidelines is a question of law with
no deference given to the sentencing court. The term "substantial" refers to something
that is real, not imagined; something with substance and not ephemeral. The term
"compelling" implies that the court is forced, by the facts of a case, to leave the status quo
or go beyond what is ordinary. The question is whether the departure factors, as a whole,
are substantial and compelling reasons for imposing a departure sentence in light of the
offense of conviction, the defendant's criminal history, and the purposes of the sentencing
guidelines. The analysis of this question is twofold: first, whether a particular reason
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given by the sentencing court is a valid departure factor and, second, whether the reasons,
as a whole, are substantial and compelling reasons for departure in a given case.
8.
Reasons which may in one case justify a departure, may not in all cases justify a
departure. Rather, the inquiry must evaluate the crime and the departure factors as a
whole to determine whether departure in a particular case is justified. It is a question of
what weight to give each reason stated and what weight to give the reasons as a whole in
light of the offense of conviction and the defendant's criminal history. The inquiry also
considers the purposes and principles of the Kansas Sentencing Guidelines.
9.
If an appellate court concludes that the sentencing court's factual findings are not
supported by evidence in the record or do not establish substantial and compelling
reasons for a departure, the appellate court must remand the case to the sentencing court
for resentencing. K.S.A. 2018 Supp. 21-6820(f).
10.
Under the facts of this case, we hold that while a defendant's acceptance of
responsibility may be a valid nonstatutory mitigating factor in support of a downward
durational departure sentence, in this case there was no substantial competent evidence to
support the factor that the defendant accepted responsibility for his crimes. Moreover,
assuming there was substantial competent evidence to support this mitigating factor, the
district court erred in its legal conclusion that this factor was real, substantial, and
compelling such that the district court was forced by the case facts to abandon the status
quo, venture beyond presumptive prison sentences, and grant probation.
Appeal from Shawnee District Court; MARK S. BRAUN, judge. Opinion filed August 16, 2019.
Reversed, sentences vacated, and case remanded with directions.
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Stacy Edwards, assistant attorney general, and Derek Schmidt, attorney general, for appellant.
James C. Heathman, of Heathman Law Office PA, of Topeka, for appellee.
Before BUSER, P.J., PIERRON and BRUNS, JJ.
BUSER, J.: This is an appeal by the State of Kansas of the district court's granting
of dispositional departure sentences to Ronald D. Morley. Upon our review, we hold the
district court erred in two respects. First, the district court's finding that Morley accepted
responsibility for his actions was not supported by substantial competent evidence.
Second, assuming there was substantial competent evidence in support of this departure
factor, that basis did not constitute a substantial and compelling reason to depart under
the totality of circumstances in this case. Accordingly, the judgment of the district court
is reversed, the sentences are vacated, and the case is remanded to the district court for
resentencing.
FACTUAL AND PROCEDURAL BACKGROUND
On November 3, 2016, Morley was indicted on 12 felony counts. In particular, he
was charged with four counts of securities fraud in violation of K.S.A. 17-12a501; four
counts of sale of an unregistered security in violation of K.S.A. 17-12a301; and four
counts of acting as an unregistered issuer agent in violation of K.S.A. 17-12a402.
According to the indictment, the crimes occurred from December 2011 through April
2013. The indictment further alleged that four Kansas investors lost a total of $845,900 as
a consequence of Morley's criminal conduct.
Prior to trial, a plea agreement was reached between the State and Morley. The
agreement provided that Morley would plead no contest to one count of securities fraud,
a severity level 4 nonperson felony, and one count of acting as an unregistered issuer
agent, a severity level 5 nonperson felony. The State agreed to dismiss the rest of the
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charges in the original indictment. The State also agreed to recommend that the sentences
run concurrent. For his part, Morley agreed that "he owes restitution to all victims listed
in the amended indictment but does not agree to the amount." Under the agreement, the
parties were permitted to argue the amount of restitution and all other aspects of the
sentence.
Punishment for both convictions was presumptive prison, although the charge of
acting as an unregistered issuer agent was a border box offense on the sentencing grid. Of
note, Morley's convictions were also subject to a special rule which provides that any
violation of the Kansas Uniformed Securities Act (KUSA) shall be presumed
imprisonment if the violation resulted in a loss of $25,000 or more. See K.S.A. 2018
Supp. 17-12a508(a)(5).
On March 23, 2018, Morley pled no contest to an amended indictment in
accordance with the plea agreement. Subsequently, the State submitted a sentencing
memorandum summarizing the factual basis for the pleas as stated at the plea hearing:
"In brief, Mr. Morley sold preferred stock shares in Summit Trust Company to four
Kansas investors: [B.A.], [T.A.-F.], [L.H.], and [D.R.]. Mr. Morley counseled the
victims the preferred stock was a safe investment with a guaranteed 6% quarterly
dividend, and he further advised the victims the preferred stock was a good fit for their
stated investment goals and avowed low risk tolerances. The victims relied entirely on
Mr. Morley's representations in making their preferred stock purchases, as Mr. Morley
failed to provide any of the victims with a prospectus or offering memorandum. Contrary
to Mr. Morley's representations, the preferred stock investment was high risk and low
liquidity and was only open to accredited investors. Mr. Morley knew none of the Kansas
investors qualified as accredited investors, and yet nonetheless sold the Kansas victims
the preferred stock securities. In addition, Mr. Morley failed to notify the victims he had
been permanently barred from the securities and investment advisory business in
Maryland after a 2006 consent order issued by the Securities Commissioner of Maryland.
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"Mr. Morley was not and never has been registered to sell securities in Kansas as
an issuer agent. Mr. Morley earned between a 5.2% and 6% commission for the Kansas
victims' purchase of preferred stock.
"[B.A.] invested a total of $352,500 in the Summit Trust preferred stock;
[T.A.-F.] invested $252,400; [L.H.] is invested $150,000; and [D.R.] also invested
$150,000. [T.A.-F.] redeemed $29,000 in preferred stock shares over time (leaving a
remaining principal of $223,400), and [D.R.] redeemed $30,000 in preferred shares
(leaving a remaining principal of $120,000).
". . . None of the Kansas investors have been able to recover any of their lost
principal."
The State calculated a total loss to the four Kansas investors of $845,900. For his
role in selling the stock to these investors, Morley received $50,154 in commissions.
Morley acknowledged receiving about $3 million in commissions over a 10-year period
from sales of Summit Trust Company (Summit) stock throughout the United States.
Before sentencing, Morley filed a motion for durational and dispositional
departure sentences. In support of the motion, Morley asserted that a departure was
appropriate "because of (1) his minor role in the offense; (2) similarly situated defendants
have also received downward departures; [and] (3) his lack of criminal background, lack
of danger to the public, his role in mitigating damage to his clients, providing restitution
and his cooperation with the SEC and other investigators."
Sentencing occurred on July 3, 2018. During the hearing, Morley testified in
support of the motion and three investors, B.A., D.R., and his wife, addressed the court
and read victim statements. Four exhibits were admitted in evidence, including
documents relating to the Summit stock offering and a 2006 consent order issued by the
Maryland Securities Commissioner permanently barring Morley from the securities and
investment advisory business in Maryland.
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At the conclusion of the hearing, the district court sentenced Morley to 41 months'
imprisonment upon his conviction for securities fraud and 32 months' imprisonment upon
his conviction for acting as an unregistered issuer agent. The sentences were ordered to
run concurrent. The district court granted Morley's motion for dispositional departure
sentences based on the nonstatutory factor that Morley accepted responsibility for his
crimes. The district judge reasoned:
"[T]he ground that I'm relying on is to the extent that I believe it's—much of it is true is
the taking of responsibility. I do think that whether it was entering the plea to . . . two
counts, he did agree to pay restitution as ordered and to me, that's part of the focus of
responsibility. The other part is he did plea. He plead[ed] no contest, but he certainly
acknowledged and he understood he was going to be found guilty.
....
". . . It's the overall issue of accepting responsibility by entering a plea to the two
offenses and agreeing to pay restitution is where I'm hanging my hat on."
Morley was placed on probation for 36 months and ordered to pay $845,900 in
restitution.
After sentencing, Morley objected to the State's proposed journal entry which
listed the sole basis for the district court's dispositional departure as "[d]efendant took
responsibility for his actions." See Supreme Court Rule 170(d) (2019 Kan. S. Ct. R. 222).
At the hearing held to resolve the language in the journal entry, the district judge
approved the State's wording, stating, "That single ground was the one the Court relied on
and still feels it was a substantial and compelling reason to depart. Court does note that it
was the single ground of the defendant taking responsibility that moved me to grant the
dispositional departure in this matter." The journal entry of judgment signed and filed by
the district court stated: "Reasons Cited as Basis for Departure: Defendant took
responsibility for his actions."
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The State filed a notice of appeal contesting the district court's granting of the
dispositional departure sentences.
KANSAS LAW REGARDING DEPARTURE DECISIONS AND STANDARDS OF REVIEW
The State presents two contentions on appeal. First, it asserts: "The district court's
decision that the record supported an articulated reason for departure, namely Morley's
acceptance of responsibility, is not supported by substantial competent evidence."
Second, the State posits: "Even if the record supported the existence of the acceptance-
of-responsibility departure factor, the district court abused its discretion in granting
Morley's motion for departure." In response, Morley submits the district court's departure
decision was supported by substantial competent evidence and "[t]he district court's
reasons are valid for departure."
We begin with a summary of Kansas law applicable to departure decisions and our
standards of appellate review. A sentencing court is required to impose the presumptive
sentence provided by the Kansas Sentencing Guidelines Act (KSGA), K.S.A. 2018 Supp.
21-6815(a), unless the district court finds substantial and compelling reasons to impose a
departure sentence. State v. Theurer, 50 Kan. App. 2d 1203, Syl. ¶ 1, 337 P.3d 725
(2014). A substantial and compelling reason to depart downward from a presumptive
sentence is a mitigating factor. 50 Kan. App. 2d 1203, Syl. ¶ 2.
Although K.S.A. 2018 Supp. 21-6815(c)(1)(A)-(E) provides a list of potential
mitigating factors, the list is nonexclusive, and a sentencing court may rely on
nonstatutory factors to depart if they are consistent with the principles underlying the
KSGA. 50 Kan. App. 2d 1203, Syl. ¶ 3. Of particular importance in this appeal, "[a]
defendant's acceptance of responsibility may be a [nonstatutory] mitigating factor in
support of a departure sentence." 50 Kan. App. 2d at 1232. This is because "[r]ecognizing
a defendant's acceptance of responsibility as a nonstatutory departure factor is consistent
8
with the underlying principles of and legislative purposes behind enacting the [KSGA]."
State v. Bird, 298 Kan. 393, Syl. ¶ 3, 312 P.3d 1265 (2013).
If, as in this case, a sentencing court determines that a departure sentence is
warranted, it must state on the record at the time of sentencing the substantial and
compelling reasons for the departure and make findings of fact regarding those mitigating
factors. See K.S.A. 2018 Supp. 21-6815(a); K.S.A. 2018 Supp. 21-6817(a)(4); State v.
Reed, 302 Kan. 227, Syl. ¶ 7, 352 P.3d 530 (2015).
On appeal—with reference to the first issue presented by the State—an appellate
court's standard of review provides that we review for substantial competent evidence to
ascertain if the record supports an articulated mitigating factor for a departure sentence.
Substantial competent evidence is evidence possessing both relevance and substance that
a reasonable person could accept as being adequate to support a conclusion. State v. May,
293 Kan. 858, 862, 269 P.3d 1260 (2012).
With reference to the second issue raised by the State, "[w]hen the record supports
the articulated departure reasons and the articulated reasons are legally valid, we apply an
abuse of discretion standard to determine whether a particular mitigating factor
constituted a substantial and compelling reason to depart." Bird, 298 Kan. at 398.
A judicial action constitutes an abuse of discretion
"if [the] judicial action (1) is arbitrary, fanciful, or unreasonable, i.e., if no reasonable
person would have taken the view adopted by the trial court; (2) is based on an error of
law, i.e., if the discretion is guided by an erroneous legal conclusion; or (3) is based on an
error of fact, i.e., if substantial competent evidence does not support a factual finding on
which a prerequisite conclusion of law or the exercise of discretion is based." State v.
Ward, 292 Kan. 541, Syl. ¶ 3, 256 P.3d 801 (2011), cert. denied 565 U.S. 1221 (2012).
9
Finally, if an appellate court concludes the sentencing court's "factual findings are
not supported by evidence in the record or do not establish substantial and compelling
reasons for a departure," the appellate court must "remand the case to the [sentencing]
court for resentencing." K.S.A. 2018 Supp. 21-6820(f).
We will separately consider the State's two issues on appeal.
WAS THERE SUBSTANTIAL COMPETENT EVIDENCE OF
MORLEY'S ACCEPTANCE OF RESPONSIBILITY?
Although Morley argued that several factors justified a dispositional departure, the
district court found only one mitigating factor for granting the dispositional departure
sentences—Morley accepted responsibility for his crimes. In particular, the district court
justified this finding of a nonstatutory mitigating factor by relying on evidence that
Morley pled no contest to two felonies with the understanding that he was going to be
found guilty and that he agreed to pay restitution as ordered by the court. Upon this
factual basis, the district court found that Morley had accepted responsibility for his
crimes.
We will individually analyze the evidence in support of Morley's no contest pleas
and agreement to pay restitution.
The No Contest Pleas
The State's first claim of error is that Morley's no contest pleas were not
substantial competent evidence to support that he accepted responsibility for his criminal
wrongdoing. The State argues that Morley did not plead guilty and, therefore, he did not
admit his guilt to the criminal charges. Instead, he pled no contest which calls his
acceptance of responsibility into question. Moreover, the State points out that Morley's
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stated reason for pleading no contest was because he received a favorable plea offer
which resulted in dismissal of 10 KUSA felonies.
In response, Morley contends a no contest plea is similar to a guilty plea in that
Morley acknowledged the State's incriminating evidence would result in convictions.
Morley acknowledges that he was never licensed to sell securities in Kansas, that he
failed to use due diligence to discover the fraudulent basis for the Summit securities, and
he failed to disclose to the potential investors that this was a high risk investment.
As we did in Theurer, we question whether a defendant's no contest pleas are
proof of acceptance of responsibility. A no contest plea is "a formal declaration that the
defendant does not contest the charge." K.S.A. 22-3209(2). It is not an admission of
wrongdoing. As we stated in Theurer, "a no contest plea 'is a plea where the defendant
does not expressly admit his or her guilt to the charge.'" 50 Kan. App. 2d at 1232
(quoting State v. Case, 289 Kan. 457, Syl. ¶ 3, 213 P.3d 429 [2009]). By his entry of no
contest pleas, Morley avoided admitting his legal responsibility for the securities
violations perpetrated on the four investors. See Theurer, 50 Kan. App. 2d at 1232.
At the sentencing hearing, Morley made clear that he purposely wanted to plead
no contest:
"Q. . . .And you had the option to plead no contest or guilty; correct?
"A. No contest or guilty, correct.
"Q. And those were explained to you what those meant?
"A. Yes.
"Q. And you chose no contest?
"A. Correct."
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Moreover, Morley testified at the sentencing hearing that while he believed a jury
could have found him guilty, he did not agree with the State's factual basis for the
charges, as shown in this colloquy with defense counsel:
"Q. But you didn't agree with everything the State said as being factually true. You didn't
admit it, did you?
"A. I don't remember doing that, no."
Morley acknowledged that he referred investors to Summit and facilitated their
investing in the company but he repeatedly emphasized that it was Summit that defrauded
the investors through a Ponzi scheme. Morley claimed that, like the four investors, he
was "duped" by Summit. Although Morley testified that he had been involved in sales of
Summit stock for many years, he claimed he did not know whether the stock was a high
risk or a low risk investment. Morley admitted that he was not licensed to sell securities,
but he stressed that he only acted as a consultant which Morley claimed did not require
licensure because a consultant may not give financial advice.
While Morley admitted to mistakes or lapses in judgment in failing to thoroughly
investigate the Summit stock offering, the State's evidence showed that—although
Morley never disclosed this fact to the prospective Kansas investors—the stock
prospectus or offering memorandum stated the investment was high risk and low liquidity
and was only open to accredited investors—not the type of investors who Morley
solicited on behalf of Summit in this case. Although Morley acknowledged the Kansas
investors were misled, he minimized his own involvement in encouraging and facilitating
the investors to purchase the stock. Moreover, Morley testified, "I knew nothing to be
false that I told them."
Morley's minimization of his criminal wrongdoing was evident throughout his
testimony:
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"Q. And you indicated that your principle, and you believe you did this throughout, is to
act forthright and honest; is that correct?
"A. Absolutely.
"Q. And you indicate that throughout this process, you were forthright and honest?
"A. I believe I was for—based on what I knew."
This disconnect between the State's factual basis establishing Morley's
wrongdoing and his testimony underemphasizing his own criminal complicity was
noticed by the district court:
"[T]here were a lot of issues or comments made during questioning and cross-
examination about why the plea, why this, why that, and this was a no contest plea. That
meant that Mr. Morley did not necessarily agree with the factual statement, and it was
lengthy and detailed provided by the State, but that Mr. Morley does not necessarily
agree with the factual statement presented, but that he agrees that if a jury heard that, or
that the Court heard that in trial, that there was a sufficient factual basis to meet the
elements of the offense."
In another colloquy with his counsel, Morley testified about his true purpose in
pleading no contest:
"Q. Because you had 12 different counts, you decided it was better to make a plea
bargain and not contest?
"A. That was the impetus and driving factor."
Indeed, similar to Theurer, one motivation for Morley to plead no contest was not
to accept responsibility but to mitigate his accountability by obtaining a very favorable
outcome to the criminal proceedings. See 50 Kan. App. 2d at 1232. In return for Morley's
no contest pleas, the State agreed to dismiss with prejudice 10 other KUSA felonies,
agreed to concurrent sentences, allowed Morley to argue for whatever restitution amount
he believed was appropriate, and to seek dispositional and durational departure sentences.
13
Under the totality of these circumstances, we are not persuaded that the fact that
Morley pled no contest was substantial competent evidence to prove the nonstatutory
mitigating factor that Morley accepted responsibility for his crimes.
Agreement to Pay Restitution
At the sentencing hearing, Morley addressed the victims and offered this sworn
assurance:
"I will take my last dying breath making certain that you get every dime of your money
back and my responsibility [for] that and the only way that I can do that is to stay in the
insurance business and enable my experience to be applied to my obligations that I'm
committing to."
During the sentencing hearing, the district court emphasized its difficulty in
deciding whether to impose presumptive sentences of imprisonment or grant dispositional
departure sentences to probation. Uppermost in the district judge's decision-making was
the importance of providing the victims an opportunity for restitution: "But I wanted to
give [Morley] not so much the chance, but the duty to work on that restitution and
whether you [the victims] see it in your lifetime or if it goes to future generations based
on estates, that that be dealt with."
The district court considered Morley's agreement to pay restitution, as ordered by
the court, as evidence that he accepted responsibility for his crimes. But the State
contends this was error because
"the evidence did not support the district court's conclusion that Morley had shown
willingness to pay restitution. . . . While [Morley] agreed he was responsible for paying
some amount of restitution, he insisted he should only be liable for what he earned from
the Summit . . . scheme and not the actual damages suffered by the victims."
14
In short, the State argues that Morley did not truly want to make the investors whole, but
he only wanted to pay back the modest amount in commissions—$50,154—that he
earned as a result of his wrongdoing, which resulted in the investors losing $845,900.
The State has a valid point. The payment of restitution to a crime victim is an
important part of a defendant's sentencing. It is also not optional, unless the district court
finds that the defendant does not have the means to pay it. In addition to a myriad of
authorized dispositions, K.S.A. 2018 Supp. 21-6604(b)(1) provides that "the court shall
order the defendant to pay restitution, which shall include, but not be limited to, damage
or loss caused by the defendant's crime." (Emphasis added.) Moreover, the importance of
restitution is shown by K.S.A. 2018 Supp. 21-6604(b)(2) which provides: "If the court
orders restitution, the restitution shall be a judgment against the defendant which may be
collected by the court by garnishment or other execution as on judgments in civil cases."
It is boilerplate Kansas law that "the appropriate measure of restitution to be
ordered is the amount that reimburses the victim for the actual loss suffered." (Emphasis
added.) State v. Hand, 297 Kan. 734, 738, 304 P.3d 1234 (2013). From the State's factual
basis for the pleas, it is apparent the four Kansas investors had an actual loss of their
principal investments totaling $845,900. Yet, while Morley agreed to pay restitution in
whatever amount the district court ordered, beginning with the negotiated terms of the
plea agreement and continuing throughout his appeal, Morley has contended that the
amount of money he earned in commissions—not the actual loss to investors—is the
appropriate amount of restitution.
We understand Morley's personal interest in limiting the adverse economic
consequences of joint and several liability. But given Morley's argument for restitution in
an amount wholly unrelated to the victims' actual loss (which constitutes only about 17%
of the actual loss), we do not understand the district court's finding that Morley's
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willingness to pay restitution—which is not optional but mandated by Kansas law—
constitutes substantial competent evidence of his acceptance of responsibility in this case.
At the sentencing hearing, the State pointed out that during the lengthy criminal
proceedings, Morley had not made any restitution payments to the victims. The district
court discounted this argument which was certainly within its discretion. Of greater
concern, however, is that Morley did not present any workable restitution plan to the
district court. At the conclusion of the sentencing hearing, the district judge referenced
Morley's "general" restitution plan and commented, "his apparent bankruptcy is about to
be completed. He's talked generally about some income but apparently has access to
money that he would be able to—and I say access. It may be a timing issue. It may be a
continuing work issue as to where he goes to get that money or how that money comes in
and how that plan would be done."
We readily acknowledge the difficult position these case facts presented to the
district court. Although the district court was uncertain about Morley's ability to make
restitution, it also noted, "[i]t certainly minimizes Mr. Morley's ability to do restitution or
be able to work and do the things he needs to do if he's in prison." While true, our review
of the record convinces us there was no substantial competent evidence that restitution in
whole or in significant part was ever a realistic possibility in this case.
At the July 3, 2018 sentencing hearing, Morley testified that in 2017 his estimated
gross income was under $50,000. In 2016, he estimated his income at $10,000 to
$12,000. In our opinion, given Morley's age (64 years old), which necessarily limits his
future work life, his extremely limited income, and pending bankruptcy proceedings—in
addition to the substantial restitution owed—it is understatement to observe that there
was considerable evidence to support the inference that Morley had no real financial
ability to make restitution for all or a substantial part of the actual losses incurred by the
victims.
16
On the other hand, had Morley proposed a workable restitution plan it may have
constituted some evidence to support Morley's claim of acceptance of responsibility. Yet,
no plan was offered, and at the time the dispositional departure decision was made by the
district court, there was scant evidence that, under the circumstances, Morley's verbal
assurances that restitution would be forthcoming had any basis in fact.
All things considered, we are not persuaded that Morley's agreement to pay
restitution as directed by the district court was substantial competent evidence to prove
the mitigating factor that the defendant accepted responsibility for his crimes.
In summary, we have reviewed the entire record for substantial competent
evidence in support of the district court's conclusion that Morley accepted responsibility
for his criminal conduct by pleading no contest and agreeing to pay restitution as ordered
by the court. We hold the district court erred in finding there was a sufficient factual basis
to support this valid, nonstatutory mitigating factor.
WAS THERE A SUBSTANTIAL AND COMPELLING
REASON TO SUPPORT A DISPOSITIONAL DEPARTURE?
Although our holding in the first issue is determinative of the appeal, the State has
raised a second issue which, in our estimation, is appropriate for our consideration. For
the sake of completeness, we will review—assuming there was substantial competent
evidence to support the mitigating factor that Morley accepted responsibility for his
criminal conduct—whether the district court abused its discretion when it concluded that
this mitigating factor constituted a substantial and compelling reason to depart in this
particular case. See Bird, 298 Kan. at 398.
17
Kansas law provides:
"Whether the factors relied upon by the sentencing court constitute substantial
and compelling reasons for departure from the sentencing guidelines is a question of law
with no deference given to the sentencing court. The term 'substantial' refers to something
that is real, not imagined; something with substance and not ephemeral. The term
'compelling' implies that the court is forced, by the facts of a case, to leave the status quo
or go beyond what is ordinary. The question is whether the departure factors, as a whole,
are substantial and compelling reasons for imposing a departure sentence in light of the
offense of conviction, the defendant's criminal history, and the purposes of the sentencing
guidelines. The analysis of this question is twofold: first, whether a particular reason
given by the sentencing court is a valid departure factor and, second, whether the reasons,
as a whole, are substantial and compelling reasons for departure in a given case."
"Reasons which may in one case justify a departure, may not in all cases justify a
departure. Rather, the inquiry must evaluate the crime and the departure factors as a
whole to determine whether departure in a particular case is justified. It is a question of
what weight to give each reason stated and what weight to give the reasons as a whole in
light of the offense of conviction and the defendant's criminal history. The inquiry also
considers the purposes and principles of the Kansas Sentencing Guidelines." State v.
McKay, 271 Kan. 725, Syl. ¶¶ 2-3, 26 P.3d 58 (2001).
We will determine whether the district court erred in its dispositional departure
decision by evaluating the offenses of conviction, the defendant's criminal history, the
departure reason stated, and the purposes and principles of the KSGA. State v. Martin,
285 Kan. 735, 744, 175 P.3d 832 (2008); McKay, 271 Kan. 725, Syl. ¶ 3; Theurer, 50
Kan. App. 2d at 1237.
Offenses of Conviction
At the outset, we must first assess the offenses of conviction. Morley was
convicted of one count of securities fraud, a severity level 4 nonperson felony, and one
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count of acting as an unregistered issuer agent, a severity level 5 nonperson felony. The
district court determined that the punishment for both convictions was presumptive
prison, while noting that acting as an unregistered issuer agent was listed as a border box
offense on the sentencing grid.
Importantly, the district court also ruled that Morley's convictions were subject to
a special statutory rule which provides that the punishment for any violation of the KUSA
shall be presumed imprisonment if the violation resulted in a loss of $25,000 or more.
See K.S.A. 2018 Supp. 17-12a508(a)(5). At sentencing, Morley's counsel agreed that this
special rule was applicable in this case. By enacting this special rule, the Kansas
Legislature statutorily mandated that securities act violations resulting in substantial
losses—as in this case—are presumptively punishable by imprisonment.
Next, we consider the offenses of conviction with particular emphasis on the effect
of these securities violations on the victimized investors. This review is mandated
because the Kansas Legislature has emphasized the importance of the district court
considering the views of crime victims in downward departure hearings. In particular,
K.S.A. 2018 Supp. 21-6817(a)(1) provides that at any hearing to consider imposition of a
downward departure sentence upon a felony conviction, a victim of the offense "may
submit written arguments to the court prior to the date of the hearing and may make oral
arguments before the court at the hearing." See also Article 15, § 15(a) of the Kansas
Constitution (2018 Supp.) ("Victims of crime, as defined by law, shall be entitled to
certain basic rights, including the right to be informed of and to be present at public
hearings, as defined by law, of the criminal justice process, and to be heard at sentencing
or at any other time deemed appropriate by the court, to the extent that these rights do not
interfere with the constitutional or statutory rights of the accused.").
At the sentencing hearing, the State argued, "The victims have no illusion that they
are going to get one dime back from Mr. Morley and as they have clearly indicated in
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their victim statements to you and as they will clearly indicate, they are asking for prison
and it is the appropriate punishment." (Emphasis added.) The written victim impact
statements are not included in the record on appeal but three victims addressed the district
court describing how Morley's criminal conduct adversely affected them.
One of the investors, B.A., lost $352,500, which was an inheritance from his
parents. He told the district court:
"I . . . think I have a lot to say here. It's tough already. I hope I get through it. I
mean, this brings up a lot of emotions. The anger, I'm okay with that. I've dealt with
anger, you know, my whole life. It's what I can deal with. The depression, you know,
that's hard to deal with. The humiliation, I'm embarrassed about all this. I heard mention
that [Morley's] family wasn't here. They were embarrassed of him. Well, I didn't invite
my family because I'm embarrassed. I'm embarrassed of what I've done here.
"A little bit about my parents. I mean, they were just simple, hardworking people.
They were frugal all their lives. My mom shopped at Aldi's for groceries. She shopped at
Salvation Army for clothes. I didn't have a clue they were millionaires. My dad drove an
old Chevy truck and mom, just a little Chrysler. Nothing special. Like I said, we didn't
have any idea of this until the funeral. They didn't eat out, they didn't go on trips.
Occasionally went to play golf with some friends.
"My relationship with them hasn't always been great. I had a lot of drug and
alcohol problems. I'm sure they wouldn't have trusted me with this kind of money until I
got cleaned up and got to the point that they could trust me with something like that, and
what happened in two years? I blew it. I wasn't planning on using it for really selfish
things. I did buy a house. I lived in a house with just wood heat. We hauled water. Have a
young girl and a wife. We bought a house a little closer to town. We have heat and water
and at night, they really like it.
"Her college, she's 15 now, sophomore this year. Talks a lot about the college
visits that she wants to do. I haven't been able to tell her that I blew her college fund. I
blew it in two years. It's gone. You know, that day is coming. Retirement, I don't really
care about that right now. I'd spend my retirement to get her into any college she wants to
go to any day.
....
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"I know Maryland, Maryland gave [Morley] a slap on the wrist. Didn't really stop
anything. They let you come here, find some easier victims, bigger suckers, whichever it
is. Now you want to ask for less restitution and departure. I don't think this is about you
now, I think it's about us trying to get back what you took. I think it's about the people of
this state getting justice, teaching you and others like you a lesson in not to come here,
you know. Welcome to Kansas, Mr. Morley. That's all."
Another victim, D.R., told the district court:
"Naturally, when you own $120,000, and I'm speaking for my sister back here
too, $120,000 myself, and my sister, $150,000, and someone steals that from you, it
creates a hardship as you are unable to live a lifestyle this money affords. We all think
along those lines. That $270,000 is a lot of money to [me] and my sister and as [B.A.]
said, we are common people. That's a ton of money. This is money my mother saved
from the sale of our farm. Even after she remarried after the death of my father, she
earmarked this, willed this to us . . . .
....
". . . Ronald Morley was sanctioned back in Maryland in 2006 for selling
unregistered stock as he also did here in Kansas. Apparently, he wasn't punished for this
first offense which enabled him to take advantage of us.
"Criminals, if punished correctly, are unable to commit the same crime if
incarcerated. . . .
"But I want to have faith in our judicial system. I sincerely request all full
restitution and appropriate prison time as well. My sister is 73, and myself soon to be 72.
We are at the age where the monies we had would have greatly improved our lives as we
both still work to compensate our Social Security. . . ."
Finally, D.R.'s wife and sister-in-law of a third victim, L.H., informed the district
court, "And it appears that this is [an] habitual crime with you, Mr. Morley. I learned
about your sanction in 2006. . . . [Y]ou are a repeat offender. Justice needs to be served
this time so there can be no more repeats of these actions by you."
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In response to the victims' statements, Morley expressed his remorse:
"To the victims, I regret that you're experiencing what you're experiencing. I serve the
same God as you do . . . and I hope you can find forgiveness in your heart. I understand
your reasons for upsetness [sic] and I understand the things that [have] caused each
family, not only from hearing it, knowing others in Maryland and across the country that
have known that."
From the statements of B.A., D.R., and his wife, four important facts are apparent.
First, as a direct result of the crimes perpetrated by Morley, individuals who were
unfamiliar with and uninformed about investing lost a substantial amount of money.
Moreover, as the district judge evaluated the evidence, Morley played a critical role in
causing the investment losses:
"[T]he hardworking people of Kansas that are the victims of this case, had they
heard, . . .[']by the way, I've been disciplined by the state of Maryland before but don't
worry, I'm okay, trust me,['] I think they might have pulled back . . . . The omissions, the
other issues that were not disclosed, I think clearly Mr. Morley was a good-sized cog in
that wheel that could have been stopped . . . ."
Second, given their limited personal income and age, the investors' loss of
substantial sums is adversely impacting their lives. Third, the deceptively obtained funds
originated from the victims' parents or relatives who had apparently sacrificed financially
in order to provide their children with inheritances. Fourth, while specifically articulated
by D.R., and implied by B.A. and D.R.'s wife, these victims expressed their opposition to
durational departure sentences.
All things considered, given the myriad ways that securities violations can impact
investors, the evidence presented and the victims' statements clearly and convincingly
proved that the offenses of conviction in this specific criminal litigation were very serious
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and caused considerable harm to the victims. The particular facts of this securities case
weigh against departing from the presumptive sentences of imprisonment.
The Defendant's Criminal History
Next, we consider Morley's criminal history. Prior to sentencing, a presentence
investigative report was prepared which indicated that Morley had never been convicted
of a crime. During the sentencing hearing, however, Morley testified that in the 1980s he
had "a bad check conviction." It does not appear that this conviction was included in
Morley's criminal history for sentencing purposes.
More importantly, there was evidence of prior wrongdoing by Morley—similar to
the case on appeal—that culminated in a September 2006 consent order issued by the
Maryland Securities Commissioner. This order was admitted as an exhibit during the
sentencing hearing. The consent order permanently barred Morley from the securities and
investment advisory business in Maryland. According to Morley, about three years prior
to the issuance of the consent order he began to offer "real estate contracts on timeshares
and rental income on properties in Cancun, Mexico." These contracts were offered to
investors who "would buy the right for rental income off the timeshare on a weekly basis.
They could own one week or all 52 weeks." At that time—as in the case on appeal—
Morley was not licensed to sell securities, and the State of Maryland determined the
contracts were, in fact, securities.
According to Morley, as part of the consent order he "paid back 100 percent of the
amounts of monies [he] made, plus a civil fine and subsequent litigation later on the
national level." Morley began making payments as required under the consent order in
2008 and, according to his testimony, paid off his obligations under the consent order in
2009. In this regard, we take special note that Morley's financial obligations under the
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consent order were apparently paid off within two years after he started earning
commissions as a result of the Summit stock offering in late 2007 and 2008.
The district court observed that Morley's conduct with regard to the timeshare
securities offering was "a prior bad act, if you want to call it that, but it is not something
that is based for criminal history purposes because it was an administrative proceeding."
Still, the district court referred to Morley as a "repeat offender" because of the similarity
between the 2006 timeshare offering and the Summit stock offering—both cases wherein
Morley, without the appropriate licensure, facilitated the sales of securities which
resulted in sizable investor losses.
We agree with the district court that Morley's conduct in the 2006 timeshare
offering—similar to a prior crime—is a prior civil wrong or prior bad act. Moreover, this
conduct—a mirror-image of Morley's current wrongdoing—is a relevant and material
factor to consider in the determination of whether a dispositional departure was
appropriate in this case. We are persuaded that this particular factor weighs against
departing from the presumptive sentences of imprisonment.
The Departure Reason Stated
Next, we consider whether the specific mitigating factor relied on by the district
court justified imposition of the dispositional departure sentences. Upon our review of
Kansas caselaw, this case is unusual because the district court, after considering other
factors submitted by Morley as grounds for his departure motion, found only one factor
supported the dispositional departure—acceptance of responsibility.
We are unaware of any case wherein a Kansas appellate court has held that the
sole nonstatutory factor—that the defendant accepted responsibility for the crime—was a
sufficient basis for a dispositional departure. But see State v. Bell, No. 118,260, 2018 WL
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4655525 (Kan. App. 2018) (unpublished opinion) (acceptance of responsibility upon
guilty plea warranted a durational departure, but not to the extent the defendant
requested); State v. Gunn, No. 118,108, 2018 WL 1770286, at *3 (Kan. App. 2018)
(unpublished opinion) (Upon defendant's guilty pleas in durational departure case,
district court found several mitigating factors applied, and on appeal our court said, "Both
parties concede Gunn's acceptance of responsibility and remorse can stand alone as a
substantial and compelling reason for a departure.").
On the other hand, in another of our court's unpublished opinions, State v. Hill,
No. 117,288, 2017 WL 4321288, at *3 (Kan. App. 2017) (unpublished opinion), we
expressed doubt in dicta in a dispositional departure case regarding whether acceptance
of responsibility could ever be a "stand-alone basis" for departure. We observed, "[i]f it
were so, every guilty plea, even those based on a favorable plea agreement, would
constitute a basis to depart. Nevertheless, this factor, when combined with other
mitigating factors, could constitute a substantial and compelling reason to depart." 2017
WL 4321288, at *3.
We are not persuaded to adopt a blanket rule holding that a defendant's acceptance
of responsibility, standing alone, may never provide a substantial and compelling reason
to grant a dispositional departure sentence. Indeed, our Supreme Court has stated as a
general proposition: "When even one factor relied upon by the sentencing court is
substantial and compelling, the departure sentence should be upheld." Bird, 298 Kan. at
398. Moreover, the proper inquiry belies bright lines because it is fact-intensive:
"Reasons which may in one case justify departure may not in all cases justify a
departure." Theurer, 50 Kan. App. 2d 1203, Syl. ¶ 7.
Still, under the unique facts relied on by the district court as undergirding Morley's
acceptance of responsibility, we are persuaded that this particular mitigating factor does
not provide a substantial and compelling basis to warrant the granting of dispositional
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departure sentences in this case. First, Morley's no contest pleas were not an admission of
guilt and they were at least partially motivated by his self-interest in obtaining a favorable
plea agreement. Second, Morley's "agreement" to pay restitution was insubstantial given
that Kansas law ordinarily requires convicted criminals to pay restitution. Third, Morley's
focus on limiting restitution to $50,154, the amount he earned as a result of his
wrongdoing rather than the victims' substantial loses is hardly compelling. Fourth,
Morley's very limited income and poor financial status coupled with his failure to submit
a workable restitution plan undercut his ability to actually accept responsibility by
making the victims whole. In sum, assuming there was substantial competent evidence to
support this particular factor, we conclude it would not weigh in favor of granting a
dispositional departure under the circumstances.
The Purposes and Principles of the KSGA
Finally, in evaluating the sentencing court's departure decision, we must consider
whether the purposes and principles of the KSGA justify departure in this case. See
Martin, 285 Kan. at 744 (listing purposes and principles). In the present case, the district
court did not specifically reference these purposes or principles in arriving at its departure
decision.
One of the principal objectives of the KSGA is that imprisonment should be
reserved for serious offenders. Another important objective is that the degree of sanctions
imposed should be based on the harm inflicted. See McKay, 271 Kan. at 730. While these
two objectives represent a general legislative purpose, K.S.A. 2018 Supp. 17-
12a508(a)(5) provides a specific statutory imperative that any violation of the KUSA
shall be presumed imprisonment if the violation resulted in a loss of $25,000 or more.
Read in pari materia, the Legislature has statutorily established that a defendant whose
criminal conduct in a securities case results in a loss of $845,900 is a serious offender
who has caused significant harm and is deserving of incarceration.
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Finally, another one of the purposes of the KSGA is to insure uniformity in
sentencing. As a result, "'departures should only be allowed in extraordinary cases.'" State
v. Brown, 305 Kan. 674, 697, 387 P.3d 835 (2017) (quoting State v. Eisele, 262 Kan. 80,
90, 936 P.2d 742 [1997]). As we have detailed in this opinion, the totality of mitigating
circumstances in this case are not extraordinary and, therefore, the presumptive prison
sentences ordinarily applied in this type of securities case should be imposed.
In summary, departure reasons must be substantial and compelling given the
unique circumstances of an individual case. Having considered the offenses of
conviction, Morley's criminal history, the sole mitigating factor of acceptance of
responsibility, and the purposes and principles of the KSGA, we hold that—assuming
there was substantial competent evidence of Morley's acceptance of responsibility—the
district court erred in its legal conclusion that this nonstatutory factor justified the
granting of dispositional departure sentences in this case. Under the totality of
circumstances, Morley's acceptance of responsibility was not real or substantial, and it
was not compelling such that the district court was forced by the case facts to abandon
the status quo and venture beyond the sentence that it would ordinarily impose. See State
v. Hines, 296 Kan. 608, Syl. ¶ 5, 294 P.3d 270 (2013).
The judgment of the sentencing court is reversed, the sentences are vacated, and
the case is remanded to the district court for resentencing.
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