State v. Graham , 733 Utah Adv. Rep. 22 ( 2013 )

2013 UT App 109_________________________________________________________
THE UTAH COURT OF APPEALS
STATE OF UTAH,
Plaintiff and Appellant,
v.
RODGER MARTIN GRAHAM,
Defendant and Appellee.
Opinion
No. 20110492‐CA
Filed May 2, 2013
Fourth District, Provo Department
The Honorable Claudia Laycock
No. 091402828
John E. Swallow, Karen A. Klucznik, and
Craig L. Barlow, Attorneys for Appellant
Ronald J. Yengich, Attorney for Appellee
JUDGE MICHELE M. CHRISTIANSEN authored this Opinion,
in which JUDGES GREGORY K. ORME and
WILLIAM A. THORNE JR. concurred.
CHRISTIANSEN, Judge:
¶1 The State appeals from a magistrate’s order declining to
bind over Defendant Rodger Martin Graham (Defendant) on three
counts of communications fraud. We affirm.
State v. Graham
BACKGROUND1
¶2 In the spring of 2005, Defendant approached Investor to
attempt to secure Investor’s investment in a potential business
opportunity involving the salvage and sale of wood reclaimed from
the site of a former steel mill. Defendant told Investor that it would
cost $250,000 to purchase the salvage rights and another $250,000
to remove the wood. Defendant also told Investor that the salvaged
wood would be worth “anywhere from 5 to 8 million bucks.”
Investor agreed to contribute to Defendant’s salvage project,
mainly because he viewed it as an opportunity to involve his son
(Investor’s Son) in a business. Defendant indicated that he would
also like his son, Benjamin Jay Graham (Defendant’s Son),2 to be
included in the project.
¶3 Investor and Defendant decided that their sons would co‐
own the salvage business, though Defendant would be the “brains”
behind the operation because neither of the young men had much
business experience. Investor agreed to provide the financing, and
soon thereafter he and Defendant formed Green Harvest Materials,
Inc. (Green Harvest). Investor’s Son, as co‐owner, was to be in
charge of marketing and Defendant’s Son, as the other co‐owner,
was to be in charge of operations. They hired an assistant to serve
as Green Harvest’s secretary and office manager (Office Manager).
Office Manager’s responsibilities included collecting all receipts
from debit card purchases on the company’s bank account,
purchasing office supplies, and paying all invoices that came
1. At a preliminary hearing, “[t]he magistrate should view the
evidence in a light most favorable to the prosecution and resolve
all inferences in favor of the prosecution.” State v. Hawatmeh, 2001
UT 51, ¶ 3, 26 P.3d 223 (citation and internal quotation marks
omitted). We state the facts here accordingly.
2. Defendant’s Son is a defendant in a related case. See State v.
Graham, 2013 UT App 110.
20110492‐CA 2 2013 UT App 109State v. Graham
through Green Harvest. Shortly after the company’s formation,
Investor began paying substantial amounts of money to
Defendant’s business, Graham Ironworks, and to Green Harvest.
While most of Investor’s contributions constituted investment
capital in Green Harvest, other funds were designated as loans to
Green Harvest.
¶4 Defendant mentored Defendant’s Son in the daily work of
removing the salvaged materials from the buildings at the site. As
the work proceeded, it became common practice for Defendant to
pay for daily operating expenses and then seek reimbursement
from Green Harvest. Defendant billed Green Harvest through
Graham Ironworks. On three separate occasions, Defendant sent
invoices to Green Harvest seeking reimbursement for costs
associated with asbestos removal at the salvage site. Neither
Defendant nor Graham Ironworks possessed a license to remove
asbestos. Defendant hired another company, CST, and its
subcontractors, to do all the asbestos removal. Defendant presented
three invoices to Green Harvest and requested reimbursement in
the amount of $11,500, $23,925, and $23,500 for asbestos removal.
¶5 By November 20, 2006, Investor and Green Harvest had
deposited a total of $871,934.51 into Graham Ironworks’s checking
account. Also, in the three years that Green Harvest was in
existence, it never sold any salvaged materials. Neither Defendant
nor Green Harvest ever paid any money to Investor in return for
his investment and loans.
¶6 On September 30, 2009, the State charged Defendant with
multiple counts of securities fraud, communications fraud, theft,
and pattern of unlawful activity, all stemming from his
involvement with the steel mill salvage site. Following the
preliminary hearing, the State sought dismissal of seven counts of
the information. In addition, the magistrate refused to bind
Defendant over on eight counts, including communications fraud
20110492‐CA 3 2013 UT App 109State v. Graham
counts 12, 16, and 17, which are the subject of this appeal.3 See
generally Utah Code Ann. § 76‐10‐1801 (LexisNexis 2012)
(communications fraud statute).4 Each of the three counts
corresponds to a separate invoice for asbestos removal sent by
Defendant and Graham Ironworks to Green Harvest. In dismissing
the counts, the magistrate found that “[t]he State [did] not present[]
enough facts to establish the second element of communications
fraud.” See id. § 76‐10‐1801(1) (explaining that a person is guilty of
communications fraud when that person uses a scheme or artifice
“to obtain from another money, property, or anything of value by
means of false or fraudulent pretenses, representations, promises,
or material omissions”). The State appeals.
ISSUE AND STANDARD OF REVIEW
¶7 The sole issue on appeal is whether the magistrate
incorrectly refused to bind over Defendant on communications
fraud counts 12, 16, and 17 following the preliminary hearing. “A
[magistrate’s] decision to bind over a criminal defendant for trial
presents a mixed question of law and fact and requires the
application of the appropriate bindover standard to the underlying
factual findings.” In re I.R.C., 2010 UT 41, ¶ 12, 232 P.3d 1040. Thus,
“an appellate court should grant commensurate limited deference
to a magistrate’s application of the bindover standard to the facts
of each case.” State v. Virgin, 2006 UT 29, ¶ 34, 137 P.3d 787.
3. The magistrate bound Defendant over on one count of securities
fraud (count 1); three counts of communications fraud (counts 2, 5,
and 20); one count of theft (count 3); and one count of pattern of
unlawful activity (count 25).
4. Because the relevant statutory provisions have not changed in a
way material to our analysis, we cite the most current version of
the Utah Code throughout this opinion.
20110492‐CA 4 2013 UT App 109State v. Graham
ANALYSIS
I. The Bindover Standard
¶8 To support the bindover of a defendant for trial, the
prosecution must put forward enough evidence at the preliminary
hearing to establish probable cause. See Utah R. Crim. P. 7(i)(2)
(allowing for bindover when the magistrate “finds probable cause
to believe that the crime charged has been committed and that the
defendant has committed it”); see also Virgin, 2006 UT 29, ¶ 17. “[A]
showing of ‘probable cause’ entails only the presentation of
‘evidence sufficient to support a reasonable belief that the
defendant committed the charged crime.’” State v. Ramirez, 2012 UT
59, ¶ 9, 289 P.3d 444 (quoting Virgin, 2006 UT 29, ¶ 17). A
“reasonable belief” in this context parallels the standard for an
arrest warrant, meaning that the level of evidence that the
prosecution must show is less than that required to prove guilt
beyond a reasonable doubt. Id. “All that is required is reasonably
believable evidence—as opposed to speculation—sufficient to
sustain each element of the crime(s) in question.” Id. Also, the
“magistrate must view all evidence in the light most favorable to
the prosecution and must draw all reasonable inferences in favor
of the prosecution.” State v. Clark, 2001 UT 9, ¶ 10, 20 P.3d 300(citation and internal quotation marks omitted). Finally, the
magistrate is not to weigh or sift through conflicting evidence
presented at the preliminary hearing. See id.
¶9 Despite the relatively low evidentiary threshold at a
preliminary hearing, a magistrate may deny bindover in certain
situations. For example, when the evidence, considered under the
totality of the circumstances, “is wholly lacking and incapable of
reasonable inference to prove some issue which supports the
[prosecution’s] claim,” the magistrate is not required to bind a
criminal defendant over for trial. See In re I.R.C., 2010 UT 41, ¶ 22,
(alteration in original) (citations and internal quotation marks
omitted).
20110492‐CA 5 2013 UT App 109State v. Graham
II. The Evidence Presented at the Preliminary Hearing
¶10 To properly bind Defendant over on each count of second
degree felony communications fraud, the evidence must support
a reasonable belief that (1) Defendant “devised [a] scheme or
artifice to defraud” Green Harvest, or that he sought “to obtain
from [Green Harvest] money, property, or anything of value”;
(2) Defendant did so “by means of false or fraudulent pretenses,
representations, promises, or material omissions”; (3) Defendant
“communicate[d] directly or indirectly with any person by any
means for the purpose of executing or concealing the scheme or
artifice”; (4) “the pretenses, representations, promises, or material
omissions made or omitted were made or omitted intentionally,
knowingly, or with a reckless disregard for the truth”; and (5) the
value of the property, money, or thing obtained or sought to be
obtained is or exceeds $5,000. See Utah Code Ann. § 76‐10‐
1801(1)(d), (7).
¶11 In refusing to bind Defendant over for trial, the magistrate
determined that the prosecution failed to present sufficient
evidence to establish that a false or fraudulent exchange took place
between Defendant and Green Harvest. Specifically, the magistrate
determined,
The State has not presented enough facts to establish
the second element of communications fraud. While
the State did show that [Defendant] did not
personally remove asbestos, the State failed to show
that he falsely stated anything by submitting the
invoice for asbestos removal. The State failed to show
that asbestos was not removed, nor did the State
offer any evidence that Graham Ironworks was not
the entity that originally paid for that removal. Thus,
the State failed to show that the invoices were false
or fraudulent in any way and that Green Harvest
paid for a service that was not rendered.
20110492‐CA 6 2013 UT App 109State v. Graham
¶12 The State argues that it was “only required to present
sufficient evidence to raise a reasonable belief that [the three
invoices for asbestos removal] were false.” In challenging the
magistrate’s decision on appeal, the State relies upon evidence
submitted at the preliminary hearing, which it claims establishes
a reasonable belief that Defendant’s invoices were false or
fraudulent. Specifically, the State presented evidence that neither
Defendant nor Graham Ironworks was licensed to do asbestos
removal. In addition, the State adduced evidence suggesting that
all asbestos removal at the steel mill salvage site was performed by
CST or its subcontractors and that no removal was performed by
Defendant, Defendant’s Son, or Graham Ironworks. The State
contends that these two facts, when viewed in the light most
favorable to the prosecution, demonstrate that “Defendant played
no role at all in the removal of asbestos from the [steel mill salvage]
site,” contrary to what his invoices show. Accordingly, the State
argues that Defendant’s invoices for asbestos removal costs were
false or fraudulent representations made in support of a scheme to
obtain money directly from Green Harvest and indirectly from
Investor.5
5. The State also directs our attention to other evidence presented
at the preliminary hearing as further support for bindover. See
generally In re I.R.C., 2010 UT 41, ¶ 24, 232 P.3d 1040 (stating that a
bindover determination includes consideration of the “totality of
the circumstances”). The State argues that “Defendant’s bindover
on the asbestos charges includes not only the evidence specific to
those charges but also evidence that Defendant had a pattern of
making false statements to obtain money from . . . [Investor] and
Green Harvest.” However, the other evidence referred to by the
State was used to support different counts of communications
fraud, securities fraud, theft, and pattern of unlawful activity. Even
though the magistrate bound Defendant over on these different
counts, the evidence supporting these counts has no particular
relevance to communications fraud counts 12, 16, and 17.
20110492‐CA 7 2013 UT App 109State v. Graham
¶13 Defendant argues that the magistrate correctly refused
bindover because the “State failed to present any evidence that
[Defendant] submitted invoices to Green Harvest by means of false
or fraudulent pretenses, representations, promises, or material
omissions.” Defendant claims that the invoices merely sought
reimbursement for his payments made to CST and its
subcontractors for asbestos removal. Defendant notes that it was
common practice for him to pay for a variety of expenses needed
for daily operations at the salvage site and then to request
reimbursement from Green Harvest. For example, Defendant
sought reimbursement for “business related stuff,” including
“miscellaneous things like tires and . . . general costs for paying
employees, and . . . day‐to‐day stuff.” In her role as office manager
and secretary, Office Manager received all invoices, reviewed them,
and submitted written checks to Defendant. Office Manager never
expressed any concern with Defendant’s invoices, and Investor’s
Son testified that the invoices Green Harvest received for asbestos
removal looked like the typical invoice regularly received from
Defendant. Furthermore, the invoices themselves explicitly state
that the asbestos removal, in addition to other daily expenses, was
part of the “Total Reimbursable Expenses” or “Reimbursement.”
III. Whether the Magistrate Acted Within Her Discretion in Not
Binding Defendant Over for Trial
¶14 We determine that the magistrate acted within her discretion
in denying bindover on the three communications fraud counts.
The determinative issue in this case is whether the evidence
supports a finding of probable cause for communications fraud
based on allegations that Defendant submitted false or fraudulent
invoices. In viewing the evidence and all inferences drawn
therefrom in the light most favorable to the prosecution, as we
must, we determine that the State did not meet its burden at the
preliminary hearing stage.
¶15 In her order denying bindover, the magistrate stated that the
prosecution failed to present “any evidence that Graham Ironworks
20110492‐CA 8 2013 UT App 109State v. Graham
was not the entity that originally paid for [the asbestos] removal.”
This finding is important because if another party had originally
paid for the asbestos removal, clearly Defendant would have no
need to seek reimbursement from Green Harvest. The State argues
that the magistrate impermissibly required it to disprove this
“speculative possibility.” See generally In re I.R.C., 2010 UT 41, ¶ 24,
232 P.3d 1040 (“[T]he State need not disprove every possibility that
tends to negate probable cause.”). However, the facts presented at
the preliminary hearing indicate that Defendant’s invoices sought
reimbursement for asbestos removal performed by CST and its
subcontractors. This does not appear to be a “speculative
possibility.” Also, the prosecution is the party that has the burden
to establish probable cause at the preliminary hearing. See Utah R.
Crim. P. 7(i)(1) (“The state has the burden of proof [at a preliminary
hearing] and shall proceed first with its case.”). Thus, it is the
prosecution’s obligation to produce evidence demonstrating a
reasonable belief that Defendant’s reimbursement explanation was
false or fraudulent. The State has not identified any evidence of this
nature in the record.
¶16 The State appears to allege that the invoices were false
because they failed to specify that the asbestos removal was
performed by parties other than Defendant. However, this theory
is inconsistent with the invoices themselves, which repeatedly
mention “Reimbursement” and “Total Reimbursable Expenses.”
These terms, on their face, suggest that Defendant may not have
been the actual party to remove the asbestos. By definition,
reimbursement means “to pay back to someone” or “to make
restoration or payment of an equivalent to.” See Merriam‐Webster’s
Collegiate Dictionary 1049 (11th ed. 2004). Defendant allegedly
incurred an expense by paying CST and its subcontractors to
perform the asbestos removal. Even when viewing the invoices in
the light most favorable to the prosecution, the State’s evidence
20110492‐CA 9 2013 UT App 109State v. Graham
does not support a reasonable inference that such a request for
reimbursement was illegal, illegitimate, or fraudulent.6
¶17 Likewise, as Defendant states, the “fact that [he] did not
personally remove the asbestos does not provide a basis for the
magistrate to reasonably infer that [his] request[ for]
reimbursement for the removal was fraudulent. Such a conclusion
would be mere speculation.” Under Utah law, a magistrate is “free
to decline bindover where the facts presented by the prosecution
provide no more than a basis for speculation—as opposed to
providing a basis for a reasonable belief.” State v. Virgin, 2006 UT
29, ¶ 21, 137 P.3d 787. “[S]peculation is defined as the act or
practice of theorizing about matters over which there is no certain
knowledge.” State v. Cristobal, 2010 UT App 228, ¶ 16, 238 P.3d 1096(citations and internal quotation marks omitted). On these counts,
the prosecution’s evidence fails to provide certain knowledge, or
a reasonable belief, that Defendant engaged in communications
fraud. Therefore, the evidence is “incapable of satisfying the
probable cause standard. When that is the case, magistrates are
empowered to deny bindover.” Virgin, 2006 UT 29, ¶ 22.
6. Subsection 7 of the communications fraud statute provides that
“[a] person may not be convicted under this section unless the
pretenses, representations, promises, or material omissions made
or omitted were made or omitted intentionally, knowingly, or with
a reckless disregard for the truth.” See Utah Code Ann. § 76‐10‐1801(7)
(LexisNexis 2012) (emphasis added). Therefore, in order to
establish a reasonable belief that Defendant’s invoices for asbestos
removal were criminally false or fraudulent, the prosecution must
show that the invoices reflected some degree of intentional,
knowing, or reckless deceit. See id. The prosecution’s evidence
reveals only that Defendant did not personally remove the asbestos
because he did not have a license to do so. Thus, the magistrate’s
determination that the totality of the evidence did not demonstrate
Defendant’s fraudulent misrepresentation appears to be correct.
20110492‐CA 10 2013 UT App 109State v. Graham
¶18 The State cites to State v. Ramirez, 2012 UT 59, 289 P.3d 444,
in support of its argument that the magistrate improperly weighed
conflicting evidence. See id. ¶ 17. In that case, the magistrate
refused to bind the defendant over on drug possession charges
after considering the evidence presented at the preliminary
hearing. Id. ¶ 5. The evidence included drug paraphernalia
containing drug residue located in a motel room in the exact
location the defendant had directed and permitted the officers to
search and the defendant’s admission to having a drug problem. Id.
¶¶ 2–5, 11. The magistrate “opined that there was no evidence that
Ramirez had knowledge that the drug residue and paraphernalia
were present in the motel room either when he was personally
present in the room or when officers searched the room.” Id. ¶ 11.
Therefore, the magistrate was faced with a choice between two
competing inferences based on the evidence. In the magistrate’s
view, “it [was] a stronger inference [that the defendant] didn’t
know the drugs were there, or he wouldn’t have sent the police
officers to that place to look around.” Id. ¶ 5 (internal quotation
marks omitted).
¶19 In reversing the magistrate’s bindover decision, the Utah
Supreme Court explained that the magistrate’s “role does not
encompass an assessment of whether [an] inference [in the
prosecution’s favor] is more plausible than an alternative that cuts
in favor of the defense.” Id. ¶ 10. Rather, “[t]hat is a matter of
factfinding, which is left for the jury at trial.” Id. The supreme court
then concluded that, though circumstantial, sufficient evidence
existed in Ramirez’s case to support the bindover. Id. ¶ 16.
¶20 Unlike the magistrate in Ramirez, the magistrate in this case
does not appear to have weighed or assessed the plausibility of the
evidence. Nor is there any indication that she rejected the
prosecution’s reasonable inferences for any alternate theory
presented by the defense. See id. ¶ 13 (“[T]he choice between two
alternative, reasonable inferences is a matter for the factfinder at
trial, not for the magistrate at the preliminary hearing.”). Rather,
the magistrate determined that the prosecution did not present
20110492‐CA 11 2013 UT App 109State v. Graham
“enough facts to establish the second element of communications
fraud.”
¶21 The prosecution’s evidence at the preliminary hearing was
limited to the fact that Defendant was not licensed to perform
asbestos removal, that he did not actually remove the asbestos, and
that he submitted invoices to Green Harvest for reimbursement for
the asbestos removal. The prosecution failed to provide any
evidence suggesting that Defendant was not entitled to the
reimbursement, such as proof showing that CST never charged
Defendant for the asbestos removal. In contrast, in Ramirez, the
prosecution presented at least some affirmative evidence at the
preliminary hearing connecting the defendant to the possession of
drugs and drug paraphernalia. See id. ¶ 11. For example, “[the]
evidence included the fact that police officers found the glass pipe
exactly where Ramirez predicted they would, that when asked to
explain the pipe, Ramirez openly admitted that he had a drug
problem, and that officers found material belonging to Ramirez
(and to no one else) in the room where they found the drugs and
paraphernalia.” Id.
¶22 At a preliminary hearing, “the magistrate is tasked only with
assuring that there is evidence that could sustain a reasonable
inference in the prosecution’s favor on each element of the crime(s)
in question.” Id. ¶ 10. Here, the magistrate was simply unable to
infer from the evidence that Defendant’s invoices for asbestos
removal constituted a false or fraudulent communication with the
intent to obtain money from Investor.
¶23 “[A]n appellate court should grant commensurate limited
deference to a magistrate’s application of the bindover standard to
the facts of each case.” State v. Virgin, 2006 UT 29, ¶ 34, 137 P.3d
787. The “proximity [of magistrates] to the facts of the case weighs
in favor of granting them some discretion in bindover decisions.”
Id. ¶ 31. Given the insufficient evidence presented by the
prosecution, we determine that the magistrate acted within her
discretion by refusing bindover.
20110492‐CA 12 2013 UT App 109State v. Graham
CONCLUSION
¶24 Even when viewed in the light most favorable to the
prosecution, the evidence does not support a finding of probable
cause. Accordingly, we affirm the magistrate’s order denying
bindover.
20110492‐CA 13 2013 UT App 109