State Of Washington, Res/cross-app. v. Laurance D. Anthone, App/cross-res. ( 2014 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
STATE OF WASHINGTON,
No. 69716-1-1
Respondent, (consolidated w/70010-3-1)
Cross-Appellant,
DIVISION ONE
o
v.
LAURANCE D. ANTHONE, PUBLISHED OPINION
9?
ro
Appellant, FILED: October 20, 2014
Cross-Respondent.
Becker, J. — In a securities fraud case, the defrauding of an individual
investor is a separate unit of prosecution even if the fraud is perpetrated through
a group presentation or through a single document signed by more than one
investor. We reverse the trial court's decision to dismiss three out of eight counts
as multiplicitous. We reject appellant's challenge to the sufficiency of the
evidence.
After working in the construction business for 17 years, Anthone left the
trade to become a developer of real estate near the end of 2002. Because he
had poor credit, Anthone was unable to obtain traditional financing. He solicited
development funds personally from individual investors. At informational
meetings held at his office in Tukwila, Anthone promised potential investors that
he had a number of real estate projects in development that would yield
No. 69716-1-1/2
substantial returns within a few months. As time went on, the projects remained
undeveloped and Anthone's promises were not kept.
The State charged Anthone with numerous counts of securities fraud
under RCW 21.20.010. Each count related to a different individual allegedly
victimized by Anthone's fraudulent conduct. Five counts were dismissed before
or during trial. Of 10 counts that went to the jury, 8 resulted in guilty verdicts.
The trial court then granted Anthone's motion to dismiss counts 4, 5, and 6 as
multiplicitous of count 3. Anthone was sentenced to concurrent 16 month
sentences on the remaining 5 counts and was ordered to pay $208,000 in
restitution. His appeal challenges the sufficiency of the evidence to support all
but the conviction on count 8. The State's cross appeal challenges the dismissal
of counts 4, 5, and 6.
MULTIPLICITY
We first address the State's cross appeal. Multiplicity is the charging of a
single offense in several counts. State v. Noltie. 116 Wn.2d 831, 847, 809 P.2d
190 (1991). Amultiplicitous indictment may implicate double jeopardy if it results
in the defendant receiving more than one sentence for the same offense. As
well, it may improperly prejudice a jury by suggesting that a defendant has
committed several crimes, not one. United States v. Langford, 946 F2d 798, 802
(11th Cir. 1991), cert, denied, 503 U.S. 960 (1992).
"When the Legislature defines the scope of a criminal act (the unit of
prosecution), double jeopardy protects a defendant from being convicted twice
under the same statute for committing just one unit of the crime." State v. Adel,
No. 69716-1-1/3
136 Wn.2d 629, 634, 965 P.2d 1072 (1998). Thus, the issue here is what unit of
prosecution the legislature intended as the punishable act under RCW
21.20.010. The inquiry is necessary to assure that the prosecutor has not been
arbitrary in dividing ongoing criminal conduct into units in order to facilitate
separate charges. Adel, 136 Wn.2d at 635. "If the Legislature has failed to
denote the unit of prosecution in a criminal statute, the United States Supreme
Court has declared the ambiguity should be construed in favor of lenity." Adel.
136 Wn.2d at 634-35, citing Bell v. United States. 349 U.S. 81, 84, 75 S. Ct. 620,
99 L Ed. 905(1955).
In this case, Anthone was charged and convicted of numerous violations
of the same statute, RCW 21.20.010. The statute criminalizes securities fraud in
the following terms:
It is unlawful for any person, in connection with the offer,
sale, or purchase of any security, directly or indirectly:
(1) To employ any device, scheme, or artifice to
defraud;
(2) To 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) To engage in any act, practice, or course of
business which operates or would operate as a fraud or
deceit upon any person.
RCW 21.20.010. The State elected to proceed against Anthone only under
subsection (2).
The trial court ruled that counts 3 through 6 were multiplicitous, even
though four different investors were involved. The four investors signed a single
investment agreement at the same meeting in response to the same
No. 69716-1-1/4
representations about how their money would be used to develop property. The
trial court concluded that Anthone committed no more than one offense with
respect to these four investors. Accordingly, the court dismissed counts 4
through 6. The State contends that every time a defendant fraudulently sells or
offers to sell a security to a different victim, a separate crime has occurred.
The investors were Dalbir Bhuller (count 3), Balwant Singh (count 4),
Harvinder Mangat (count 5), and Sarbjit Singh (count 6). Bhuller saw a sign
advertising Anthone's business, "MAQuik Framing," on a property in a
neighborhood where he was interested in building a home. Bhuller went to
Anthone's office and said he wanted to buy a lot. Anthone said he was in the
process of developing the property into a number of lots to be known as Eden
Estates. He represented Eden Estates as an investment opportunity that Bhuller
could invest in if he found other investors for the project. In return for the
promise of a substantial profit when the lots were sold, each investor would need
to agree to pay Anthone $5,000 up front, $25,000 after approximately six weeks,
and more after breaking ground. Anthone represented that everything on the
property was "almost done" and he just needed "to pay all the fees and
everything and start breaking the ground."
Bhuller recruited the other three investors, and together, they met with
Anthone. Anthone presented them with a single "joint venture agreement." The
agreement characterized the investors as joint venturers and partners in the
development of Eden Estates. On June 1, 2004, Anthone and the investors
signed the agreement and each investor gave Anthone $5,000.
No. 69716-1-1/5
The State contends the transaction supports four counts of securities
fraud because each count involved a separate victim making a separate
investment. Relying on Langford, Anthone responds that only one count was
permissible because he sold a single security to a conglomerate of buyers.
The defendant in Langford employed a scheme to inflate the price of a
private company artificially before its purchase by a single buyer. The
government charged three counts of securities fraud related to separate false
statements made in a proxy statement, a telephone call, and a letter. Langford,
946 F.2d at 800. The court concluded that the convictions on those counts were
multiplicitous because all three were "based on the same scheme to defraud and
on the same purchase of securities." Langford, 946 F.2d at 804.
Unlike in Langford, here the four counts at issue involved sales to different
investors. The fact that all four signed the same agreement does not justify
Anthone's description of them as a "conglomerate" that engaged in a single
purchase. It was Anthone who insisted that Bhuller recruit additional investors,
and it was Anthone who prepared the agreement that defined them as joint
venturers. The agreement was itself an instrument of the fraud. It does not
obscure the reality that Anthone directly or indirectly induced each investor into
contributing personal funds.
The term "sale" is defined broadly by statute:
"Sale" or "sell" includes every contract of sale of, contract to
sell, or disposition of, a security or interest in a security for
value. "Offer" or "offer to sell" includes every attempt or offer
to dispose of, or solicitation of an offer to buy, a security or
interest in a security for value.
No. 69716-1-1/6
RCW 21.20.005(14).
The term "security" is also defined broadly. As relevant here, and as
reflected in a jury instruction, the definition includes any "certificate of interest or
participation in any profit-sharing agreement," as well as any "investment of
money or other consideration in the risk capital of a venture with the expectation
of some valuable benefit to the investor where the investor does not receive the
right to exercise practical and actual control over the managerial decision of the
venture." RCW 21.20.005(17)(a); see Instruction 19. Notably, the definition
applies "whether or not the security is evidenced by a written document." Former
RCW 21.20.005(12)(a) (2006), recodified as RCW 21.20.005(17)(a).
The Securities Act of Washington, chapter 21.20 RCW, is interpreted
broadly to protect investors, and its antifraud goals "should not be frustrated
merely because a scheme uses novel or atypical transactions." Kinney v. Cook,
159 Wn.2d 837, 846, 154 P3d 206 (2007). Looking to the broad definitions of
"sale" and "security," we conclude the statute unambiguously makes each sale or
offer to sell a security a separate unit of prosecution. See United States v.
Dioguardi, 492 F.2d 70, 83 (2d Cir.) ("Each transaction in a securities fraud case
constitutes a separate offense."), cert, denied, 419 U.S. 873 (1974). We further
conclude the State employed an appropriate unit of prosecution in counts 3
through 6 because each was based on a separate sale. Each investor made a
separate investment in the supposed "joint venture." The money Anthone
received came from individuals, not from a single organized entity. The trial
No. 69716-1-1/7
court's determination that counts 4 through 6 are multiplicitous of count 3 must
accordingly be reversed.
SUFFICIENCY OF THE EVIDENCE
Anthone's appeal argues that with the exception of count 8, the evidence
was insufficient to prove that he committed securities fraud. Because this is a
sufficiency challenge, we draw all reasonable inferences from the evidence in
favor of the State. State v. Salinas, 119 Wn.2d 192, 201, 829 P.2d 1068 (1992).
The three subsections of RCW 21.20.010 state several ways in which
securities fraud can be committed. The to-convict instructions show that the
State elected to proceed at trial only under the second subsection. For example,
the to-convict instruction in count 3, involving Bhuller, required proof beyond a
reasonable doubt of the following elements:
(1) That during a period of time intervening between May 1,
2004 and August 5, 2005, the defendant, directly or indirectly,
willfully made an untrue statement of material fact to Dalbir Bhuller,
or omitted to state a material fact to Dalbir Bhuller that was
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and
(2) That the acts described in (1) were in connection with the
sale of a security to Dalbir Bhuller; and
(3) That the acts occurred in the State of Washington.
Instruction 9; see RCW 21.20.010 (2).
For the conviction on count 8, involving investor Kanwaljit Dulai, Anthone
concedes there was sufficient evidence that he made untrue statements of
material fact. The joint venture agreement that Dulai signed represented
Anthone as the property owner of the land that the venture would develop into
town homes. Anthone admits he was not the owner. He also concedes there
No. 69716-1-1/8
was evidence that he represented that he and Dulai were the only people with a
financial stake in the property, when in fact he had sold another investor a
financial stake in the same development.
For the remaining counts, Anthone argues there is no evidence that he
made any untrue statements or omissions of a material fact. He points out
instances where a particular witness could not remember hearing him make any
particular statements that were untrue. Some witnesses could testify to receiving
only a general impression about what was being promised. But taking the record
as a whole and all inferences in favor of the State, we conclude that for each
investor there was sufficient evidence that Anthone made material
misrepresentations of fact, directly or indirectly.
The State presented evidence that Anthone made statements to the effect
that his real estate projects were "ready to go" and he was about to "break
ground." The evidence showed, however, that at the time Anthone made these
statements, Anthone had done next to nothing to prepare the land for
development. Trishah Bull, a planner for King County Department of
Development and Environmental Services, testified that Anthone did not file an
application to develop Eden Estates until September 9, 2004. This was three
months after he promised it was ready to go and accepted investments for the
purpose of completing it. Bull testified that the application had to be cancelled in
January 2006 because, despite meetings with Anthone that were held to make
him aware of deficiencies in the application, he did not correct errors or supply
requested information.
8
No. 69716-1-1/9
Anthone told Bhuller, Balwant Singh, Mangat, and Sarbjit Singh that
authorization to develop Eden Estates would be obtained shortly after he
received their payments, when in fact he had barely begun the lengthy permitting
process. Bhuller testified that Anthone represented that the investors' money
would be used only to pay for municipal fees, excavate the property, and put in a
sewer. In fact, according to a chart prepared by one of Anthone's employees, his
business plan was to use all but 15 percent of the invested cash to pay salaries,
overhead, and profit. This employee also testified that Anthone was unable to
obtain permits and never completed any of his development projects.
Anthone represented that projects would soon come to fruition, but he did
not disclose the existence of wetlands that he knew would be a substantial
obstacle to development. Anthone held himself out to investors as a contractor
as well as a developer, when in fact his contractors' license had been revoked
before he began soliciting investments. He held himself out as an experienced
developer and failed to disclose that he had never completed a project. He made
agreements to provide promissory notes and deeds of trust when he knew he
was not in a position to give any security. Among other things, Anthone did not
disclose that land he promised to provide as security was heavily encumbered by
senior lenders or not owned by him at all.
In short, the evidence was sufficient to support the jury in finding, for each
count on which there was a guilty verdict, that Anthone misrepresented or
omitted material facts relating to the sale of a security.
No. 69716-1-1/10
STATUTE OF LIMITATIONS
Anthone contends that the convictions on counts 2, 11, and 15 must be
reversed because the State did not prove the offenses occurred within the five-
year limitation period imposed by RCW 21.20.400(3).
The to-convict instructions for counts 2, 11, and 15 added a temporal
element related to the statute of limitations for securities fraud. For example,
count 2 involved investor Philip Ross. The charging period for the count began
on July 11, 2003, the date that Ross invested with Anthone. A statute of
limitations issue existed because the charge on count 2 was not filed until August
5, 2008. To ensure that Anthone was not convicted based on conduct outside
the five-year limitations period, the jury was instructed to convict only if at least
one materially misleading statement or omission "in connection with" the sale of a
security to Phillip Ross occurred after August 4, 2003.1 The phrase "in
1 To convict LAURANCE D. ANTHONE of the crime of Securities
Fraud as charged in Count 2, each of the following elements of the crime
must be proven beyond a reasonable doubt:
(1) That during a period of time intervening between July 11, 2003
and August 5, 2005, the defendant, directly or indirectly, willfully made an
untrue statement of material fact to Phillip Ross, or omitted to state a
material fact to Phillip Ross that was necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading; and
(2) That the acts described in (1) were in connection with the sale
of a security to Phillip Ross; and
(3) That the acts occurred in the State of Washington; and
(4) That at least one act described in (1) in connection with the
sale of a security to Phillip Ross occurred after August 4, 2003.
If you find from the evidence that each of these elements has
been proved beyond a reasonable doubt, then it will be your duty to return
a verdict of guilty on Count 2.
On the other hand, if, after weighing all the evidence, you have a
reasonable doubt as to any one of these elements, then it will be your
duty to return a verdict of not guilty as to Count 2.
10
No. 69716-1-1/11
connection with" was defined to mean "acts or omissions occurring at or around
the time of the offer or sale and acts occurring subsequent to the offer or sale
that 'lull' the investor into a false sense of security and that are designed to
prevent detection of a defendant's fraud." Another instruction informed the jury
that lulling "occurs when the defendant's activities induce the investor into a state
of passive inactivity. Lulling ceases when a reasonable person knows or should
have known of the defendant's fraudulent activities."
Anthone does not assign error to the instructions, which were based on
case law providing that where the prosecution is for a Ponzi-type scheme, a
defendant's lulling activities that serve to perpetuate the fraud will toll the
securities fraud statute of limitations. State v. Argo, 81 Wn. App. 552, 567-68,
915 P2d 1103 (1996). Under the lulling doctrine, transactions that occur more
than five years before the filing of the information will not be time barred when
the defendant's activities have lulled victims into a "state of passive inactivity."
Argo, 81 Wn. App. at 567. In a scheme like the one discussed in Argo, the
statute of limitations does not begin to run until the fraudulent activities cease.
Argo. 81 Wn. App. at 568.
Under the instructions received by the jury, count 2 was timely if the State
proved that between July 11, 2003, and August 5, 2003, there was at least one
act or omission by Ross that lulled Ross into a state of inactivity. The State met
its burden with evidence that when Ross made his investment, Anthone
promised a return of $60,000 by October 17, 2003. A jury could find that this
11
No. 69716-1-1/12
promise lulled Ross into a false sense of security and prevented him from
detecting that fraud had occurred until at least October 17, 2003.
Count 11 involved Paulina Chhour, who invested $13,500 with Anthone on
July 22, 2003. Chhour testified that she did not have any contact with Anthone
after signing the agreement on July 22, 2003. The information charging this
count was filed on October 14, 2008, more than five years later. The State thus
had to prove that Anthone lulled Chhour into inactivity between July 22 and
October 15, 2003. The State met its burden with evidence that Anthone
promised Ross she would receive a substantial return on her investment in three
months. He thereby prevented detection of the fraud for at least three months.
Count 15 involved Frederick Wilson, who made an investment on August
1, 2003. Anthone promised Wilson he would have a return on his investment on
December 2, 2003. The State filed the charge on January 5, 2009, more than
five years after the return date. However, there was evidence that after the
return date, Anthone told Wilson that minor issues in the development process
prevented payment and the project was going to take longer to complete than
originally anticipated. Wilson testified that Anthone extended the completion date
many times, advising patience. Wilson could not testify with precision when
these "lulling" communications occurred. His best estimate was one to three
months after December 2, 2003. Wilson's close friend and coinvestor, Dennis
Rossignol, testified that for at least "one to three months after" the December 2,
2003, return date, Anthone continued to promise that the investment would be
reassigned to another project. Ajury could find that at least one act or omission
12
No. 69716-1-1/13
that amounted to lulling occurred within five years before the information was
filed.
The convictions on counts 2, 3, 11, and 15 are affirmed. The order
dismissing counts 4, 5, and 6 as multiplicitous of count 3 is reversed, and the
evidence supporting counts 4, 5, and 6 is held sufficient. The case is remanded
for further proceedings consistent with this opinion.
WE CONCUR:
-_ -*^*"*Z^/
13