People of Michigan v. Thomas Mulholland

STATE OF MICHIGAN
COURT OF APPEALS
PEOPLE OF THE STATE OF MICHIGAN, UNPUBLISHED
March 1, 2018
Plaintiff-Appellee,
v No. 335078
Ingham Circuit Court
JAMES C. MULHOLLAND, JR., LC No. 15-001145-FH
Defendant-Appellant.
PEOPLE OF THE STATE OF MICHIGAN,
Plaintiff-Appellee,
v No. 335218
Ingham Circuit Court
THOMAS MULHOLLAND, LC No. 15-001085-FH
Defendant-Appellant.
Before: O’CONNELL, P.J., and BECKERING and STEPHENS, JJ.
PER CURIAM.
In these consolidated appeals, defendants, James C. Mulholland, Jr. and Thomas
Mulholland, appeal as of right convictions for conducting a criminal enterprise, MCL
750.159i(1), conspiracy to conduct a criminal enterprise, MCL 750.157a and MCL 750.159i(1),
obtaining money ($20,000 to $50,000) by false pretenses, MCL 750.218(5)(a), obtaining money
($1,000 to $20,000) by false pretenses, MCL 750.218(4)(a), fraudulent scheme or statement in
connection with the sale of a security, MCL 451.501, selling an unregistered security, MCL
451.701,1 fraudulent sale of securities, MCL 451.2501, and general securities act violations,
MCL 451.2508. The trial court sentenced both defendants to concurrent prison terms of 120 to
1
MCL 451.501 and MCL 451.701 were repealed, effective October 1, 2009, 2008 PA 551, but
the new Michigan Uniform Securities Act, MCL 451.2703(1), provides that the former Uniform
Securities Act applies to facts and circumstances occurring before that date.
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240 months each for conducting a criminal enterprise and conspiracy to conduct a criminal
enterprise, 100 to 180 months for obtaining money ($20,000 to $50,000) by false pretenses, 36 to
60 months for obtaining money ($1,000 to $20,000) by false pretenses, and 72 to 120 months
each for fraudulent scheme or statement in connection with the sale of a security, fraudulent sale
of securities, selling an unregistered security, and general securities act violations. We affirm
defendants’ convictions but vacate their sentences and remand for resentencing.
I. BACKGROUND
Defendants owned and operated Mulholland Financial. The company used investor
money to purchase rental property and issued “demand notes” to investors. These “demand
notes” were not registered as securities. In 2009, Mulholland Financial began to experience
financial difficulties, yet defendants continued to seek new investments. Defendants did not
disclose the company’s financial difficulties when soliciting new investments. Instead, they
promised a return rate of 7% interest and assured investors they could get their money back with
30 days’ notice. On January 1, 2009, Mulholland Financial had a balance of $218,648.11 and
owed $18.3 million to investors. From March 2009 through February 2010, defendants paid
earlier investors more than $1 million with new investor money, converting their business to a
Ponzi scheme. The company and defendants filed for bankruptcy protection in February 2010.
II. DISCUSSION
A. EXPERT TESTIMONY
Thomas argues that the trial court erred by allowing Joseph Spiegel, a securities expert, to
testify about legal issues. To preserve an evidentiary issue, the defendant must have objected to
admission of the evidence at trial for the reasons asserted on appeal. People v Aldrich, 246 Mich
App 101, 113; 631 NW2d 67 (2001). Because Thomas did not object to Spiegel’s testimony at
trial, this issue is not preserved for appeal. We review unpreserved evidentiary issues for plain
error affecting a defendant’s substantial rights. People v Carines, 460 Mich. 750, 763-764; 597
NW2d 130 (1999). An unpreserved error affects a defendant’s substantial rights when it is
prejudicial, i.e., when it affects the outcome of the trial court proceedings. Id. at 763.
The parties agreed that the trial court would take judicial notice of the definition of a
security, and the trial court admitted the relevant statute as an exhibit at trial. Unlike People v
Lyons, 93 Mich. App. 35, 45-46; 285 NW2d 788 (1979), Spiegel did not testify about the legal
definition of a security but offered his opinion that the facts demonstrated that the demand notes
provided to investors were securities. Similarly, Spiegel’s testimony that a letter to an investor
failed to make appropriate disclosures was an opinion based on the facts. MRE 704 allows
expert testimony to embrace an ultimate issue to be considered by the trier of fact. Therefore,
Thomas has failed to demonstrate plain error.
In addition, to the extent that admission of Spiegel’s testimony could be considered
improper, Thomas has not established prejudice. The trial court instructed the jury how to assess
expert testimony, including assessing the expert’s credibility, reasoning, and qualifications, and
the weight to accord his testimony. The trial court also instructed the jury that it was the jury’s
job to decide the facts and the trial court’s duty to instruct the jury about the law. “Jurors are
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presumed to follow their instructions, and instructions are presumed to cure most errors.” People
v Abraham, 256 Mich. App. 265, 279; 662 NW2d 836 (2003). Thomas has presented no reason to
conclude that the jury did not follow instructions. Therefore, Thomas has not shown that any
error arising from Spiegel’s testimony affected his substantial rights.
Thomas further argues that defense counsel’s failure to object to Spiegel’s testimony
denied him the effective assistance of counsel. Defense counsel is not required to make a
meritless objection. People v Chelmicki, 305 Mich. App. 58, 69; 850 NW2d 612 (2014).
Spiegel’s testimony was admissible because he did not improperly comment on a legal issue, so
defense counsel had no basis for objecting. Thomas has otherwise failed to show that trial
counsel’s performance was objectively unreasonable. Further, Thomas made no argument about
prejudice. Accordingly, Thomas failed to demonstrate that he was denied the effective
assistance of counsel, and we decline to remand for a hearing on the matter.
B. SUFFICIENCY OF THE EVIDENCE
Thomas argues that the evidence was insufficient to support his convictions for obtaining
money by false pretenses. This Court reviews de novo a challenge to the sufficiency of the
evidence. People v Cline, 276 Mich. App. 634, 642; 741 NW2d 563 (2007). We “view the
evidence in a light most favorable to the prosecution and determine if any rational trier of fact
could have found that the essential elements of the crime were proven beyond a reasonable
doubt.” Id. (quotation marks and citation omitted).
To prove the offense of obtaining money by false pretenses, the prosecution must show
“(1) a false representation concerning an existing fact, (2) knowledge by the defendant of the
falsity of the representation, (3) use of the representation with intent to deceive, and (4)
detrimental reliance on the false representation by the victim.” People v Reigle, 223 Mich. App.
34, 37-38; 566 NW2d 21 (1997). Thomas contests the sufficiency of the evidence supporting the
first element, arguing that it cannot be based on a material omission, namely, the failure to
disclose information. Thomas’s argument is incorrect. In People v Jory, 443 Mich. 403, 417;
505 NW2d 228 (1993), our Supreme Court concluded that the crime of false pretenses can be
committed through silence or concealment.
Thomas acknowledges that one investor testified that she would not have invested money
with the company if she had known that Mulholland Financial was not making payments to other
investors, the company owed $18.3 million to investors, and it did not have the money to pay the
investors. According to the witness, when she invested $20,000 with defendants in August 2009,
she was told that defendants “still had all of their real estate” and that her “money was
guaranteed.” She was not told about defendants’ mortgage debt or debt to other investors.
Similarly, another witness testified that when he invested $15,000 of his severance pay in
December 2009, defendants never indicated that the company was not generating income, how
much they owed to other investors, or how much they owed on mortgages. He explained that he
would not have invested money with the company if he had known of the company’s financial
condition. This evidence supports the jury’s finding beyond a reasonable doubt that defendants
solicited funds under false pretenses by knowingly suppressing existing facts that had a direct
bearing on the company’s ability to repay its investors and to pay interest as represented by
defendants. Therefore, Thomas has not identified a gap in the evidence.
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C. RIGHT TO PRESENT A DEFENSE
In a pro se brief, filed pursuant to Supreme Court Administrative Order No. 2004-6,
Standard 4, Thomas argues that the trial court violated his constitutional right to present a
defense by refusing to allow him to introduce evidence that several attorneys advised him that
the promissory notes were not securities, thus negating the intent element. Thomas did not raise
this issue in the trial court, so it is unpreserved. Accordingly, we review it for plain error
affecting Thomas’s substantial rights. See Carines, 460 Mich. at 763-764.
The record does not support this claim of error. Thomas did not call any witnesses or
attempt to introduce the testimony he argues was improperly excluded. Rather, during James’s
testimony, James’s counsel acknowledged that the content of a conversation between James and
an attorney was inadmissible hearsay. James’s counsel elicited testimony that James consulted
with an attorney and that he obtained a promissory note from the attorney before he started
acquiring property using promissory notes. James’s counsel did not attempt to introduce any
documentary evidence or call the attorneys who purportedly provided legal advice or the
promissory note. Similarly, Thomas did not seek to call any witnesses or offer any evidence that
was excluded by the trial court. Therefore, Thomas has failed to demonstrate plain error.
D. SENTENCING
James and Thomas both argue that resentencing is necessary because the trial court erred
in scoring the sentencing guidelines. We agree.
In People v Lockridge, 498 Mich. 358, 365; 870 NW2d 502 (2015), our Supreme Court
declared Michigan’s sentencing guidelines advisory. Even so, sentencing courts must still
calculate the sentencing guidelines range. Id.
James and Thomas both argue that the trial court erred in its scoring of offense variables
(OVs) 4, 9, and 10. The sentencing court’s factual scoring determinations must be supported by
a preponderance of the evidence, and we review them for clear error. People v Hardy, 494 Mich.
430, 438; 835 NW2d 340 (2013). “Clear error is present when the reviewing court is left with a
definite and firm conviction that an error occurred.” People v Fawaz, 299 Mich. App. 55, 60; 829
NW2d 259 (2012) (quotation marks and citation omitted). This Court reviews de novo “whether
the facts, as found, are adequate to satisfy the scoring conditions prescribed by statute[.]” Hardy,
494 Mich. at 438.
1. OV 4
Defendants argue that the trial court erroneously scored OV 4 at 10 points because there
was no evidence that the victims suffered serious psychological injury requiring professional
treatment. OV 4 warrants 10 points if a victim experienced “[s]erious psychological injury
requiring professional treatment . . . .” MCL 777.34(1)(a). Although it is not necessary for the
victim to seek treatment, the record must contain evidence of psychological injury. People v
Lockett, 295 Mich. App. 165, 183; 814 NW2d 295 (2012). “The trial court may not simply
assume that someone in the victim’s position would have suffered psychological harm because
MCL 777.34 requires” actual psychological injury. Id. For example, a description of the victim
as “ ‘visibly shaken’ ” in the absence of other evidence about the victim’s psychological state
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was insufficient to show “that the victim suffered a serious psychological injury.” People v
McChester, 310 Mich. App. 354, 358-359; 873 NW2d 646 (2015).
In the present case, the trial court assessed 10 points for OV 4 because people suffered
“damages.” The presentence investigation report contains no information indicating that any of
the victims suffered serious psychological harm, the record contains no victim impact statements,
and no victim offered testimony about his or her psychological state at trial or made a statement
at sentencing. The trial court’s reasoning was insufficient to assess 10 points for OV 4. Because
a preponderance of record evidence does not establish that a serious psychological injury
actually “occurred to a victim,” the trial court clearly erred by assessing 10 points for OV 4.
2. OV 9
Defendants argue that the trial court erred by assessing 25 points for OV 9,2 which
considers the “number of victims” associated with an offense. MCL 777.39(1). A sentencing
court should “[c]ount each person who was placed in danger of physical injury or loss of life or
property as a victim.” MCL 777.39(2)(a). The present case involves only allegations of property
loss. Twenty-five points are proper when “20 or more victims . . . were placed in danger of
property loss,” MCL 777.39(1)(b), 10 points when “4 to 19 victims . . . were placed in danger of
property loss,” MCL 777.39(1)(c), and zero points when “fewer than 4 victims . . . were placed
in danger of property loss,” MCL 777.39(1)(d).
The trial court scored 25 points for OV 9 based on the total number of investors who lost
money as a result of defendants’ conduct. OV 9 is offense-specific and depends only on the
number of people affected when the sentencing offense was committed. People v Sargent, 481
Mich. 346, 350; 750 NW2d 161 (2008). OV 9 does not encompass events after completion of the
offense. People v McGraw, 484 Mich. 120, 133-134; 771 NW2d 655 (2009). In this case, the
presentence investigation report identified 10 victims associated with defendants’ conduct of
conducting a criminal enterprise. The trial court, however, erroneously looked beyond the
sentencing offense and counted all persons affected by defendants’ overarching criminal scheme
of defrauding investors as victims for purposes of OV 9. Thus, the trial court should have
assessed 10 points for OV 9 for 10 victims rather than 25 points for 20 or more victims. Because
defendants’ conduct for the sentencing offense only placed the named victims in danger of losing
property, the trial court erred by assessing 25 points for OV 9.
3. OV 10
Defendants argue that the trial court erred by assessing 15 points for OV 10. We
disagree. OV 10 relates to “exploitation of a vulnerable victim.” MCL 777.40(1). Predatory
2
During James’s sentencing, the trial court scored OV 9 only for the convictions for conducting
a criminal enterprise. During Thomas’s sentencing, the trial court purported to score OV 9 for
all other convictions that were scored (i.e., all offenses except obtaining money ($20,000 to
$50,000) by false pretenses and fraudulent sale of securities). It appears, however, that the trial
court intended to score the guidelines in the same manner for both defendants.
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conduct merits 15 points. MCL 777.40(1)(a). “Predatory conduct” is defined as “preoffense
conduct directed at a victim . . . for the primary purpose of victimization.” MCL 777.40(3)(a).
To assess points for OV 10, it should be “readily apparent that a victim was ‘vulnerable,’
i.e., was susceptible to injury, physical restraint, persuasion, or temptation.” People v Cannon,
481 Mich. 152, 158; 749 NW2d 257 (2008). Vulnerability is not limited to a victim’s personal
characteristics, but can include “a victim’s relationships or circumstances.” People v Huston,
489 Mich. 451, 464; 802 NW2d 261 (2011).
The evidence showed that most of the victims were not random. Most were people with
whom defendants had an established business relationship, and defendants initiated contact with
the victims to solicit additional funds. Defendants’ prior or ongoing relationship with the
victims, combined with the degree of trust established, made the victims vulnerable to
defendants’ additional “investment” opportunities. The victims were susceptible to defendants’
persuasion to invest because they trusted them. Thus, a preponderance of the evidence supports
a finding that the victims met the definition of a “vulnerable person” for purposes of scoring OV
10. Accordingly, the trial court did not err by assessing 15 points for OV 10.
4. GUIDELINES CALCULATION
a. DOCKET NO. 335078
A recalculation of James’s OV scores shows that the trial court should resentence James.
Conducting a criminal enterprise is a class B offense, MCL 777.16i. James’s OV score for
counts 1 and 2 was 60 points, placing him in OV Level V (50 to 74 points) in the class B
sentencing grid, MCL 777.63. Prior record variable (PRV) Level C combined with OV Level V
gave a guidelines range of 51 to 85 months.3 A reduction of 25 points in the OV score (10 points
for OV 4 and 15 points for OV 9) lowers James’s total OV score from 60 to 35 points, placing
him in OV Level IV (35 to 49 points) and resulting in a guidelines range of 45 to 75 months.
Obtaining money ($1,000 to $20,000) by false pretenses, fraudulent scheme or statement
in connection with the sale of a security, selling an unregistered security, and violating the
securities act are all class E offenses. MCL 777.14j; MCL 777.16l. James’s total OV score for
these counts was 35 points, placing him in OV Level IV (35 to 49 points) in the Class E
sentencing grid, MCL 777.66. PRV Level C and OV Level IV resulted in a guidelines range of 5
to 23 months. A reduction of 10 points for OV 4 lowers James’s total OV score from 35 to 25
points, placing James in OV Level III (25 to 34 points), with a range of 0 to 17 months.
Because the scoring errors affect James’s appropriate ranges, he is entitled to
resentencing. See People v Biddles, 316 Mich. App. 148, 156; 896 NW2d 461 (2016). Thus, we
need not address James’s argument regarding the reasonableness of the sentences imposed. On
resentencing, the trial court shall resentence James consistent with People v Steanhouse, 500
Mich. 453; 902 NW2d 327 (2017).
3
The trial court inaccurately identified the range as 51 to 78 months.
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b. DOCKET NO. 335218
Recalculating Thomas’s OV scores also requires resentencing. Thomas’s total OV score
for the criminal enterprise and conspiracy convictions was 60 points for each, placing him in OV
Level V (50 to 74 points). PRV Level C combined with OV Level V resulted in a guidelines
range of 51 to 854 months. A reduction of 25 points (10 points for OV 4 and 15 points for OV 9)
lowers Thomas’s total OV score from 60 points to 35 points, placing him in OV Level IV (35 to
49 points) and resulting in a guidelines range of 45 to 75 months.
The trial court scored the guidelines for Thomas’s convictions for obtaining money
($1,000 to $20,000) by false pretenses, fraudulent scheme or statement in connection with the
sale of a security, selling an unregistered security, and violating the securities act. Thomas’s
total OV score for these counts was 60 points for each, placing him in OV Level V (50 to 74
points). OV Level V, combined with PRV Level C, produced a guidelines range of 7 to 23
months in the Class E sentencing grid, MCL 777.66. A reduction of 10 points for OV 4 lowers
Thomas’s total OV score from 60 to 50 points, which is still within OV Level V. However,
Thomas’s 60-point score includes 25 points for OV 9. The trial court did not score OV 9 for
James with respect to these convictions, and it appears that the trial court intended to score the
guidelines consistently for both defendants. Treating Thomas’s challenge to the scoring of OV 9
as encompassing the scoring of the guidelines for these other counts, Thomas’s OV score for
these counts should have been 25 points, which would have placed him in OV Level III (25 to 34
points), resulting in a guidelines range of 0 to 17 months.
Because the scoring errors affect Thomas’s guidelines ranges, he is also entitled to
resentencing. See Biddles, 316 Mich. App. at 156. Thus, we need not address Thomas’s
argument regarding the reasonableness of the sentences imposed. On resentencing, the trial
court shall resentence Thomas consistent with Steanhouse, 500 Mich. 453.
We affirm defendants’ convictions but vacate their sentences and remand for
resentencing. We do not retain jurisdiction.
/s/ Peter D. O’Connell
/s/ Jane M. Beckering
4
The trial court inaccurately identified the range as 51 to 78 months.
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