2015 UT App 112
THE UTAH COURT OF APPEALS
STATE OF UTAH,
Plaintiff and Appellee,
v.
SHAWN H. MOORE,
Defendant and Appellant.
Opinion
No. 20130422-CA
Filed April 30, 2015
Third District Court, Salt Lake Department
The Honorable Katie Bernards-Goodman
No. 081908861
Lori J. Seppi and John B. Plimpton, Attorneys
for Appellant
Sean D. Reyes and Karen A. Klucznik, Attorneys
for Appellee
JUDGE JAMES Z. DAVIS authored this Opinion, in which JUDGES
J. FREDERIC VOROS JR. and JOHN A. PEARCE concurred as to Part I
and concurred in the result.
DAVIS, Judge:
¶1 Shawn H. Moore appeals from his convictions of four
counts of securities fraud, four counts of sale by an unlicensed
agent, and one count of pattern of unlawful activity. We agree
with Moore’s argument that the jury instructions defining the
‚willfulness‛ mens rea for the securities fraud charges and the
sale by an unlicensed agent charges were incomplete and
misstated the law. Accordingly, we reverse all of Moore’s
convictions and remand for further proceedings in accordance
with this opinion.
State v. Moore
BACKGROUND
¶2 Moore’s convictions arise from investments various
clients made in VesCor Capital, Inc. while Moore worked there.
The details of the investments and Moore’s relationship to the
investments, however, are not central to our determination on
appeal. Suffice it to say, counts one through eight against Moore
represent the securities fraud charges and unlicensed agent
charges and arise from four specific investments made by four
different VesCor clients between December 2003 and January
2006. Count nine, the pattern of unlawful activity charge, alleges
counts one through eight as predicate offenses and alleges three
additional investments occurring in August 2001 and March and
June 2003 (the time-barred investments) as predicate offenses.
The State did not bring separate securities fraud and unlicensed
agent charges against Moore for these additional investments
because they fell outside of the statute of limitations.
¶3 Moore’s primary argument on appeal is that the jury
instructions defining the ‚willfulness‛ element of counts one
through eight were incorrect and misleading. Moore also argues
that Brian Glen Lloyd, a practicing attorney who testified for the
State as a securities expert, impermissibly provided legal
conclusions in his testimony. Additionally, Moore challenges the
trial court’s restitution order, arguing that the court failed to
consider the mandatory statutory factors in calculating court-
ordered restitution and that the court’s requiring Moore to pay
restitution for the time-barred investments was improper
because those investments did not form a basis for his securities
fraud or unlicensed agent convictions.
ISSUES AND STANDARDS OF REVIEW
¶4 ‚Generally, *w+hether a jury instruction correctly states
the law presents a question of law which we review for
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State v. Moore
correctness.‛ State v. Cruz, 2005 UT 45, ¶ 16, 122 P.3d 543
(alteration in original) (citation and internal quotation marks
omitted). ‚*W+e look at the jury instructions in their entirety and
will affirm when the instructions taken as a whole fairly instruct
the jury on the law applicable to the case.‛ State v. Maestas, 2012
UT 46, ¶ 148, 299 P.3d 892 (citation and internal quotation marks
omitted).
¶5 Because we agree with Moore that the ‚willfulness‛ jury
instructions were erroneous, we need not decide the other issues
raised on appeal. This decision nonetheless addresses Moore’s
arguments to the extent that doing so may offer guidance for the
trial court on remand.1 See Armed Forces Ins. Exch. v. Harrison,
2003 UT 14, ¶ 38, 70 P.3d 35 (‚*I+n the interest of judicial
economy, a brief discussion of these issues is appropriate as
guidance for the trial court on remand.‛ (citation and internal
quotation marks omitted)).
ANALYSIS
I. The Willfulness Jury Instruction
¶6 Moore’s defense at trial focused on the willfulness
element in both the securities fraud charges and the sale by an
unlicensed agent charges. As charged, the securities fraud
statute makes it unlawful for
1. Judge Voros and Judge Pearce concur only as to Part I of this
decision and do not join in Part II, to the extent they disagree
with the propriety of reaching issues that may arise on remand
in this case. As a result, the discussion under Part II reflects the
views of Judge Davis and is not a part of the majority decision.
20130422-CA 3 2015 UT App 112
State v. Moore
any person, in connection with the offer, sale, or
purchase of any security, directly or indirectly to:
...
(2) make any untrue statement of a material fact or
to omit to state a material fact necessary in order to
make the statements made, in the light of the
circumstances under which they are made, not
misleading; or
(3) engage in any act, practice, or course of
business which operates or would operate as a
fraud or deceit upon any person.
Utah Code Ann. § 61-1-1 (LexisNexis 2011). The sale by an
unlicensed agent charges required the State to prove that Moore
transacted ‚business in this state as a broker-dealer or agent‛
without a license. Id. § 61-1-3(1). This section ‚govern*s+ both
civil and criminal liability.‛ State v. Larsen, 865 P.2d 1355, 1358
(Utah 1993). ‚To ascertain the elements of a criminal violation,‛
we must read this section ‚in conjunction with section 61-1-21,
which specifies the requisite mental state and penalties for a
criminal violation.‛ Id. Here, the mens rea required for both the
securities fraud and unlicensed agent offenses is willfulness. See
Utah Code Ann. § 61-1-21 (LexisNexis 2011).
¶7 A showing of willfulness, therefore, was required as to
each of the nine charges against Moore. For counts one through
eight, the jury was required to directly find that Moore acted
willfully in relation to the specific elements of each charge. With
count nine, the pattern of unlawful activity charge, the jury was
required to find that Moore engaged in ‚at least three episodes
of unlawful activity,‛ which could include ‚the activity alleged
in counts one through eight.‛ See id. § 76-10-1602(2) (Supp. 2014)
(defining ‚pattern of unlawful activity‛); id. § 76-10-1603 (2012).
In other words, Moore’s conviction on count nine depended
upon the jury’s verdict for counts one through eight. The jury
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State v. Moore
could also determine that the time-barred investments
constituted two of the ‚at least three episodes of unlawful
activity‛ necessary for a conviction on count nine. But for the
jury to rely on any of the time-barred investments in reaching its
verdict on count nine, it was instructed that it had to determine
whether Moore ‚willfully‛ omitted or made untrue statements
of material fact or ‚willfully‛ sold securities without a license
with regard to those particular investments. Accordingly, the
mens rea of willfulness pervaded the trial, and Moore’s
convictions on all nine counts depended on the jury’s
understanding and application of that concept.
¶8 Jury instructions 23, 43, and 50 address the mens rea
required to sustain Moore’s convictions. Moore argues that
Instruction 50 was ‚legally incorrect‛ and that ‚Instructions 23
and 43, when read together, were incomplete and misleading.‛
We address each argument in turn.
A. Instruction 50
¶9 Instruction 50 states,
In securities law, salespeople are under a
duty to investigate.
A salesperson cannot deliberately ignore
that which he has a duty to know and recklessly
state facts about matters of which he is ignorant. A
salesperson cannot recommend a security unless
there is an adequate and reasonable basis for such
recommendation. By his recommendation he
implies that a reasonable investigation has been
made and that his recommendation rests on the
conclusions based on such investigation.
Where the salesperson lacks essential
information about a security, he should disclose
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State v. Moore
this as well as the risks which arise from his lack of
information. A salesperson may not rely blindly
upon the issuer of the security for information
concerning a company.
Moore argues that Instruction 50 imposed criminal liability for
behavior that amounted to recklessness and directed the jury
that ‚it had to convict‛ him of securities fraud if it found that he
failed to satisfy a ‚‘duty to investigate’ or ‘duty to know.’‛ We
agree.
¶10 Instruction 50 has essentially supplanted the actual
elements of the securities fraud charges against Moore. Nowhere
in the applicable statutory framework is there any language akin
to Instruction 50 imposing criminal liability for acts amounting
to willful blindness or a violation of a duty to know. See State v.
Johnson, 2009 UT App 382, ¶ 42, 224 P.3d 720 (‚*T+he plain
language of section 61-1-1(2) . . . makes no mention of an
affirmative duty to disclose in the absence of a prior[,
misleading+ statement.‛). Moreover, section 61-1-21
unambiguously reserves criminal liability for ‚willful‛ violations
of the Utah Uniform Securities Act and decidedly does not allow
criminal prosecution of an individual who, as Instruction 50
provides, ‚recklessly state[s] facts about matters of which he is
ignorant.‛ (Emphasis added.) See Utah Code Ann. § 61-1-21.
Indeed, the use of the word ‚recklessly‛ in Instruction 50 is a
clear indicator that the instruction is not appropriate in this
criminal case. See Larsen, 865 P.2d at 1358 (‚The plain language
of section 61-1-21 requires that to be liable for a criminal
violation of section 61-1-1(2), the defendant must have acted
‘willfully’ in misstating or omitting material facts.‛).
¶11 Hanly v. Securities & Exchange Commission, 415 F.2d 589
(2d Cir. 1969), the source of the language incorporated into
Instruction 50, supports our conclusion. There, the Second
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State v. Moore
Circuit Court of Appeals indicated that a violation of a ‚duty to
know‛ would not be sufficient to sustain even a civil action for a
securities violation. Id. at 595–96. Hanly involved an appeal from
an administrative proceeding initiated by the Securities and
Exchange Commission (SEC), in which the SEC ‚barred‛ five
securities salesmen ‚from further association with any broker or
dealer‛ for having made ‚materially misleading‛
representations in the offer and sale of a particular stock. Id. at
592, 595. In its review of the SEC’s decision, the Second Circuit
recognized that the ‚petitioners have not been criminally
charged, nor have they been sued for damages by their
customers‛; rather, the SEC initiated ‚private proceedings,‛ at
the close of which it revoked ‚each petitioner’s privilege of being
employed in the securities industry.‛ Id. at 595 (emphasis
omitted). It was ‚in this context‛ that the Second Circuit
recognized that ‚*b+rokers and salesmen are under a duty to
investigate and their violation of that duty brings them within
the term ‘willful’ in the *federal securities+ Act.‛ Id. at 595–96
(citation and additional internal quotation marks omitted). The
court explained that the petitioners were being held to such
‚strict‛ standards in light of a ‚special duty‛ imposed in that
circuit ‚upon those who sell *the specific type of stock at issue+
not to take advantage of customers in whom confidence has
been instilled.‛ Id. at 597. The court recognized that a securities
dealer, by virtue of that position, ‚implicitly represents‛ to
potential buyers that ‚he has an adequate basis for the opinions
he renders.‛ Id. at 596. The court also recognized the unique role
of this implied warranty given the posture of the case, stating,
‚*T+his implied warranty may not be as rigidly enforced in a
civil action where an investor seeks damages for losses allegedly
caused by reliance upon his unfounded representations . . . .‛ Id.
¶12 Thus, Hanly is applicable to only a small class of
specialized securities cases initiated by the SEC in an
administrative setting, and the Second Circuit recognized that
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the standards imposed on the petitioners in that case were not
appropriate in a civil, let alone criminal, setting. Accordingly,
Hanly does not provide an appropriate basis for a jury
instruction in the case before us. See State v. Larsen, 865 P.2d
1355, 1360 (Utah 1993) (recognizing that ‚the Utah legislature
has not required the courts to interpret the Utah Uniform
Securities Act in lockstep with federal decisions‛). The broad
language of Instruction 50 essentially imposes criminal liability
for conduct that in Hanly was sufficient to sustain an
administrative action, not a criminal action or even a civil action.
See Larsen, 856 P.2d at 1360 (explaining that willfulness is a
‚highly culpable mental state‛ and ‚is not consistent with ‘strict
liability’‛). Likewise, Instruction 50 raises the specter of a
knowledge or scienter requirement, which Utah courts have
specifically and repeatedly rejected in the context of criminal
prosecutions under the Utah Uniform Securities Act. See, e.g., id.
at 1360 & n.8 (‚*A+ finding of scienter is not a prerequisite to
criminal liability under section 61-1-1(2) . . . .‛); State v. Wallace,
2005 UT App 434, ¶¶ 12–15 & n.6, 124 P.3d 259 (encouraging the
legislature to weigh in on whether a defendant’s knowledge of
the facts underlying a securities violation should factor into a
finding of willfulness, i.e., whether the defendant acted
‚‘deliberately and purposefully’‛), aff’d, 2006 UT 86, 150 P.3d
540.2 This is far from the particularized unlawful conduct and
2. We echo this court’s sentiment in State v. Wallace that guidance
from the legislature on this issue would be helpful. See 2005 UT
App 434, ¶ 15 n.6, 124 P.3d 259, aff’d, 2006 UT 86, 150 P.3d 540.
After all, a ‚fundamental purpose‛ behind the securities reforms
that occurred after ‚the stock market crash of 1929 and the
depression of the 1930s‛ ‚was to substitute a philosophy of full
disclosure for the philosophy of caveat emptor.‛ Securities &
Exch. Comm’n v. Capital Gains Research Bureau, Inc., 375 U.S. 180,
186 (1963).
20130422-CA 8 2015 UT App 112
State v. Moore
standard of willfulness required by the Utah Code. Cf. State v.
Chapman, 2014 UT App 255, ¶ 11, 338 P.3d 230 (describing the
willfulness instruction as including a defendant’s ‚conscious*+
avoid*ance of+ the existence of a fact or facts‛ or a ‚conscious
objective or desire to ignore a material fact or facts‛ and
distinguishing this from actions that are ‚merely negligent,
careless, or foolish‛ (internal quotation marks omitted)); State v.
Bushman, 2010 UT App 120, ¶ 19, 231 P.3d 833 (‚*T+he actions for
which the [Securities] Act imposes administrative sanctions—
violations of Utah securities laws—do not constitute criminal
behavior under the Act unless undertaken with the appropriate
mental state.‛).
¶13 ‚*A+n error in jury instructions that was properly
preserved at the trial level is reversible only if a review of the
record persuades the court that without the error there was a
reasonable likelihood of a more favorable result for the
defendant.‛3 State v. Crowley, 2014 UT App 33, ¶ 17, 320 P.3d 677
3. Moore urges that we apply the ‚higher standard of scrutiny‛
that is available when an ‚error results in the deprivation of a
constitutional right.‛ See State v. Calliham, 2002 UT 86, ¶ 45, 55
P.3d 573. Under this higher standard, we must reverse the
‚conviction unless we find the error harmless beyond a
reasonable doubt.‛ Id. In contrast, under the standard we
generally apply, we may reverse a conviction ‚only if a review of
the record persuades the court that without the error there was a
reasonable likelihood of a more favorable result for the
defendant.‛ State v. Crowley, 2014 UT App 33, ¶ 17, 320 P.3d 677
(citation and internal quotation marks omitted). Because we
conclude that the errors here satisfy the lower, ‚reasonable
likelihood‛ standard for reversal, we need not separately
consider the harmless-beyond-a-reasonable-doubt standard.
Moreover, Moore has not demonstrated that an error in an
(continued<)
20130422-CA 9 2015 UT App 112
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(citation and internal quotation marks omitted). The State asserts
that Instruction 50 ‚was not key to the State’s case‛ and that any
error in the instruction was harmless in light of the
‚overwhelming‛ evidence that Moore ‚knew‛ he was omitting
or misstating material information to investors and acting
without the proper license. Moore asserts that the State utilized
the standard outlined in Instruction 50 to its advantage by
presenting the case to the jury as both ‚a material omission case‛
and a ‚duty to investigate case,‛ and he cites examples from the
State’s closing argument describing Moore as having a ‚duty to
know this stuff,‛ the ‚onus . . . [to] do what you need to do to
make sure you don’t hurt people,‛ and the ‚legal obligation to
make sure that *the+ things *he is+ telling *an investor+ are true.‛
¶14 We agree with Moore that Instruction 50 greatly distorted
the willfulness element required for a conviction on eight of the
nine charges against Moore. While Instruction 50 is framed in
(