State v. Larsen

865 P.2d 1355, 228 Utah Adv. Rep. 3, 1993 Utah LEXIS 157, 1993 WL 523544
Utah Supreme Court·Decided December 17, 1993·No. 920114·Published·Cited by 138 cases

Opinion

ON CERTIORARI TO THE UTAH COURT OF APPEALS

ZIMMERMAN, Justice:

C. Dean Larsen petitioned for a writ of certiorari, seeking review of a Utah Court of Appeals decision upholding the district court’s rulings on two issues relating to his conviction on eighteen counts of criminal securities fraud. Larsen contends that the trial court erred in refusing to instruct the jury that the intent to defraud, deceive, or manipulate is an element of a criminal violation of sections 1(2) and 21 of the Utah Uniform Securities Act. See Utah Code Ann. §§ 61-1-1(2), -21. Larsen also complains that the trial court erroneously allowed a State expert to testify as to the “materiality” of information that Larsen allegedly had failed to disclose to investors. We affirm his convictions.

The facts of this case are detailed in the court of appeals’ opinion in State v. Larsen, 828 P.2d 487, 488-90 (Utah Ct.App.1992). To summarize, Larsen was charged with, and convicted of, eighteen counts of securities fraud under sections 61-1-1(2) and 61-1-21 of the Code. These convictions arose out of his actions while president of a real estate development company in which others had invested. Larsen’s criminal acts included his failure to inform investors of material information related to the company, misrepresentations of material facts regarding the eom-pany’s financial status, and related acts of dishonesty. Larsen appealed to the court of appeals, which affirmed his convictions. 828 P.2d at 496. We granted certiorari to consider his claims of legal error.

Larsen first asserts that the trial court erroneously instructed the jury as to the applicable law. He alleges that the trial court improperly refused to give portions of his proposed instructions concerning the elements of and defenses to criminal securities fraud. The omitted portions, in substance, would have instructed the jury that to be guilty of a criminal violation of section 61-1-1(2), Larsen must have acted with the specific intent to defraud and that a representation made “in good faith constitutes a complete defense to a charge of securities fraud.”

The propriety of the instructions given hinges on the correct interpretation of sections 61-1-1(2) and -21. 1 In particular, does a criminal violation of these sections require proof of an intent to defraud, deceive, or manipulate? The correct interpretation of a statute is a question of law and is reviewed for correctness. State v. James, 819 P.2d 781, 796 (Utah 1991); Ward v. Richfield City, 798 P.2d 757, 759 (Utah 1990).

When faced with a question of statutory construction, this court first examines the plain language of the statute. Schurtz v. BMW of N. Am., Inc., 814 P.2d 1108, 1112 (Utah 1991); Bonham v. Morgan, 788 P.2d 497, 500 (Utah 1989) (per curiam). Section 61-1-1(2) states in relevant part:

It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly to:
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(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 circum *1358 stances under which they are made, not misleading.

Utah Code Ann. § 61-1-1(2). 2 This section’s standards govern both civil and criminal liability. To ascertain the elements of a criminal violation, however, this section must be read in conjunction with section 61-1-21, which specifies the requisite mental state and penalties for a criminal violation. Utah Code Ann. § 61-1-21. Section 61-1-21 provides in pertinent part:

Any person who willfully violates any provision of this chapter [including section 61-1-1(2) ] ... or who willfully violates any rule or order under this chapter ... shall upon conviction be fined not more than $10,000 or imprisoned not more than three years, or both.

Utah Code Ann. § 61-1-21 (emphasis added). 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. Id. Larsen asks this court to interpret “willfully” as requiring “scienter,” the intent to deceive, manipulate, or defraud, as defined by the United States Supreme Court in Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976), a rule 10b-5 case.

In determining whether we can, or should, give “willfully” such a construction, we first look to the statutory definition of “willful.” The legislature has indicated that a person acts willfully when it is his or her “desme to engage in the conduct that cause[s] the result.” Utah Code Ann. § 76-2-103. Nothing in this definition requires scienter. 3 Moreover, a brief survey of the Code confirms that the Utah legislature knows how to require scienter, if it so desires, by including specific language to that effect. See, e.g., id. §§ 23-20-27, 41-la-1319, 76-6-506.2, 76-10-706 & -1006.

Failing to find support in the express terms of the Code, Larsen suggests that the scienter requirement is an “independent element” of the offense. Stated another way, although it is not apparent from the language of the provision, Larsen contends that we should read the scienter requirement into the statute. We have rejected similar attempts to engraft a judicially created intent requirement upon the plain language of a criminal statute. E.g., State v. Delmotte, 665 P.2d 1314, 1315 (Utah 1983) (holding offense of writing bad check does not require intent to defraud). Perhaps more on point, other states have rejected attempts to import scienter into analogous securities-fraud statutes. See, e.g., People v. Johnson, 213 Cal.App.3d 1369, 262 Cal.Rptr. 366, 369 (Ct.App.1989); State v. Temby, 108 Wis.2d 521, 322 N.W.2d 522, 526 (Ct.App.1982). This court will not affix new “independent requirements” to an otherwise clear and constitutional statute.

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State v. Larsen, 865 P.2d 1355, 228 Utah Adv. Rep. 3, 1993 Utah LEXIS 157, 1993 WL 523544 (Utah 1993).

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