State v. Stuber

962 P.2d 1104, 25 Kan. App. 2d 254, 1998 Kan. App. LEXIS 71
CourtCourt of Appeals of Kansas
DecidedJuly 2, 1998
Docket76,952
StatusPublished
Cited by4 cases

This text of 962 P.2d 1104 (State v. Stuber) is published on Counsel Stack Legal Research, covering Court of Appeals of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State v. Stuber, 962 P.2d 1104, 25 Kan. App. 2d 254, 1998 Kan. App. LEXIS 71 (kanctapp 1998).

Opinions

Lewis, J.:

In 1990, defendant and a business associate formed a corporation, which they named Agri-Data. After forming the corporation and investing approximately $80,000 of their own money, defendant and his associate set out to raise more money for the venture primarily by selling stock in the corporation. Ultimately, [255]*255Agri-Data went broke, and the investors lost all or most of their money. Defendant was prosecuted for several violations of the securities laws. He was convicted by a jury of one count of engaging in business as a broker/dealer without having been registered, one count of offering for sale unregistered securities, and two counts of unlawful acts in connection with the sale of securities. As a result of the convictions, defendant was sentenced to 2 to 5 years in the penitentiary and was ordered to pay restitution in the amount of $1,532,000 to Mark Thomas and $113,000 to Fannie Jones. Defendant appeals his sentence and convictions.

The facts are involved and, at times, confusing. We will attempt a brief recitation of those facts and, as necessary, will add detail in our opinion.

Agri-Data was incorporated by defendant and his business associate in 1990. Its original purpose was to provide fertilizer products and related services to farmers. One of its services was to advise clients on marketing strategy. Unfortunately, defendant paid too much attention to his own advice; Agri-Data began commodity trading and experienced severe losses, which ultimately led to Chapter 7 bankruptcy. Indeed, at one point, one of the investors found that the losses he had been covering, which he thought were those of the corporation, were in fact losses incurred by defendant in his personal account.

Vic Carter was hired by the company within a few months after it was formed. He was paid $1,500 per month in deferred compensation, which he later converted into stock.

Defendant argues that Carter was simply being paid to be the company’s treasurer. The State contends that Carter was being paid for finding investors and selling securities. The evidence on this issue is conflicting, but the fact is, Carter obtained money from Fannie Jones and Don Peniston. These individuals received stock in exchange for their contributions. Jones invested $103,300, and Peniston invested $12,000.

Mark Thomas was a childhood acquaintance of defendant. Defendant knew that Thomas had sold his interest in a Coca Cola plant in Idaho and went to Idaho to convince Thomas to invest in Agri-Data. Defendant was successful; Thomas invested in the cor[256]*256poration and he continued to invest until he lost $1,532,000. Indeed, in order to make his investments, Thomas eventually cashed in his life insurance policy.

Defendant raises several issues on appeal.

SALE OF SECURITIES TO FANNIE TONES

In 1986, defendant pled guilty to gambling while placing a bet on a baseball game. In addition, also in 1986, defendant was convicted of two felony counts of giving a worthless check. Defendant’s associate, Clayton Albers, had also been convicted of theft in South Dakota and had served time in prison.

At the time Fannie Jones decided to invest in the company, defendant failed to disclose to her the existence of his and Albers’ criminal convictions. This failure, the State charges, was an unlawful act. In this connection, Jones testified that had she known defendant had been convicted of crimes, she might not have invested in the company.

The instruction given to the jury on this issue is illustrative as to what the State was required to prove:

“1. That the defendant sold or offered to sell a security to Fannie Jones;
“2. That the defendant omitted to state a material fact necessary in order to make the statements which were made, in light of the circumstances under which they were made, not misleading:
“3. Specifically, that defendant failed to disclose to Fannie Jones:
“A. The criminal background of Clayton Albers and J. Scott Stuber, including:
“The defendant admits the matter in Number One and Number Three . . . above.
“As to the matter in Number Two above, the State must prove that all or any one of the items set out in 3.A.(1), (2) and (3) were ‘material’. Such proof must be beyond reasonable doubt.
“A ‘material’ fact is one that relates to some matter which is so substantial and important as to influence a reasonable prudent person.
“If you find that the State has not proven that one or more of the items set out in 3.A.(1), (2) or (3) were ‘material’, you should find the defendant not guilty of the charge in count Number Three.
“If you find the State has proven that any of the items set out in 3.A.(1), (2) or (3) were ‘material’, you should find the defendant guilty of the charge in count Number Three.
‘Tour finding should be set out on the verdict form.”

[257]*257The charge against defendant, if true, is a violation of K.S.A. 1997 Supp. 17-1253, which provides in pertinent part:

“(a) It is unlawful for 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.”

The question is whether defendant’s failure to disclose his criminal convictions to Jones amounts to the omission of a material fact. In resolving this question, we must determine whether a broker under the Kansas Securities Act, K.S.A. 17-1252 et seq., is required to reveal a criminal past, which includes crimes of dishonesty, in selling stock to an investor. Put another way, did defendant’s failure to disclose his and his associate’s criminal convictions make the statements to Jones misleading?

To a certain extent, the failure to disclose the convictions cannot be said to have been misleading. At no point does the record indicate that defendant told Jones that he was a reputable, trustworthy, or skillful financial manager. Had defendant made such a statement, his failure to disclose his convictions for crimes of dishonesty clearly would have been misleading. Despite this fact, Jones testified that had the convictions been disclosed, she would have been suspicious of what defendant had told her. If we believe Jones, as the jury must have done, we can only conclude that the failure to disclose the convictions was quite material to her.

In the final analysis, we must determine whether K.S.A. 1997 Supp. 17-1253(a)(2) requires the disclosure to an investor of any information that would make an ordinary investor wary and suspicious of the person making the sale.

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Related

People v. Rivera
56 P.3d 1155 (Colorado Court of Appeals, 2002)
State v. Ismaili
7 P.3d 236 (Supreme Court of Kansas, 2000)
State v. Stuber
1 P.3d 333 (Court of Appeals of Kansas, 2000)

Cite This Page — Counsel Stack

Bluebook (online)
962 P.2d 1104, 25 Kan. App. 2d 254, 1998 Kan. App. LEXIS 71, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-v-stuber-kanctapp-1998.