v. Baker

2021 CO 29
CourtSupreme Court of Colorado
DecidedMay 11, 2021
Docket19SC975, People
StatusPublished
Cited by185 cases

This text of 2021 CO 29 (v. Baker) is published on Counsel Stack Legal Research, covering Supreme Court of Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
v. Baker, 2021 CO 29 (Colo. 2021).

Opinion

The Supreme Court of the State of Colorado 2 East 14th Avenue • Denver, Colorado 80203

2021 CO 29

Supreme Court Case No. 19SC975 Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 16CA1545

Petitioner:

The People of the State of Colorado,

v.

Respondent:

Karl Christopher Baker.

Judgment Affirmed en banc May 10, 2021

Attorneys for Petitioner: Philip J. Weiser, Attorney General Brittany L. Limes, Assistant Attorney General Denver, Colorado

Attorneys for Respondent: Megan A. Ring, Public Defender Rachel K. Mercer, Deputy Public Defender Denver, Colorado

JUSTICE GABRIEL delivered the Opinion of the Court. ¶1 This case, like Lawrence v. People, 2021 CO 28, __ P.3d __, which we are also

announcing today, requires us to explore the limits of expert testimony offered by

high-level officials (or former officials) of the Colorado Division of Securities in a

securities fraud and theft prosecution. Specifically, here, we must decide whether

the admission of a deputy securities commissioner’s expert testimony that

defendant Karl Christopher Baker’s misstatements and omissions were material

was reversible error.1

¶2 Because (1) in presenting such opinions, the deputy commissioner also

opined that certain disputed facts were true; (2) such testimony involved weighing

the evidence and making credibility determinations, which are matters solely

within the jury’s province; and (3) in our view, the error in admitting such

testimony was not harmless, we agree with the court of appeals division below

that the admission of this testimony was reversible error.

¶3 Accordingly, we affirm the division’s judgment.

1 Specifically, we granted certiorari to review the following issue: Whether the deputy securities commissioner’s expert testimony that the defendant’s misstatements and omissions were material was reversible error.

2 I. Facts and Procedural History

¶4 Baker and his business partner sought investors for a company called

Aviara Capital Partners, LLC. According to promotional materials that Baker

provided to potential investors, investment money would be used to purchase

distressed banks that were being shut down and were under the control of the

Federal Deposit Insurance Corporation (“FDIC”). In conjunction with the

purchase of the distressed banks, Aviara would operate a “distressed assets fund”

to purchase the assets of such banks. Aviara would then acquire additional banks

under a business plan by which Aviara and its investors would collectively own

eighty percent of the banks, while bank management, directors, advisors, and

employees would own the other twenty percent.

¶5 In the course of soliciting potential investors, Baker spoke, independently,

with the purported victims in this case, Donna and Lyal Taylor, Dr. Alan Ng, and

Stanley Douglas. In addition to providing the above-described promotional

materials to these potential investors, Baker allegedly told them, among other

things, that (1) he had lined up “Class A” investors who had millions of dollars to

invest and he was looking for smaller “Class B” investors; (2) the “Class B”

investors’ money would be held in an escrow or “trust” account until the

“Class A” investors had invested and Aviara was ready to purchase a bank; (3) the

“Class B” investors’ money would go toward Aviara, the purchase of distressed

3 banks, or the asset fund; (4) neither Baker nor other corporate officers would take

a salary or otherwise pay themselves out of investment funds but rather would be

paid only once Aviara was operational and profitable; (5) the investors would get

their principal back quickly (e.g., the Taylors within three to four months, and Ng

and Douglas within one year); and (6) the amount of money that they could lose

was capped (at $30,000 for the Taylors, a lack of profit for Ng, and twenty-five

percent of his investment for Douglas).

¶6 Purportedly in reliance on these representations, the Taylors ultimately

invested $150,000, Ng invested $50,000, and Douglas invested $300,000. In

exchange for their investments, each of them received a certificate stating that they

had obtained a certain number of units of interest.

¶7 The alleged victims’ investments did not work out as they claim to have

been promised, and a grand jury subsequently indicted Baker on, among other

charges, three counts of securities fraud under sections 11-51-501(1)(b) and

11-51-603(1), C.R.S. (2020) (based on Baker’s allegedly untrue statements or

omissions of material facts), one count of securities fraud under sections

11-51-501(1)(c) and 11-51-603(1) (based on Baker having allegedly engaged in acts

operating as a fraud or deceit on other persons), and three counts of theft under

section 18-4-401, C.R.S. (2020). The indictment alleged that (1) Baker had

concealed from the victims that their investment money was not going toward

4 Aviara or the purchase of distressed banks but rather would go toward personal

and non-investment related expenses of Baker and others; (2) the alleged victims’

money was not placed into an escrow or “trust” account but was placed into

Aviara’s operating accounts, after which the majority of the money was used for

non-investment related expenses; (3) contrary to Baker’s purported

representations, he took sums of the investment money for personal use and for

non-investment related expenses; (4) no “Class A” investors had ever been

identified; and (5) the investors had received no return of their principal and no

profit at any time.

¶8 The matter proceeded, and prior to trial, the People identified Lillian Alves,

then the Deputy Securities Commissioner for Colorado, as an expert in the area of

securities and the Colorado Securities Act (the “Act”). Thereafter, Baker filed a

motion in limine to exclude this proffered testimony. In his motion, Baker noted

that the Deputy Commissioner apparently planned to testify that certain of Baker’s

alleged statements to the purported victims constituted material misstatements

and omissions and that such statements were misleading. In Baker’s view, such

testimony would usurp the functions of both the judge and the jury.

¶9 The trial court does not appear to have addressed Baker’s motion prior to

trial, but it did so at trial, before the prosecution called Deputy Commissioner

Alves to testify. Ruling from the bench, the court denied Baker’s motion. In so

5 ruling, the court began by noting that it had reviewed the applicable case law and

that, in one case, a division of the court of appeals had observed that the issue of

whether testimony like that at issue would confuse the jury regarding what law to

follow (i.e., the judge’s or the expert’s) was “kind of a close question.”

Nonetheless, the court found the analyses of those divisions that had admitted

similar testimony persuasive and thus decided to admit the proffered expert

testimony here. The court noted, however, that if any party wished, the court

would instruct the jury that in the event of a dispute regarding the applicable law,

the jury was to follow the law as set forth in the court’s instructions.

¶10 The prosecution then called Deputy Commissioner Alves to the stand. After

the prosecution qualified her as an expert in securities and the Act, at Baker’s

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2021 CO 29, Counsel Stack Legal Research, https://law.counselstack.com/opinion/v-baker-colo-2021.