State v. Taylor , 349 P.3d 696 ( 2015 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2015 UT 42
IN THE
S UPREME C OURT OF THE S TATE OF U TAH
STATE OF UTAH ,
Appellee,
v.
ROGER EDWARD TAYLOR,
Appellant.
No. 20130556
Filed March 31, 2015
Third District, Salt Lake
No. 111906891
The Honorable Elizabeth A. Hruby-Mills
Attorneys:
Sean D. Reyes, Att’y Gen., John J. Nielsen, Asst. Att’y Gen.,
Salt Lake City, for appellee
Joan C. Watt, Michael D. Misner, Salt Lake City, for appellant
JUSTICE PARRISH authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
JUSTICE DURHAM , and JUDGE ORME joined.
Due to his retirement, JUSTICE NEHRING did not participate herein;
COURT OF APPEALS JUDGE GREGORY K. ORME sat.
JUSTICE DENO G. HIMONAS became a member of the Court on
February 13, 2015, after oral argument in this matter, and
accordingly did not participate.
JUSTICE PARRISH , opinion of the Court:
INTRODUCTION
¶1 Roger Taylor was charged with multiple counts of securities
fraud and theft on the basis of his alleged operation of a Ponzi
scheme. Mr. Taylor asked the district court to dismiss eight of the ten
charges based on the applicable statutes of limitations. The district
court concluded that securities fraud and theft are continuing
offenses and evaluated the timeliness of the charges accordingly. On
interlocutory review, we hold that securities fraud and theft are not
STATE v. TAYLOR
Opinion of the Court
continuing offenses and therefore remand the case to the district
court to re-evaluate the timeliness of the charges in light of our
holding.1
BACKGROUND
¶2 Mr. Taylor and Richard Smith are alleged to have operated
a Ponzi scheme in which multiple investors lost large sums.2 They
initiated the alleged scheme by founding an investment firm known
as Ascendus Capital Management. Once clients deposited money
with Ascendus, Mr. Taylor and Mr. Smith created false account
statements reflecting investment gains to lure further funds from
their clients. Later, Mr. Taylor and Mr. Smith founded the Franklin
Forbes Composite Fund. They asked existing clients to transfer
funds to Franklin Forbes, assuring them that the investment was
safe. Mr. Taylor and Mr. Smith falsely represented that Franklin
Forbes would be investing in Lyxor, a French asset-management
company, and that the investment would be guaranteed by Société
Générale, a well-known and prestigious French bank. Instead, Mr.
Taylor and Mr. Smith placed the funds in a larger Ponzi scheme in
California, used some of the funds to pay other investors, and raided
the remaining funds to pay personal expenses. Mr. Taylor and Mr.
Smith again created false account statements showing investment
gains to lull investors. Eventually, however, the Ponzi scheme
collapsed and the “guaranteed” investments were lost.
¶3 On August 13, 2010, the State filed an information charging
Mr. Taylor with two counts of securities fraud and one count of
abuse, neglect, or exploitation of the elderly. One year later, on
August 30, 2011, the State amended the information. Less than one
month later, when the State failed to appear at a scheduling
conference, the district court dismissed the case without prejudice.
1
In a companion case issued today, we address the same
question with respect to the communications fraud statute, Utah
Code section 76-10-1801. State v. Kay, 2015 UT 43, __ P.3d __.
2
Because this case comes to us on an interlocutory appeal, the
facts have yet to be determined. On interlocutory review, we recount
the facts as alleged and in a light most favorable to the ruling below.
Cf. Peck v. State, 2008 UT 39, ¶ 2, 191 P.3d 4 (“On appeal from a
motion to dismiss, ‘we review the facts only as they are alleged in
the complaint.’ We accept the factual allegations as true and draw all
reasonable inferences from those facts in a light most favorable to
the plaintiff.”).
2
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Opinion of the Court
The State refiled a substantially similar information the same day,
September 22, 2011, charging Mr. Taylor with five counts of
securities fraud, four counts of theft, and one count of engaging in
a pattern of unlawful activity, all second-degree felonies. It is this
last information that is at issue here.
¶4 Mr. Taylor filed a motion to dismiss, claiming that four of
the five securities fraud charges and the four theft charges were time
barred. The district court denied the motion as to the four securities
fraud charges and three of the theft charges after ruling that
securities fraud and theft are both continuing offenses for which the
limitations period did not begin to run until Mr. Taylor sent the last
false account statement to investors.
¶5 The four securities fraud charges at issue in this case are
based upon four separate investments in Franklin Forbes. Counts 1
and 2 are based on two investments by A.D. She began investing
through Ascendus as early as June 2003 and, over the years, invested
about $600,000. On the basis of false information from Mr. Taylor,
A.D. transferred her Ascendus investment to Franklin Forbes in
February 2006. And in July 2006, she invested an additional $401,000.
Mr. Taylor then sent A.D. false account statements showing
investment gains through December 2007.
¶6 Counts 6 and 7 arise from similar transfers by other
investors. The factual predicate for count 6 is an $800,000 investment
by W.M. and K.M. that they moved from their Ascendus account to
Franklin Forbes in February 2006. W.M. and K.M. received false
account statements through May 2008. The factual predicate for
count 7 is an investment by A.W., who transferred almost $1.8
million from Ascendus to Franklin Forbes in February 2006. A.W.
received false account statements through April 2007.
¶7 The three theft charges at issue are based on Mr. Taylor’s
unauthorized use or withdrawal of funds from Franklin Forbes.
Count 5 arises from Mr. Taylor’s unauthorized use of funds from
E.K. In March 2007, E.K. invested approximately $330,000 in
Franklin Forbes with express direction that it be used for investment.
But Mr. Taylor withdrew the funds soon thereafter and used them
for another purpose. Mr. Taylor then sent E.K. false account
statements showing investment gains through April 2008.
¶8 Counts 9 and 10 arise from Mr. Taylor’s misuse and
withdrawal of funds belonging to unknown investors. Count 9 arises
from misuse of over $1.5 million removed from Franklin Forbes as
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STATE v. TAYLOR
Opinion of the Court
late as January 2008. And Count 10 is based on a final withdrawal of
funds from Franklin Forbes by Mr. Taylor as late as August 2008.
¶9 Following the district court’s denial of his motion to dismiss,
Mr. Taylor filed a petition for interlocutory review, which the court
of appeals granted. It then certified the interlocutory appeal to this
court. We have jurisdiction pursuant to Utah Code section 78A-3-
102(3)(b).
STANDARD OF REVIEW
¶10 The issue of whether securities fraud and theft are
continuing offenses is one of statutory construction. We give no
deference to the district court’s ruling on such an issue and instead
review it for correctness.3
ANALYSIS
¶11 The district court concluded that securities fraud, in
violation of Utah Code section 61-1-1, and theft, in violation of Utah
Code section 76-6-404, are continuing offenses. On the basis of that
conclusion, the district court determined that none of the securities
fraud counts and only one of the four theft counts were time barred.
Mr. Taylor contends that neither securities fraud nor theft is a
continuing offense and, therefore, that the charges are not timely.
We agree with Mr. Taylor that securities fraud and theft are not
continuing offenses and therefore remand the case to the district
court to re-evaluate the timeliness of the charges.
I. THE TEST FOR CONTINUING OFFENSES
¶12 We are asked to determine whether the criminal charges in
this case are time barred. In general, “a prosecution for” a felony,
misdemeanor, or infraction “shall be commenced within” four, two,
or one year, respectively, “after it is committed.”4 If the State does
not commence prosecution within this period, any criminal liability
will expire. The limitations period begins to run when a crime is
“committed.”5 A crime is committed when every “element of the
3
State v. Lusk, 2001 UT 102, ¶¶ 10–11, 37 P.3d 1103.
4
UTAH CODE § 76-1-302(1); see also id. § 61-1-21.1(1) (“No
indictment or information may be returned . . . [for securities fraud]
more than five years after the alleged violation.”).
5
See id. § 76-1-302; see also Russell Packard Dev., Inc. v. Carson,
2005 UT 14, ¶ 20, 108 P.3d 741 (“As a general rule, a statute of
(continued...)
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Opinion of the Court
offense” is met.6 But the Legislature has structured the elements of
some offenses in such a way that a perpetrator continues to commit
the offense so long as he continues to satisfy the elements. These
offenses are considered continuing offenses. In the case of a
continuing offense, while criminal liability attaches when every
element is satisfied, the statute of limitations does not begin to run
until the perpetrator ceases to satisfy the elements of the crime.7 At
that point, the whole arc of criminal conduct is aggregated into a
single criminal violation.
¶13 In determining whether a crime is a continuing offense, the
United States Supreme Court looks to the intent of Congress. In
Toussie v. United States, it recognized the inherent tension between
the policies underpinning statutes of limitations—preventing
prosecution of stale claims and motivating prompt investigation of
crimes—and the imposition of criminal liability for proscribed acts.8
With that tension in mind, the Court reasoned that criminal statutes
should not be interpreted to create a continuing offense “unless the
explicit language of the substantive criminal statute compels such a
conclusion, or the nature of the crime involved is such that Congress
must assuredly have intended that it be treated as a continuing
one.”9 Other states considering this question have looked to Toussie,
either adopting its language or citing its reasoning.10
5
(...continued)
limitations begins to run upon the happening of the last event
necessary to complete the cause of action.” (internal quotation marks
omitted)).
6
See State v. Roth, 2001 UT 103, ¶ 14, 37 P.3d 1099 (surveying
cases and holding that the crime of escape was complete when the
defendant left official custody without authorization).
7
22 C.J.S. Criminal Law § 256 (2015) (“Although normally a statute
of limitation begins to run from the time the crime is complete, if the
crime is a continuing one the statute does not begin to run until the
continuous commitment of the crime ceases.”); see also WAYNE R.
LA FAVE ET AL., 5 CRIMINAL PROCEDURE § 18.5(a) (3d ed. 2007).
8
397 U.S. 112, 114–15 (1970).
9
Id. at 115.
10
See, e.g., People v. Thoro Prods. Co., 70 P.3d 1188, 1193–94 (Colo.
2003); State v. Francois, 577 N.W.2d 417, 418 (Iowa 1998); State v.
Gainer, 608 P.2d 968, 970 (Kan. 1980); State v. Mullin, 886 P.2d 376,
(continued...)
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Opinion of the Court
¶14 The Toussie analysis is generally consistent with our long-
standing approach to statutory construction. Our objective in
construing statutes is to effectuate the intent of the Legislature as
expressed in the statutory text.11 Thus, to determine whether a
criminal statute creates a continuing offense, we look to the plain
meaning of the enacted text, considering that text in the context of
the whole statute.12 And we harmonize the statute with related
provisions of the code, including any applicable statutes of
limitations.13
¶15 In sum, we respect the legislative policy choice reflected in
a clear statute of limitations and will effectuate that protection
except in those instances where we find clear, contrary legislative
intent in the terms of the substantive criminal statute at issue. In this
case, we are asked to determine whether securities fraud and theft
are continuing offenses. We turn first to securities fraud and then to
theft.
II. SECURITIES FRAUD IS NOT A CONTINUING OFFENSE
¶16 The district court concluded that securities fraud, in
violation of Utah Code section 61-1-1, is a continuing offense. On the
basis of that conclusion, it determined that the securities fraud
charges against Mr. Taylor were not time barred because Mr. Taylor
continued the crimes by sending false account statements to lull the
investors after the securities transactions were complete. Mr. Taylor
argues that the district court’s determination was in error because
the statutory language criminalizing securities fraud does not give
rise to a continuing offense. Therefore, the statute of limitations
began to run at the time that the securities transactions were
complete. We agree with Mr. Taylor that securities fraud is not a
continuing offense.
10
(...continued)
378 (Mont. 1994); State v. Nuss, 454 N.W.2d 482, 485–86 (Neb. 1990);
State v. Legg, 9 S.W.3d 111, 116 (Tenn. 1999); John v. State,
291 N.W.2d 502, 505 (Wis. 1980); see also 22 C.J.S. Criminal Law § 256
(2015) (“Whether or not a crime is a continuing offense depends
upon the legislative intent in defining the crime . . . .”).
11
LeBeau v. State, 2014 UT 39, ¶ 20, 337 P.3d 254.
12
See id.
13
See id.
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Opinion of the Court
¶17 The Utah Uniform Securities Act, patterned after section 101
of the Uniform Securities Act of 1956, provides that
[i]t is unlawful for any person, in connection with the
offer, sale, or purchase of any security, directly or
indirectly to:
(1) employ any device, scheme, or artifice to defraud;
(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.14
The act contains a five year statute of limitations that expressly
supercedes the general criminal statute of limitations.15
¶18 The text of the Utah Uniform Securities Act does not suggest
that the Legislature intended securities fraud to constitute a
continuing offense. To the contrary, the offense is anchored in the
discrete events of an “offer, sale, or purchase of any security.”16 And
subsection (2) similarly identifies the discrete acts of “mak[ing] any
untrue statement [or] . . . omitt[ing] to state a material fact.”17
¶19 In arguing that the Legislature intended securities fraud to
constitute a continuing offense, the State points to subsections (1)
and (3), which speak of “employ[ing] any . . . scheme . . . to defraud”
and “engag[ing] in any . . . practice[] or course of business which
14
UTAH CODE § 61-1-1 (emphasis added).
15
Id. § 61-1-21.1. In the case of the generally-applicable statutes of
limitations, the Legislature has provided a safety valve for
undiscovered fraud offenses that extends the limitations period for
up to three years so long as the prosecution is commenced within
one year of the fraud being reported to law enforcement. Id. § 76-1-
303(1). But that extension is not available in the case of securities
fraud, which is governed by its own statute of limitations for which
the Legislature has not provided a similar extension mechanism.
16
Id. § 61-1-1.
17
Id. § 61-1-1(2) (emphasis added).
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STATE v. TAYLOR
Opinion of the Court
operates . . . as a fraud.”18 It argues that these phrases give rise to a
continuing offense. We disagree. While these phrases refer to
activities that may continue for a period of time, their presence does
not necessarily compel the conclusion that securities fraud is a
continuing offense. Rather, they must be read in concert with the
statutory requirement that any actionable fraud take place “in
connection with the offer, sale, or purchase of any security.”19
¶20 The United States Supreme Court has construed similar
language in a federal statute to require that any scheme to defraud
be material to a purchase or sale of a covered security. In Chadbourne
& Parke LLP v. Troice, the Court considered the scope of the statutory
phrase “‘misrepresentation or omission of a material fact in
connection with the purchase or sale of a covered security.’”20 On the
basis of “a natural reading of the Act’s language,” the Court held
that “[a] fraudulent misrepresentation or omission is not made ‘in
connection with’ such a ‘purchase or sale of a covered security’
unless it is material to a decision by one or more individuals (other
than the fraudster) to buy or to sell a ‘covered security.’”21 The
similar language of the Utah Uniform Securities Act compels a
similar conclusion. An activity listed in subsections (1) through (3)
cannot be “in connection with [an] offer, sale, or purchase of any
security”22 “unless it is material to a decision by one or more
individuals (other than the fraudster).”23
¶21 By definition, an act occurring subsequent to a securities
transaction cannot be material to the decision to engage in that
transaction. It therefore cannot satisfy the elements of securities
fraud. Thus, the language of the Utah Uniform Securities Act
dictates that the commission of securities fraud terminates and the
statute of limitations begins to run when the offer, sale, or purchase
is complete, even if some of the activities listed in subsections (1) and
18
Id. § 61-1-1(1), (3).
19
Id. § 61-1-1 (emphasis added).
20
134 S. Ct. 1058, 1066 (2014) (emphasis added) (construing
15 U.S.C. § 78bb(f)(1)(A)).
21
Id.
22
UTAH CODE § 61-1-1.
23
Chadbourne & Parke, 134 S. Ct. at 1066.
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Opinion of the Court
(3) continue thereafter.24
¶22 Related Utah statutes also support our conclusion that the
Utah Uniform Securities Act does not create a continuing offense.
The discrete acts that often follow securities fraud in a broader arc
of fraudulent conduct—like the false account statements in this
case—are more appropriately charged under related statutes, such
as the communications fraud statute, Utah Code section 76-10-1801.
Indeed, that provision specifically criminalizes communications
“concealing [a] scheme or artifice.”25 And with that offense,
“[r]eliance on the part of any person is not a necessary element.”26
Thus, the separate crime of communications fraud captures
subsequent communication designed to conceal securities fraud.
Similarly, one of the various theft statutes may apply if the
perpetrator takes or disposes of the invested funds with the requisite
intent.27 Finally, in cases involving three or more episodes of
unlawful activity, such as securities fraud, communications fraud,
and theft, the State may bring charges for engaging in a pattern of
unlawful activity.28 The Legislature’s enactment of criminal offenses
that more precisely capture the discrete acts that the State contends
constitute continuation of securities fraud confirms our conclusion
that the Legislature did not intend for securities fraud to be a
24
See United States v. United Med. & Surgical Supply Corp.,
989 F.2d 1390, 1398 (4th Cir. 1993) (“Mail or securities fraud is not
complete, and the statute of limitations does not begin to run, until
the sale of the security or the use of the mail. Thus, a securities and
mail fraud prosecution falls within the statute of limitations if the
use of the mails or the sale of the security occurred within five years
of the indictment.” (citation omitted) (citing United States v. Read,
658 F.2d 1225, 1240 (7th Cir. 1981); United States v. Dunn,
961 F.2d 648, 650 (7th Cir. 1992); United States v. Scop, 846 F.2d 135,
139 (2d Cir. 1988); United States v. Perholtz, 842 F.2d 343, 364–65
(D.C. Cir. 1988) (per curiam); United States v. Ashdown, 509 F.2d 793,
798 (5th Cir. 1975); United States v. Blosser, 440 F.2d 697, 699 (10th Cir.
1971))).
25
UTAH CODE § 76-10-1801(1).
26
Id. § 76-10-1801(3).
27
See, e.g., id. § 76-6-404 (Theft); id. § 76-6-405 (Theft by
deception); id. § 76-6-406 (Theft by extortion); id. § 76-6-408
(Receiving stolen property).
28
Id. § 76-10-1603.
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STATE v. TAYLOR
Opinion of the Court
continuing offense. Instead, the Legislature has criminalized each
discrete unit of criminal activity and, in extended cases, the pattern
of unlawful activity itself.
¶23 In this case, the district court evaluated the timeliness of the
securities fraud charges on the basis of its erroneous conclusion that
securities fraud is a continuing offense. In light of our contrary
holding, we remand this case to the district court to engage in a
factual assessment to determine for each count of securities fraud
when the offer, sale, or purchase took place and whether the charge
was filed not more than five years later.29
¶24 In sum, we hold that securities fraud, in violation of Utah
Code section 61-1-1, is not a continuing offense. Instead, the crime of
securities fraud is complete and the statute of limitations begins to
run when an “offer, sale, or purchase” is made “in connection with”
an activity specified in subsections (1) through (3).
III. THEFT IS NOT A CONTINUING OFFENSE
¶25 The district court concluded that theft, in violation of Utah
Code section 76-6-404, is a continuing offense. On the basis of that
conclusion, the district court determined that only one of the theft
counts are time barred because Mr. Taylor continued to commit theft
by sending false account statements to conceal his crime. Mr. Taylor
argues that the district court erred because the statutory language
does not convey a clear legislative intent that theft is a continuing
offense. Rather, he contends that the statute of limitations began to
run at the time that he first obtained or exercised unauthorized
control over the funds. We agree with Mr. Taylor that theft is not a
continuing offense.30
¶26 Under the Utah Criminal Code,
[a] person commits theft if he obtains or exercises
unauthorized control over the property of another
29
Id. § 61-1-21.1. We are unable to engage in the determination of
timeliness because the record on interlocutory appeal is incomplete
and not all relevant facts have been established at this early point in
the proceedings.
30
Courts in our sister states have reached the same conclusion
with regard to similarly worded statutes. See, e.g., State v. Harrison,
561 N.W.2d 28, 29 (Iowa 1997) (per curiam); State v. Gainer,
608 P.2d 968, 971 (Kan. 1980); State v. Mullin, 886 P.2d 376, 378
(Mont. 1994).
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Opinion of the Court
with a purpose to deprive him thereof.31
Theft is subject to the general criminal statute of limitations.32
¶27 We see nothing in the statutory language to suggest that
theft is a continuing offense. The key actus reus elements of the
offense—“obtain[ing] or exercis[ing]”—are discrete acts that are
satisfied instantaneously.33 And the commission of the crime is
complete when a person obtains or exercises that control with the
requisite intent.34
¶28 In arguing that theft is a continuing offense, the State focuses
on the statutory language indicating that a person commits theft if
he obtains property with a “purpose to deprive.”35 The State reasons
that a purpose to deprive may continue beyond the discrete act of
obtaining or exercising control. But the phrase “purpose to deprive”
simply defines the mens rea element.36 And that element either exists
or does not exist at the time that the person obtains or exercises
unauthorized control of another’s property. That phrase does not
suggest that the Legislature intended theft to constitute a continuing
offense.
¶29 Related provisions of the code support the conclusion that
theft is not a continuing offense. The acts of “dispos[ing],”
“conceal[ing], sell[ing], [or] withhold[ing]” stolen property are more
appropriately charged under the receiving stolen property statute,
Utah Code section 76-6-408. Thus, the Legislature has provided an
additional statute that criminalizes subsequent activity.
¶30 In ruling that theft is a continuing offense, the district court
analogized to the single larceny rule, which we recognized in State
31
UTAH CODE § 76-6-404. The State makes several arguments
based on other variants of theft, such as theft by receiving stolen
property. See id. § 76-6-408. That section includes an actus reus
element of “retain[ing]” stolen property. This case would be
different if that provision were at issue. But Mr. Taylor was charged
under section 76-6-404. We therefore focus our analysis on the text
of that section, which does not contain such language.
32
Id. § 76-1-302.
33
Id. § 76-6-404.
34
State v. Eagle, 611 P.2d 1211, 1213 (Utah 1980).
35
UTAH CODE § 76-6-404.
36
See id. § 76-6-401(3).
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STATE v. TAYLOR
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v. Crosby37 and State v. Kimbel.38 The single larceny rule, as applied in
those cases, allows the aggregation of multiple takings over a period
of time into a single charge of theft.39 But that rule and those cases
are inapplicable to the charges in this case, which each involve only
a single taking. Indeed, nothing in those cases supports the
proposition that a single commission of theft continues beyond the
last taking.40
¶31 The district court’s determination that the theft charges were
timely was premised upon its erroneous conclusion that theft is a
continuing offense. Because we reverse the district court on that
issue, we remand this case to the district court to reassess the
timeliness of the theft charges in light of our holding. That court is
better able to determine for each theft count when Mr. Taylor
obtained or exercised unauthorized control of another’s property
and whether the corresponding charge was filed within four years
of that date.41
¶32 In sum, we hold that theft, in violation of Utah Code section
76-6-404, is not a continuing offense. The crime of theft is complete
and the statute of limitations begins to run when a person “obtains
or exercises unauthorized control” over the property of another with
the requisite intent.
CONCLUSION
¶33 The district court concluded that securities fraud, in
violation of Utah Code section 61-1-1, and theft, in violation of Utah
code section 76-6-404, are continuing offenses. This conclusion was
in error. We therefore reverse the ruling of the district court and
remand the matter for further proceedings consistent with this
opinion.
37
927 P.2d 638 (Utah 1996).
38
620 P.2d 515 (Utah 1980).
39
See Crosby, 927 P.2d at 645–46; Kimbel, 620 P.2d at 518.
40
Other states have come to a similar conclusion. See, e.g.,
Harrison, 561 N.W.2d at 29–30.
41
UTAH CODE § 76-1-302(1)(a).
12