State v. Himes, 2015 MT 91 (March 24, 2015) (Shea, J.) (5-0, aff’d & rev’d)
Issue: (1) Whether “security” was adequately defined for the jury; (2) whether the state proved that Himes sold a security; (3) whether the mens rea rule requires a mental state other than ‘willfully’ to sustain a felony conviction; (4) whether the “willfully” jury instruction created a strict liability offense, and renders the 10-year sentence a violation of Himes’ due process rights; (5) whether the fraudulent practices jury instruction was erroneous; and (6) whether Himes was properly sentenced.
Short Answer: (1) Yes; (2) yes; (3) yes; (4) no; (5) yes; and (6) yes.
Affirmed in part and reversed (fraudulent practices conviction)
Facts: Geoffrey Serata met Harris Himes at Himes’ ministry, Big Sky Christian Center. Over time, Serata became involved in the ministry, and considered Himes a close friend. Serata has little experience or knowledge about investing.
In 2007, Serata learned he was going to receive about $150,000 from his grandfather’s trust. He contacted Himes for advice about risk-free investments. Himes told Serata about Duratherm, a solar-panel production company that was close to starting production. Himes said he had the factory, equipment, and buyers – he just needed a glue machine, which would cost about $150,000. Eventually, Serata wired $150,000 in June 2008. Shortly thereafter, he learned there was no factory ready to produce solar panels. When he asked to be bought out of his investment, Himes said he had never suggested Serata invest in Duratherm.
Serata went to the Ravalli County Sheriff, who referred the case to the Office of the Commissioner of Securities and Insurance. When they investigated, they found that neither Duratherm nor its parent company were not registered to be sold as securities, and that Himes was not registered to offer or sell securities in Montana.
Further investigation showed that Serata’s $150,000 wire transfer was used to pay four credit card companies, various hotels, restaurants and stores.
Procedural Posture & Holding: Himes was charged with six felonies, and was convicted of three by a jury. He was sentenced to three concurrent 10-year sentences with the DOC, with all but 90 days suspended, and subject to conditions. He was also ordered to pay court fees and $150,000 restitution to Serata. Himes appeals, and the Supreme Court affirms in part and reverses in part.
Reasoning: (1) “Security” was defined with the statutory definition, and Himes did not object. The Court declines to exercise plain error review.
(2) A reasonable juror could have concluded that Himes sold Serata a security.
(3) The District Court correctly instructed the jury in accordance with the statutory definition of “willfully.”
(4) Sufficient evidence supports a finding that Himes had the requisite mental state to violate the Securities Act.
(5) Himes’ conviction for fraudulent practices is reversed because the jury incorrectly instructed the jury that the willful omission of a prospectus constituted fraudulent practices.
(6) The district court acted within its discretion when it imposed a suspended rather than a deferred sentence, and properly ordered restitution.