2015 COA 107
Colo. Ct. App.2015Background
- Defendant Michael Mendenhall appealed a judgment of conviction for securities fraud and theft.
- CSA defines security to include any note; issue is whether note is always a security and if jury instructed accordingly.
- Defendant allegedly loaned over $1 million to insurance clients using notes, with collateral claims that were falsified and notes secured by properties with no equity.
- Notes were used to fund personal expenses; collateral was worthless; some interest paid from new victims.
- Jury convicted on multiple counts; mittimus and aggregate sentence inconsistent; court vacated securities convictions and remanded for new trial on securities, with theft convictions affirmed but sentence wholly vacated for resentencing.
- Court held that the instruction defining “security” as “any note” was erroneous and requires reversal of the securities convictions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the trial court err by instructing that a note is a security? | Mendenhall argues ‘any note’ too broad; Reves requires context. | Mendenhall contends not all notes are securities; context matters. | Yes, instructional error; note is not always a security. |
| Was the instructional error preserved for appeal? | Defendant preserved by opposing the incomplete definition. | Defense did not tender a written instruction. | Yes, error preserved. |
| Was the instructional error harmless as to theft convictions? | Even with error, theft convictions supported by evidence. | Not necessary to discuss; focus on securities. | Error not harmless for securities; theft convictions unaffected or separately reviewed. |
| Should mittimus/sentencing be corrected on remand? | Record shows inconsistency between oral ruling and mittimus. | Remand needed to fix sentencing. | Sentence vacated in its entirety; remanded for resentencing on theft and new trial on securities. |
Key Cases Cited
- Reves v. Ernst & Young, 494 U.S. 56 (1990) (defines note security test; context controls breadth of ‘any note’)
- Marine Bank v. Weaver, 455 U.S. 551 (1982) (context governs interpretation of securities definitions)
- United States v. McKye, 734 F.3d 1104 (10th Cir. 2013) (requires note security determination with precise proof of security status)
- State v. Crespin, 721 P.2d 688 (Colo. 1986) (jury verdict on alternative theories; constitutional error analysis)