State v. Kelson
284 P.3d 695
Utah Ct. App.2012Background
- Kelson appeals multiple securities and related charges; the court vacates the pattern-of-unlawful-activity conviction and remands for new trial on other charges.
- Kelson and Owners sought funding for two developments and contemplated a letter of credit; promissory notes were issued to Employee, Daughter, and Brother.
- Promissory notes were deposited into S.D.C. Financial, funds diverted, and the letter of credit was never obtained; Kelson breached funds and used some for personal use.
- Trial: Director testified about note security; Jury Instruction 25 presumes notes are securities and outlines a four-factor test to classify nonsecurities.
- Appellate court finds Instruction 25 created a mandatory presumption that shifted the burden of persuasion; counsel’s stipulation to Instruction 25 was ineffective, and pattern-of-unlawful-activity conviction was improper; remanded for new trial on securities-related charges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Jury Instruction 25 create a mandatory presumption shifting burden? | Kelson argues due process violation; presumption shifts burden | State contends instruction accurate and curable by other instructions | Yes; violates due process; remand for new trial on securities charges (ineffective assistance discussed) |
| Was stipulating to Instruction 25 ineffective assistance? | Counsel performed deficiently by agreeing to the instruction | Stipulation was a reasonable trial strategy | Yes; prejudicial, require remand for new trial on securities charges |
| Did the trial court err by denying a directed verdict on pattern of unlawful activity? | Acts occurred over a few days, not a substantial period | Hill v. Allred supports multiple episodes within a pattern | Yes; pattern of unlawful activity not shown; pattern conviction vacated; remand on other charges |
| Was the pattern issue properly preserved for appeal? | Argued as not multiple episodes; Hill controls post-trial | Issue not preserved?； | Preserved; court analyzes Hill framework and sustains reversal on pattern |
| What is the court’s ultimate disposition on the charges? | N/A | N/A | Conviction vacated for pattern; reversed/remanded on offer/sale, unregistered securities, and securities fraud |
Key Cases Cited
- Francis v. Franklin, 471 U.S. 307 (U.S. 1985) (due process presumption error; burden-shifting analysis)
- Sandstrom v. Montana, 442 U.S. 510 (U.S. 1979) (mandatory vs. permissive presumptions)
- In re Winship, 397 U.S. 358 (U.S. 1970) (reasonable-doubt standard applies to all elements)
- Estelle v. McGuire, 502 U.S. 62 (U.S. 1991) (contextual review of jury instructions; finality and accuracy)
- Searle v. Milburn Irrigation Co., 2006 UT 16, 133 P.3d 382 (Utah 2006) (distinguishes burden of production vs. persuasion in evaluating instructions)
- Hill v. Estate of Allred, 2009 UT 28, 216 P.3d 929 (Utah 2009) (continuous/related predicates; pattern of unlawful activity; substantial time requirement)
- H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (U.S. 1989) (continuity/relationship framework for pattern crimes)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (U.S. 1985) (pattern of racketeering context; continuity plus relationship)
- Reves v. Ernst & Young, 494 U.S. 56 (U.S. 1990) (four-factor test for determining whether notes are securities (civil context))