State v. Zarinegar, 474 P.3d 683

Background

Alabama and Kansas securities commissions entered Cease-and-Desist / Consent Orders finding Zarinegar engaged in securities violations; despite those Orders Zarinegar organized PRM and continued offering securities.
Investor James Rees invested about $550,800 through ARP → AHIT → PRM; offering materials described real‑estate business and did not disclose the Alabama/Kansas Orders (PRM memorandum only had a footnote referring to AHIT public filings).
PRM filed Form D in Idaho; Idaho Department of Finance investigated and sued under the Idaho Uniform Securities Act alleging violations of I.C. § 30‑14‑501(2) (untrue statements/omissions) and (4) (diversion of investor funds).
Financial records show $175,000 transferred from PRM’s account to Zarinegar’s personal accounts and subsequent personal expenditures; AHIT’s SEC filing (not PRM’s offering materials) disclosed the prior Orders.
The district court denied most motions to strike (admitting the state Orders and financial records under public‑record and business‑record exceptions), granted summary judgment for the Department, enjoined Zarinegar/PRM, ordered $550,800 restitution and $20,000 civil penalty; Idaho Supreme Court affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Personal & subject‑matter jurisdiction	Department: court has jurisdiction; PRM’s Idaho Form D & Form U‑2 consented to service; I.C. §30‑14‑603 authorizes civil enforcement	Zarinegar: no contacts with Idaho; no waiver; proceeding was criminal so subject matter lacking	Court: Zarinegar waived personal jurisdiction by appearance and failed to plead it; PRM’s consent forms submitted; subject matter proper under I.C. §30‑14‑603; civil enforcement, not criminal
Right to jury / right to proceed pro se	Department: summary judgment proper where no triable issues; no Sixth Amendment pro‑se right in civil cases	Zarinegar: entitled to jury trial and to proceed pro se; district court improperly delayed counsel withdrawal	Court: summary judgment did not violate jury right because no issues remained for trial; no Sixth Amendment right to proceed pro se in civil case; district court did not abuse discretion in temporarily denying withdrawal given competency/delay concerns
Motions to strike documentary evidence	Department: Orders are public records; bank/broker records are business records and were properly certified	Zarinegar: lack of foundation; hearsay; Orders allegedly untrue and not noticed to him	Court: admission proper—Orders self‑authenticating and fit I.R.E. 803(8)/902; financial records certified and admissible under I.R.E. 803(6)/902(11)
Merits — §30‑14‑501(2) & (4) violations	Department: omissions (failure to disclose Orders and transfer/use of funds) and diversion of investor funds established by records	Zarinegar: AHIT public filings disclosed the Orders; offering materials vested manager broad discretion; no proof funds used personally	Court: omission of Orders was material as a matter of law; PRM memo’s footnote insufficient; transfers into Zarinegar accounts and personal expenditures demonstrate diversion—summary judgment affirmed

Key Cases Cited

Dickinson Frozen Food, Inc. v. J.R. Simplot Co., 164 Idaho 669, 434 P.3d 1275 (Idaho 2019) (standards for personal‑jurisdiction review and waiver by appearance)
TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (U.S. 1976) (objective materiality standard for omissions/misrepresentations in securities context)
McGimpsey v. D&L Ventures, Inc., 165 Idaho 205, 443 P.3d 219 (Idaho 2019) (relationship between summary judgment and jury‑trial preservation)
State v. Shama Resources Ltd. P’ship, 127 Idaho 267, 899 P.2d 977 (Idaho 1995) (IUSA securities‑fraud elements and scope)
SEC v. Merchant Capital, LLC, 483 F.3d 747 (11th Cir. 2007) (omission of state cease‑and‑desist orders against seller is material to reasonable investors)
Portfolio Recovery Assocs., LLC v. MacDonald, 162 Idaho 228, 395 P.3d 1261 (Idaho 2017) (affidavit/foundation requirements for summary‑judgment evidence)