*1 (91-CF-282) Plaintiff-Respondent, Wisconsin, State
v. W. Mueller, Defendant-Appellant.† Mark (91-CF-283) Plaintiff-Respondent, Wisconsin, State Defendant-Appellant.† I.
James Stopple, Appeals Court of 93-3228-CR,. 93-3227-CR, October Submitted on Nos. briefs 28,1996. 6,1994. March Decided 455.) (Also reported to review denied. Petition †
For the defendants-appellants the cause was sub- mitted on the brief of James Geis of James Gets Law Chicago, Hurley Hurley, Stephen IL; H. Bur- Office Milliken, Madison; Bell, ish & John W. Markson of Metzner, & Moore Gierhart of Madison. plaintiff-respondent
For the the cause was submit- Doyle, attorney general, ted on the brief of James E. Roy attorney general. Korte, with assistant Dykman Sundby, Gartzke, P.J.,
Before and JJ. GARTZKE, P.J. Defendants Mark W. Mueller Stopple appeal judgments and James I. from of convic- against Organized tion them under the Wisconsin (WOCCA), §§ 946.88, Crime Control Act 946.80 to Stats. Each defendant was convicted on one count of 946.83(3) racketeering activity, pattern §§ and 946.82(2), eighteen predicate for violations of 551.41(2) (3), securities fraud under and Stats. (1) The issues are: whether the statute of limita- prosecution this tions bars because warrants signed executed, defendants' arrests were never but timely the information was not filed and the defend- (2) appeared voluntarily appearance; ants at the initial prove "wilfully" whether to defendants violated state they laws, securities the State must establish knowingly acted with intent to defraud or violated (3) requires law; securities whether WOCCA knowl- beyond required predicate edge or intent for the (4) racketeering activity; offenses that constitute jury whether the could find from the evidence that corpora- on of their notes the defendants issued behalf replaced tion were securities and that the defendants corporate assets with less valuable assets. against
We decide all issues the defendants judgments affirm the of conviction. therefore
I.
BACKGROUND Agricul- In 1979 the defendants formed Diversified (DAS), corporation. tural Services a Wisconsin DAS purchased three subsidiaries from Keefe & Associates ("Keefe") FLS, million. a farm auction busi- $1.8 subsidiary. ness, was one such Keefe had owed FLS forgave part million. FLS million of the debt as $3.6 $1 acquisition DAS, of its and Keefe transferred to FLS in million accounts receivable at their book value. $2.6 DAS, FLS then transferred those receivables to and in FLS then showed its books the million balance $2.6 By due it from DAS. 1985 DAS owed FLS million $1.5 on In the debt. 1985 the defendants transferred DAS exchange receivables to FLS in for cancellation of the DAS debt to FLS.
By acquired some time in defendants had majority president interest in DAS. was the Mueller Stopple vice-president FLS, and of both DAS and they companies. they were directors of both While day-to-day operation in were not involved of the they directly FLS, business were involved its over- operation all its controlled finances. oppor-
FLS offered its farm-auction customers an tunity gains to defer their income tax on realized from properties. accomplish the sale of their To tax defer- properties ment, FLS, customers sold their farm taking part price of the sale in cash and the balance in FLS's unsecured installment notes. FLS marketed these notes to its farm auction customers as invest- higher ments and offered interest rates than those Beginning at local available banks. FLS option buying offered investors the either unsecured bank-guaranteed usually notes or notes. Investors took unguaranteed paid notes. Those notes more interest *6 bank-guaranteed than the notes.
In 1985 FLS wrote to its auction customers who offering notes, held its installment to renew its notes as opportunity company." "an to invest in our It offered employees "generated" commissions to who its non- guaranteed installment notes. operated through
FLS in at loss 1985. The presented State evidence that between 1981 and 1985 forty-six FLS issued or renewed of its installment sales twenty-one paid January notes and off notes. In bankruptcy, pay FLS filed and could not million on $1.5 its unsecured notes. subsequently charged
The State each defendant racketeering alleging WOCCA, with one count of under they engaged eighteen predicate that had in acts 551.41(2) (3), securities fraud in violation of alleged Stats. The State in that seventeen instances relating defendants failed to state material facts to ability pay eight- FLS's its unsecured notes. For an predicate alleged act, eenth the State that defendants by transferring violated Wisconsin securities laws exchange in worthless accounts receivable to FLS for forgiveness just eight of DAS's debt to FLS months bankrupt. FLS went before through May they
Nine farmers testified that acquired, total, had in seventeen unsecured notes from exchange properties. FLS in for the sale of their farm acknowledged Defendant Mueller that he had not told employees or directed FLS to disclose to customers that highly leveraged, operated FLS was that it had at a every year risky loss since that the notes were delinquent investments, that FLS had accounts receiv- depended good able, will, that its net worth on its employees long-standing had FLS certain January resigned 1985. as directors testimony jury in 1985 DAS trans- heard exchange receivables to FLS ferred worthless million of the DAS debt about $1.5 cancellation FLS.
HH1—i LIMITATIONS STATUTE OF 939.74(1), provides in material Section STATS., part: *7 felony must be commenced for a
[P]rosecution meaning this sec- years. 6 . . Within the within . a warrant tion, has commenced when prosecution found, issued, or an an indictment is or summons information is filed. terminated on defendants' WOCCAviolations
May did contend that the State 27, 1985. Defendants against felony prosecutions timely not commence the prosecution They not com- that this was them. assert years and the and no warrant issued menced within six six-year the limita- was not filed within information felony prosecutions were We conclude that the tion. February 1991, therefore the 26, on commenced years. brought within six actions were proper appli- undisputed, the facts are the Because 939.74(1), we is an issue of law which cation of opinion. the trial court's without deference to decide 35, 33-34, Pham, 31, Wis. 2d v. State (1987). day February filed 26,1991, the same the State On complaints court, the the clerk of with the criminal judge signed circuit court warrants for defendants' prosecutor arrests and the received the warrants. The court found that the warrants never were delivered to placed law enforcement to be served and instead were prosecutor's in the files. The warrants were never filed because, found, the court the defendants' counsel arranged appear voluntarily for them to for an initial appearance February 26, on 1991. The filed State the 12,1991. informations on June Lemay,
State
202,
155 Wis. 2d
Lemay means that an arrest warrant issues when signed by judge a it is with it intent that be executed possession judge. and the warrant the leaves of the happened February only That here on 1991. The reasonable inference is that the because warrants were put prosecutor day, in the hands the on that trial the signed they had court the warrants with intent that be prosecutor on warrants is the sat the executed. That prosecu- warrant, not the The court issues a irrelevant. "any law enforcement tor. That the warrants command them law enforcement officer officer" execute and no question to the when the warrants did so irrelevant issued.1 they voluntarily
Defendants contend that because appeared, never issued and the warrants should have warrants did not commence therefore issuance the 939.74(1), felony prosecutions § under Stats. 968.04(l)(a), argument § their on Defendants base part: provides in relevant "When an which voluntarily judge, appears a no war- accused ... before complaint shall be filed rant shall be issued and judge." reject We defendants' forthwith with argument. The record not show that the warrants does voluntarily appeared. issued after the defendants had issued, The fact is the warrants had com- 939.74(1). prosecution menced the under I—I HH hH A FRAUD WILFULNESS ELEMENT IN SECURITY 551.41(2) (3), AND PROSECUTION UNDER THAT STATS., REQUIRE DOES NOT PROOF TO DEFENDANT ACTED WITH INTENT jurisdictions are with Cases from other consistent our (6th 1950) Bell, 198, 199 (holding See 180 F.2d Cir. view. Nave v. signed when that an arrest warrant had issued it was mailed, though was who was even it not delivered the officer period expired). had See to execute it until after limitation (Mich. Hentkowski, Ct. People App. also 1986) (magistrate signs appropriate he an issues warrant when person). proper it over document and turns to the *9 DEFRAUD OR KNOWLEDGE THAT THE LAW WAS
VIOLATED The eighteen predicate acts the WOCCA charge are securities fraud charges against defendants for vio- 551.41(2) (3), lations of Chapter Stats.
Stats., is the Wisconsin Uniform Law. Securities 551.41,
Section STATS., provides: It is in any person, unlawful for with connection offer, sale purchase any security state, or of in this directly indirectly: or
(1) any device, To employ scheme or artifice to defraud;
(2) any To make untrue statement of a material fact or to necessary omit state a material fact in made, order to make the fight statements in the made, they circumstances under which are not misleading; or
(3) any act, To engage practice or course busi- ness which operates operate or would as a fraud or any deceit upon person. 551.58(1),
Section the penalties provision Stats., 551, Stats., in ch. 551.41, makes a violation of 551.58(1) a crime. Section provides: Any person wilfully any who violates provision of except 551.54, this or chapter any s. rule under this chapter, any person notice, or order of which the has or who s. knowing violates 551.54 or reason- having able cause to believe the statement made was misleading any may false or respect, material be $5,000 fined imprisoned not more than or not more years than. 5 both. specified or Each of the acts shall separate constitute a and a prosecution offense *10 any one offenses shall not bar for of such conviction any other offense. or conviction prosecution jury part: the The trial court instructed only knowingly the defendant Wilful... means that not charged. act Wilful does mean committed the intent or that the had an to defraud that defendant law was knowledge had the the defendant being violated. was the instruction
The defendants assert They pro- § 551.58, Stats., assert that because error. are that "wilful" violations of the securities law vides apply penalties the crimes, the statute does not unless defraud, facts had intent to was aware the accused giving duty rise to a to disclose financial information legal duty requiring disclosure. and was aware of disagree. We correctly § 551.58, read
Whether the defendants ques proper That turns on its construction. is independently we of the trial tion of law which decide opinion. 4, Bd., v. Area 117 court's Ball District No. (1984). 529, 389, 537, 394 Because Wis. 2d persons disagree or could whether intent reasonable knowledge § 551.58, element of we conclude the an Adamany, ambiguous. v. 104 Wis. statute is Kollasch (1981). 47, N.W.2d 51-52 Whether 2d legis knowledge depends on or is an element intent examining that intent lature's intent. We ascertain subject history, scope matter, context, the statute's Steinberg, Village purpose. 2d 174 Wis. of Shorewood (1993). 191, 202, N.W.2d § 551.58, The We turn first to context STATS. among § 541.41, is, it context includes because STATS., others, the whose "wilful" violation is critical statute § under 551.58. Nowhere in 551.41 is there an requirement express that a intend defendant to make an untrue statement intend omit a material state- ment, or intend to violate the statute. statutory § 551.58(1), The context of STATS., express
includes reference to lat- 551.54, Stats. it ter makes unlawful to make a statement in a document filed with commissioner of securities misleading which is false or toor omit to state a mate- necessary rial fact in order to make the statements *11 misleading. made not Section adds the to 551.58(1) misleading filing "knowing offense the element of or having reasonable cause to believe that the statement misleading." made was false or Sections 551.54 and counterparts §§ 551.58 are to 404 and 409 of the Uni- Seligman form Securities Act. Professors Loss and comment as on follows these sections of the Uniform Act: [our
Section 409 a distinguishes 551.58] willful § 551.54] violation of 404 [our from a willful viola- § any 404, tion of other section. To violate which proscribes misleading filings, person must not only willfully act but also know a statement made to a state securities administrator "to be false or mis- any in leading material ..." respect. Elsewhere in Act, the Commentary Official to the 1956 the term require "proof person defined to willful that intentionally acted the sense that was he aware doing." of what he was Official Comment to 204(a)(2)(B). 1 Loss 64 n.84 Regulation Seligman, Securities 1989). (3rd ed. Chap- purpose
We turn next of the statute. ter is the Wisconsin Uniform Securities 551, STATS., Law. ch. Section directs us to construe 551.67,
133 general purpose make uniform its 551 "to effectuate enact the 'Uniform Secur- ofthose states which law ities Act'... have the Uniform
The other states which enacted Act a criminal securities Securities have held or to case, to deceive or defraud violate fraud intent knowledge being violated, is not law, that the law is or Bayhi offense.2 v. an element of the securities fraud (Ala. 1993); App. 782, State, 629 2d 791 Crim. So. (Ind. 1985); 501, State, v. 486 507 Clarkson N.E.2d (Mich. People 304, Ct. Mitchell, v. 437 306-08 N.W.2d (Neb. 1989); App. 398, Fries, v. 337 N.W.2d State (N.J. 1983); Super. Russell, 583, v. 291 A.2d State 1972); App. 935, 939 Div., Cox, 566 P.2d Ct. (Wash. State 1977). knowledge App. motive or Ct. Bad an was also been held not to be the law violated has for failure of a broker-dealer to element of offenses register selling unregistered under the securities (subchs. & Act, II, II III Ill Securities Part Uniform Dumke, 100, 102 ch. (Mo. State v. 901 S.W.2d Stats.). 1995); App. Freis, Ct. State v.
(Neb. 1983); Sheets, and State v. 610 P.2d 1980).3 (N.M. App. Ct.
2
in
opinions
not
the
states
The dissent does
refer to
other
Act or
statu
have
the Uniform Securities
to our
which
enacted
551, STATS.,
general
tory duty
ch.
effectuate its
to construe
to
purpose make
law of those states which enact the
to
uniform the
Act.
Uniform Securities
3
unregistered
of
Supreme
The Alaska
held in a sale
Court
Act,
State,
case
the
Hentzner v.
613
securities
under
Uniform
(Alaska
821,
1980),
prohib-
the
P.2d
826
crime
"malum
se,"
itum,
intent
in the
not malum in
and therefore "criminal
wrongdoing
regarded as a
of
should be
sense of consciousness
. . ."
Court of
separate element of the offense .
The Missouri
aberration;
Appeals
"an
overwhelm-
referred to Hentzner as
134
Finally,
legislature's
we consider the
in
inaction
pertinent
by
appeals.
the face of a
decision
the court of
any
§
The absence
551.41,
of
reference to intent
in
Temby,
led
in
us to conclude State v.
108 Wis. 2d
(Ct. App.
521, 528, 531,
522, 526,
322 N.W.2d
527
1982), that intent to defraud is not an
of
element
§§
said,
violation under
551.41
551.58,
Stats. We
given
"We conclude that
the construction of the term
'wilfully'
prior
legisla-
statute,
under
that had the
require specific
ture wanted
defraud,
to
intent
to
it
explicitly
would have
530,
stated so."Id. at
reasoning
Temby
at 527.4 Our
in
also means that a
ing weight
existing
of
opposite
case law reaches an
result."
Dumke, 901
argued
S.W.2d at 104. It could be
that the wilful-
requirement
penalties provision
ness
in the
409 of the
§
(our 551.58, Stats.),
Uniform Act
apply differently
should
different offenses under the Uniform Securities Act. But see
135, —,
Ratzlaf,
655,
510
(1994), noting
U.S.
114 S.Ct.
single
when
penalty provision
"wilfulness"
applicable to
statutory
various
violations
be
way
should
construed "the same
Aversa,
each
play," citing
time it is called into
United States v.
(1st
493,
1993),
984 F.2d
Cir.
vacated sub nom. Donovan v.
—
States,
—,
(1994),
United
U.S.
It was stated this court in Hobbins v. 214 Wis. knowingly that "if one commits an act N.W.
135
giving
or awareness of the facts
knowledge
defendant's
disclose,
to
legal duty
or of
duty
rise to a
to disclose
the
of
violation of 541.41.5
is not an element
a criminal
§
necessarily
by
act
prohibited
commits that
a criminal statute be
wilfully.
responsibibty
exempted from
because
He is not
criminal
legislature,
wrongful.
prohibition
in
the
not
The
he considered
statute,
quality
enacting
act
the
of the
in
the
determined
here,
knowingly
acts
respect."
as
defendant
committed the
So
the
involved,
Sky
charged
sections
the Blue
Law
as violations of the
of
wilfully,
he entertained when he
his acts
done
and the intent
were
them,
acts,
than an intent not to commit
committed the
other
legislature
the
the
cannot excuse his violation of
statute. Where
act,
doing
penalty,
specific
of
"the
prohibited, under
the
a
has
a
crime,
only
doing
the
fact
of
act constitutes the
and...
the inhibited
the
cases is whether the defendant did
to be determined
these
(Citations omitted.)
163,
Boyd,
at
N.W. at 335-
217 Wis.
act."
36.
erroneously
in State
asserts that we later held
The dissent
(Ct.
1993),
App.
Swift, 173
2d
Id. at N.W.2d at jury was appellant's brief in discloses that Swift 551.41(3), requires that "fraud or deceit" in § instructed "knowingly representations_" made false that the defendant Appendices 870, 496 Appel Wis. 2d N.W.2d Briefs, Library. But Brief State Law whether scienter lant's at 551.41(3) was not an was not an issue and indeed element Moreover, appel appeals. court of neither briefed any whatever nor the State's brief made reference lant's brief in the version of the Uniform penalty provision Wisconsin 551.58(1), STATS., A Law, "wilful" element. its Securities not a regarding an issue briefed is statement a court never Bloomer, Systems City Inc. holding. Analysis, See Power *14 legislature's Temby The inaction after we decided correctly is some indication that we construed the "wil- ful" in 551.58, element Our although by way construction of STATS. 551.41(2) §§ 551.58, of important dictum, commerce, was to to the bar and to yet legislature the courts of this state.6 And has not purge amended these sections to the force of our dic- "[L]egislative following judicial tum. inaction statute, conclusive, construction of a while not evinces legislative approval interpretation." of the State v. Eichman, 552, 566, 155 Wis. 143, 2d 456 N.W.2d 149 (1990). support position
To
their
that "wilfulness" in
requires
knowledge
§ 551.58, STATS.,
intent and
in a
rely heavily
case,
securities fraud
the defendants
on
Collova,
State v.
473,
79 Wis. 2d
The Collova court construed a statute which made person operate it unlawful for a a motor vehicle during suspension operating privi- or revocation of his (Ct. 1995) 817, 827, App. 197 Wis. 2d 541 N.W.2d (judicial appeal discussion of issues not raised or briefed on dicta). Thus, State v. "knowingly we did not hold Swift representation" make a false is an element of 551.41. Temby Other persua state courts have found our dictum Mitchell, (Mich. People sive. See 304, 308 App. Ct. Larsen, (Utah 1993). State v. 1989); 1355, 1358 865 P.2d 7 Temby In we addressed the intent issue in the of interests judicial having economy, reversed and ordered a new trial on unnecessary A disposi another issue. decision on an issue to a Bruendl, tion is dictum. State ex rel. Schultz v. 168 Wis. 2d (Ct. 1992). 112, 483 App. N.W.2d responsibility lege filing proof financial before obtaining reinstatement of a new license or before person required privilege. mind was state of The express The court never- the statute. not an element required a "state of the statute concluded that theless mind."8 strict criminal liabil Collova court noted that
ity,
liability regardless
defendant's state of
i.e.,
of the
[which] are in
to "acts
mind, has been held to attach
*15
who
innocent acts. Persons
of themselves not
and
danger
engage
unusual and
in these kinds of
choose to
reasonably
highest
may
to the
be held
activities
ous
by
precision,
strict crim
enforced
standards of care and
government
liability,
conforming
inal
regulations."
The rela
at
The Collova
where, in the words of the
is not a situation
ties fraud
punishment
"[t]o
on a
inflict
court,
substantial
Collova
negligent
any
person
intentional or
who is innocent of
justice
wrongdoing
and is ineffec-
offends the sense of
person
who
at
The defendants refer to decisions under
17 and
77q(a)
1933,15
§§
ofthe Securities
ofAct
U.S.C.
persuasive authority
proof
77x, as
of criminal
They
intent is essential to a criminal conviction.
cite
(5th
1979);
Vasilios,
U.S. v.
Section of the Securities Act in pertinent part:
77q(a). any person It shall be unlawful in the by any offer or sale of securities the use of means or transportation instruments of or communications mails, in interstate commerce or the use of the directly indirectly— or provisions The fraud of the Uniform Securities Law were 77q(a).
modeled after 15 U.S.C. Uniform Securities Act § 101§ (1985). cmt., 7B U.L.A. 516
(1) scheme, device, or arti- employ any defraud, fice to or
(2) money by means property to obtain or of a material fact any of untrue statement a material fact any or omission to state necessary make the statements in order to made, circumstances light in the of the made, not mislead- they under which were ing, or
(3) transaction, any practice, in engage operates which or or course business upon as a fraud or deceit operate would purchaser. 77x of the Securities
The penalties provision, § Act, provides pertinent part: wilfully any of the Any person
77x. who violates . . seq.] [15 of this title U.S.C. 77a et . provisions § conviction be fined not more than upon shall years, $10,000 not more than five or imprisoned or both. Uniform Securities
The drafters' comment to the consist- "wilfully" Act directs that we construe the term in the Securities Act of ently Exchange with a provision 1934, not the Securities Act of 1933. Uniform Securi- at 409 cmt. at 632. "As the ties Act cmt. § § the term federal courts and the SEC have construed 15(b) Exchange of the Securities Act of 'willfully' 78o(b),10 required proof 15 U.S.C. all that is in the sense that he intentionally that the acted person he was Uniform Securities doing." was aware of what 78o(b) Exchange authorizes the Securities Com Section suspend registration mission to or revoke brokers wilfully violated federal securities laws. dealers who have *17 persuades § 264, Act cmt. at 545. The comment us that position may defendants' is not the We law. consider published the official and comments of the drafters of a determining meaning uniform law when the of an ambiguous provision Spatt Balson, of that law. (Ct. 1994), App. 31, 42, Wis. 2d citing Statutory 2B Norman J. Singer, Sutherland (5th 1992). § 52.05, at 225 ed. Construction,
Moreover, other state courts have cited the draft-
ruling
ers' comment when
that "scienter" is not
required
§§
for violations of
101 and 409 of the Uniform
(our
§§
Securities
551.58,
Act
551.41 and
STATS.).
Bayhi,
791; Russell,
Defendants that we com- according Supreme because, ment Court, to the Alaska Act, the drafter of the Uniform Securities Professor "expressed Loss, has substantial doubt as to whether meaning 'wilfully' for administrative enforce- purposes purposes ment is the same as for of criminal liability." pertinent por- Hentzner, 613 at 828. The P.2d tion Loss treatise the Hentzner court cited is as follows: conceivable, therefore,
It "willfully" means 15(b) 78o(b)] something [15 less in U.S.C. than it § § acts, penal provisions does of the SEC something applied pro- that it means less when to a which is malum Act, like 5 of vision the Securities prohibitum, than provisions, to one of the fraud mala in se. nearly approach which more consistently the Commission has rate, any At 15(b) held under that the require term does not *18 law, motive, or or intent to violate the proof evil of being violated. knowledgethat the law was (Empha- added.) sis Regulation
2 Louis (2nd Loss, ed. Securities 1961). poten- treatise,
In Professor Loss described his meanings "wilfully" tially varying within different of meaning "wilfully" laws, not the of federal securities His conclusion that the Uniform Securities Act. within 15(b) consistently has held under the Commission require proof motive, of evil or that the term does not knowledge law, that the law was intent to violate the or hardly being violated, Securi- contradicts the Uniform "wilfully" directing that be construed ties Act comment mean, "all that in accordance with federal decisions intentionally required proof person is that the acted doing." he was in the sense that he was aware of what context, his- Based on our review of the statute's tory purpose, conclude that the wilfulness and we security prosecution not in fraud does element a require proof with intent to that the defendant acted knowledge that the law was violated. defraud or
IV. REQUIRE NOT PROOF OF INTENT WOCCADOES REQUIRED THAT FOR OR KNOWLEDGE BEYOND OFFENSES, THIS THE PREDICATE IN CASE FRAUD SECURITIES Stopple charged and were and convicted Mueller 946.83(3) 946.82(2), §§ under on one count STATS., by conducting participating violating or of WOCCA racketeering enterprise through pattern activ- a of an security eighteen predicate ity consisting offenses of 551.41(2) (3), STATS. fraud violation of pertinent WOCCA are provisions as follows: 946.83(3), provides, person
Section STATS., "No employed by, any enterprise may with, or associated participate, directly indirectly, conduct or enterprise through in the pattern racketeering activity." 946.82(3), "pattern Section defines ofracke- *19 teering activity" "engaging as in at least 3 incidents of racketeering activity that have the same or similar accomplices, intents, results, victims or methods of by commission or otherwise are interrelated distin- guishing characteristics...." 946.82(4), "racketeering
Section STATS.,defines activity" attempt, conspiracy as "the commit, or com- specified predicate including mission of' felonies, § 551.41, Stats., the securities fraud statute. in the
Nothing pertinent WOCCA statutes estab- lishes that intent or knowledge that an act is unlawful is an element of a WOCCA violation.11 Because noth- in ing exists, WOCCA that such an suggests element 939.23(1), we look to Stats. That statute provides, When criminal intent is an element of a in crime chs. 939 such intent is indicated 951, the term "intentionally", to", the phrase "with intent that", phrase "with intent or some form of the verbs "know" or "believe".
Since none of the terms or verb forms listed in 939.23(1) appear pertinent statutes, WOCCA it is unlikely legislature intended that criminal intent is an element of a WOCCA violation.
11 946.82(3), Stats., phrase Section uses the "the same or similar intents." We construe "intents" that context to mean object proposed." "an end or WEBSTER'S THIRD NEW INTERNA (1993). TIONAL DICTIONARY 1176
143
Finally,
interpreting
case law
the federal Racket-
(RICO)
Corrupt Organizations Act
eer Influenced and
authority
interpret
persuasive
when we
WOCCA.
606,
O'Connell,
598,
State v.
179 Wis. 2d
508 N.W.2d
(Ct.
1993);
App.
725,
23,
Evers,
State v.
163 Wis. 2d
26
(Ct.
1991).
App.
732,
828,
Federal case
require
that RICO does not
an element
law establishes
knowledge beyond
required
of intent or
to violate
necessary
predicate
"The
rea
offense.
mens
element
for a
RICO conviction is the same as is
substantive
required
predicate
for the
crime . . . ." United States v.
(9th
1995),
Baker,
1478,
63 F.3d
Cir.
cert. denied
(1996), citing
nom.,
U.S.,
sub
Hale v.
The RICO statute itself contains no mens requirement beyond rea or mental state that called in outlawing predicate statutes act itself. Although racketeering specific acts must be by the accompanied required the mental state act, prohibiting statute that the RICO statute requires sup- no other evidence of mental state to port finding engaged pattern a that a defendant in a racketeering activity. F. Charles B. 2 Edward J. Blackmar, Devitt, Kevin Jury Instructions, O'Malley, Federal Practice 1990). (4th at 703 ed. 48.03 Criminal, Similarly, pattern for a WOCCA instructions separate intent element. See violation do not include jury 1883. We infer that the criminal WlS JI —Criminal intent or committee has concluded that an instructions knowledge of a an act is unlawful is not an element that jury The work of the criminal WOCCA violation. persuasive, State v. committee can be instructions 286, 299, 362, 367 Schambow, 176 Wis. 2d (Ct. 1993), App. our conclusion. and here it buttresses require proof of WOCCAdoes not
We conclude that knowledge beyond required for the intent or underlying predicate offenses.
V. VERDICT EVIDENCE SUSTAINING A. As Securities *21 securities are offered.... in the manner in which note, indebtedness, any of
Security means evidence or, any general, contract in interest or investment the inci- commonly having instrument known as or security or offered in the manner in which dents of a promissory are offered. Not all notes are securities may securities under Wisconsin law. You consider any evidence in this case in this statute and other notes constitute determining whether or not these securities. closely pertinent parts
The instruction tracks the of the 551.02(13)(a). defining "security," § statute Neither the objected State nor the defendants to the instruction. sufficiency evidence, we review the ofthe we When may evidence, not reverse a conviction unless favorably State, viewed most to the is so insufficient probative value and force that it can be said as a matter acting reasonably law, that no trier of fact could have guilt beyond a doubt. State v. Poel found linger, reasonable 493, 501, 2d 451 N.W.2d
153 Wis.
(1990). relying the evidence without on the
We review
jury
argument
State's
that the
could find that the FLS
notes were securities on the basis of the factors estab-
(1990).13
Young,
in Reves v. Ernst &
basis jury solely heard. the evidence the on argue jurors find, could not The defendants them, that the notes are to the instructions under disagree. securities. We Security prosecution the Wisconsin witness from
A of a the definition Office testified that Commissioner's security 551.02(13)(a), promissory includes agreed that what is on cross-examination notes. He security debatable and Wisconsin law is often under frequently interpret deter- the law to must that a court security. particular is a instrument mine whether a touching testimony directly no other The State offered question are securities. whether the FLS notes testimony by produced such However, the defense attorney specializes He testi- in securities law. who an presumed securities and are to be that all notes fied security determining four note is a whether a that in whether the note into account: are taken factors being opposed capital, issued to to raise as offered to transaction; the note whether commercial facilitate a transaction; in an isolated commercial was issued opportu- investment note was issued as an whether the accompanied nity; a risk- the note is and whether opposed being reducing insured, as factor such as being uninsured, and uncollateralized. unsecured attorney's jury of the on the basis was entitled testimony the FLS to find that instructions and their FLS shows that First, the record securities. notes are capital. wrote The defendants to raise the notes offered stating employees, FLS has program sale years the installment many For financing lending excellent source been an eager . . . We are Loan Service. of Farm operations of funds within time to increase this source at this structure, reducing thus our reliance corporate our banking system.... on the commercial raising capital of new In order to facilitate instituting pro- we are an incentive operation, our employees of Farm Loan gram for those direct non-guaranteed generate who are able to Service *23 company. the installment sales for jury as notes were issued The could infer that the marketing program, part and were not isolated of a in sin- transactions. FLS issued the notes commercial gle customers, but transactions with its farm-auction forty-six notes 1985 the defendants sold from 1981 to paid twenty-one. an additional off As of 1985 outstanding thirty-five that had been sold notes were sixty bankruptcy, some to When FLS filed before 1981. outstanding totaling seventy holding *24 551.41(3), STATS., not argue, § was under a fraud argument. reject proved. the We bookkeeper that in March testified FLS A former FLS was debt to showed DAS's FLS books 1985 the accounting April the she made In $1,541,833.36. by reflecting notes and DAS of transfer the entries having $1,320,868 to value of ostensible an accounts testimony jury exchange. heard the Because in the FLS FLS were substan- to DAS transferred the assets that jury tially to infer entitled worthless, was substantially than less valuable were assets those proved a State FLS, and therefore to DAS's debt 541.41(3), fraud under Stats.
VI.
CONCLUSION recapitulate. prosecution We is not barred the statute of limitations. The State did not have to prove defendants acted with intent to defraud or knowingly require violate the law. WOCCA does not proof knowledge beyond required or intent for predicate racketeering. acts that constitute Suffi- jury cient evidence existed for the to find that the FLS replaced notes were and securities that defendants cor- porate substantially assets with less valuable assets. judgments We affirm the of conviction.
By Judgments affirmed. Court.— (dissenting). SUNDBY, J. Each defendant is sub ject imprisonment ninety $90,000 to fines of and for years. may imposed Such severe sanctions not be on negligent innocent but defendants. See State v. Col lova, 473, 486, 79 Wis. 2d 587-88 (1977). I dissent. racketeering
Defendants were convicted of issuing promissory through misrepresentation *25 jury: instructed the know- only that the defendant means
Wilful... not charged. Wilful does the act ingly committed or an intent to defraud defendant had mean that the law knowledge that was had that the defendant being violated. may guilty accept of a I be
I understand negligence. by my injure criminal if I someone crime " negli- 939.25(1), '[C]riminal provides: Stats., Section degree, high ordinary negligence gence' to a means consisting should realize the actor of conduct which or risk of death and unreasonable a substantial creates great nothing bodily is uncon- to another." There harm negligent punishing which conduct stitutional about a substantial realize creates actor should bodily great harm to risk of death or unreasonable 2d 196- Barman, 183 Wis. See State v. another. 1994). (Ct. key App. 493, 501-02 200, 515 N.W.2d constitutionality is that statutes of reckless behavior his or her conduct realize" that the actor "should jury propose to find However, to allow we unlawful. guilty of crimes because in this case the defendants may retrospectively, have been conduct, viewed their negligent. "Any 551.58(1), part: provides in Stats.,
Section any provision wilfully1 this person violates who may chapter $5,000 not more than be fined . . . (Emphasis years imprisoned or both." not more than 5 added.) predi- eighteen convicted of were Defendants cate acts. part: provides 551.41,
Section decisions, in some of the cited and of the statutes 1In some throughout. "wilful" I will use spelled "willful." "wilful" is *26 It is any person, unlawful for in connection with offer, any sale purchase security or of in this state, directly indirectly: or
(2) any To make untrue statement of a mate- necessary rial fact or to omit to state a material fact made, in order to make the light statements made, of the they circumstances under which are misleading; not or
(3) act, engage any practice To or course of business which operates operate or would as a fraud or upon any person. deceit " is a '[Wilful]'... 'word of and 'its many meanings,' construction often . . [is] . influenced its context.'" (1994) States, v. United 114 655, S. Ct. Ratzlaf States, v. (quoting Spies United 317 U.S. (1943)).
The seminal
case in Wisconsin construing
word "wilful" is
Preston,
State v.
34 Wis.
683-85
(1874). According
Court,
to the Wisconsin Supreme
Preston continues
to be "a leading
on the
authority
"
word,
nuances of the
'wilful.' Department
Transp.
of
Transportation Comm'n,
The word as used to denote the intent done, with which an undoubtedly act is is suscepti- ble of different meaning degrees shades of or intensity according to the context and pur- evident pose the writer. It is sometimes so modified reduced plain as mean little more than intention- ally, not, however, designedly. Such is its ordinary signification when used in criminal law frequently there most penal statutes. It sense, conveying as understood, mild a but not in so degree, or less greater malice in legal idea of justifia- intent without is, an evil implying as ble excuse. added). (emphasis The court said 683-84
34 Wis. at *27 satisfactory it discussion" "fullest and most "[wilfully]" in United States was of the word had found Rep. 196, where Cars, 1 U.S. Railroad Abbott's v. Three differentiating the words "know- between court, in the ingly," "maliciously," "[wilfully]" as used and penal statutes, said: and criminal not, par- in common of these words does The first per construction, necessarily lance, legal or in disposition, perverse or se purpose a wicked imply motive, intent or any improper indeed evil or or in a ordinarily used bad the second is feeling; but kind, or to char- something of that express sense which a man wantonly, or one an act done acterize ability must know to knowledge of reasonable duty. contrary to his be 685.
34 Wis. at in the 551.58, STATS., are set 551.41 and Sections 551, "Fraudulent ch. entitled IV of context of subch. subchapter or subdivi- the title of While Practices." may part law, it be of the not a statute is sion of Poultry legislative See intent. of indicative Pulsfus 805-06, 149 Wis. 2d Leeds, Farms, Town Inc. v. (1989). Plainly, purpose of 329, 333 N.W.2d 440 practices. proscribe "Astate- fraudulent IV is to subch. falsely made . . . with if it was is 'fraudulent' ment ... (6th 662 Dictionary to deceive." the intent Black's Law added). 1990) (emphasis ed. 153 unlawful, Where a statute makes fraud the Crimi- Jury requires knowledge nal "scienter," Instruction that the act is unlawful. See WlS J I—CRIMINAL (welfare making representations); fraud: false WlS J (welfare report fraud: failure to I — Criminal (welfare assets); income or WlS J I—CRIMINAL facts); notify change fraud: failure to authorities of (food stamp and WlS J I—CRIMINAL fraud: mis- facts). stating Even where the statute does not use "knowingly," term "wilful" or "intentional" or the Crim- Jury inal Instructions Committee has concluded that a proscribes requires statute which fraud that the State prove an intent to violate the law. See WlS J 4; Comment Wis J I — Criminal I — Criminal 1854, Comment 3. majority Temby, relies on State v. 108 Wis. 2d (Ct. 1982), App.
521, 528-30, 322 N.W.2d 526-27 where we stated that intent to defraud is not an ele- §§ ment 551.58, of a violation of 551.41 and Stats. gratis However, that statement dictum. We are *28 by holding bound our in the later case of State v. Swift, (Ct. App. 870, 878, 173 2d Wis. 716 1993), where we held:
One element of the offense of theft securities fraud is knowingly the defendant made false representations with the intent to defraud. See Wis 551.41, STATS., JI —Criminal 1453. Section makes it to person unlawful defraud a in connection with the any security by sale of making untrue statements of omitting material fact or a material fact. majority rejects holding The our in because Swift
the issue of scienter was not
The
briefed.
clear reason is
that it never occurred to the State that a defendant
innocently
could
defraud another. I have found no case
jurisprudence
in Wisconsin criminal
in which "wilful"
permit the conviction of a defen-
construed to
has been
knowledge
was
had
that his or her act
who
no
dant
and
intent to
an unlawful act.
unlawful
had no
commit
gratis
Temby,
announcing
in
its
dic-
In
the court
erroneously
on
v. Securities and
relied
Aaron
tum
(1980),
Exchange
not
Comm'n, 446 U.S.
which was
The
a
action but a civil enforcement action.
criminal
17(a)
§
of
the Securities Act
Aaron Court construed
of
virtually
§
It
551.41,
which
identical
STATS.
required
Congress
scienter to find a
concluded that
17(a)(1) 551.41(1)]
§
[§
of
it used the
violation
because
"device," "scheme,"
U.S. at
and "artifice." 446
words
Congress
concluded, however,
The
695-96.
Court
require
a
of
intend
scienter to find violation
did not
(3)
17(a)(2)
17(a)(3) 551.41(2)
].
[§
446 U.S. at
and
persuasive
construing
in
Aaron is therefore
696-97.
provides
§ 551.59, of
which
for civil enforcement
construing
§ 551.58,
551.41, but
in
not
STATS.
history
legislative
of the Securities Act of
Congress
clearly shows that
understood that scienter
required
person of
to convict a
a criminal
would be
representation
making
in a
offense of
a false
securities
liability,
questioned
one
civil
transaction. When
about
Act
liabil-
drafters of the 1933
stated: "Criminal
of the
making
only
knowingly
ity
on
is based
false
liability
in
But
exists even
the case
statement.
civil
Judge
Alexan-
an innocent mistake. . . ." Statement
Attorney
Special
to the
Holtzoff,
Assistant
der
then
Hearings
Act,
875, Senate Com-
General, Securities
on
Currency,
Congress,
Banking
1st
73d
on
mittee
(1933), quoted Aaron,
(Blackmun, dissenting concurring part J., added). part) (emphasis *29 by guided only suggest the Swift, not where
I we be by self-evident, law but considered the court Ratzlaf. The Court did not construe securities law but a Ratzlaf (31 Secrecy cousin, distant the Bank Act U.S.C. 5311-5322). requires §§ The Act banks and other finan- report Secretary cial institutions to the of the Treasury exceeding cash transactions $10,000, and prohibits person "wilfully" evading report- a from ing requirement by breaking up single a transaction into smaller transactions. Ratzlaf was indicted a grand jury structuring payment $100,000 a cash through a Nevada casino checks, a series of cashier's each of which was for less $10,000. than He was con- jury victed after the district court instructed the prove the Government did not have to that Ratzlaf violating anti-structuring knew he was law. 114 S. Supreme concluding Ct. at 657. The reversed, Court proscribed that because the Act conduct, "wilful" prove Government had to that Ratzlaf acted with knowledge that his act was unlawful. proscribes establishes that where a statute Ratzlaf prove only conduct,
"wilful" the Government must not doing that the defendant knew what he was but knew that his or her act was unlawful. The Court noted that consistently federal courts had construed "wilfulness" require purpose as used in related statutes to to diso bey appellate the law. Id. at 656. Wisconsin courts have consistently require guilty construed "wilful" to intent. e.g., See, Collova, 486, 255 79 Wis. 2d at N.W.2d at 587- 88. unnecessary Court found it to resort to Ratzlaf
legislative history
statutory
because the
text was clear.
A
instructed
representations
material
as to
made false
defendants
from those to whom
material facts
facts and concealed
knowing
they
their acts
securities,
transferred
jury
was not
(3), Stats. The
551.41(2)
violated
and
permitted
were charla-
whether defendants
to decide
merely optimists.
jury
instructed that
The
was
tans or
they
an
defendants committed
were not to find whether
they
simply
did the act.
whether
unlawful act but
instruction, defendants had no
incorrect
Under that
jury
found that
However,
could have
defense.
good
Ser-
faith,
that Farm Loan
defendants, in
believed
maturity,
upon
*31
92,
However,
at 164.
the court
ate. Id. at
330 N.W.2d
penal,
if
statute had
it would
made clear that
been
strictly, thereby requiring
"wilful"
an
have construed
90,
evil or
intent. Id. at
The Collova court
view
punishment
per-
on a
this case: "To inflict substantial
any
negligent
of
intentional or
son who is innocent
justice
wrongdoing
is ineffec-
offends the sense of
at
Wis. 2d at
588.
tive." 79
majority
rationale
not
concludes that the Collova
does
any
apply
person
because
who makes an untrue state
of a
ment
material fact or omits to state a material fact
wrongdoing." Majority op.
of
"is not innocent
at 138.
tragic
only
This is a
misstatement not
of the law but of
experience. may
good
my
I
human
faith tell
wife I
p.m.
will be home for dinner at 6:30
but miss the 5:55
My
my
bus.
I
statement was untrue but do not believe
guilty wrongdoing.
wife would find me
In Reda v.
(Ct. App.
Sincaban,
145 Wis. 2d
The invades the of the "should, it concludes that defendants are cheaters and guilty knowledge." Majority op. more, at without have agree majority engaged with the that a cheater is 139.1 "[A] wrongdoing. However, in person a "cheater" is a swindler: dishonestly, deceives, or defrauds: He who acts a is a cheat and liar." Dictionary The Random House (2d 1987). Typical syno- ed. English Language THE sharper, dodger, nyms "swindler, trickster, are: phony, charlatan, fraud, fake, mountebank." Id. In this guilty presents strong case, the State case of knowl- jury edge. tempting well, It is to conclude: "Oh guilty anyway." probably have found defendants would jury may, however, be different. The next case gave court will become which the trial instruction jury meaning of "wilful." Numerous law as to the to reflect that the will have to be rewritten instructions longer statutes no as used criminal word "wilful" knowledge requires that he she that defendant have consequences violating of our decision the law. The was frightening. I therefore dissent. are Notes State failed to contend that The defendants promissory to its notes FLS issued that the establish as defined customers were securities farm-auction 551.02(13)(a), assert STATS.12 Defendants the notes to that FLS issued the record shows because purchase of their for the its customers as consideration properties, not securities. the notes are jury court instructed the The trial part: relevant 551.02(13)(a), provides in Section indebtedness; . . . "Security" any . . note . . . evidence means . or, general, any contract;... or instrument interest investment security having commonly ofa or offered the incidents known as or
Notes
notes farmers creditors FLS. At one million were unsecured $1.5 outstanding million. notes totaled about $3.5 time the jury offered heard evidence that defendants customers as investment notes to its farm-auction the opportunities. letter to farmers FLS used a standard stating opportunity to invest that it had available "an "very company" competitive interest rate." at a in our beginning regularly before FLS used the letter according contains to defendant Mueller. The record many examples who were advised that of noteholders higher than was earn a rate of interest the notes would through money bank, market at a or available account. Finally, jury that heard other evidence because by any form of collateral and were unsecured the notes reasonably jurors uninsured, could conclude were risk-reducing unaccompanied by a were that the notes factor. FLS in Assets to Worthless Transfer of B. Fraud of Noteholders alleged separate aas in the information Count 18 April predicate WOCCA, that on about under crime substantially transferred 30, 1985, the defendants FLS in receivable to and notes accounts worthless exchange in the same a debt elimination of for the alleges information DAS. The FLS to amount owed operated named or deceit on as a fraud the transfer 551.41(3) contrary §§ 551.58, STATS. noteholders, to seriously the State's contest do not The defendants position sub- to FLS were assets transferred that the They stantially however, that assert, worthless. prove the DAS debt the value of State failed greater receiv- value of the than the was FLS cancelled put in no the State to FLS. Since DAS transferred ables going DAS debt value of the to the direct evidence only specu- jury argue could that the FLS, defendants exchange comparative regarding in the values late reason, defendants DAS. For FLS and between
notes 551.41(2) (3), fraud, violation of Stats. For purposes deciding correctly whether the trial court jury, any misrep- instructed the we must assume that resentations or omissions defendants made to induce purchasers accept although innocent, the notes were negligent. propose We to hold that the trial court cor- rectly jury instructed the that it could find defendants guilty though they innocently. even acted This cannot be the law. objection, Over defendants' the trial court
notes redeem its unsecured vices could problems. though company had financial even of Transp. Department clear from It is Ratzlaf body legislative Transportation Comm'n that v. may activity by industry regulate an to choose penal imposing In the latter civil and sanctions. both regulating finance construed the statute case, the court adjustment companies companies, dealers, auto charged agencies. an automobile The State collection manager president dealership, with and its sales its violating the wilful fail which made unlawful a statute buyer. agreement perform with a to a written ure Doucas Oldsmobile at 160. 2d at Wis. agreement to sell an automo in its discovered an error price buyer pay increased The refused bile. agreed parties that the on. The Doucas insisted which good-faith at mistake. Id. was a omission sought transportation commission 161. The at N.W.2d enjoin violations of from future Doucas Oldsmobile required argued a Doucas that the statute the statute. finding intent, malice were made with evil that its acts justifiable excuse. Id. at 330 N.W.2d at or without regulatory, held that because this was 162. court inappropri- non-penal statute, was strict construction