Opinion ID: 2608751
Heading Depth: 1
Heading Rank: 4

Heading: Existence of Substantial Relationship

Text: (4a) We turn next to appellant's further contention that his nolo conviction was insufficient to furnish the requisite reasonable or substantial relationship to the qualifications, functions or duties of his profession. Appellant was convicted of conspiracy, a federal offense. (18 U.S.C. § 371.) The judgment recites that the conspiracy conviction was as charged in Count 1 in the Indictment in 66 Counts.... (5) The indictment was introduced as an exhibit at the administrative hearing and by reason of appellant's nolo plea, all facts alleged therein stand admitted. ( Lott v. United States (1961) 367 U.S. 421, 426 [6 L.Ed.2d 940, 943-944, 81 S.Ct. 1563]; United States v. Heller (6th Cir.1978) 579 F.2d 990, 998.) Therefore, the indictment may be considered by us in evaluating the nature of the offense for which appellant stands convicted. ( Matanky v. Board of Medical Examiners, supra, 79 Cal. App.3d 293, 302; Tseung Chu v. Cornell (9th Cir.1957) 247 F.2d 929, 935-936.) The indictment accused appellant and others of willfully and knowingly conspiring to commit various specified offenses in violation of a variety of federal statutes (15 U.S.C. §§ 77q, 77x, 78m, 78o(d), 78ff(a); 17 C.F.R. §§ 240.13a-1, 240.15d-1, 249.310; 18 U.S.C. §§ 215, 1014, 1341, 1343, 2314) by assisting in the creation of a false and inflated financial picture of U.S. Financial, a corporation engaged in real estate development. (4b) Specifically, the indictment charges that appellant aided and abetted the fraud by his active and knowing participation in land sales to strawmen or shell corporations, for the purpose of generating the false impression that U.S. Financial was realizing large profits from these sales. Although appellant was neither an employee nor officer of U.S. Financial, it was alleged that he agreed to become an owner or operator of various shell corporations which supposedly purchased property from U.S. Financial in arm's length transactions, using funds provided by U.S. Financial or its officers for payment of the purchase price. An important aim of the conspiracy was to promote the sale of U.S. Financial stock at substantially higher prices which were reflective of the apparently successful and profitable land sales. It is apparent from a reading of the indictment that the charges against appellant bore a reasonable and substantial relationship to the qualifications, functions or duties of his profession as real estate broker. These charges included wilful participation in dummy land sales transactions which were entered into for illegal and fraudulent purposes. Similar offenses involving dishonest or fraudulent conduct frequently have been held to constitute grounds for administrative discipline. ( In re Hallinan (1957) 48 Cal.2d 52, 55-56 [307 P.2d 1]; Gold v. Fox, supra, 98 Cal. App.3d 167, 176-177 [real estate broker]; Matanky v. Board of Medical Examiners, supra, 79 Cal. App.3d 293, 305-306; Ring v. Smith (1970) 5 Cal. App.3d 197, 205 [85 Cal. Rptr. 227] [real estate broker]; Rhoades v. Savage (1963) 219 Cal. App.2d 294, 299-300 [32 Cal. Rptr. 885] [real estate broker].) Ring involved a real estate broker who suffered a nolo conviction for conduct which included misrepresentations in the sale of securities. The Ring court said One of the purposes of the governing legislation [§ 10177, subd. (b)] is to insure, as far as possible, that real estate brokers and salesmen will be honest, truthful and of good reputation. [Citation.] By making the above representations appellants manifestly demonstrated a lack of integrity. (P. 205.) At the administrative hearing, appellant and his counsel were permitted to testify regarding the circumstances which surrounded appellant's offense. Appellant acknowledged that the transactions conducted by the officers of U.S. Financial constituted security fraud, because these transactions were made for the purpose of misrepresenting the company's profits which then were reflected in its financial statements. Appellant, however, argued that the record lacked any evidence of his own improper intent. As characterized by his counsel It would come down to a question as to whether [appellant] realized that he was helping in something that was illegal. Notwithstanding his conviction, he attempted to introduce evidence which would raise doubt as to his guilt of the federal offense. As we have previously noted, this he may not do. Appellant continues to assert that administrative discipline would be improper in the absence of any positive proof of his wrongful intent beyond the indictment and nolo conviction themselves. Yet as we have seen, the nolo conviction stands as conclusive proof of appellant's guilt of the specific offense charged in the indictment. No extrinsic independent evidence thereof need be introduced. Nor is appellant permitted to impeach that conviction. ( Matanky, supra, at p. 302.) We conclude that the record amply supports the commissioner's finding that appellant's offense bore a substantial relationship to the qualifications, functions or duties of his profession.