Court Opinion

ID: 2726417
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:02:52.029163+00
Date Added: 2024-06-11T15:43:25.376986
License: Public Domain

Sep 13 2013, 5:18 am

FOR PUBLICATION

ATTORNEYS FOR APPELLANT:                     ATTORNEYS FOR APPELLEE:

ROBERT W. HAMMERLE                           GREGORY F. ZOELLER
KATHRYN DINARDO                              Attorney General of Indiana
Hammerle Law Office
Indianapolis, Indiana                        ELLEN H. MEILAENDER
                                             Deputy Attorney General
VICTORIA L. BAILEY                           Indianapolis, Indiana
Beech Grove, Indiana

                            IN THE
                  COURT OF APPEALS OF INDIANA

JERRY A. SMITH,                              )
                                             )
     Appellant-Defendant,                    )
                                             )
            vs.                              )    No. 24A01-1210-CR-469
                                             )
STATE OF INDIANA,                            )
                                             )
     Appellee-Plaintiff.                     )

       INTERLOCUTORY APPEAL FROM THE FRANKLIN CIRCUIT COURT
                  The Honorable Clay M. Kellerman, Judge
                       Cause No. 24C02-1102-FB-44

                                 September 13, 2013

                            OPINION - FOR PUBLICATION

KIRSCH, Judge
       Jerry A. Smith (“Smith”) brings this interlocutory appeal from the trial court’s order

granting in part and denying in part his motion to dismiss the charges against him. Smith

contends that further prosecution in state court after his plea of guilty to charges of federal

conspiracy to commit mail and wire fraud is barred by statutory double jeopardy principles.

The State cross-appeals from the trial court’s order granting, in part, Smith’s motion to

dismiss.

       We affirm in part, reverse in part, and remand.

                       FACTS AND PROCEDURAL HISTORY

       Between 2004 and 2010, Smith and Jasen Snelling (“Snelling”) ran a Ponzi scheme

out of CityFund Advisory (“CityFund”) and Dunhill Investment Advisors Ltd. (“Dunhill”).

Central Registration Depository records showed that Snelling was listed as the President of

CityFund, and Smith was listed as the Secretary/Treasurer. CityFund’s investment advisor

license with the U.S. Securities and Exchange Commission (“SEC”) was withdrawn in 2004,

and Dunhill’s registered trust with the SEC was withdrawn in 2002. Smith has not been

registered to sell securities since May of 2008 and was never registered to sell securities

through CityFund or Dunhill. Of the securities sold through CityFund and Dunhill, none

were registered as required by law.

       In December, 2011, the Franklin County Prosecutor’s Office filed a twenty-five count

information against Smith related to this Ponzi scheme. Four victims, who were Indiana

residents, were identified in the charges. Smith and Snelling told the victims that they were

                                              2
involved in day trading, were licensed to sell securities, and promised unusually high returns

on the investments.

       A sealed federal indictment was filed against Smith by the United States Attorney’s

Office for the Southern District of Ohio on June 4, 2012. The federal indictment charged

Smith with conspiracy to commit mail and wire fraud, obstruction, and tax evasion. The

indictment generally alleged that between 2003 and 2011, in the Southern District of Ohio

and elsewhere, Smith and Snelling conspired to commit mail fraud and wire fraud by using

the U.S. Mail and interstate wire communications to execute a scheme to defraud investors in

CityFund and Dunhill and to obtain money from investors by means of false and fraudulent

promises and representations.

       Smith and Snelling were alleged to have told investors that they were involved in day

trading, all investments were liquidated to cash at the close of each day, and that this strategy

guaranteed profits of 10-15%. Smith and Snelling held themselves out as being licensed to

sell securities. Those representations were false because neither was licensed to sell

securities nor were the firms licensed brokerage firms, and the investors’ money was never

invested in anything or used in day trading; instead, it was used to enrich Smith and Snelling.

Smith and Snelling prepared and sent to investors, through both the mail and electronic mail,

falsified quarterly statements for Dunhill and CityFund purporting to show positive account

balances and fictitious earnings, all as part of the scheme. A total of approximately seventy-

two investors in Ohio, Kentucky, and Indiana collectively lost over $8,900,000.00 in this

investment scheme.

                                               3
        Smith entered a guilty plea to the three federal charges against him on June 12, 2012.

Smith signed an agreed statement of facts acknowledging the Ponzi day trading scheme in

which he and Snelling falsely represented that they were licensed to sell securities when they

were not and the investors’ money was never invested. Smith acknowledged that he and

Snelling performed the specific overt acts set forth in the indictment.

        After pleading guilty in federal court, Smith filed a motion to dismiss the Franklin

County charges, contending that the State’s prosecution was barred by Indiana Code section

35-41-4-5, our statutory double jeopardy provision pertaining to prosecution by dual

sovereigns. The Franklin Circuit Court dismissed Counts 11 through 25 setting out the

charges alleging that Smith committed securities fraud and securities fraud involving a victim

over sixty years of age on the basis that the conduct alleged was the same or substantially the

same as the conduct alleged in the federal indictment to which Smith pleaded guilty.

However, the trial court denied Smith’s motion to dismiss Counts 1 through 10 setting out

the charges alleging that Smith engaged in unlawful acts related to the offer or sale of a

security and alleging Smith’s failure to comply with the requirement of broker-dealer

registration.. Both parties now appeal.

                                  DISCUSSION AND DECISION1

        Smith now appeals from the trial court’s order denying in part his motion to dismiss,

and the State cross-appeals from the trial court’s partial grant of Smith’s motion to dismiss.

        1
           We held oral argument in this appeal and an appeal involving the same defendant and issues, but
arising from orders issued in different counties, on July 10, 2013 in the Indiana Court of Appeals Courtroom in
Indianapolis, Indiana. We commend counsel for the quality of their oral and written arguments.

                                                      4
The defendant bears the burden of proving by a preponderance of the evidence those facts

necessary to support a motion to dismiss. Swenson v. State, 868 N.E.2d 540, 541-42 (Ind. Ct.

App. 2007). The clearly erroneous standard of review depends upon whether the party is

appealing a negative judgment or an adverse judgment. Baird v. ASA Collections, 910

N.E.2d 780, 785 (Ind. Ct. App. 2009). Where the party bearing the burden of proof appeals

from the trial court’s ruling, he appeals from a negative judgment and will prevail only upon

establishing that the judgment is contrary to law. Id.

       When a party appeals from a negative judgment, we will reverse the trial court’s

ruling only if the evidence is without conflict and leads inescapably to the conclusion that the

party was entitled to dismissal. Swenson, 868 N.E.2d at 542.

       A party appeals from an adverse judgment, as the State does here in its cross-appeal,

when the judgment is entered against a party defending on a particular question. McCarty v.

Walsko, 857 N.E.2d 439, 443 (Ind. Ct. App. 2006). Where the trial court enters findings in

favor of the party bearing the burden of proof, the findings are clearly erroneous if they are

not supported by substantial evidence of probative value. Romine v. Gagle, 782 N.E.2d 369,

376 (Ind. Ct. App. 2003). The judgment will be reversed even if we find substantial

supporting evidence, if we are left with a definite and firm conviction that a mistake has been

made. Id.

       Smith argues that the trial court erred by partially denying his motion to dismiss the

state-court charges against him contending that further prosecution is barred by the previous

federal prosecution.

                                               5
      “The Indiana and United States Constitutions provide no protection from double

jeopardy as between federal and state prosecutions.” State v. Allen, 646 N.E.2d 965, 967

(Ind. Ct. App. 1995). As we explained further in Swenson,

      Although the Indiana and United States Constitutions provide no protection
      from double jeopardy as between “dual sovereigns,” Indiana has provided
      statutory protection against double jeopardy in such situations.

868 N.E.2d at 542. That statutory protection is codified by Indiana Code section 35-34-1-4,

which provides in relevant part as follows:

      (a) The court may, upon motion of the defendant, dismiss the indictment or
      information upon any of the following grounds: . . (7) The prosecution is
      barred by reason of a previous prosecution.

“Therefore, the double jeopardy question involved in this case is one of statutory

construction, rather than constitutional construction.” Allen, 646 N.E.2d at 968. Federal

governments are considered to be separate or dual sovereigns. Id.

      Indiana Code section 35-41-4-5 provides as follows:

      In a case in which the alleged conduct constitutes an offense within the
      concurrent jurisdiction of Indiana and another jurisdiction, a former
      prosecution in any other jurisdiction is a bar to a subsequent prosecution for
      the same conduct in Indiana, if the former prosecution resulted in an acquittal
      or a conviction of the defendant or in an improper termination under section 3
      of this chapter.

“Whether a prosecution is barred by double jeopardy is a question of law.” Swenson, 868

N.E.2d at 542 (citing Allen, 646 N.E.2d at 968).

      “The primary rule in statutory construction is to ascertain and give effect to the intent

of the legislature.” Brown v. State, 790 N.E.2d 1061, 1063 (Ind. Ct. App. 2003) (citing

                                              6
Hendrix v. State, 759 N.E.2d 1045, 1047 (Ind. 2001)). We have found the best evidence of

legislative intent is the language of the statute itself. Id. All words must be given their plain

and ordinary meaning unless otherwise indicated by statute.             Id. at 1063-64.     Our

presumption is that the legislature intended the language actually used in the statute to be

applied logically and not to bring about an unjust or absurd result. Id. at 1064-65.

       The plain language of the statute requires a comparison of the conduct alleged to

constitute an offense in Indiana with the conduct alleged to constitute an offense in another

jurisdiction, here, in federal district court. In both, Smith and Snelling were alleged to have

operated a Ponzi scheme. They stated to investors that they were involved in day trading,

meaning all investments were liquidated to cash at the close of each day, and that this

strategy guaranteed a large return in profits. Smith and Snelling held themselves out as being

licensed to sell securities when neither was licensed to sell securities nor were the firms

licensed brokerage firms, and the investors’ money was never invested in anything or used in

day trading, but rather to enrich Smith and Snelling.

       Unlike state constitutional double jeopardy analysis, we do not engage in application

of the statutory elements test or the actual evidence test to determine if Smith was subjected

to repeated prosecution for the same offense. See Richardson v. State, 717 N.E.2d 32, 49-50

(Ind. 1999) (“Both of these considerations, the statutory elements test and the actual evidence

test, are components of the double jeopardy ‘same offense’ analysis under the Indiana

Constitution.”). Statutory double jeopardy shields a defendant from subsequent prosecution

                                               7
for the same conduct that resulted in an acquittal or a conviction in the former prosecution. I.

C. § 35-41-4-5.

       Both the federal indictment and the state charges arise from the overarching Ponzi

scheme involving numerous victims in multiple states who were harmed by the actions of

Smith and Snelling. The Ponzi scheme was a single scheme to defraud multiple victims

including those identified in the Franklin County charges. The Ponzi scheme resulted in

combined investment losses by the victims in excess of $8,900,000.00 including the losses

sustained by the Franklin County victims.

       The federal court’s judgment included all of the victims and all of the losses identified

in the Franklin County indictment. The federal court’s judgment ordered Smith to pay

restitution of $5,000,000.00. Specifically included in the federal restitution order were each

of the victims identified in the Franklin County prosecution.

       Indiana Code section 35-41-4-5 provides that a former prosecution in any other

jurisdiction is a bar to a subsequent prosecution for the same conduct in Indiana if the former

prosecution resulted a conviction of the defendant. Here, the conduct for which Smith was

prosecuted in the federal proceeding was the overarching Ponzi scheme. That scheme also

formed the basis of the federal charges and those brought by Franklin County in Counts 1-5

and 11-25. Accordingly, we conclude that Franklin County prosecution of Smith as to these

counts is for the same conduct as that included in his federal conviction.

       However, Counts 6 through 10 are different. Smith was alleged to have violated

Indiana Code section 23-2-1-8, which was repealed by P.L. 27-2007 SEC. 37, eff. July 1,

                                               8
2008, under Count 10 for acts occurring in 2004, and Indiana Code sections 23-19-4-1 and

23-19-5-8 under Counts 6 through 9 for acts occurring in October 2008 and thereafter. The

counts allege that Smith knowingly transacted business as a broker-dealer without being

registered as such with the Indiana Secretary of State, Securities Division, as required by law,

and without being exempt from registration. In those counts the offense is failing to register

as a broker-dealer as required by law before transacting business as such and does not

involve the same conduct as the conduct forming the basis for Smith’s federal conviction,

i.e., devising and participating in the scheme to defraud investors.

       There is no overlap between the failing to register counts in this proceeding and

Smith’s federal conviction. On one hand, had Smith been registered as a broker-dealer, he

would still have faced the federal prosecution for his fraudulent acts. On the other, had

Smith sold legitimate securities, he would have still have faced prosecution in this

proceeding for his failure to register as a broker-dealer.

        Accordingly, we affirm the trial court’s order of dismissal dismissing Counts 11

through 25 and its order denying Smith’s motion to dismiss Counts 6 through 10, and we

reverse the trial court’s order denying Smith’s motion to dismiss the remaining state-court

charges (Counts 1 through 5), and we remand to the trial court for further proceedings

consistent with this opinion.

       Affirmed in part, reversed in part, and remanded.

PYLE, J., concurs

VAIDIK, J., concurs in part and dissents in part with separate opinion.

                                               9
______________________________________________________

                              IN THE
                    COURT OF APPEALS OF INDIANA

JERRY A. SMITH,                                   )
                                                  )
       Appellant-Defendant,                       )
                                                  )
              vs.                                 )    No. 24A01-1210-CR-469
                                                  )
STATE OF INDIANA,                                 )
                                                  )
       Appellee-Plaintiff.                        )
                                                  )

VAIDIK, Judge, concurring in part and dissenting in part.

       I agree with the majority’s conclusion that Counts 1-5 and 11-25 of the Franklin

County charges (“the state charges”) against Smith are barred by the statutory prohibition

against double jeopardy, Indiana Code section 35-41-4-5. But respectfully, I do not agree

that the remaining state charges, Counts 6-10, can stand. I believe those charges, which

allege that Smith knowingly transacted business as a broker-dealer without being registered

to do so, are also barred. Indiana’s double-jeopardy statute provides:

       In a case in which the alleged conduct constitutes an offense within the
       concurrent jurisdiction of Indiana and another jurisdiction, a former
       prosecution in any other jurisdiction is a bar to a subsequent prosecution for
       the same conduct in Indiana, if the former prosecution resulted in an acquittal
       or a conviction of the defendant or in an improper termination under section 3
       of this chapter.

                                             10
Ind.Code § 35-41-4-5. Thus, a conviction in any other jurisdiction bars a later prosecution in

this State for the “same conduct.” State v. Allen, 646 N.E.2d 965, 968 (Ind. Ct. App. 1995),

reh’g denied, trans. denied. Whether a prosecution is barred by double jeopardy is a question

of law. Id. at 972. Importantly, “this determination is made by considering the ‘overt acts’

alleged in the sister jurisdiction’s charge in juxtaposition with the allegation in the State’s

charge.” Id.

       The majority concludes that Counts 6-10 may go forward because those charges are

not based on the same conduct underlying Smith’s federal conviction. The majority reaches

this conclusion by reasoning that Smith could have been charged in federal court for

conspiracy to commit fraud even if he was a registered dealer-broker, and likewise could

have been charged in state court for failing to register as a dealer-broker even if he sold

legitimate securities. I believe this hypothetical reasoning ignores the directive of our

previous decisions to look to “consider[] the ‘overt acts’ alleged in the sister jurisdiction’s

charge in juxtaposition with the allegation in the State’s charge.” Id.

       The overt act alleged in the state charges is Smith’s sale of a security despite not being

registered as a dealer-broker. The federal charging information cites the same conduct.

Describing the operation of Smith’s conspiracy and scheme to defraud, the federal charging

information states that Smith was not licensed to sell securities as required by Indiana law.

While Smith’s failure to register as a dealer-broker was not specifically mentioned in the

section describing acts in furtherance of the conspiracy, we should view the federal charging

information as a whole, given that the federal prosecutor controlled its content. And here, the

                                              11
federal prosecutor chose to include Smith’s failure to register as a dealer-broker. When

reviewing the federal charging information as a whole, I conclude that both the federal and

state charges rely in part on Smith’s failure to register as a dealer-broker. For this reason, I

respectfully disagree with the majority’s conclusion that Counts 6-10 can stand. Because I

find that these charges are barred by Indiana’s statutory prohibition against double jeopardy, I

would dismiss Counts 6-10.

                                              12