PEOPLE v. FREDERICK

Filed 8/29/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

Continue from Part I ---

Mercedes, Felix, and Frederick carried out the managerial functions of LLDO. They alone made the important management decisions essential to LLDO's operations. LLDO members, many of whom were poor and uneducated, were not in charge and could not influence the management of LLDO. The success or failure of LLDO rested upon defendants' managerial efforts, not the efforts of its members. (People v. Smith, supra, 215 Cal.App,3d 230, 235 [general rule].) "When an investor entrusts money or other consideration to a promoter through any arrangement but retains substantial power to affect the success of the enterprise, he has not 'risked capital' within the meaning of the Corporate Securities Law." (People v. Figueroa, supra, 41 Cal.3d 714, 738-739.) Here LLDO investors did not retain "substantial power" to affect the success of LLDO. (Ibid.)

IV.

Appellants argue that the trial court denied them their constitutional rights to due process of law and to a jury trial by failing to reinstruct at the conclusion of evidence regarding the elements of operating an endless chain scheme (count 1). (§ 327.) They point out that three weeks of evidence elapsed between preinstruction and deliberations, and assert that jurors likely forgot the required elements of the crime. (People v. Valenzuela (1977) 76 Cal.App.3d 218, 222 [better practice to reinstruct regarding credibility where three days of trial elapsed, counsel argued credibility of witnesses, and counsel paraphrased credibility instruction during summation].) Appellants also assert that the trial court did not include the instruction among the written instructions given at the conclusion of trial. They argue the error relieved the prosecution of proving the requisite elements of the crime. Appellants claim that the error is federal constitutional error and prejudicial per se, or alternatively, not harmless beyond a reasonable doubt.

Following opening statements by counsel, the trial court instructed regarding the elements of the crime of grand theft, and stated that it would instruct from time to time during trial. The court also then provided the jurors with written instructions concerning grand theft.

Several days later, the trial court instructed concerning operating an endless chain scheme, informing counsel beforehand that the instruction was "taken straight from the Penal Code." The court also provided jurors with "some more [written] instructions . . . and they incorporate also counts 1 [operating an endless chain scheme] and count 2 [conspiracy to commit grand theft]."

The court then instructed: "The Defendants are accused in count 1 of having violated 327 of the Penal Code, operating an endless chain scheme. . . . Every person who willfully contrives, prepares, sets up, or operates any endless chain scheme is guilty of a crime.

An "endless chain" means any scheme for the disposal or distribution of property whereby a participant pays a valuable consideration for the chance to receive compensation for introducing one or more additional persons into participation in the scheme, or for the chance to receive compensation when a person introduced by the participant introduces a new participant.

In order to prove this crime, each of the following elements must be proved:

Number One, a person willfully contrived, prepared, set up, or operated a business entity or other organization.

Number Two, the business entity or other organization gives compensation to some person.

Number Three, the compensation is given by the business to the person for the chance to receive compensation for introducing one or more additional persons into participation in the scheme, or, for the chance to receive compensation when a person introduced by the participant introduces a new participant. . . ." The court read this instruction as the jurors followed along with their 7-page handouts.

Thereafter, the trial court instructed the jury immediately prior to summation, but did not reinstruct concerning the elements of operating an endless chain scheme. During the prosecutor's summation, however, he discussed the instruction's three elements: "One, a person set up or operated a business entity or other organization. Two, the organization gave compensation to some person. Three, compensation was given by the business for a chance to receive compensation for introducing an additional person or persons into the scheme."

Section 1093, subdivision (f), permits the trial court to instruct "[a]t the beginning of the trial or from time to time during the trial . . . ." It does not require a re-reading of all instructions at the conclusion of trial. (People v. Chung (1997) 57 Cal.App.4th 755, 759.) "Breaking instructions into phases of the trial does not tax the attention span of jurors, provides timely and useful information to jurors as the trial progresses, and arguably benefits the parties." (Id., at p. 760.)

For several reasons, the trial court did not err by not rereading the endless chain instruction. First, defense counsel did not object to the early instruction, and did not request rereading of the instruction at the conclusion of the evidence. (People v. Chung, supra, 57 Cal.App.4th 755, 760.) Second, the trial court provided jurors with a written instruction when it instructed during the prosecutor's case-in-chief. (Ibid.) Third, the prosecutor summarized and discussed the essential elements of the instruction during summation. (Id., at pp. 759-760.) Fourth, the instruction accurately defines the crime of operating an endless chain scheme.

V.

Felix argues that the trial court erred by not instructing that count 25, sale of security without qualification, requires knowledge that the security was unqualified and not exempt. (Corp. Code, § 25110 [securities must be registered with the Department of Corporations unless exempt].) He asserts that the error violated his right to a jury trial and denied him due process of law, because the LLDO programs did not appear to be securities as commonly understood. Felix adds that expert witness evidence at trial differed whether LLDO programs were securities. He points out that the Department of Corporations declined to prosecute the LLDO matter because it was questionable whether an offer or sale of securities was involved.[1] Felix asserts that Mercedes, not he, primarily managed LLDO. He argues the error is not harmless beyond a reasonable doubt.

During the pendency of this appeal, our Supreme Court decided the issue of scienter and Corporations Code section 25110. (People v. Salas (2006) 37 Cal.4th 967.) Pursuant to our invitation, Felix has submitted additional briefing in light of Salas.

Corporation Code section 25110 proscribes the offer or sale of a security that has not been qualified with the Department of Corporations, unless the security is exempt from qualification. At trial, the parties stipulated that LLDO had not applied for qualification with the Department of Corporations.

In People v. Salas, supra, 37 Cal.4th 967, our Supreme Court held that "a seller who believes reasonably and in good faith that a security is exempt is not guilty of the crime of unlawful sale of an unregistered security." (Id., at p. 971.) Guilty knowledge is not an element of the crime, however. (Ibid.) "Rather, a defendant's reasonable good faith belief that a security is exempt from registration is an affirmative defense on which the defense bears the initial burden of proof." (Ibid.) Thus, the trial court must instruct concerning a defendant's good faith belief "only when the defense has presented evidence sufficient to raise a reasonable doubt that the defendant knew, or was criminally negligent in failing to know, that the security was not exempt." (Id., at p. 972.) This rule presents no unfairness or hardship to a defendant because his knowledge or lack of knowledge is peculiarly within his personal knowledge. (Id., at p. 982.)

The trial court was not required to instruct regarding defendants' good faith belief because defendants did not present any evidence that they had a reasonable good faith belief that they were not selling securities or that the securities were exempt from qualification. Defendants' knowledge or lack of knowledge regarding LLDO is peculiarly within their personal knowledge. An inference drawn from differing expert witness opinions regarding the general nature of a security is insufficient to support an instruction here concerning defendants' knowledge or lack of knowledge regarding LLDO. (People v. Salas, supra, 37 Cal.4th 967, 982.) Defendants did not bear their initial burden of proof. (Id., at p. 972.)

VI.

Frederick asserts that the trial court erred by not instructing, sua sponte, concerning theft by trick or device, rather than theft by false pretenses. (People v. Ashley (1954) 42 Cal.2d 246, 258 [crime of theft by false pretenses involves fraudulent acquisition of title and possession; theft by trick or device involves only fraudulent possession of property].) She contends that the LLDO victims transferred only possession, not ownership, of the money paid to LLDO because they expected a particular product in return. Frederick claims the error is prejudicial because she presented a defense that LLDO would have paid all members had the police not frozen LLDO bank accounts, and precluded further marketing. In other words, she asserts that the prosecution would have been unable to prove beyond a reasonable doubt that she intended "to convert [the funds] to [her] own use and to permanently deprive the owner [thereof]." (People v. Traster (2003) 111 Cal.App.4th 1377, 1390 [victim gave computer consultant checks to purchase software licenses; he absconded with funds instead].)

The crime of theft by trick or device requires: 1) obtaining possession of property of another by some trick or device; 2) intent by the wrongdoer to convert it to his own use and to permanently deprive the owner thereof; and 3) transfer of possession but not title to the wrongdoer. (People v. Traster, supra, 111 Cal.App.4th 1377, 1390.)

The crimes of theft by trick or device and theft by false pretenses are similar. (People v. Traster. supra, 111 Cal.App.4th 1377, 1387.) Theft by trick or device involves a transfer of possession only; theft by false pretenses involves a transfer of title and possession. (Ibid.) Generally, if a victim gives money to a wrongdoer with the understanding that it will be spent for a particular purpose, title does not pass to the wrongdoer. (Id., at p. 1388.) Under those circumstances, the wrongdoer may have committed the crime of theft by trick or device. (Ibid.)

The trial court did not err. Theft by false pretenses was the prosecution's theory of the case against the LLDO officers, and sufficient evidence supports the convictions. Members joined LLDO by paying meeting fees, buying programs for ownership interests, dream homes, Mitsubishi automobiles, cell phones, telephone calling cards, and credit cards, as well as by recruiting new members. Unlike People v. Traster, supra, 111 Cal.App.4th 1377, victims did not give LLDO funds to purchase specific articles. Moreover, the amounts of money given by each victim were insufficient to purchase the items promised, including a dream home and Mitsubishi automobile.

In any event, any error is harmless beyond a reasonable doubt. (People v. Traster, supra, 111 Cal.App.4th 1377, 1389 [technical error where jury instructed on wrong theory of theft].) The prosecutor proved the additional element of transfer of ownership for the crime of theft by false pretenses. The evidence also established no possibility that LLDO could repay its thousands of investors. Moreover, shortly after execution of the search warrant, Frederick drained the LLDO bank accounts, in part by obtaining a $1.3 million check payable to her.

VII.

Frederick and Mercedes argue that the trial court erred by not instructing that the jury must agree unanimously upon the victims of the grand theft, counts 10 through 15. (People v. Laport (1987) 189 Cal.App.3d 281, 283; People v. McNeill (1980) 112 Cal.App.3d 330, 335-336 [particularized unanimity instruction required where single count alleged four victims of assault].) They concede that the trial court instructed with CALJIC No. 17.01 regarding counts 10 through 15 that "in order to return a verdict of guilty . . . all jurors must agree that [defendants] committed the same act or acts . . . ." Frederick and Mercedes assert the error denies them due process of law and impairs their constitutional right to jury unanimity. They contend the error is not harmless beyond a reasonable doubt because they presented different defenses to each victim. (People v. Brown (1996) 42 Cal.App.4th 1493, 1500-1502 [standard of review regarding unanimity instruction error].)

In a criminal case, the jury must agree unanimously that the defendant is guilty of a specific crime. (People v. Russo (2001) 25 Cal.4th 1124, 1132.) "This requirement of unanimity as to the criminal act 'is intended to eliminate the danger that the defendant will be convicted even through there is no single offense which all the jurors agree the defendant committed.'" (Ibid.) Thus, when a defendant is charged in a single count with several offenses, and the evidence shows that he committed more than one of the offenses, the trial court must instruct with CALJIC No. 17.01. (People v. Laport, supra, 189 Cal.App.3d 281, 283.)

Here the verdict forms state the names of LLDO members and/or a particular Mitsubishi dealership in the alternative. The trial court instructed with CALJIC No. 17.01 ("Verdict May be Based on One of a Number of Unlawful Acts"). Defendants did not request the trial court to amplify or modify CALJIC No. 17.01 to instruct upon the necessity of juror agreement regarding a specific victim. Although the trial court is obliged to instruct upon general principles of law, a defendant must request any clarifying or amplifying instructions. (People v. Talamantes (1992) 11 Cal.App.4th 968, 974-975.)

Waiver aside, any error is harmless under any standard of review. (People v. Wolfe (2003) 114 Cal.App.4th 177, 185-188 [failure to give unanimity instruction tested under Chapman v. California (1967) 386 U.S. 18, 24]; People v. Vargas (2001) 91 Cal.App.4th 506, 562 [People v. Watson (1956) 46 Cal.2d 818 is applicable standard].) By agreeing upon which act constituted the theft in counts 10 through 15, the jury necessarily determined the specific victim of each count. Moreover, the evidence established that the Mitsubishi automobile salesmen were LLDO members who falsified the credit applications of LLDO members referred to them by LLDO leaders. There is no reasonable basis for a juror to conclude that Frederick and the Navarretes defrauded the dealers, but not the individual LLDO members who participated financially in the LLDO programs to qualify for a new automobile.

VIII.

Mercedes asserts that the section 186.11 enhancement instruction was inadequate because the trial court did not define the phrases "related felonies" and "pattern of related felony conduct." She contends the error is not harmless beyond a reasonable doubt. (People v. Sengpadychith (2001) 26 Cal.4th 316, 324-326.)

Section 186.11, subdivision (a)(2), provides additional punishment where a "pattern of related felony conduct" by the defendant involves a taking exceeding $500,000. Thus, the trial court instructed in part that the "elements" of the section 186.11 enhancement include: "1. A person is guilty of two or more related felonies and; 2. A material element of each of these felonies for which the person is found guilty is fraud or embezzlement; and 3. The felonies involve a pattern of related felony conduct."

The trial court properly instructed regarding the section 186.11 enhancement. During trial, the court twice instructed in the language of the section 186.11 statute. Generally, the language of a statute defining a crime or defense may serve as the instruction. (People v. Rodriguez (2002) 28 Cal.4th 543, 546.) The parties may request amplification or further definition. (Ibid.)

Moreover, unless the terms of an instruction have a technical meaning peculiar to the law, the trial court need not instruct further with definitions. (People v. Bland (2002) 28 Cal.4th 313, 334.) Here the phrases "pattern of related felony conduct" and "related felonies" have no peculiar technical meaning, and are phrases commonly understood without further definition. (People v. Rodriguez, supra, 28 Cal.4th 543, 547 ["recurring access" phrase within child molestation statute has no technical meaning and is commonly understood].) There is no error.

People v. Sengpadychith, supra, 26 Cal.4th 316, is distinguishable. There the trial court did not instruct that the commission of one or more statutorily enumerated felonies would trigger a street gang enhancement. (Id., at pp. 319-324.) Sengpadychith did not involve the subdefinition of commonly understood words or phrases in an instruction.

Sentencing Contentions

IX.

Mercedes asserts that the trial court was required to stay sentence on counts 3 through 15 [grand theft], pursuant to section 654, because it stayed sentence on those counts when sentencing Frederick. She points out that the trial court sentenced her four months following Frederick's sentencing, and the trial judge remarked that she could not "really remember everything that [she] ruled on [in the earlier sentencing]." Mercedes argues that the trial court made an implied finding of an indivisible course of conduct when it applied section 654 to Frederick. (People v. Nelson (1989) 211 Cal.App.3d 634, 638 [implied finding regarding divisibility of course of conduct inheres in judgment].) She contends that she held but a single intent and objective - to take money from LLDO members - in committing counts 3 through 15.

We interpret the record differently. At Frederick's sentencing, the trial court ruled upon defendants' motions regarding application of section 654 to counts 3 through 15. The trial court denied the motions. The trial judge stated: "[T]here is a course of conduct here that is divisible in time, which I think gives rise to multiple violations and punishment, appropriately so under 654 and [People v. Gaio (2000) 81 Cal.App.4th 919]." After further argument regarding section 654, the trial judge ruled: "I think that each count is divisible in time, and therefore, giving rise to multiple punishments, if necessary." Shortly thereafter, however, the trial court sentenced Frederick and inexplicably stayed sentence for counts 3 through 15 pursuant to section 654. The trial judge then stated that sentence for those counts "must be stayed pursuant to Penal Code section 654."

The trial court either misspoke or extended leniency to Frederick, a behind-the-scenes participant in LLDO. There is "no reason . . . why the mistake should be perpetuated and carried into the sentencing of [a codefendant]." (People v. Nelson (1987) 194 Cal.App.3d 77, 80.) The grand theft counts involved specific individuals who contracted to purchase Mitsubishi automobiles at either Assael Mitsubishi or Miller Mitsubishi. The offenses concerned acts committed at different times. (People v. Gaio, supra, 81 Cal.App.4th 919, 935 [offenses separated by time allow defendant an opportunity to reflect upon his conduct].) Substantial evidence supports the trial court's express ruling that the counts were divisible in time, warranting multiple punishments. (Ibid.) Moreover, the trial court stated during sentencing that Mercedes's crimes involved many victims, she took advantage of poor and vulnerable people, she does not harbor remorse, and LLDO was a fraudulent and well-planned scheme.

X.

Mercedes argues that there is insufficient evidence of the excessive taking enhancements of section 186.11, subdivision (a)(2) [$500,000] and 12022.6, subdivision (a)(4) [$2,500,000]. She relies upon expert witness accounting testimony that LLDO made payments to its members or purchased telephone calling cards with most of the $9 million passing through LLDO bank accounts in 2000 and 2001.

Mercedes also argues that she is not liable for the Mitsubishi Motor Credit losses because dealer salesmen falsified the credit applications and caused the losses. She claims that in the trial of the salesmen defendants, the prosecutor argued that the salesmen alone were responsible for Mitsubishi Motor Credit losses.

Sufficient evidence supports the excessive taking enhancements. Millions of dollars passed through LLDO bank accounts in 2000 and 2001. Frederick obtained three cashier's checks for nearly $2 million in April 2001. She also attempted to leave the Navarrete home with nearly $14,000 cash. A safe in the home also contained $10,000 cash. Police officers seized approximately $2.3 million (including the cashier's checks) in LLDO bank accounts. Although LLDO may have purchased $2.2 million in telephone calling cards for its members, it did exercise dominion and control over the funds, and it is proper to include them in calculating any excessive taking amounts. "We think the Legislature did not intend that the application of section 12022.6 should depend upon the fortuitous circumstances of whether the police were able to recover stolen property or the victim was able to establish a civil claim for the return of property or its proceeds traced by some circuitous route [footnote omitted]." (People v. Ramirez (1980) 109 Cal.App.3d 529, 539 [obvious purpose of § 12022.6 enhancement "is to deter large-scale crime."].) Thus, apart from any losses to Mitsubishi Motor Credit, the excessive taking enhancements are supported by substantial evidence.

Moreover, the Mitsubishi Motor Credit losses are not attributable to the dealer salesmen alone, and the prosecutor did not assert such in a later trial. We have examined the records in each appeal and conclude that the prosecutor did not argue inconsistent theories of liability. Without the promises made by Mercedes, LLDO members would not have gone to Mitsubishi dealerships and purchased expensive automobiles, believing that LLDO would make the payments. LLDO members also paid substantial sums to LLDO to qualify for the automobile program, which was a central and important part of LLDO's programs.

XI.

Frederick and Mercedes contend that Blakely v. Washington, supra, 542 U.S. 961, Apprendi v. New Jersey, supra, 530 U.S. 466, and federal constitutional principles of due process of law require that the jury determine beyond a reasonable doubt the factual findings used by the trial court to impose upper and consecutive terms of imprisonment.

In People v. Black (2005) 35 Cal.4th 1238, our Supreme Court held that imposition of an upper term of imprisonment or a consecutive sentence pursuant to section 669 does not violate a defendant's constitutional right to trial by jury. (Id., at p. 1244.) Black reasoned that "in operation and effect, the provisions of the California determinate sentence law simply authorize a sentencing court to engage in the type of factfinding that traditionally has been incident to the judge's selection of an appropriate sentence within a statutorily prescribed sentencing range." (Id., at p. 1254.) Imposition of upper term and consecutive sentencing does not violate defendants' constitutional rights to a jury trial. (Id., at p. 1244.)

XII.

Mercedes and Felix assert that the section 12022.6, subdivision (a)(4) taking enhancement does not apply to count 28, filing a false income tax return. (Rev. & Tax. Code, § 19705, subd. (a).) Specifically, they argue that filing a false income tax return is not a "taking" within section 12022.6, subdivision (a), nor is the false filing part of "a common scheme or plan" for purposes of aggregating losses within subdivision (b). Mercedes and Felix describe the false filing as distinct from the LLDO crimes, and point out the difficulties of proving the amount of loss to the government. They add that the purpose of the taking enhancement is to punish severely "'those in positions of trust . . . who steal large amounts of money.'" (People v. Nasalga (1996) 12 Cal.4th 784, 796, fn. 10.)

Section 12022.6, subdivision (a)(4), provides for a four-year sentence enhancement where "any person takes, damages, or destroys any property in the commission . . . of a felony . . . [i]f the loss exceeds two million five hundred thousand dollars ($2,500,000) . . . ." Subdivision (b) permits the aggregation of losses arising "from a common scheme or plan" based upon multiple allegations of takings in an accusatory pleading.

Mercedes, Felix, and the People rely on People v. Crow (1993) 6 Cal.4th 952. In Crow, defendant committed welfare fraud. He received funds to which he was not entitled. The county's loss was computed by calculating the amount it would have paid had the fraud not occurred. The application of 12022.6 to aggregate losses was properly applied because the county proved its loss exceeded $25,000.

Unlike the crime of welfare fraud in Crow, the crime of filing a false income tax return is not part of a common scheme or plan to take property within the meaning of section 12022.6, subdivision (b). The common scheme or plan here involved completed acts of theft and fraud against thousands of LLDO members as well as automobile dealerships. The Navarretes' filing of a false income tax return was a separate act occurring at a different time against a different victim. The plain language of the statute does not permit application of the taking enhancement here to count 28. We therefore strike it, and direct the trial court to amend the abstract of judgment accordingly, and forward it to the Department of Corrections.

XIII.

Mercedes contends that the trial court erred by imposing and staying sentence for count 26 (using a false statement in the sale of a security) because the jury did not return a verdict concerning that count. The Attorney General concedes, pointing out that the trial court dismissed count 26 when the jury neglected to complete a verdict form for that count. The trial court stated: "[T[here were so many verdict forms . . . we must have had over 150 verdict forms [and it] was overlooked by the Court and by counsel. And the Court will find that that count should be dismissed because there was no verdict findings . . . ."

There is no error to correct, however. Neither the court minutes nor the abstract of judgment reflect imposition of sentence for count 26.

We strike the section 12022.6 enhancement concerning count 28, but otherwise affirm.

CERTIFIED FOR PUBLICATION.

GILBERT, P.J.

We concur:

YEGAN, J.

PERREN, J.

Tricia Ann Bigelow, Judge

Superior Court County of Los Angeles

______________________________

Janyce Keiko Imata Blair for Defendant and Appellant, Joan Frederick.

John Steinberg for Defendant and Appellant, Mercedes Navarrete.

Christine Vento for Defendant and Appellant, Felix Navarrete.

Bill Lockyer, Attorney General, Robert R. Anderson, Chief Assistant Attorney General, Pamela C. Hamanaka, Senior Assistant Attorney General, Linda C. Johnson, Lawrence M. Daniels, Supervising Deputy Attorneys General, Ana R. Duarte, Karen Bissonnette, Deputy Attorneys General, for Plaintiff and Respondent.

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[1] The trial court properly did not permit evidence of the Department of Corporation's decision not to prosecute.