Santa Cruz County Superior Court No.: F17146 The Honorable Paul M. Marigonda Trial Judge.
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J. Wilder Lee, under appointment by the Court of Appeal, for Appellant for Defendant and Appellant.
Kamala D. Harris, Attorney General Dane R. Gillette, Chief Assistant Attorney General Gerald A. Engler, Assistant Attorney General Rene A. Chacon and Linda M. Murphy, Deputy Attorneys General, for Plaintiff and Respondent.
RUSHING, P. J.
Defendant Kenneth Mark Doolittle was sentenced to 13 years in prison after the trial court, sitting without a jury, found him guilty on three counts of theft by false pretenses (Pen. Code, § 532, subd. (a)), six counts of theft from an elder or dependent adult (Pen. Code, § 368, subd. (d)), nine counts of false statements or omissions in the sale of securities (Corp. Code, §§ 25401, 25540, subd. (b)), one count of selling unregistered securities (Corp. Code, §§ 25110, 25540, subd. (a)), and one count of sale of a security by willful and fraudulent use of a device, scheme, or artifice to defraud (Corp. Code, § 25541). He challenges the judgment on the grounds that 10 of the charges were barred by the statute of limitations, that two were not supported by substantial evidence, that when modified to accommodate these deficiencies the findings cannot sustain a sentence enhancement based upon the taking or loss of more than $500, 000, and that the sentence on two of the charges violated the statutory proscription against multiple punishment (Pen. Code, § 654). We conclude that (1) defendant may challenge the judgment on the grounds that the trial court’s implied finding of timely prosecution is not supported by substantial evidence; (2) his challenge on that ground is well taken with respect to two of the charges; (3) the remedy in such cases is to remand for a further hearing on the timeliness of the affected charges; (4) further hearing may also be necessary to resolve several issues affecting applicability of the sentence enhancement for aggregate losses over $500,000; and (5) on the facts of this case, defendant’s conviction for sale of unregistered securities and sale of securities by means of a fraudulent device does not rest on the same conduct as the counts in which he was charged, and on which he was convicted, of fraud against
specific victims, and his sentence on the former counts therefore does not offend the proscription against duplicative punishment.
A. The Mobile Home Venture
Defendant was the proprietor of Monterey Bay Securities, a registered securities broker/dealer, and Monterey Bay Investment Corporation, a registered investment adviser. He or his corporations held licenses, permits, or certificates to engage in various additional activities including real estate and insurance brokerage and tax preparation. He testified that while he initially conducted a “general securities business, ” the “emphasis” later “changed more into real estate, ” specifically “[r]eal estate financing” and associated ventures. Around 1990 his primary business became “trust deeds investments, ” in which “you [would] have borrowers that would want to borrow funds secured by real property but, for whatever reason, couldn’t get a bank loan and would go to a private source.” He “would arrange groups of investors together to buy those loans or to fund those transactions for different types of individuals and institutional borrowers.”
Defendant testified that the venture at issue here had its germ in discussions with Larry Kroeker, a “friend who was a mobile home contractor.” Kroeker suggested “that we consider going into business to purchase and finance mobile homes because of what he saw in the marketplace at that time.” This led to defendant’s “selling mobile home notes to investors.” He testified that this may have commenced as early as 1997, but bank records show October 1998 as the month when he began making deposits in a bank account designated Mobile Home Trust Account. Deposits continued until September 2005—the year in which, defendant testified, he ceased doing business. The records, which were apparently incomplete, showed total deposits of $14,889,506.68. Apparently, however, this sum included both income from the venture and investments in it.
B. Montgomery Investment
Of the 10 victims named in this matter, Jacquelyn Montgomery was the earliest to place funds in the mobile home venture. She testified that her history with defendant dated to 1992, when she and her father invested funds with him. After that investment paid off, defendant approached them about an investment in mobile homes. He said their rate of return would be 15 percent. As he described the venture to them, “He would buy mobile homes. And, when the people paid him, we would get our payment with princip[al] with the interest.” He said that while there was “always risk, ” there was “very
little in this mobile home investment.” He said it was “pretty secure.” He told her that if the buyer stopped paying, she “would still receive the interest.”
On November 12, 1998, Montgomery wrote a check investing $25, 000 in the mobile home venture. These funds apparently went into a trailer whose first purchaser promptly defaulted on the associated loan. The trailer then went through the hands of several successive purchasers, with monthly payments sometimes stopping and restarting, until one of the purchasers paid off the entire loan. When that happened, apparently in February 2002, the proceeds were reinvested in another trailer without Montgomery’s knowledge or consent. At the time of trial Montgomery had received all but six of the payments due on that trailer.
C. Perdue Investments
Another early investor was Joseph Perdue, who was “80-something” at the time of trial and who had died by the time of sentencing. He was the victim named in counts 8 and 18 of the information, which respectively charged defendant with theft from an elder (Pen. Code, § 368, subd. (d)) and false statements and omissions in connection with an offer of a security (Corp. Code, §§ 25401, 25540, subd. (b)).
Mr. Perdue invested $50, 000 in October 1999 and another $50, 000 in February 2000. Each of these investments was confirmed in letters from defendant. In the first letter, dated October 4, 1999, defendant acknowledged that Perdue had invested “$50, 000.00 into mobile home notes through our office.” He wrote that the term of the notes was seven years and that investors generally held them to maturity, adding, “However, our office has made a practice of maintaining a secondary market for these notes in case an investor needs to liquidate their note for cash prior to it’s [sic] maturity. Please accept
this letter as a firm commitment from me personally to sell your note to another client (without loss) should the need arise.”
The second letter, dated February 18, 2000, stated that Perdue had “agreed to lend us $50,000.00 to be used for the purchase and sale of mobilehomes, ” that “we” would “place [the funds] in our trust account” and “spend” them “to acquire, repair (if necessary), and resell bank repossessed and distress sale mobilehomes throughout the United States.” The firm would “hold financing contracts on the mobilehomes and w[ould] create promissory notes that [it] w[ould] hold in [its] name.” It assumed responsibility for collecting monthly payments, and undertook to pay monthly interest to Perdue at a 15 percent annual rate. The letter specified that “[t]he $50, 000.00 balance that we have borrowed from you will result in you receiving $625.00 as monthly interest payments.” The concluding paragraph stated, “Should you decide to withdraw your funds from your loan to us, we will refund to you the full or partial requested amount to you upon no less than sixty days notice.”
The third letter, dated February 21, 2000, reconfirmed Perdue’s second investment and contained identical recitals except for the concluding paragraph, which stated, “You have asked that we agree to a two year term for this loan. This will mean that this loan will mature on 2/21/2002. Should you decide not to withdraw your funds from your loan to us at that time, we can renegotiate the terms for a possible extension at that [sic]. Should you have any further questions, please do not hesitate to call.”
Beginning in March or April of 2000, Perdue received four successive monthly payments totaling about $5,000. After that he apparently received nothing more from his investment.
D. Repetti Investments
Mary Repetti was 68 years old when she commenced a series of investments in the mobile home venture. She had been investing with defendant for years, having met him around 1988 or 1989. When defendant first told her and her husband about the mobile home venture, Mr. Repetti, “being an old real estate broker, was very skeptical and... really didn’t want to go along with the program.” But defendant was “a good salesman” and “convinced us that they were a safe investment.” He said “he would be collecting the payments, distributing them to us, ” as well as “taking care of any foreclosure matters, ” a subject they discussed “in detail.” He “kept mentioning 15
percent.” He “guarantee[d]” this rate of return. He said their investment would be secured “[b]y notes.” He informed them in writing that if a purchaser stopped paying on the note, he would “take care of all expenses.” “[T]here would be no servicing charges on our part.”
The Repettis initially invested $100,000. Defendant memorialized the investment in a letter dated November 9, 1999. It included the statement, “We agree to guarantee to you the timely repayment of principal and interest on each note that you hold throughout the duration of each note.” It also said, “The interest rate you will receive will be 15% on the remaining principal balance.”
The Repettis received an “Investor Portfolio” dated February 10, 2000, listing five loans in which their funds had apparently been placed. Mrs. Repetti received payments on some notes, while payments stopped on others. However, she apparently made at least six further investments in the mobile home scheme, the last of which was either in 2002 or 2005. She testified that her total investment was $250,000.
E. Lipsius Investment
Jeffrey Lipsius testified that he was looking for an investment counselor and an accountant to do his taxes in 1999 or 2000 when he found defendant’s name in the phone book under investment counselors. He initially engaged defendant only to do his taxes, but defendant began giving him investment advice as well. Lipsius told defendant he was looking for a safe investment for his daughter, who would be going to college in a few years. Defendant said he knew about a “mobile home investment” that paid 15 percent, was “great, ” and was “very safe” and “risk-free.” The only detail Lipsius recalled about the nature of the venture was that “it involve[d] mobile homes. Somehow the money [wa]s invested in mobile homes.”
Defendant did not explain “how it would be handled if the purchaser of a mobile home stopped payment.” He did not “explain that, if certain conditions occurred, [Lipsius] would not get paid.” He did not tell Lipsius that payments would only be made to him if the mobile home purchaser paid defendant. Nor did he say that Lipsius would not be paid if the mobile home market took a downturn. He did not say that he could use the invested money for his personal needs. Had he said any of these things, Lipsius would not have invested.
On August 1, 2000, after the idea “percolated... for a number of months, ” Lipsius gave defendant a check for $25,000 to invest in the described enterprise. Thereafter he “request[ed] paperwork” from defendant. When this
was not immediately forthcoming, Lipsius had “second thoughts about the investment, ” and in an October 2000 meeting with defendant, he “asked him for [his] money back.” Defendant replied, “[T]hat money’s gone.” Lipsius did not question him: “It seemed like a clear statement.” Asked why he had requested the return of his money, Lipsius testified, “You know, nothing happened. I didn’t have any paperwork. It was unsecured. It was, you know, I didn’t get any money yet. It didn’t seem professional to me. It didn’t seem like a safe investment.” However he “continued to press [defendant] for paperwork, ” i.e., “[t]o, at least, show some documentation that there is an investment.” Defendant finally furnished a letter, dated November 7, 2000, memorializing the investment.
At about this same time, Lipsius received a “mobile home contract” reflecting the sale of a mobile home in Las Vegas from Larry Kroeker to Clint and Dawn Walker. The contract recited a sale price of $27,000, of which $1,000 was to be paid upon execution and the remaining $26,000 was financed by the seller at 15 percent interest over seven years, with monthly payments of $390.23 and a balloon payment of some $16,000 at the end of the seven years. Lipsius was “surprised to hear that my money was put towards a mobile home. I thought it was a fund, ” meaning “like a pool of lots of mobile homes that people are paying into.... I didn’t know that I just bought a mobile home.”
By February 2001 Lipsius had begun receiving monthly payments on the home. These continued for about three years. After they stopped in February or March of 2004, he contacted defendant, who said the buyer had stopped paying “[s]o, therefore, checks are no longer coming to me.” At the time of the original investment, defendant had not indicated that payments would stop if the buyer stopped paying defendant. Defendant now told him he was going to try to find a new buyer.
In March 2005, Lipsius wrote to defendant summarizing the history of the investment. He wrote that defendant had promised to make payments to him
regardless of whether the purchaser had stopped paying defendant. He called upon defendant to continue the monthly payments to which they had agreed. He also related his discovery, through his own investigation, that defendant had sold the Walker home to someone else in November 2004. He had not paid off Lipsius’s interest or contacted him about the sale. Lipsius learned that he had no interest in the mobile home, i.e., “[t]here was no record of me being associated with that mobile home.” That discovery led him to contact Larry Kroeker, the named title-holder, who added Lipsius to the title as a lienholder.
In any event, defendant apparently continued to recognize that Lipsius had an interest in the home. At some point it was resold and payments resumed for a while, though they had stopped again, as he testified, “pretty recently.” Lipsius contacted defendant, who said the buyer had gone bankrupt. At that time, apparently, defendant had “assigned the entire interest of the mobile home” to Lipsius. Lipsius ultimately sold the home for $7,000, which he described as “a huge loss.”
Asked whether he had, “at some point, contact[ed] the authorities about the defendant not paying” him, Lipsius replied that he had done so “about 2002 or something.” However, he responded affirmatively to the question that “it would have been after” the payments initially stopped in 2004.
F. Jacobs Investment
Enedina Jacobs had apparently known defendant longer than any other victim; she first met him when he was working for a large nationwide investment house, where he helped her open an account. When he started his own company, he asked whether she would like to invest with him. She agreed to do so, “since he was the only one [she] knew” at the investment house and she “thought he was a nice young man.” He originally placed her funds into a mutual fund, which she recalled as a good investment. He gave her timely advice to liquidate that investment about a month before the market crashed in October 1987. After her husband died in 1997, defendant placed all her IRAs in a money market fund that paid quite well.
In September 2001 defendant called her and said he wanted to talk to her about something. She went to his office, where he “presented this mobile home thing about buying repossessed mobile homes and then fixing them up
and selling them to people.” As she understood it, when someone purchased a mobile home, she “would be the lender, and then they would owe [her] for that home.” Initially her money would “go into a holding company, ” where it would remain until defendant found a buyer for a mobile home. The rate of return would be “like 16 percent, ” of which “one percent would go to the company and 15 would go to me.” He told her it was a “good investment” and a “sure thing.” She asked what would happen “if someone does not pay, ” and “He said, well that’s no problem. We will repossess it and we’ll sell it to someone else like the banks do.” Alluding to some rental properties that he knew she owned, he told her that “nothing can go wrong. The people are going to be paying you. You know how you do when you rent a house, people pay you, and that’s it.”
Defendant presented her with a “piece of paper” placing some or all of her holdings in a bank or “trust company” for “safekeeping.” She transferred about $133,000. He immediately withdrew $15,000, and by the end of the month had withdrawn all but $1,200 or $1,300. The speed of these withdrawals troubled her, but she “really trusted him, ” having “been with him all these years.” She trusted “that he knew what he was doing and that he was working for my benefit, because he’s known me for many years and he knew where I had my money before, which was safe.”
When she made the transfers she was 70 years old. Afterwards defendant never contacted her. When she contacted him and asked what was going on, he would tell her “you’ll be hearing from me probably in this next month, you know. You’ll be having a sale or whatever.” Her daughter urged her to get a prospectus, which defendant finally provided in 2003. In July of that year he assured in person her that her money “is here with me and it’s safe. You’ve been getting money from day one. You’ve been getting interest.” At her request, he “put this in writing” by a letter dated July 1, 2003. Afterwards she “realized he was avoiding me, ” and learned that he had made payments to persons who invested later than she had. She consulted counsel. Letters from two lawyers failed to produce any response.
G. Amarant Investment
John Amarant was 65 years old in September 2002 when he invested $90, 000 from his IRA in the mobile home venture. Defendant told him, among other things, that the funds he invested would be used to refurbish units so as to increase their value. His funds would earn 14 percent “whether they went into a mobile home or not.” Defendant did not disclose that he could use the money for his personal needs, that it would be commingled with his operating funds, or that it might be used to pay returns to other investors unrelated to Amarant’s investment. Nor did defendant tell Amarant
that he might have a conflict of interest in that he was buying and selling interests in the mobile homes for his own and others’ accounts.
Amarant received two notes reflecting mobile home units in which he had an interest. The first was a note for $22,500, in which his share was $12,918, between defendant and Marvalynn Woods. That note yielded monthly payments of $240 for about three years beginning in January 2003. After they stopped, defendant told Amarant he had lost contact with the owner and could not find her without incurring costs to track her down, adding that Amarant was free to pursue the matter himself. Eventually Amarant learned that “absolutely no refurbishing” had been done on the unit, and that the park in which it was located would “have problems selling it because it was not up to code.” The manager said they were foreclosing on the record owner for default in space rent, and that they were “doing whatever they do to get rid of that unit.” Eventually he was told it had been demolished. When he asked defendant for “an accounting” for purposes of showing a loss on his taxes, he “got nothing.” He testified that when the note went into default, the remaining principal was $8,581.
Amarant’s second note was an $8,167 interest in a $29,900 note between defendant and Dennis and Phyllis Akin. That note began yielding monthly payments in March 2003 and was still paying at the time of trial. There was $4,455 remaining in unpaid principal.
So far as Amarant knew, the remainder of his $90,000 investment—some $68,915—was never allocated to a mobile home. Despite repeated requests, he never received any accounting for these funds. When he learned defendant had filed for bankruptcy, he submitted a claim for $99,000, on which he received slightly over $6,200.
H. Kloepfer Investment
James Kloepfer was 66 years old when, on May 29, 2003, he made his first investment in the mobile home venture. He had gone to defendant’s office to take advantage of an advertisement defendant placed offering free notary services. While notarizing an instrument for Kloepfer, defendant told him about “a good investment, something that I could invest in that would not only help me but it would help the people ...