State v. Andresen

Opinion

The primary issue in this appeal is whether a defendant charged with selling unregistered securities under the criminal provisions of the Connecticut Uniform Securities Act (CUSA), now General Statutes §§ 36b-2 to 36b-33,1 has the burden of persuasion on *315the issue of whether the securities were exempt from registration. The defendant, Constance Andresen,2 was convicted of five counts of selling unregistered securities in violation of General Statutes (Rev. to 1995) § 36b-16.3 On appeal, the defendant concedes that the securi*316ties were not registered, but contends that there was *317insufficient evidence presented by the state to prove that the securities were not exempt from registration.4 The defendant claims that the trial court improperly *318placed on her the burden of proving that the securities were exempt, and that, by shifting the burden of proving this exemption to her, the trial court deprived her of her constitutional right to due process under the federal and state constitutions.5 The defendant also contends that the trial court improperly admitted into evidence a cease and desist order that had been issued against her by the state department of banking (department) in 1985, and improperly permitted testimony concerning that order. Finally, the defendant claims that her reasonable reliance on the advice of counsel precluded a conviction for selling unregistered securities. We dis*319agree with the defendant and affirm the judgment of the trial court.

The record contains the following relevant facts. In early 1972, John Andresen and two associates formed a research and development company called Microbyx Corporation (Microbyx), which they incorporated in Delaware. Microbyx developed a specialized tampon-like device for collecting cells from menstrual fluid that, potentially, could be utilized for the early detection of cervical and endometrial cancers. Microbyx had planned to market the device as an easier and more reliable means of obtaining cell samples for cancer screening than the Pap smear test. To date, Microbyx has never marketed the device, never turned a profit, and has no employees, other than two officers.

The defendant married John Andresen in 1976 and began serving as corporate secretaiy and chief financial officer of Microbyx in 1984. Although the defendant had not become involved officially with Microbyx in a managerial capacity until that time, she had engaged in activities relating to its financing in 1981. After joining Microbyx, the defendant devoted the bulk of her time to the company and she and her husband conducted almost all of the business from their home in New Canaan. Sarles Associates, Inc. (Sarles Associates), an investment management and advising company that the defendant’s husband had formed and controlled, provided management services to Microbyx. Beginning in 1984, Microbyx paid Sarles Associates monthly fees ranging from $8000 to $15,000.

In 1983, after receiving a complaint from an investor who had purchased securities from the company, the department began investigating Microbyx. The department discovered that Microbyx securities were not registered in Connecticut and promptly issued to the defendant and her husband a cease and desist order to *320prohibit further sales. The defendant and her husband requested a hearing on the cease and desist order, which was held on March 9, 1984. As a result of the hearing, the department issued findings of fact and conclusions of law, and ordered that the original cease and desist order enter permanently against the defendant and her husband.6

In 1987, Microbyx filed an application with the department to register its securities by coordination.7 The department requested that Microbyx provide a list of all of those people who had invested in the company prior to 1987 and explain on which exemption from registration it had relied in selling those securities. Microbyx withdrew the application shortly thereafter.

In 1993, Microbyx filed another application with the department to register securities by qualification.8 The *321department then issued subpoenas to Microbyx, the defendant and her husband. On April 13,1994, the defendant testified before the department regarding her possible sale of unregistered Microbyx securities between 1991 and 1993. After turning over to the department records of prior sales, Microbyx attempted to withdraw its second application. The department did not permit the withdrawal,9 and instead initiated a further investigation that culminated in criminal charges against the defendant.

From 1990 to 1993, approximately ninety investors purchased securities from Microbyx, with the defendant or her husband listed on the stock certificates as the seller. At trial, several investors testified that the defendant and her husband had solicited their stock purchases and had represented to them that Microbyx had a patented, market-ready device approved by the federal Food and Drug Administration that would lead, to a public offering of Microbyx stock and returns on their investments. Many were novice investors, and some were given unpaid management positions with Microbyx after they had purchased the securities. The investors were not informed of the cease and desist order, nor were they informed that the device collected cell samples that were of little use in diagnosing cancer.

Between 1990 and 1994, investors poured $1.3 million into Microbyx while the company spent only $35,000 on research and development for the cell collection device. More than $1 million was funneled to the defen*322dant and her husband either directly or indirectly through Sarles Associates.

The state charged the defendant in 1995 with five counts of securities fraud in violation of General Statutes (Rev. to 1995) § 36b-4 (2),10 and five counts of selling unregistered securities in violation of § 36b-16.11 A trial to the court began on August 3,1999, and continued through August 6, 1999. The trial court, Hiller, J., found the defendant guilty on the five counts of selling unregistered securities and acquitted her of all charges involving securities fraud. The defendant received a total sentence of ten years incarceration, suspended after two years, five years of probation and a fine of $10,000.12 From the judgment of conviction, the defendant appealed to the Appellate Court, and we transferred the appeal to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.

Before addressing the defendant’s claims, we note that state securities laws, or “blue sky laws,”13 are reme*323dial statutes. See Connecticut National Bank v. Giacomi, 242 Conn. 17, 67, 699 A.2d 101 (1997); see also Securities & Exchange Commission v. C. M. Joiner Leasing Corp., 320 U.S. 344, 353, 64 S. Ct. 120, 88 L. Ed. 88 (1943) (noting that state securities laws have “dominating purpose to prevent and punish fraudulent floating of securities”); Connecticut National Bank v. Giacomi, 233 Conn. 304, 320, 659 A.2d 1166 (1995) (noting that state securities laws contain antifraud provisions, require registration of brokers and sellers of securities and registration of securities themselves); People v. Landes, 84 N.Y.2d 655, 660, 645 N.E.2d 716, 621 N.Y.S.2d 283 (1994) (“purpose of [New York securities] statute is remedial: to protect the public from fraudulent exploitation in the offering and sale of securities”). “In 1977, the Connecticut legislature formally adopted the Uniform Securities Act (Uniform Act).” Connecticut National Bank v. Giacomi, supra, 233 Conn. 319. Although this court has had occasion to address civil liability under the Uniform Act; see id.; and has interpreted the criminal portions of the prior Connecticut Securities Act; see State v. Kreminski, 178 Conn. 145, 147-53, 422 A.2d 294 (1979); this case requires us to address, as a matter of first impression, the criminal provisions of CUSA that prohibit the sale of unregistered securities.

I

The defendant contends that the state failed to provide sufficient evidence to support a conviction for selling unregistered securities under § 36b-16. The defendant claims that the evidence at trial “clearly established that the transactions at issue were exempt from registration under the private placement exemption . . . .” See General Statutes (Rev. to 1995) § 36b-*32421 (b) (9).14 The defendant contends that this issue “was properly preserved for appeal by [a] motion to set aside the verdict made by the defendant at the close of evidence.” Our review of the record shows that no such motion was filed. Moreover, the defendant has neither requested review of her claim as plain error; Practice Book § 60-5;15 nor has she sought review under State v. Golding, 213 Conn. 233, 239-40, 567 A.2d 823 (1989) (establishing requirements for appellate review of unpreserved claims). Consequently, we decline to review this claim because it was neither raised sufficiently at trial nor properly preserved for appeal.16 *325Ghant v. Commissioner of Correction, 255 Conn. 1, 17, 761 A.2d 740 (2000) (inappropriate to engage in level of review not requested).

II

The primary issue in this appeal is whether the trial court properly placed the burden of proving an exemption from registration on the defendant. The defendant contends that, because the trial court shifted the burden to her to prove that the securities or transactions were exempt, she was denied her constitutional right to due process under the fourteenth amendment to the United States constitution and article first, § 8, of the Connecticut constitution. See footnote 5 of this opinion. The defendant failed to object at trial and claims that this issue is reviewable under State v. Golding, supra, 213 Conn. 239-40 (defendant’s unpreserved claim will fail unless “[1] the record is adequate to review the alleged claim of error; [2] the claim is of constitutional magnitude alleging the violation of a fundamental right; [3] the alleged constitutional violation clearly exists and clearly deprived the defendant of a fair trial; and [4] if subject to harmless error analysis, the state has failed to demonstrate harmlessness of the alleged constitutional violation beyond a reasonable doubt”).

“The first two steps in the Golding analysis address the reviewability of the claim, while the last two steps involve the merits of the claim. State v. Beltran, 246 Conn. 268, 275, 717 A.2d 168 (1998).” (Internal quotation marks omitted.) State v. Henry, 253 Conn. 354, 359, 752 A.2d 40 (2000). In the absence of any one of the four Golding conditions, the defendant’s claim will fail. State v. Hafford, 252 Conn. 274, 305, 746 A.2d 150, cert. denied, 331 U.S. 855, 121 S. Ct. 136, 148 L. Ed. 2d 89 *326(2000); State v. Golding, supra, 213 Conn. 240. We agree with the defendant that the record of the trial court’s decision to place on the defendant the burden of proving an exemption is adequate for review. Although the defendant did not object, if improper, the trial court’s decision in this regard clearly implicates her constitutional right to a fair trial. See State v. Taylor, 239 Conn. 481, 512, 687 A.2d 489 (1996), cert. denied, 521 U.S. 1121, 117 S. Ct. 2515, 138 L. Ed. 2d 1017 (1997) (jury instruction that dilutes state’s burden of proof or places burden on defendant to prove innocence is unconstitutional); State v. Wolff, 237 Conn. 633, 669, 678 A.2d 1369 (1996) (due process requires for conviction proof beyond reasonable doubt of every fact necessary for crime charged). Indeed, the state does not dispute that the first two prongs have been met. See State v. Golding, supra, 239-40.

“[I]f we are persuaded that the merits of the defendant’s claim should be addressed, we will review it and arrive at a conclusion as to whether the alleged constitutional violation clearly exists and whether it clearly deprived the defendant of a fair trial.” Id., 241. We conclude that the defendant’s claim does not satisfy the third condition under Golding, because she has failed to establish a constitutional violation that clearly deprived her of a fair trial. See id.

“ ‘[T]he Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which [she] is charged.’ In re Winship, 397 U.S. 358, 364, 90 S. Ct. 1068, 25 L. Ed. 2d 368 (1970).” State v. Valinski, 254 Conn. 107, 120, 756 A.2d 1250 (2000).17 “It is constitutionally permissible for the state *327to place the burden on a criminal defendant to prove by a preponderance of the evidence elements which would constitute an affirmative defense but which do not serve to negate any essential element of the crime which the state has the burden of proving beyond a reasonable doubt in order to convict. Patterson v. New York, 432 U.S. 197, 210, 97 S. Ct. 2319, 53 L. Ed. 2d 281 [(1977)].” State v. Arroyo, 181 Conn. 426, 430, 435 A.2d 967 (1980); State v. Valinski, supra, 120-21. Thus, the question is whether proving an exemption is an affirmative defense or whether the nonexistence of an exemption from registration under § 36b-21 is a required element for a conviction of selling unregistered securities under § 36b-16.

A

The defendant contends that, to support a conviction under § 36b-16, the state must prove beyond a reasonable doubt that the security, in addition to being sold or offered, was not registered and was not exempt from registration. Specifically, the defendant claims that an exemption from registration is nowhere “declare [d] ... to be an affirmative defense” by the legislature, and that, in accordance with General Statutes § 53a-12,18 the state should have had the burden of disproving the exempt status of the securities or transactions beyond a reasonable doubt.

The state claims that the plain language of CUSA places on the defendant the burden of proving an *328exemption and that, because an exemption from registration is an affirmative defense, rather than an element of the crime of selling unregistered securities, the trial court properly placed the burden on the defendant to prove that the securities fell within an exemption. We agree with the state.

Whether an exemption from registration is an affirmative defense to the crime of selling unregistered securities requires us to construe provisions of CUSA. “Statutory construction is a question of law and therefore our review is plenary. . . . [O]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature. ... In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter.” (Citation omitted; internal quotation marks omitted.) State v. Murray, 254 Conn. 472, 487-88, 757 A.2d 578 (2000). On the basis of these factors, we conclude that an exemption from registration under CUSA is an affirmative defense to the charge of selling unregistered securities under § 36b-16.

The language of CUSA is clear. General Statutes (Rev. to 1995) § 36b-21 (d) provides that “[i]n any proceeding under sections 36b-2 to 36b-33, inclusive, the burden of proving an exemption or an exception from a definition is upon the person claiming it.” The defendant does not dispute that the reference to “sections 36b-2 to 36b-33, inclusive” includes § 36b-16, the statute that defines the prohibited conduct of which she was found guilty. (Emphasis added.) She claims, without citing any legal authority, that simply because § 36b-21 (d) is codified among the other provisions of CUSA, rather than in the Penal Code, it “applies only to civil or administrative proceedings, not criminal trials.” We are not persuaded.

*329The defendant’s reliance on General Statutes § 53a-2 is misplaced. That section applies generally to offenses defined in the Penal Code or offenses defined elsewhere in the General Statutes, “unless otherwise expressly provided or unless the context otherwise requires . . . .”19 Section 36b-21 (d) applies specifically to the provisions of CUSA and expressly provides that a party claiming an exemption or an exception from a definition shall have the burden of proof on that issue. “As a matter of statutory construction, specific statutory provisions are presumed to prevail over more general statutory provisions dealing with the same overall subject matter. McKinley v. Musshorn, 185 Conn. 616, 623-24, 441 A.2d 600 (1981); Edmundson v. Rivera, 169 Conn. 630, 635, 363 A.2d 1031 (1975).” State v. Torres, 206 Conn. 346, 359, 538 A.2d 185 (1988); see Velez v. Commissioner of Correction, 250 Conn. 536, 550, 738 A.2d 604 (1999). Had the legislature intended the burden articulated in § 36b-21 (d) to apply only in civil matters, it certainly could have drawn that distinction in the text of the statute. See Home Ins. Co. v. Aetna Life & Casualty Co., 235 Conn. 185, 195, 663 A.2d 1001 (1995) (“[w]e will not impute to the legislature an intent that is not apparent from unambiguous statutory language in the absence of a compelling reason to do so”).

In addition, the purpose of CUSA supports the conclusion that a defendant should bear, as an affirmative defense, the burden of proving that no registration was required for the offer or sale of the securities at issue. “[T]he primary purpose behind [CUSA] was to institute comprehensive registration requirements and thereby improve surveillance of securities trading.” Connecticut National Bank v. Giacomi, supra, 233 Conn. 320, *330citing Conn. Joint Standing Committee Hearings, Banks, Pt. 1, 1977 Sess., pp. 175-76, remarks of Banking Commissioner Lawrence Connell. Given this regulatory purpose, we conclude that, as a matter of policy, it would make little sense to construe the statute in a manner that would make it exceedingly difficult for the state to enforce the prohibition on the sale of unregistered securities in § 36b-16.20

Moreover, because numerous, varied exemptions exist under General Statutes (Rev. to 1995) § 36b-21 (a)21 *332and (b),22 “[o]nce the seller has determined that a security falls within a class of exempt securities, that knowledge is peculiarly within the personal knowledge of the seller.” United States ex rel. Shott v. Tehan, 365 F.2d 191, 195 (6th Cir. 1966), cert. denied, 385 U.S. 1012, 87 S. Ct. 716, 17 L. Ed. 2d 548 (1967). It is apparent that an exemption from registration is an affirmative defense to the charge of selling unregistered securities under § 36b-16. This conclusion comports with cases from other jurisdictions that maintain statutory provisions virtually identical to § 36b-16. See, e.g., id., 194-95; Hunter v. State, 330 Ark. 198, 201-202, 952 S.W.2d 145 (1997); People v. Morrow, 682 P.2d 1201, 1205 (Colo. App. 1983), cert. denied, 682 P.2d 1201 (Colo. 1984); State v. Kershner, 801 P.2d 68, 70 (Kan. App. 1990); *333State v. Crooks, 84 Or. App. 440, 445-46, 734 P.2d 374 (1987).23

B

Because an exemption is an affirmative defense to the crime of selling unregistered securities, the question devolves to whether requiring the defendant to bear the burden of proving the existence of an applicable exemption by a preponderance of the evidence passes constitutional muster. See State v. Valinski, supra, 254 Conn. 129-30. “The proper approach to resolving this question, as dictated by Patterson [v. New York, supra, 432 U.S. 210], is first to determine the elements of [the offense of selling unregistered securities], and second to determine whether the defense [that the securities were exempt from registration] necessarily negates any of those elements. White v. Arn, 788 F.2d 338, 343-44, (6th Cir. 1986), cert. denied, 480 U.S. 917, 107 S. Ct. 1370, 94 L. Ed. 2d 686 (1987).” (Internal quotation marks omitted.) State v. Valinski, supra, 129-30.

A conviction under § 36b~16 requires proof that the defendant (1) sold or offered a security in this state, and (2) that the security is not registered under §§ 36b-2 through 36b-33, inclusive. If we were to agree with *334the defendant that the state must also prove, in addition to the aforementioned elements, that the securities at issue were not exempt under § 36b-21, the state would be required to prove the nonexistence of some thirty-six exemptions. See footnotes 3 and 21 of this opinion. Given the remedial purpose of the Uniform Act; see Connecticut National Bank v. Giacomi, supra, 242 Conn. 67; we cannot conclude that such a construction is warranted. See Southington v. Commercial Union Ins. Co., 254 Conn. 348, 358, 757 A.2d 549 (2000) (noting that “we read each statute in a manner that will not thwart its intended purpose or lead to absurd results” [internal quotation marks omitted]); State v. Ehlers, 252 Conn. 579, 593, 750 A.2d 1079 (2000) (same); State v. Tinsley, 181 Conn. 388, 403, 435 A.2d 1002 (1980), cert. denied, 449 U.S. 1086, 101 S. Ct. 874, 66 L. Ed. 2d 811 (1981) (burden not on state to disprove exceptions to statute where exceptions not essential elements of crime charged), overruled in part on other grounds, State v. Pinnock, 220 Conn. 765, 788, 601 A.2d 521 (1992); State v. Goetz, 312 N.W.2d 1, 9 (N.D. 1981), cert. denied, 455 U.S. 924, 102 S. Ct. 1286, 71 L. Ed. 2d 467 (1982) (nonexistence of exemption from registration not element of offense of selling unregistered securities).

It is equally clear that the availability of an exemption from registration does not negate any of the essential elements of the crime of selling unregistered securities. An unregistered security or transaction that qualifies for one of the statutory exemptions enumerated in § 36b-21, and may be offered or sold in Connecticut because of its exempt status, is still an unregistered security. The mere fact that an issuer may legally sell such a security does not transform an otherwise unregistered security into one that is registered under CUSA. See State v. Frost, 57 Ohio St. 2d 121, 127, 387 N.E.2d 235 (1979) (not unconstitutional to require defendant to carry burden of *335proof on exemption under Ohio blue sky law “because it does not require the defendant to negate any facts of the crime which the state must prove in order to convict”).

Decisions from other jurisdictions addressing the crime of selling unregistered securities under the Uniform Act or similar provisions of state blue sky laws consistently have placed the burden on the defendant to prove an exemption. See, e.g., United States ex rel. Shott v. Tehan, supra, 365 F.2d 194; State v. Goodman, 110 Ariz. 524, 526, 521 P.2d 611 (1974); Hunter v. State, supra, 330 Ark. 201-202; State v. Kershner, supra, 801 P.2d 70; Commonwealth v. David, 365 Mass. 47, 53-54, 309 N.E.2d 484 (1974); People v. Dempster, 396 Mich. 700, 713-14, 242 N.W.2d 381 (1976); Fullerton v. State, 116 Nev. , 8 P.3d 848, 850 (2000); State v. Goetz, supra, 312 N.W.2d 9-10; State v. Frost, supra, 57 Ohio St. 2d 127; State v. Shepherd, 989 P.2d 503, 509 (Utah App. 1999); cf. People v. Morrow, supra, 682 P.2d 1207 (“ [o]nce the prosecution raised the issue of [the applicability of an exemption as an] affirmative defense, it assumed the burden of proving beyond a reasonable doubt that the affirmative defense was not applicable”); accord Securities & Exchange Commission v. Ralston Purina Co., 346 U.S. 119, 126, 73 S. Ct. 981, 97 L. Ed. 1494 (1953) (imposition of burden of proof on issuer of securities seeking to utilize exemption is “fair and reasonable” because of “broadly remedial purposes of federal securities legislation”).

Accordingly, we conclude that the existence and applicability of an exemption does not “serve to negate any essential element of the crime which the state has the burden of proving beyond a reasonable doubt in order to convict”; State v. Arroyo, supra, 181 Conn. 430; and that requiring the defendant to bear the burden of proof, by a preponderance of the evidence, with respect to the affirmative defense of an exemption from regis*336tration does not violate the defendant’s right to due process under the fourteenth amendment to the United States constitution. Patterson v. New York, supra, 432 U.S. 210; State v. Valinski, supra, 254 Conn. 131; State v. Arroyo, supra, 430.24

III

The defendant next claims that the trial court improperly admitted into evidence the cease and desist order that the department had issued against the defendant and her husband. The defendant contends that the cease and desist order “was neither relevant nor material” and its admission “prejudiced [her] by diverting attention from the actual issues in the case . . . [specifically] whether or not § 36b-16 [had been] violated.” The defendant concedes that the evidence was admitted without objection, but seeks review under the plain error rule of Practice Book § 60-5. See footnote 15 of this opinion.

“Plain error review is reserved for truly extraordinary situations where the existence of the error is so obvious that it affects the fairness and integrity of and public confidence in the judicial proceedings. . . . Westport Taxi Service, Inc. v. Westport Transit District, 235 Conn. 1, 25, 664 A.2d 719 (1995).” (Internal quotation marks omitted.) State v.