Pursuant to the Utah Pattern of Unlawful Activity Act (“UPUAA”), the state must prove that an individual engaged in a “pattern of unlawful activity.” As defined by the statute, a “‘[p]attern of unlawful activity’ means engaging in conduct which constitutes the commission of at least three episodes of unlawful activity.” The UPUAA lists approximately 64 violations of Utah law that constitute unlawful activity for purposes of the UPUAA. A Violation of the Utah Uniform Securities Act is included within the offenses that constitute “unlawful activity” under the UPUAA.
In a case that has involved an investigation and lawsuit by the Securities and Exchange Commission (“SEC”), a federal prosecution for obstruction of justice and providing false information, and state charges for securities fraud and engaging in a pattern of unlawful activity, Third District Judge Elizabeth Hruby-Mills recently sentenced Roger S. Bliss to a minimum of four years in the Utah State Prison. Mr. Bliss’ sentence follows his guilty plea to four counts of communications fraud and one count of engaging in a pattern of unlawful activity. Judge Hruby-Mills said that Mr. Bliss’ four year sentence will run consecutively with his one-year prison term imposed from federal court as it relates to the charges of obstruction of justice and providing false information.
SEC Files Suit
In February 2015, the SEC sued Mr. Bliss in Utah federal court. In its complaint, the SEC alleged Mr. Bliss solicited investors by offering them a membership in purported investment club. Mr. Bliss communicated to potential investors that he could day trade (speculation in securities) Apple stock for annual returns of 100 to 300 percent and that he had not lost money on a day trade in the last six years, the SEC said.
In order to further entice investors, Mr. Bliss told them that he was trading more than $300 million in assets. However, the SEC has said that Mr. Bliss’ brokerage account actually showed losses of at least $3 million over a three year period, with an ending balance of only $32,000.
According to court papers filed by the SEC, Mr. Bliss allegedly structured the scheme as an investment club following a meeting with attorneys, whereby the attorneys told him that structuring the scheme as an investment club would keep him from having to register as an investment adviser or a broker-dealer.
SEC Obtains TRO and Asset Freeze
On the same day the SEC lawsuit was filed, a Utah federal court also entered a temporary restraining order and asset freeze against Mr. Bliss. In July 2015, the SEC filed a motion for an order to show cause, claiming that Mr. Bliss had violated the court’s asset freeze when he failed to disclose ownership of a catamaran and had the boat removed from his property five days after the asset freeze was entered. In response to the SEC’s motion, Mr. Bliss said in a sworn declaration that his brother-in-law, Kevin Fortney, who had not been named in the SEC’s lawsuit, owned the boat but stored it at his house in Bear Lake during the off-season.
Mr. Bliss Held in Contempt
Following the statements in Mr. Bliss’ sworn declaration, U.S. District Judge Robert J. Shelby held Mr. Bliss in civil contempt. Judge Shelby stayed any sanctions against Mr. Bliss, and, instead, referred the matter to the U.S. Attorney’s Office for the District of Utah for a consideration of whether criminal charges should be brought against Mr. Shelby for criminal contempt.
Mr. Bliss and Mr. Fortney Indicted in Utah Federal Court
In August 2015, Mr. Bliss and Mr. Fortney were indicted by a federal grand jury for allegedly lying about the ownership of the catamaran during the SEC’s investigation. Mr. Bliss ultimately pled guilty to the federal charges, and was sentenced to a one-year prison term.
As previously noted, State charges were also filed against Mr. Bliss in connection with his alleged Apple investment scheme, including four counts of securities fraud and one count of engaging in a pattern of unlawful activity. The State was able to include a charge for engaging in a pattern of unlawful because they had alleged four “episodes” of securities fraud attributable to Mr. Bliss. A charge under the UPUAA is a second degree felony, but also carries the potential penalties of cost of suit, restitution, disgorgement, or other reasonable restrictions that may be placed on the future activities or investments of the individual, including ordering the dissolution or reorganization of any enterprise as defined by the UPUAA.
Mr. Bliss Ordered to Pay Restitution in Addition to Prison Time
Mr. Bliss ultimately pled guilty to the State charges, which led to the court imposing a four-year sentence against him. In addition to sentencing Mr. Bliss to prison, the court also ordered him to pay approximately $21 million in restitution to the victims of his securities scheme.