The unauthorized practice of law: woman posing as lawyer sentenced to jail and banned from legal profession

lawyer2n-2-webIn late December 2014, a woman was arrested in Summit County on allegations that she had been impersonating a Utah attorney and handling cases in court, representing actual clients under another attorney’s name.  The woman, identified as Karla Carbo, then 29 and residing in South Jordan, was arrested and booked into the Summit County Jail on suspicion of felony fraud, forgery and identity theft.

Carbo Held Self Out as an Attorney, Using Real Attorney’s Bar Information

Investigators said that Carbo had held herself out as an attorney in several jurisdictions, including impersonating an attorney at least times in the six months before her arrest.  Carbo was arrested within a week negotiating felony counts down to misdemeanors on behalf of her client in Summit County.  In fact it was that exact plea deal that garnered the attention of the Utah Bar Association.  The Bar told police that Carbo had been using a legitimate attorney’s name and bar number to represent clients without a license.

Police said that Carbo had represented to the courts that her name was Karla Stirling Fierro, but that the bar number Carbo gave as her own actually belonged to Utah attorney Karla Stirling.  In an interview, Stirling said, “It’s been shocking to hear that there’s been somebody else whose doing this with my name and my bar number.  I mean, who would take it that far to full-on impersonate someone and use a legitimate bar number?”

Stirling Was Completely Unaware Carbo Was Posing as Her

Stirling said that she found out about Carbo’s impersonation of her when she was contacted by the Draper City Justice Court about a pending hearing.  Stirling told the court she had no idea what they were talking about, and that she did not even practice criminal law.  “I said, ‘I don’t know what this is. There must be some mistake.’ And they went back and checked and said, ‘Oh no, this is no mistake,'” Stirling said.

“I don’t do any criminal work. I’ve never done any criminal work or immigration or personal injury. I’ve done business contracts, real estate,” Stirling said.  “I have not done any litigation matters in Utah.  There shouldn’t be any court files with my name or my bar number in Utah whatsoever.”

Soon after the court contacted Stirling, the Summit County Attorney’s Office got a call from the Utah State Bar telling them “that Fierro was not an attorney.”

Utah AG’s Office Takes Over Prosecution

In April 2015, the Utah Attorney General’s Office took over the prosecution of Carbo’s case.  That meant that Summit County prosecutor’s agreed to dismiss the charges pending against Carbo there, while new charges would be filed by the State in 3rd District Court.  The State charged Carbo with 12 felony counts, including one count each of second-degree felony engaging in a pattern of unlawful activity and identity fraud, along with five counts of second-degree felony communications fraud.  The charges also include five counts of third-degree felony forgery, court records show.

Carbo Pleads Guilty to Felony Counts, Including UPUAA Count

In July 2015, Carbo accepted a plea deal from State prosecutors, which required her to plead guilty to second-degree felony counts of pattern of unlawful activity, identity fraud, communication fraud, and one third-degree felony count of forgery.  In exchange for Carbo’s pleas, prosecutors dismissed eight other counts.  As part of the plea deal, Carbo agreed to pay more than $7,000 in restitution – money she earned as legal fees for her misrepresented services.  As it related to sentencing, prosecutors told Judge Keith Kelly at the plea hearing that they would be asking the court to impose a 90-day jail sentence with probation to follow that.

Carbo Sentenced to 62 Days in Jail, Ordered to Pay Restitution, and Banished From Legal Profession

At the sentencing hearing in September 2015, Judge Kelly sentenced Carbo to 62 days in jail.  Judge Kelly suspended potential prison terms of up to 15 years and, per a plea agreement negotiated by attorneys, ordered her to serve 90 days in jail, but gave her credit for 28 days already served.  Judge Kelly also imposed 36 months of probation, which required Carbo to complete 75 hours of community service, as well as obtain treatment to address theft issues.  Carbo was also ordered to pay approximately $7,274 in restitution to five clients wo paid for her fraudulent legal services.  Finally, Judge Kelly ordered that Carbo not engage in any legal-related employment.

Carbo’s attorney said of the sentence, “She understands she has harmed these people. She understands she has harmed the legal system.”  “She’s a hardworking mother and she just wants to put this behind her,” her attorney added.

Carbo Victims Offered “Do-Over”

As it relates to the plea deal Carbo negotiated just prior to her arrest, Summit County attorney Matthew Bates said, “This is a very serious matter because we know of at least one person out there now who has pled guilty to a crime without having a competent attorney.”  Further, Bates said that the judge in that case had sent a notice to the defendant telling him what had happened and scheduled a new court date, at which time the defendant will be allowed to be appointed a real attorney as well as withdraw his guilty plea if he wants to, and that Bates’ office would not object to a “do-over.”

“Legally, he has pretty solid grounds to withdraw his plea if he wanted to because the plea was essentially uncounseled and an uncounseled plea is a violation of the Constitution,” Bates said.

While, Carbo’s criminal matter may have been resolved, the Utah Pattern of Unlawful Activity Act (“UPUAA”) allows persons harmed by a pattern of unlawful activity to file a civil suit against the wrongdoer.  That portion of the UPUAA allows a person injured through a pattern of unlawful activity to recover “twice the damages” he or she “sustains,” as well as “the costs of suit, including reasonable attorney fees” if they prevail.  A civil action under the UPUAA must be commenced “within three years after the conduct prohibited by Section 76-10-1603 terminates or the cause of action accrues, whichever is later.”

Contact Our UPUAA Team Today

To date it does not appear that any of Carbo’s victims have filed suit against her under the civil prong of the UPUAA, but they still have time.  If you or someone you know has been a victim of a pattern of unlawful activity, do not hesitate to call our UPUAA attorney team for a consultation.  Conversely, if you have been arrested and charged with a violation of the UPUAA, which is a second-degree felony, please contact our UPUAA attorneys for a consultation as well.  Our UPUAA attorneys can be reached by telephone at (801) 323-5000 or by email at Karra.Porter@chisjen.com.

* Photo Cred.: nydailynews.com

Ex-Utah County Commissioner charged with communications fraud and engaging in a pattern of unlawful activity after he allegedly posed as LDS Church leader

1661897Former Utah County Commissioner Gary Jay Anderson and businessman Alan McKee have been charged with three counts of communications fraud and one count of engaging in a pattern of unlawful activity for allegedly posing as LDS Church leaders in an attempt to defraud a construction company out of $1.2 million.

All four charges filed against Mr. Anderson and Mr. McKee in 3rd District Court by the Utah Attorney General’s Office are second-degree felonies, which carry the potential penalties of one to 15 years in prison.

Anderson and McKee Posed as LDS Church Officials From 2011 to 2015

According to an article from the Salt Lake Tribune, investigators wrote in the charging documents that Mr. Anderson and Mr. McKee impersonated LDS Church officials from 2011 to 2015 in order to attract investors to what the pair said was a plan to establish a rail line and an industrial park on LDS Church land in Elberta, Utah.

Apparently, employees of the LDS Church’s land management corporation have acknowledged that they discussed a potential rail service with Mr. McKee, but that the proposal stalled in 2013 after Mr. McKee failed to follow through.  Mr. McKee had been introduced to the Church’s officials by several Utah County commissioners, including Mr. Anderson.

McKee and Anderson Defraud Ames Construction

During the same time Mr. McKee was in talks with the LDS Church, he was also corresponding with Ames Construction.  According to investigators, Mr. McKee sent Ames letters on LDS Church letterhead, which purported to be from people connected to the Church and its land management corporation.  The letters allegedly discussed the industrial park and showed support for Mr. McKee’s involvement in the project, even going so far as to praise Mr. McKee’s earlier work on the project.

As part of the correspondence with Ames was a 2013 email from a Yahoo account that Mr. McKee claimed belonged to “Eric Peling,” who supposedly worked for the Church’s land management company.  The email apologized that the substance of the communication was not on official letterhead, but that the LDS Church was “making financial payouts” in connection to the rail line and set meetings to finalize a $4 million payout from the Church to Ames Construction and Mr. McKee.

Ames’ regional vice president, Mark Brennan, met with Mr. McKee and someone who identified himself as “Mr. Peling,” but LDS Church officials later said there is no church employee by that name, investigators claimed.

While Mr. McKee was trying to garner Ames participation in the rail line and industrial park, Mr. McKee was also speaking with Mr. Brennan about a personal business deal to purchase the LDS Church’s surplus farm equipment at a discount.  Mr. McKee claimed to be a “preferred buyer” for the Church’s equipment and said he could act as a go-between for Mr. Brennan and the Church.  Mr. Brennan paid Mr. McKee $110,000 for the equipment, but it was never delivered.

Throughout the negotiations with Mr. McKee, Mr. Brennan received numerous phone calls from a man identifying himself as “Stevenson,” which continually reassured Mr. Brennan that the Church was committed to the pending rail line project and the equipment deal.  However, after listening to two of the recorded conversations between Mr. Brennan and “Stevenson,” investigators determined that the voice of the caller was actually Mr. Anderson.

Anderson and McKee Defraud McKee’s Friend and Fellow Churchgoer

In addition to defrauding Ames, investigators claim that Mr. McKee also defrauded a fellow churchgoer out of $750,000 after Mr. McKee claimed to be a “preferred buyer” of foreclosed farm and construction equipment.  However, the business that Mr. McKee said he could buy the equipment from never existed.  Even still, someone claiming to be the president of the company called Mr. McKee’s friend and sent him numerous text messages regarding the purchase of the equipment.  Again, investigators determined that the purported president was in fact Mr. Anderson.

Investigators seized the cellphones of Mr. McKee and Mr. Anderson and found text messages between them, coordinating communications with the alleged victims.  Mr. Anderson at times told the victims he was Mr. McKee’s attorney; he later told investigators he was not Mr. McKee’s attorney, but received $10,000 per month from Mr. McKee for “consulting” services.

Investigators reviewed Mr. McKee and Mr. Anderson’s finances and found several transactions between them.  They found that Mr. McKee was shifting money around his accounts and accounts to his business, Ophir Minerals and Aggregate, LLC.  The company was named by the Utah County Commission as “business of the year” in 2011, while Mr.  Anderson was serving on the Utah County Commission.

LDS Church Releases Statement on Charges

LDS Church spokesman Eric Hawkins released a prepared statement Monday regarding the charges.

“Two individuals have been charged with fraud for claiming to be or represent (former) Bishop Gary E. Stevenson during their business dealings.  Elder Stevenson was serving as the presiding bishop of the church at that time.  He does not know these individuals, has never spoken with them, and was completely unaware of their activities,” Hawkins said in the statement.  “The church alerted authorities as soon as it learned of the matter, and Elder Stevenson has provided a statement to prosecutors confirming he was not involved in this brazen scheme, which attempted to misuse the good name of the church and the office of the presiding bishop,” Hawkins said.

* Photo cred.: deseretnews.com

Apple stock scheme lands Utah man in prison

wall-street-HPursuant 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.

Utah Supreme Court holds that UPUAA allows “prevailing” plaintiff to recover “reasonable attorney’s fee” in Westgate v. Consumer Protection Group

shutterstock_304652984-800x380

The Utah Pattern of Unlawful Activity Act (“UPUAA”) provides a private right of action for persons “injured by a pattern of unlawful activity.”  As part of this private right of action, the statute entitles a “prevailing party” to “recover … a reasonable attorney’s fee.”

In a recent appeal to the Utah Supreme Court handled by Christensen & Jensen (“C&J”) attorney Karra Porter, the Supreme Court held that while the Utah Uniform Arbitration Act (“UUAA”) does not authorize an arbitration panel to award attorney fees for court proceedings confirming the panel’s decision, the UPUAA allows prevailing plaintiffs to recover a reasonable attorney fee.  Accordingly, the Supreme Court confirmed the panel’s award of attorney fees expended during the arbitration, as well as granting the appellee’s request for attorney fees associated with the appeal.

On appeal, Westgate argued that the arbitration panel had no authority to award attorney fees for the court proceedings confirming the panel’s decision, and that the arbitration panel manifestly disregarded the law by awarding attorney’s fees in excess of the amount Consumer Protection Group (“CPG”) agreed to pay their lawyer.

C&J has been pursuing this case for more than a decade now.  In 2002, Westgate sued CPG for various alleged torts and breaches of contract.  Then, in 2005, CPG raised counterclaims under the UPUAA.  Under the UPUAA, a party may force arbitration of fraud claims, which Westgate took advantage of in 2008.

In 2010, an arbitration panel resolved the UPUAA claims in CPG’s favor.  However, before the arbitration panel ruled on CPG’s request for attorney fees, Westgate discovered that one of the arbitrators was a first cousin of a shareholder at the law firm representing CPG.  As a result, Westgate moved the district court to vacate the panel’s decision.  The district court granted Westgate’s motion, CPG appealed, and the Supreme Court reversed, but without ruling on CPG’s request for attorney fees.

The case then went back to the arbitration panel, which declined to award fees for pre-award arbitration litigation, but ordered approximately $558,810.30 for work performed during the arbitration and approximately $88,829.50 for work in what the panel called “post-arbitration proceedings.”  Westgate thereafter again moved the district court to vacate the panel’s decision, challenging the fee awards.  The district court denied Westgate’s motion, and Westgate appealed to the Utah Supreme Court.

As to whether the arbitration panel exceeded the scope of its authority by awarding attorney fees for post-arbitration proceedings, the Supreme Court held that the section 122 of the UUAA does not authorize an arbitration panel to award post-arbitration fees.  According to the Supreme Court:

The decision-makers most familiar with CPG’s attorneys’ work during the confirmation proceedings and resulting appeal were the courts that presided over those confirmation proceedings and resulting appeal. We think it best to assign those courts sole responsibility for granting attorney fees in those proceedings, and we therefore conclude that the panel exceeded its authority when it ordered Westgate to pay post- arbitration attorney fees.

In relation to the second issue raised on appeal, namely whether the arbitration panel acted in manifest disregard of the law by allowing CPG to collect attorney fees in excess of the contracted amount, the Supreme Court held that the arbitration panel did not manifestly disregard the law in awarding attorney fees to CPG as the prevailing party.  In fact, the Supreme Court said that not only was the panel allowed to make such an award, but also that such an award was compelled under the UPUAA.

Instead of challenging the panel’s authority to award fees for arbitration, Westgate challenged the method the panel used to calculate the fees it awarded to CPG.  The panel determined that the reasonable fee award to CPG was approximately $558,810.30, which it arrived at by multiplying reasonable hours by a reasonable market rate.  Westgate asserted that the panel’s calculations were in error, and that Utah law required the panel to cap the attorney fees at the amount that CPG contracted to pay.  The Supreme Court disagreed, holding:

Ultimately, because the UPUAA does not expressly limit a plaintiff’s attorney fees to those actually incurred and there is no controlling Utah case law interpreting this specific question, the arbitration panel did not commit an obvious error in its calculation of reasonable attorney fees. The district court’s order confirming the panel’s award of $558,810.30 is affirmed.

Finally, the Supreme Court addressed CPG’s request for attorney fees as it related to the instant appeal.  There, the Supreme Court granted CPG’s request for attorney fees as it related to the appeal, finding that the UPUAA authorized attorney fees related to an appeal.

Update: Utah Supreme Court Reverses Court of Appeals’ Decision in Grace Kelson Case

In the fall of 2014, the Utah Supreme Court ruled to reverse a 2012 Utah Court of Appeals decision in the Grace Kelson case.

Grace Kelson Verdict Overturned

In the fall of 2014, the Utah Supreme Court ruled to reverse a 2012 Utah Court of Appeals decision in the Grace Kelson case, which had vacated Ms. Kelson’s conviction for pattern of unlawful activity and reversed and remanded for a new trial on all other charges. The Utah Supreme Court’s decision remanded the case back to the court of appeals for further consideration of any remaining issues in the case, namely to consider an alternative ground for reversal of Ms. Kelson’s convictions that the court of appeals did not consider.

As background, in or around October 2001, Ms. Kelson and the owners of a mortgage company attempted to purchase a $15 million letter of credit to fund the two development projects. In order to secure the letter of credit, Ms. Kelson and the owners had to raise $125,000. As a result, they set about persuading friends, colleagues, and the families of their friends and colleagues, to provide funds for the letter of credit. In exchange for funding the letter of credit, the investors received promissory notes signed by Ms. Kelson for amounts several times larger than the amounts they provided. The promissory notes stated a financial services company that Ms. Kelson was the registered agent of would pay the investors within thirty days. However, Ms. Kelson failed to secure the line of credit and the investors were never paid. Ms. Kelson was subsequently charged and convicted on three counts of securities fraud, one count of offering or selling unregistered securities; one count of sales by an unlicensed broker-dealer, agent, or investment advisor; and one count of engaging in a pattern of unlawful activity. Ms. Kelson appealed her convictions.

On appeal, Ms. Kelson argued that her convictions should be overturned on the basis of ineffective assistance of counsel, and that the trial court erred in denying her motion for directed verdict because the court misapplied the UPUAA. The Utah Court of Appeals agreed, overturning Ms. Kelson’s UPUAA conviction and remanding for a new trial on all other charges. Specifically as it related to the pattern of unlawful activity conviction, Ms. Kelson argued that her activity in this case didn’t constitute a pattern of unlawful activity as a matter of Utah law. The court of appeals agreed. According, to the holding in Hill v. Estate of Allred, “[t]he proper test for determining whether there was a pattern of unlawful activity is whether there was `a series of related predicates extending over a substantial period of time’ or a demonstrated threat of continuing unlawful activity and not whether there were multiple schemes.” In the eyes of the court of appeals, the State had failed to satisfy the Hill test because:

Although Kelson’s actions involved multiple alleged crimes committed for the common purpose of obtaining cash, Kelson’s alleged crimes took place over a matter of days. Kelson first alerted Employee about the opportunity shortly before October 11, 2001, and all checks exchanged for promissory notes were deposited by October 15, 2001. Thus, Kelson’s alleged unlawful activity took place over a “closed period,” and the State was required to show “‘a series of related predicates extending over a substantial period of time.'” The State does not contend that it has done so, nor could it have made such a showing. As the Supreme Court noted in H.J., “[p]redicate acts extending over a few weeks or months,” which do not threaten “future criminal conduct,” do not constitute a substantial period of time sufficient to show continuity. Accordingly, Kelson’s acts over the course of only a few days are insufficient as a matter of law to satisfy Hill’s requirement that a pattern of unlawful activity must occur over a substantial period of time.

 

The State thereafter filed a petition of certiorari to the Utah Supreme Court, but did not challenge the court of appeals ruling on the pattern of unlawful activity conviction. The Utah Supreme Court disagreed with the court of appeals ruling on the securities conviction, and overturned the decision. The Utah Supreme Court reasoned “the jury instruction in question was an accurate statement of the underlying criminal law and not a burden-shifting evidentiary presumption.” As a result, the Utah Supreme Court “reject[ed] Kelson’s claims of ineffective assistance of counsel and plain error, and reverse[d] and remand[ed] to the court of appeals,” for further consideration of any remaining issues in the case.

While Ms. Kelson’s vacated convictions for securities fraud were ultimately overturned by the Utah Supreme Court, the court of appeals decision regarding the UPUAA has stood. The court of appeals decision is important because it further solidifies the Hill test, which recognizes that in order to constitute a pattern of unlawful activity under Utah law, the criminal activity must extend over a “substantial period of time.” If it does not, then a UPUAA charge may not be sustained as a matter of law. It remains to be seen what will happen to the rest of Ms. Kelson’s appeal, but at least her case has produced one favorable result, even if her convictions are ultimately upheld by the court of appeals.

Putting a Defendant on Adequate Notice Under the UPUAA

The Utah Supreme Court has previously explained that Article I, section 12 requires “that the accused be given sufficient information ‘so that he [or she] can know the particulars of the alleged wrongful conduct and can adequately prepare his [or her] defense.'”

UPUAA NoticeUnder Article I, section 12 of the Utah Constitution, “In criminal prosecutions the accused shall have the right … to demand the nature and cause of the accusation against him [and] to have a copy thereof.” The Utah Supreme Court has previously explained that Article I, section 12 requires “that the accused be given sufficient information ‘so that he [or she] can know the particulars of the alleged wrongful conduct and can adequately prepare his [or her] defense.'” The requirements of Article I, section 12 naturally extend to UPUAA charges, and defendants charged under the UPUAA must be given sufficient notice of the charges against them.

In State v. Bell, the Utah Supreme Court determined that the State had failed to give Mr. Bell sufficient notice of the particulars of the RICE (the UPUAA’s predecessor) charges against him. The first question facing the court was “whether the indictment was itself detailed enough to give Bell sufficient notice of the charges.” To this the court responded:

The indictment merely repeated verbatim the broad, vague language of the RICE statute without describing any facts or circumstances constituting the crime charged other than a statement that the crime had been committed during a ten-month period. This indictment met the minimal standards 105*105 of rule 4(b) … but by no stretch of the imagination did it provide Bell with sufficient notice of the facts underlying the charges to enable him to prepare an adequate defense.

The next question was whether Mr. Bell had “exercised his right to seek more particular notice by requesting a bill of particulars under rule 4(e) and , this preserved his claim for error. There the court determined:

Bell did submit a timely request that the State provide a bill of particulars describing the factual basis for the element of racketeering activity and specifically explaining “what enterprise is alleged as being involved.” Therefore, under rule 4(e), the State had the burden of providing an adequate bill of particulars.

Finally, the court was left to answer whether the State had met its burden, and if the State had not whether trial court’s failure to enforce the notice requirement was prejudicial. The court started by addressing the State’s conduct, finding that the State had not met its burden:

Although Bell persistently objected to the inadequacy of the bill of particulars, the State refused to amend or supplement the bill as it would have been permitted to do under rule 4(e). The State failed to meet the burden of notice imposed on it by rule 4(e), and the trial court’s failure to enforce this requirement was clearly error under the plain language of rule 4(e), as well as the standards described in Fulton.

Satisfied that the State had not met its burden and that it was error for the trial to court not to enforce the notice requirement upon the State, the court turned to the question of whether the trial court’s error was harmless or prejudicial. There the court determined:

Our review of the record leaves us unconvinced that Bell did in fact receive adequate notice through these convoluted means. None of the sources pointed to by the State explicitly laid out the three enterprise theories later presented at trial. Nor do we think that the three allegations are necessarily implicit in these sources of information, even when they are taken as a whole. Thus, the State has failed to meet its burden.

Also, we think it important to clarify that we reject the implication of the State’s argument: that the State, having failed to provide even a minimally adequate bill of particulars despite persistent requests from Bell, can excuse that failure under the guise of harmless error by claiming that Bell had pretrial access to a mass of various items of information from which, one can conclude in hindsight, Bell could have gleaned the State’s theories for the essential elements of the crimes charged. For this Court to accept such an argument would not only vitiate the specific requirements of rule 4(e), it would negate the accused’s constitutional right, implemented by rule 4(e), to “have a copy” of a document setting out in clear terms “the nature and cause of the accusation.”. A defendant, having complied with the procedural requirements of rule 4(e) in requesting a bill of particulars, ought not to have to look beyond the indictment or information and the bill of particulars to obtain sufficient notice of the specific allegations to be faced at trial.

The State has not met its Knight burden of persuading this Court that the failure to provide an adequate bill of particulars did not unfairly prejudice Bell’s ability to prepare and present a defense. Therefore, we reverse Bell’s conviction and remand for a new trial with instructions that Bell be given an adequate bill of particulars.

The court’s decision in Bell makes clear that a UPUAA defendant needs to be put on sufficient notice of the charges against him or her, and that the State may not just simply repeat the UPUAA verbatim in its charging documents. In addition to the notice requirements placed on the State, the UPUAA also requires civil plaintiffs to plead their claims with particularity. This means that civil plaintiffs must also give defendants sufficient notice of the claims against them, and may not rely on merely conclusory allegations of racketeering activity.

When are you Entitled to Attorney Fees Under the UPUAA?

Under the UPUAA, a successful civil plaintiff is entitled to recover double damages. In addition to the damages recovered, a successful plaintiff may also recover the costs of suit.

UPUAA Attorney FeesUnder the UPUAA, a successful civil plaintiff is entitled to recover double damages. In addition to the damages recovered, a successful plaintiff may also recover the costs of suit, including reasonable attorney fees. However, if a defendant prevails against a private party and the claim “is dismissed prior to trial or disposed of on summary judgment, or if it is determined at trial that there is no liability, the prevailing party shall recover from the party who brought the action or asserted the claim or counterclaim the amount of its reasonable expenses incurred because of the defense against the action, claim, or counterclaim, including a reasonable attorney’s fee.” Thus, any prevailing party in a civil UPUAA action is entitled not only to the costs of suit, but are also entitled to a reasonable attorney’s fee.

In Albright v. Attorneys Title Ins. Fund, the United States District Court for the District of Utah was faced with a motion for attorney’s fees made by a prevailing a defendant in a civil UPUAA case. Plaintiffs’ claim arose out of alleged racketeering conspiracy between the Florida Fund and Cohen Cox. Plaintiffs’ complaint contained eighteen different causes of action, including claims under RICO and the UPUAA. Defendants defended against Plaintiffs’ claims, and ultimately Plaintiffs’ entire case was dismissed on summary judgment.

Following the entry of summary judgment, defendants sought to recover attorneys’ fees and other expenses incurred in defending against the racketeering claims pursuant to the UPUAA. Defendants argued that while the federal RICO statute does not provide a means for a prevailing party to recover attorney fees, the court should still permit defendants to recover their entire attorney fees in this case under the UPUAA “because the state and federal racketeering claims were factually and legally related.” Plaintiffs responded by arguing that the court shouldn’t award any of the fees and costs requested by defendant because the federal RICO statute prevents an award to defendants in this case. According to plaintiffs, the federal statute only allows for recovery of attorneys’ fees by a prevailing plaintiff and not a defendant. Alternatively, plaintiffs argued that even if defendants were entitled to recover fees and expenses for prevailing on the UPUAA claims, the court should still deny their motions because defendants have failed to allocate between time and expenses spent on the UPUAA claims versus the other non-UPUAA claims.

The district court disagreed with the plaintiffs’ contentions, finding that “pursuant to Utah Code Ann. § 76-10-1605(8), Defendants are entitled to ‘recover from the party who brought the claim[s]’ their reasonable expenses and attorneys’ fees.” The court was not persuaded by the plaintiffs’ arguments that the federal RICO statute somehow precluded recovery of attorney fees by a defendant where a plaintiff asserted both state and federal racketeering claims. The district court wrote in its opinion that:

There is nothing on the face of the federal RICO statute that preempts state racketeering fee provisions. See 18 U.S.C. § 1964(c). And, although the federal statute expressly allows prevailing plaintiffs to recover attorneys’ fees, the statute is merely silent with regard to a prevailing defendant’s right to recover attorneys’ fees. Had Congress intended to preempt state law in this area, it certainly knew how, and would have done so explicitly. Moreover, as Defendants point out, courts that have been confronted with this very issue, including the Tenth Circuit Court of Appeals, have uniformly held that a defendant can recover fees and costs under a state racketeering statute even where the plaintiff asserted both state and federal racketeering claims.

After rejecting plaintiff’s arguments that defendants were not entitled to attorney fees, the court turned its attention to determining a reasonable attorneys’ fee under the circumstances of the case. However, this time the court accepted plaintiff’s arguments that defendants shouldn’t be entitled to recover their entire requested attorneys’ fees. As the court pointed out:

Having presided over this case for several years, and having a thorough knowledge of the manner in which this case was presented and ultimately resolved, the Court is of the opinion that it would be unreasonable to allow the Defendants to recover the overwhelming majority of their fees and expenses based on claims that played a somewhat minor role in the proceedings. However, the Court also recognizes that the Plaintiffs’ decision to include the state racketeering claims required the Defendants to conduct additional research, explore the different parameters of the state and federal statutes and address those differences in order to mount an appropriate defense.

As a result, defendants were precluded from recovering their entire fees. Even still the court concluded that defendants were still entitled to a reasonable fee under the UPUAA:

Accordingly, the Court is of the opinion that it is fair and equitable to award the Defendants twenty percent of the attorneys’ fees and expenses they have presented to the Court, which the Court has reviewed and has determined were reasonably incurred. The Court believes that awarding fees and expenses in this amount serves to honor the state statute, which provides for the recovery of fees and costs, while at the same time recognizing that the UPUAA claims in this case played a relatively minor role in comparison to the federal racketeering claims.

The court’s decision in Albright is significant for several reasons. First, the court’s decision gives teeth to the UPUAA’s provisions regarding attorney fees, allowing successful defendants to recover attorney fees the same as successful plaintiffs. Second, the court made clear that even if a plaintiff asserts federal RICO claims against a defendant, it makes no difference as to whether a successful defendant may recover attorney fees under the UPUAA. Finally, although the court ultimately awarded fees to the prevailing defendants, the court determined that defendants were not entitled to their entire fee request. Rather, defendants were only entitled to a reasonable attorneys’ fee, which in the court’s opinion was 20% of the entire fee requested.

Calculating Damages Under the UPUAA

The UPUAA allows for both criminal and civil liability. Under the civil liability prong of the UPUAA.

The UPUAA allows for both criminal and civil liability. Under the civil liability prong of the UPUAA:

(1) A person injured in his person, business or property by a person engaged in conduct forbidden by an provision of Section 76-10-1603 may sue in an appropriate district court and recover twice the damages he sustains, regardless of whether:

(a) the injury is separate and distinct from the injury suffered as a result of the acts or conduct constituting the pattern of unlawful conduct alleged as part of the cause of action; or

(b) the conduct has been adjudged criminal by any court of the state or the United States.

 

Furthermore, a principal, in addition to being responsible for actual damages caused by his or her agent(s), may also be liable for double damages:

[I]f the pattern of unlawful activity alleged and proven as part of the cause of action was authorized, solicited, requested, commanded, undertaken, performed, or recklessly tolerated by the board of directors or a high managerial agent acting within the scope of his employment.

 

However, even if a civil plaintiff is able to recover double damages under either section of the UPUAA, how does a court properly calculate the plaintiff’s actual damages award?

alta industries UPUAAIn Alta Indus. v. Hurst, the Utah Supreme Court sought to shed some light on the damages calculation question as it related to civil liability under the UPUAA. There, Steelco had sued defendants alleging claims for fraud, conversion, conspiracy, receiving stolen property, and a pattern of unlawful activity. Following a bench trial, the trial court ruled that defendants had converted property, had entered into a civil conspiracy, and committed fraud in its dealings with Alta Industries. However, the court also dismissed Steelco’s claims for relief and double damages under the UPUAA. Defendants appealed the judgment, and Steelco cross-appealed the court’s ruling dismissing its pattern of unlawful activity claim.

On appeal, the Utah Supreme Court had two issues to consider as it related to Steelco’s pattern of unlawful activity claim: 1) whether the trial court erred in dismissing the claim; and 2) if so, what the proper calculation of damages was sustained by Steelco. As to the first question, the court found that the trial court had erred in its interpretation of the UPUAA. According to the trial court, for the act to apply, “there must be three similar episodes that involve separate and different entities, and not within the same entity.” However, the supreme court disagreed, holding:

While subsection 76-10-1602(3) requires the commission of at least three episodes of unlawful activity, the Act does not require three separate entities. The term “entity” does not even appear in the statute. Furthermore, while the Act requires the existence of an enterprise, section 76-10-1603 expressly provides that the existence of one enterprise is sufficient to invoke liability under the Act. Indeed, our case law establishes that the Act requires proof of only a single enterprise.

Having determined that the UPUAA did not require proof of separate enterprises, the court went on to find that defendants had engaged in a pattern of unlawful activity in this case.   As a result, Steelco was entitled to double damages under the UPUAA. However, an issue remained concerning the calculation of the damages sustained by Steelco.

The court started its damages calculations analysis by pointing out that the civil prong of the UPUAA “does not provide a method for calculating actual damages. Furthermore all of the predicated acts, or unlawful activities, under the Act are crimes, not civil causes of action. Accordingly, we must look outside the Act to determine a method of calculating damages.” To that end, the court looked to causes of action similar to the crimes charged in this case. According to the court:

In the instant case, because the elements of civil conspiracy are subsumed in the crime of bribery proven in this case, the damage calculation applicable to a civil conspiracy can be used to arrive at the actual damages Steelco sustained due to the kickback arrangements. Similarly, because the elements of conversion are subsumed in the crime of receiving stolen property proven in this case, the damage calculation applicable to conversion can be used to arrive at the actual damages Steelco sustained because of the theft of the steel. The trial court awarded Steelco damages on the bases of fraud, in connection with the kickback scheme, and conversion, in connection with the steel theft. Those damages may also be used to arrive at the damages Steelco sustained as a result of the pattern of unlawful activity.

However, defendants claimed that the trial court erred in its damages calculation as it related to Steelco’s conversion claim.

The trial court awarded Steelco the amount of money received by defendants from the sale of the steel plus interest. Defendants disagreed with the award, claiming that the “appropriate market for a retailer of steel is the wholesale market, not the retail market, and therefore, Steelco was only entitled to recover its replacement costs.” To answer the question raised by defendants, the court noted that the Restatement (Second) of Torts gave Steelco three options for determining its damages, which included the amount of money defendants received from the sale of the steel. The trial court’s award was based upon the amount of money defendants received from the sale of the steel. As a result, the trial court’s damages calculation was not in error, and therefore “the measure of damages is twice the amount Wasatch received for the sale of the steel plus interest.”

The Utah Supreme Court’s ruling in Alta Industries rejects any argument that in order to recover a civil judgment under the UPUAA a plaintiff must prove the existence of different enterprise. However, it also provides guidance for determining the proper damages calculations for the various offenses a defendant may commit under the UPUAA. While the UPUAA does not provide for a way to properly calculate a plaintiff’s actual damages, other areas of the law can be examined for guidance on the issue.

When Trying to Prove “Enterprise” Goes Awry

Merely being an individual engaged in a pattern of unlawful of activity does not necessarily subject a criminal defendant to a racketeering charge under the UPUAA.

Utah Supreme CourtMerely being an individual engaged in a pattern of unlawful of activity does not necessarily subject a criminal defendant to a racketeering charge under the UPUAA. In order to sustain a racketeering conviction under the UPUAA, the state must prove more than just the substantive offense. Rather, the State must prove the existence of an “enterprise” and its relation to the racketeering activity.

In State v. Hutchings, the Utah Court of Appeals answered the questions of whether a person could also be an entity under the UPUAA, and whether the same facts could be used to prove the unlawful activity and the existence of an “enterprise”. Even still, a question lingered regarding the “enterprise” issue. In 2004, the Utah Court of Appeals reiterated the supreme court’s words, and further clarified the required proof to sustain a racketeering charge under the UPUAA.

In State v. Bradshaw, the court of appeals was tasked with answering the question of whether the State had to prove the existence of a relationship between the unlawful activity and the “enterprise”. The State alleged Mr. Bradshaw, over a period of several months defrauded eleven people for a total of approximately $5,400. According to the State, Mr. Bradshaw falsely represented himself as the owner of various mortgage companies, and that he would promise to assist his would-be victims in obtaining refinancing or to avoid foreclosure in exchange for a fee. Two of Mr. Bradshaw’s coworkers allegedly witnessed the fraudulent activity, and Mr. Bradshaw in fact asked one of those employees to falsely represent himself as an appraiser to one of the victims. Mr. Bradshaw was charged with eleven counts of communications fraud and one count of pattern of unlawful activity, all second-degree felonies. In response to the charges against him, Mr. Bradshaw filed a motion to quash the racketeering charge under the UPUAA and to reduce the degree of offense of the communications fraud charges. The trial court denied the motion, finding that the State could prove the “enterprise” element even if Mr. Bradshaw only used the funds for personal expenses, and that the State could in fact charge Mr. Bradshaw with all eleven counts of communications fraud.

After his motion was denied, Mr. Bradshaw entered into a plea agreement with the State. Pursuant to the plea agreement, Mr. Bradshaw pled guilty to four counts of attempted communications fraud, but he reserved his right to appeal the trial court’s denial of his motion.   The trial court subsequently accepted the plea and the remaining charges were dismissed. Mr. Bradshaw thereafter appealed.

On appeal, the Utah Court of Appeals reversed the trial court’s decision and remanded with instructions to grant Mr. Bradshaw’s motion to quash the UPUAA charge and to reduce the degree of offense of the communications fraud charges. As it related to the racketeering charge, Mr. Bradshaw argued that the State had failed to establish probable cause that he was engaged in an “enterprise”. The court of appeals agreed, finding that neither the criminal information nor the stipulated facts properly alleged the existence of an UPUAA “enterprise”. As the court aptly pointed out:

“The State’s information merely parrots the language of UPUAA and offers no insight into the State’s theory of the alleged enterprise. Likewise, the stipulation nowhere mentions the word “enterprise.” On appeal, the State postulates that its theory of an enterprise is an “association in fact” between Bradshaw and his two former coworkers. An “association in fact” enterprise “is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” The stipulation’s vague references to the fact that two of Bradshaw’s acquaintances witnessed some of the misrepresentations and may have participated on one occasion is not suggestive of an “ongoing organization” or that Bradshaw and his so-called accomplices “function[ed] as a continuing unit.”

Continuing on, the court of appeals noted that the State also misunderstood the UPUAA when it argued that it need only to point to the existence of an “individual” to satisfy the “enterprise” element. The court noted that while it is true that under Hutchings, a criminal defendant may be both an “individual” and an “enterprise” under subsections (1) ands (2) of the UPUAA, the State’s arguments in this case “would essentially collapse the ‘enterprise’ and ‘pattern of unlawful activity’ elements into one and would extend the scope of antiracketeering laws to virtually all substantive criminal offenses.” The court rejected this argument.

The court of appeals concluded its analysis of the racketeering charge by finding that the State had also failed to include any facts suggesting Mr. Bradshaw used the funds from his unlawful activity to invest or gain interest in an enterprise as required by subsection (1) of the UPUAA. According to the court of appeals:

The stipulation submitted in this case suffers from an additional fatal defect in that it fails to include any facts suggesting Bradshaw used the proceeds from his fraudulent activity to invest or gain an interest in an enterprise as required by section 76-10-1603(1). Instead, the stipulation states that Bradshaw used the money to pay his “personal bills.” The trial court nevertheless deemed the stipulation sufficient in this respect, finding that, as a matter of law, using the proceeds from a pattern of unlawful activity to pay one’s personal bills “qualif[ies as] racketeering.” We disagree.

The State appealed the court of appeals decision as it related to the communications fraud charges, but did not challenge the ruling on the UPUAA charge. The Utah Supreme Court overturned the court of appeals decision, and Mr. Bradshaw’s conviction was upheld. Even still, the court of appeals decision in Bradshaw represents an important decision regarding the necessary proof of an “enterprise” under the UPUAA and the connection that must be shown between the “unlawful activity” and that “enterprise”. Going forward, the State must do more than simply parrot the UPUAA in its charging documents and factual stipulations. Rather, it must prove the existence of an “enterprise” beyond the mere existence of the individual and that the enterprise is related to the “unlawful activity” to sustain a conviction under the UPUAA.

What Constitutes “Enterprise” Under the UPUAA?

In order to sustain a conviction under the UPUAA, the State must prove 1) the defendant is engaged in a pattern of unlawful activity and 2) the defendant is involved in an enterprise.

Decorative Scales Of Justice In The CourtroomIn order to sustain a conviction under the UPUAA, the State must prove 1) the defendant is engaged in a pattern of unlawful activity and 2) the defendant is involved in an enterprise. Often times the pattern of unlawful activity is easily proven, but proving the existence of an “enterprise” can be more challenging for the State. The UPUAA comprehensively defines “enterprise” as:

[A]ny individual, sole proprietorship, partnership, corporation, business trust, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity, and includes illicit as well as licit entities.

Thus, an “enterprise” for purposes of the UPUAA can be anything from an individual to a group of individuals to a corporation or association, whether legal or illegal. Even still, the question of what constitutes an entity under the various sections of the UPUAA isn’t as easily answered.

In 1988, the Utah Supreme Court, while the issue was not squarely before it, implicitly ruled that the same set of facts could be used to prove the pattern of unlawful activity as well as used to prove the existence of an enterprise. In State v. McGrath, the court rejected the defendant’s argument that there was insufficient evidence to prove the existence of an enterprise under the RICE Act, the predecessor to the UPUAA. In so ruling, the evidence relied on by the court to find a pattern of unlawful activity and the existence of an enterprise was the same, the defendant’s cocaine trafficking. According to the court’s opinion:

These facts show an ongoing enterprise the purpose of which was to traffic in controlled substances. Defendant’s participation in this enterprise, when combined with his acts constituting a pattern of racketeering activity, establishes the necessary elements to convict….

Almost ten years later in 1997, in State v. Hutchings, the Utah Court of Appeals clarified the supreme court’s previous statements in McGrath. In Hutchings, the court of appeals was squarely tasked with answering the question of whether a UPUAA defendant can also constitute a UPUAA enterprise under section 76-10-1603(1), (2), or (3). The court began by examining U.S. Supreme Court and federal circuit court precedent on the issue, which generally found that “the same set of facts used to prove a pattern of racketeering activity may be used to prove a RICO enterprise.” The court then turned to Utah law, which it determined had already “implicitly ruled [in McGrath] that the same set of facts used to prove the pattern of unlawful activity can be used to prove the existence of an enterprise.” As such, the court of appeals agreed with the majority of federal courts and the Utah Supreme Court’s previous implicit holding in McGrath and found that the same set of facts could be used to prove a pattern of unlawful activity and an enterprise.

The court of appeals next turned to the various provisions of the UPUAA to determine whether the whether the “person” under section 76-10-1603(1), (2), or (3) can be the same entity as the “enterprise.” The court held that, for purposes of section 76-10-1603(1), “the liable ‘person’ and the ‘enterprise’ can be the same entity,” under section 76-10-1603(1), as long as the “person” is “actually… the direct beneficiary of the pattern of racketeering activity.” Similarly, the court held that with respect to subsection (2) “the ‘person’ and ‘enterprise’ within section 76-10-1603(2) need not be separate and distinct.” However, the court wasn’t willing to extend the same reasoning to subsection (3). According to the court:

[We] hold that for the purposes of section 76-10-1603(3), the “person” and “enterprise” must be separate and distinct entities. We, too, would be stretching the interpretation of the language in section 76-10-1603(3) to impose liability on both the culpable person and the enterprise. “The enterprise is mentioned in the section only as the instrument of the person doing the racketeering, and there is no suggestion that the enterprise also may be liable, even if it is a wholly illegitimate operation.”

As a result, under Utah law in order to sustain a conviction under subsection (3), the State must prove the existence of an “enterprise” that is distinct from the defendant themselves. Furthermore, the court went on to examine whether the sole proprietorship at issue in this case could constitute an “enterprise” for purposes of subsection (3). The court of appeals determined that as it related to the sole proprietorship at issue in in this case, “the man and the proprietorship really are the same entity in law and fact.” As result the State had failed to pass the distinction test.

While the Utah Supreme Court has declined to require distinction between the individual and the entity under subsections (1) and (2), it does require the state to prove the existence of more than a one-man show under subsection (3). Defendants facing charges under the UPUAA need to be cognizant of this fact, and must take steps to ensure their counsel argues that point to the court, and that the jury is properly instructed on the issue at trial.