What does it mean to “devise” a scheme to defraud under the Utah communications fraud statute? Utah Court of Appeals affirms communications fraud conviction in State v. Hawkins.

2016-01-CourtofAppealsIn order to sustain a charge under the Utah Pattern of Unlawful Activity Act (“UPUAA”), the State must prove that a defendant engaged in “at least three episodes of unlawful activity.”  The UPUAA includes “communications fraud” within its definition of “unlawful activity” for purposes of the statute.

In a recent case before the Utah Court of Appeals, the appellate court affirmed the conviction of Clair Rulon Hawkins for communications fraud arising out of a fraud scheme related to real property near Park City, Utah.  Mr. Hawkins was initially charged with three counts of communications fraud and one count of engaging in a pattern of unlawful activity, but only the two counts of communications fraud went forward to trial.  As a result, the State could not sustain its UPUAA charge against Mr. Hawkins.

A jury acquitted Mr. Hawkins on the first count of communications fraud, but convicted him on the second.  The second count alleged that the victim owned a business in Colorado, which was ultimately sold, realizing approximately $1 million in profit.  The victim spoke with Ms. Chapple, VP and a Director of Empire Homes, over the phone and arranged a time where he could come to Utah to meet with Empire.

When he met with the victim, Mr. Hawkins provided certain assurances regarding the victim’s potential investment in the development.  Upon these assurances, the victim decided to purchase two lots in the development, putting approximately $423,000 down on each lot.  However, nothing went as promised, and the victim lost his investment.

Following the trial, Mr. Hawkins appealed his conviction.  On appeal, Mr. Hawkins, among other things, argued that the trial court erred in its determination that sufficient evidence established that he “devised” the alleged fraudulent scheme, because, as he put it, the district court equated “participation” in a scheme to having “devised” the scheme.

In its opinion, the Court of Appeals explained that “the trial evidence showed that Hawkins devised a scheme to entice the victim to buy property based on a promise that Empire Homes would take care of everything.”  “In furtherance of that scheme,” Mr. Hawkins made a number of representations to the victim that were simply not true, including that utilities were not a problem, funding was not a problem, and Empire Homes had an insurance policy that would cover any loss should the home they built sell for less than promised.

To further persuade the victim, the court found that Mr. Hawkins represented to the victim that the developer would treat the victim and his family to a cruise when in fact the victim’s money was used to pay for the cruise.  Lastly, after the victim had purchased one of the lots, Mr. Hawkins created and had the victim sign a risk disclosure statement, which effectively revoked every promise Mr. Hawkins made to the victim.

Upon the foregoing evidence, the Court of Appeals concluded:

From the evidence, the jury could reasonably conclude that Hawkins knew that no private trust existed to fund the Deer Canyon Development but that he nevertheless affirmatively represented the existence of such a trust; that Hawkins knew that utilities presented a problem, but affirmatively represented they did not; that Hawkins knew that the developer would not pay for a Disney cruise, but represented that it would; that Hawkins knew that no insurance policy guaranteed the sale price of the homes; and that Hawkins knew the falsity of everything he promised, but promised it all anyway and then conceived a risk disclosure statement repudiating his promises in an effort to shield himself from liability. Moreover, from evidence of Hawkins’s role in every stage of the scheme, the jury could reasonably conclude that he not only acted to execute someone else’s scheme, but that he also had a hand in devising it.