Opinion
Record No. 0701-91-3
December 15, 1992
FROM THE CIRCUIT COURT OF ROANOKE COUNTY CLIFFORD R. WECKSTEIN, JUDGE.
Gerald T. Zerkin (Robert Godfrey; Kristine H. Smith; Edwin Vieira; Gerald T. Zerkin Associates, on briefs), for appellants.
John H. McLees, Jr., Assistant Attorney General (Mary Sue Terry, Attorney General, on brief), for appellee.
Amicus Curiae: (Scott T. Harper, on brief, for certain attorneys, retired judges and legislators), for appellants.
Present: Chief Judge Koontz, Judges Moon and Bray.
Argued at Salem, Virginia.
Pursuant to Code § 17-116.010 this opinion is not designated publication.
Anita G. Gallagher, Paul Gallagher and Laurence Hecht (defendants) were tried together and each convicted of multiple counts of securities fraud in violation of Code §§ 13.1-501 — 13.1-522, the Virginia Securities Act (the Act). On appeal, defendants contend that (1) the evidence was insufficient to prove that the offending transactions involved securities as contemplated by the Act, (2) the convictions infringed upon their due process and First Amendment rights, and (3) the trial judge erred by refusing to recuse himself. We disagree and affirm the decision of the trial court.
Defendants were convicted of one count of the offer and sale of an unregistered security with the intent to defraud in violation of Code § 13.1-507, one count of transacting business as an unregistered broker, dealer or agent with the intent to defraud in violation of Code § 13.1-504, and multiple counts of the unlawful sale of a security with the intent to defraud in violation of Code § 13.1-502.
The parties are fully conversant with the record and this memorandum opinion recites only those facts necessary to a disposition of the issues before the Court.
The record discloses that defendants were employed as fund-raisers for the National Caucus of Labor Committees (NCLC), a political organization founded by Lyndon H. LaRouche, Jr. The complete organizational structure of the NCLC and its fund-raising activities and techniques were detailed by this Court in Ascher v. Commonwealth, 12 Va. App. 1105, 1108-12, 408 S.E.2d 906, 908-11 (1991), cert. denied, 61 U.S.L.W. 3061 (U.S. Oct. 5, 1992). Similarly, those facts relevant to the recusal issue now before the Court were examined in Welsh v. Commonwealth, 14 Va. App. 300, 314-17, 416 S.E.2d 451, 459-61 (1992). See also Billington v. Commonwealth, 13 Va. App. 341, 343, 412 S.E.2d 461, 462 (1991).
Viewing the evidence in the light most favorable to the Commonwealth and according to it all reasonable inferences,Traverso v. Commonwealth, 6 Va. App. 172, 176, 366 S.E.2d 719, 721 (1988), the record sufficiently supports the finding that the "notes" or evidences of debt that were the subject of this prosecution constituted securities. In Ascher, we examined essentially identical instruments issued by the NCLC and concluded that "there [was] no context in which the jury could have found the notes at issue not to have been securities within the proscriptions" of the Act. 12 Va. App. at 1121, 408 S.E.2d at 916.
Here, like Ascher, "all the lenders were investing with an expectation of a return of principal and interest, and the organization was using this method to generate operational capital." Id. at 1125, 408 S.E.2d at 919. The notes "were offered for sale to a `broad segment of the public,'" id. (quoting Reves v. Ernst Young, 494 U.S. 56, 68 (1990)), with assurances of "safety and a history of repayment" by the organization. Id. Finally, "[b]ut for the regulatory scheme imposed by [the Act] through the State Corporation Commission, there would be `no risk reducing factor' or `substantial regulation' of these notes." Id. at 1125-26, 408 S.E.2d at 919 (quoting Reves, 494 U.S. at 69). The trial court, therefore, properly denied defendants' motions to dismiss the indictments and to strike the Commonwealth's evidence.
Defendants next argue that the convictions violated the Due Process Clause because they "lacked prior notice that [the Act] would apply to these loans." This issue was recently resolved in Welsh, where we concluded that the Act "clearly and expressly includes `notes' within the definition of a security" and provides "fair notice" that such instruments are "within its ambit." 14 Va. App. at 318, 416 S.E.2d at 461-62. Thus, the trial court again correctly denied defendants' motions to dismiss.
U.S. Const. amend. XIV, § 1.
Defendants' complaint that application of the Act to "political loans" violates the First Amendment is also without merit. A statute "in which `the governmental interest is unrelated to the suppression of free expression'" is "content-neutral" and "constitutional so long as it furthers an important governmental interest and `the incidental restriction on alleged First Amendment freedoms is not greater than is essential to the furtherance of that interest.'" Hernandez v. Commonwealth, 12 Va. App. 669, 673, 406 S.E.2d 398, 400-01 (1991) (quoting United States v. O'Brien, 391 U.S. 367, 377 (1968)). The clear and appropriate interests of the government in "informing" and "protecting [the public] against securities fraud" are promoted by the Act's registration and disclosure provisions, reasonable and proper safeguards which do not unduly infringe upon First Amendment rights. Caucus Distribs., Inc. v. Maryland Sec. Comm'r, 577 A.2d 783, 792-93 (Md. 1990); see Cantwell v. Connecticut, 310 U.S. 296, 306 (1940); S.E.C. v. World Radio Mission, Inc., 544 F.2d 535, 538-39 (1st Cir. 1976); Caucus Distribs., Inc. v. Commissioner of Commerce, 422 N.W.2d 264, 272-73 (Minn.Ct.App. 1988), cert. denied, 488 U.S. 1006 (1989).
Lastly, defendants contend that the trial judge erred in refusing to recuse himself. This issue was also addressed inWelsh, where, finding "no substantial appearance of bias" in the same trial judge, we held that he "did not abuse his discretion in refusing to recuse himself." 14 Va. App. at 314, 317, 416 S.E.2d at 459, 461; see Commonwealth v. Burns, 240 Va. 171, 174, 395 S.E.2d 456, 457 (1990). Likewise, we "find no evidence to support [defendants'] allegation of bias in the trial judge's rulings, findings, remarks, or demeanor at trial" in the instant case. Welsh, 14 Va. App. at 314, 416 S.E.2d at 459.
Accordingly, defendants' convictions are affirmed.
Affirmed.