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State v. Reynolds

Supreme Court of Montana

February 8, 2017

STATE OF MONTANA, Plaintiff and Appellee,

          Submitted on Briefs: December 7, 2016

         District Court of the Eighteenth Judicial District, In and For the County of Gallatin, Cause No. DC 12-37A Honorable Holly Brown, Presiding Judge

          For Appellant: Chad Wright, Chief Appellate Defender, Chad Robert Vanisko, Assistant Appellate Defender

          For Appellee: Timothy C. Fox, Montana Attorney General, Tammy K Plubell, Assistant Attorney General, Jesse Laslovich, Special Assistant Attorney General

          Marty Lambert, Gallatin County Attorney


          Laurie McKinnon, Justice

         ¶1 Richard Reynolds (Reynolds) appeals his conviction for securities fraud on speedy trial grounds and, alternatively, asks for a new trial on the basis that the District Court erred when instructing the jury. At trial, the District Court refused Reynolds' proposed jury instructions, which included language regarding exemptions to the statutes under which he was charged-§§ 30-10-201(1) and -202(1), MCA. The District Court used the State's proposed instructions instead, which omitted the references to the statutory exemptions. Reynolds' objections to the District Court's refusal of his proposed jury instructions form the basis of this appeal, in addition to the denial of his motion to dismiss for lack of a speedy trial. We affirm and restate the issues on appeal as follows:

         1.Whether Reynolds was denied his right to a speedy trial guaranteed by Article II, Section 24 of the Montana Constitution.

         2. Whether the District Court erred when it refused Reynolds' proposed jury instructions referencing exemptions to §§ 30-10-201 and -202, MCA.


         ¶2 The State filed an Information against Reynolds, charging him with multiple felony counts that alleged fraud, theft by embezzlement, failure to register as a securities salesperson, failure to register a security, and operating a fraudulent pyramid promotion scheme. Reynolds' schemes and frauds were far-reaching and victimized not only Montanans, but people throughout the country. The State's charging documents reflected the complexity of his scheme and listed or referenced 141 witnesses across the country by their initials. Although Reynolds targeted some unsophisticated investors for smaller amounts, he fooled some who were experienced and convinced many to part with substantial sums. Reynolds accumulated over $5.3 million from these individuals and kept approximately $4.3 million for his own personal use.

         ¶3 The complexity of Reynolds' schemes matched the scale of his takings. Reynolds created false companies that purportedly engaged in gold mining, trading, currency exchange, and other plausible-sounding market activities. He gave the companies names like Buffalo Investment Corporation, Buffalo Investment Group Incorporated, Buffalo Exchange Company, Buffalo Extension, Real World Direct Corporation, Consulting Investors Incorporated, Plus 5 Market Incorporated, and United Consultant Investment Corporation. Reynolds asked his investors to sign confidential questionnaires that enabled him to deny requests to inspect company books, allowing him to shuffle funds between these companies as often as he liked. He made himself CEO or president of each company and ensured that only he or he and his wife were the sole signatories to the corporate accounts.

         ¶4 After taking money from individuals, Reynolds would generate and send fictional statements showing remarkable returns on the purported investments. Sometimes, when investors were suspicious of their remarkable good fortune, they would test Reynolds by asking him to return a portion of their initial investment. Reynolds would comply, using shuffled funds from other investors to ease their mind. Eventually, however, he failed to return money when it was demanded. In July of 2011, one investor asked to withdraw $10, 000 of his investment, but never received it. In September of 2011, that same investor asked that the entirety of his $75, 000 be returned. He never received that either. Similar misfortune befell others as Reynolds' schemes became more and more unsustainable.

         ¶5 Lynne Egan (Egan) is a forensic accountant trained in securities investigations, financial analysis, and financial forensics. She is a non-practicing Certified Public Accountant and Deputy Securities Commissioner for the Montana Commissioner of Securities and Insurance. This agency oversees the Securities Department of the State Auditor's Office, which reviews applications of individuals seeking to offer and sell securities in Montana. Egan first encountered Reynolds in June of 2009, when she counseled him on how to comply with a Cease and Desist order her office had issued against him. In the spring of 2011, Reynolds again garnered her attention when her office fielded multiple inquiries regarding his offerings and sales of securities. These inquiries eventually prompted her to investigate whether Reynolds had violated Montana securities statutes. As part of her investigation, she met with the FBI regarding Reynolds' activities and spoke with investors who had given him money. By subpoenaing bank statements for his personal and business accounts, Egan was able to track Reynolds' financial activities and potential securities violations.

         ¶6 Reynolds never registered any of his business entities with Montana's Securities Department as Montana law required. His Private Placement Memoranda (PPM), which served as a prospectus for potential investors, stated that his offerings were exempt from registration requirements. Indeed, not every issuer of securities in Montana must register. If an issuer wishes to claim a registration exemption, however, he must apply for and be approved for that exemption through Egan's office. Egan testified she could not identify any exception upon which Reynolds could have relied. Additionally, she indicated he would not have been granted an exemption from her office. His PPMs, she testified, contained unreasonable promises of 100 percent returns every 90 days, and other concerning language that she had never encountered before in a PPM. Additionally, the state of Missouri had issued a Cease and Desist order relating to fraud against Reynolds within the last five years, also making Reynolds ineligible for an exemption. Egan thus testified she would never have approved an exemption for Reynolds.

         ¶7 Reynolds eventually discovered Egan's investigation. In order to avoid detection, Reynolds did not fly, but drove to Atlanta in November of 2011 for an investors' meeting. Once in Atlanta, Reynolds confessed in the meeting that the fantastic returns on the statements he had sent were fabricated. He informed the investors at the meeting that he had been moving funds between his companies to cover losses and support failing companies. A witness to the meeting testified that Reynolds said, "[T]hey've got stuff on me. Lynne Egan has probably 20 counts on me and four or five of them will probably stick."

         ¶8 Egan did indeed have "stuff" on him. She had tracked every investment, expenditure, and investor connected with Reynolds. She compiled all of this information, including the names, addresses, email addresses, and telephone numbers for each investor into a 120-page report. On February 22, 2012, the State filed an Information against Reynolds and requested issuance of a warrant. During a subsequent bond hearing, at which the District Court continued bond for $10, 000, 000, Reynolds admitted he was aware of the charges and warrant for his arrest, but nonetheless chose not to turn himself in. Electing instead to continue his business dealings, he eluded capture until July 5, 2012-134 days after the State filed its Information. Another 19 days would pass until his initial appearance. The District Court scheduled his omnibus hearing 28 days later on August 21, 2012, but postponed it three times, at Reynolds' request, until November 20, 2012-91 days after the original omnibus date. After the omnibus hearing, the State requested a trial in March or April of 2013, and the District Court would have set trial in May of 2013. However, defense counsel objected as he would not have sufficient time to prepare his case by then, preferring instead a trial date in July. The court's next available date, however, was August 5, 2013. The State's requested trial date would have represented a 192-day span, but the defendant's request for additional time added another 66 days-258 days in total. Defense requests to continue trial after the initial date added another 120 days of delay, until December 3, 2013, when Reynolds finally had his trial. A total of 650 days passed from the day the State filed the Information until trial. Reynolds filed a motion to dismiss for lack of a speedy trial in August 2013, which the District Court denied after conducting an Ariegwe analysis.

         ¶9 Reynolds could not afford his bond and so spent much of the delay before trial in Gallatin County Detention Center. Despite complaints of overall discomfort, Reynolds testified the jail administrators made genuine efforts to run a quality facility. These administrators, at the direction of the District Court, agreed to make special accommodations to allow him greater access to a computer and other materials to assist in his defense. However, Reynolds maintained that these accommodations were inadequate and insisted on a daily work-release program or house arrest instead.

         ¶10 Before entering Gallatin County Detention Center, Reynolds suffered from chronic lower back pain, high blood pressure, excessive weight, and type II diabetes. While there, his conditions did not deteriorate significantly. Although the detention center hospitalized him for refusing his medication, which he said made him ill, he did have an x-ray of his lower back, saw an orthopedic surgeon for his back problems, and lost weight. He eventually felt well enough in the detention center to write songs and literature that would potentially earn him money. The high-carbohydrate prison diet exacerbated his diabetes, however. He was not able to control his diet until his release to house arrest. While under house arrest, which the District Court granted in June of 2013, Reynolds saw a chiropractor and slept on a special mattress in his home for his back pain. His house arrest meant he had access to 3 file cabinets ...

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