[This opinion has been published in Ohio Official Reports at
89 Ohio St.3d 616.]
THE STATE OF OHIO, APPELLANT, v. HURD, APPELLEE.
[Cite as State v. Hurd, 2000-Ohio-2.]
Securities—Making false representations in regard to registering transactions by
description is not the equivalent of making false representations in regard
to registering securities by description—Former R.C. 1707.44(B)(1),
construed and applied.
(No. 99-1140—Submitted March 7, 2000—Decided September 13, 2000.)
APPEAL from the Court of Appeals for Franklin County, No. 96APA03-326.
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{¶ 1} Appellee, Dwight I. Hurd, provided legal counsel for Dublin
Securities, Inc. (“DSI”) between 1987 and 1992. During this period, DSI was
involved in a scheme that entailed selling worthless or nonexistent shares of stock.
To sell any securities, a person is required by the Ohio Securities Act to register the
securities with the Division of Securities. In furtherance of the scheme, Hurd
registered the stocks to be sold by DSI on Form 6(A)(1) pursuant to R.C.
1707.06(A)(1), which governs the registration of transactions by description. On
various 6(A)(1) forms, Hurd claimed that DSI would not be involved in the sale of
the securities and that DSI’s commission, in connection with the sale, would be
limited to three percent. Because the issue is not before us, we will assume that
these claims were false representations.
{¶ 2} A jury found Hurd guilty of engaging in a pattern of corrupt activity.
R.C. 2923.32. The jury also found Hurd guilty of three counts of violating R.C.
1707.44(B)(1), which prohibits a person from making false representations in the
registration of securities by description.
{¶ 3} On appeal, the court of appeals reversed the trial court and ruled that
the state had not presented evidence that Hurd made registrations of securities by
SUPREME COURT OF OHIO
description. R.C. 1707.44(B)(1). Instead, the appellate court concluded that the
evidence presented at trial indicated that the filings with the Division of Securities
were registrations of transactions by description. R.C. 1707.06(A)(1). The court
concluded further that if false representations were made, they were made in regard
to registering transactions by description and that R.C. 1707.44(B)(1) had not been
violated.
{¶ 4} The cause is now before this court upon the allowance of a
discretionary appeal.
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Vorys, Sater, Seymour & Pease, L.L.P., Duke W. Thomas, James E. Phillips,
David F. Axelrod and W. Evan Price II, for appellant.
Thompson Hine & Flory, L.L.P., and William C. Wilkinson; Synenberg &
Marein and Roger M. Synenberg, for appellee.
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PFEIFER, J.
{¶ 5} Appellee Hurd was charged with making false representations in
regard to registering securities by description. R.C. 1707.44(B)(1). The evidence
presented at trial established that any false representations that were made were in
regard to registering transactions by description. In its appeal, the state has asked
us to determine, for the purposes of imposing criminal liability pursuant to R.C.
1707.44(B)(1), that making false representations in regard to registering
transactions by description is the equivalent of making false representations in
regard to registering securities by description. For the reasons that follow, we
decline the invitation.
{¶ 6} Former R.C. 1707.44(B) provided:
“No person shall knowingly make or cause to be made any false
representation concerning a material and relevant fact, in any oral statement or in
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any prospectus, circular, description, application, or written statement, for any of
the following purposes:
“(1) Complying with sections 1707.01 to 1707.45 of the Revised Code, in
regard to registering securities by description.” 140 Ohio Laws, Part I, 1145.
{¶ 7} When a statute is plain and unambiguous, as is R.C. 1707.44(B)(1),
“there is no occasion for resorting to rules of statutory interpretation.” Sears v.
Weimer (1944), 143 Ohio St. 312,
28 O.O. 270,
55 N.E.2d 413, paragraph five of
the syllabus; Storer Communications, Inc. v. Limbach (1988),
37 Ohio St.3d 193,
194,
525 N.E.2d 466, 467. Accordingly, despite the state’s entreaties, we will not
examine “the General Assembly’s manifest intent as evidenced by the legislative
purpose, the practical consequences of the lower Court’s construction, the statute’s
language, its structure, the absence of any other direct prohibition and the overall
statutory scheme.” Instead, we will apply the statute as written and conduct no
further investigation. State ex rel. Herman v. Klopfleisch (1995),
72 Ohio St.3d
581, 584,
651 N.E.2d 995, 997-998.
{¶ 8} We are further constrained in interpreting R.C. 1707.44(B)(1) by R.C.
2901.04(A), which states that “[s]ections of the Revised Code defining offenses or
penalties shall be strictly construed against the state, and liberally construed in favor
of the accused.” However, “[t]he canon in favor of strict construction of criminal
statutes is not an obstinate rule which overrides common sense and evident
statutory purpose.” State v. Sway (1984), 15 Ohio St.3d 112, 115, 15 OBR 265,
268,
472 N.E.2d 1065, 1068.
{¶ 9} For purposes of this appeal, we assume that Hurd made false
representations. However much our society and our legal system abhor false
representations, our General Assembly has not criminalized all such conduct. It
may seem that we are mired in a Borgesian Labyrinth or Kafkaesque Castle, where
there is a wrongdoing and yet no way to punish the perpetrator.
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{¶ 10} However, the statute, R.C. 1707.44(B), is clear. The General
Assembly differentiates between securities “requiring registration by description,”
R.C. 1707.05, and transactions “requiring registration,” R.C. 1707.06. When
confronted with an “evident statutory purpose,” we have at times extended the
scope of criminal statutes to include analogous conduct. See Sway, supra; State v.
Warner (1990),
55 Ohio St.3d 31,
564 N.E.2d 18. Here, however, the General
Assembly makes a clear distinction, rendering us unable to determine that securities
“requiring registration by description” and transactions “requiring registration” are
analogous.
{¶ 11} The General Assembly could have included false representations in
regard to transactions by description among the prohibitions of R.C. 1707.44(B) or
prohibited all false representations made for the purpose of “[c]omplying with
sections 1707.01 to 1707.45 of the Revised Code.” R.C. 1707.44(B)(1). The
General Assembly did neither, and we will not, we cannot, pretend that it did.
{¶ 12} Unfortunately for the state and all those appalled by the acts
committed by various employees of DSI, our review of the record yields the
inescapable conclusion that any false representations made by Hurd were not made
“in regard to registering securities by description.” R.C. 1707.44(B)(1).
Accordingly, Hurd cannot be convicted of violating R.C. 1707.44(B)(1). Further,
the making of false representations in regard to registering transactions by
description, something we assume Hurd to have done, is not “defined as an offense
in the Revised Code,” R.C. 2901.03(A). Accordingly, Hurd cannot be convicted of
making false representations in regard to registering transactions by description.1
We affirm the judgment of the court of appeals.
1. It is possible that Hurd could have been charged with making false representations for the purpose
of “selling” securities, R.C. 1707.44(B)(4), making false statements “with purpose to mislead a
public official in performing the public official’s official function,” R.C. 2921.13(A)(3), making
false statements “with purpose to secure the issuance by a governmental agency of a license, permit,
authorization, certificate, registration, release, or provider agreement,” R.C. 2921.13(A)(5), or
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Judgment affirmed.
MOYER, C.J., DOUGLAS and F.E. SWEENEY, JJ., concur.
RESNICK, COOK and LUNDBERG STRATTON, JJ., dissent.
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LUNDBERG STRATTON, J., dissenting.
{¶ 13} I respectfully dissent. I believe the majority’s construction of R.C.
1707.44(B)(1) results in an illogical conclusion that fails to further the overall
purpose of the Securities Act. This opinion, in effect, renders meaningless the
requirement in R.C. 1707.08 for an individual to verify by oath the description of
transactions for the sale of securities because there is no criminal penalty for failure
to comply.
{¶ 14} Ohio’s securities laws are designed “to prevent the fraudulent
exploitation of the investing public through the sale of securities.” In re Columbus
Skyline Securities, Inc. (1996), 74 Ohio St.3d 495, 498,
660 N.E.2d 427, 429. To
that end, the statutory scheme provides for registration of the securities to be sold
and civil remedies and criminal penalties for noncompliance.
{¶ 15} The Securities Act provides for registration by description. It may
be registration of a particular security itself or, if a series of transactions to sell or
distribute securities is planned, then the entire proposed transaction may be
registered by description. R.C. 1707.05 and 1707.06. Appellee utilized the latter
type by filing a Form 6(A)(1).
{¶ 16} R.C. 1707.08 describes the process for registration by description,
whether it be of a security as set forth in R.C. 1707.05 or of a transaction in R.C.
1707.06. The process in R.C. 1707.08 makes no differentiation between the two
types. Both require a “description, verified either by the oath of the person filing it
or of any person having knowledge of the facts.”
making false statements “in writing on or in connection with a report or return [which] is required
or authorized by law,” R.C. 2921.13(A)(7).
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{¶ 17} Appellee was accused of making false representations on the Form
6(A)(1) filings that he prepared. He was charged under R.C. 1707.44(B)(1), which,
at the time of the indictment, prohibited a person from knowingly making false
representations concerning a material and relevant fact for the purpose of
“complying with sections 1707.01 to 1707.45 of the Revised Code, in regard to
registering securities by description.”2 (Emphasis added.) Because the section used
the word “securities” and did not also use the word “transaction,” appellee argues
that he cannot be convicted under this section. A majority of this court agrees. As
a result, the majority concludes that Ohio’s securities laws intended to prohibit false
representations by those who register a security by description; however, there is
no proscription against making false representations when registering an entire
transaction to sell securities. By narrowly focusing on the phrase “registering
securities by description,” the majority completely eliminates from R.C. Chapter
1707 any prohibition against making false representations that are material and
relevant when registering an entire transaction for the sale of securities.
{¶ 18} On more than one occasion, this court has relied on the maxim that
“strict construction of criminal statutes is not an obstinate rule which overrides
common sense and evident statutory purpose.” State v. Warner (1990), 55 Ohio
St.3d 31, 62,
564 N.E.2d 18, 47; State v. Sway (1984),
15 Ohio St.3d 112, 116, 15
OBR 265, 268,
472 N.E.2d 1065, 1068. The canon in favor of strict construction
“is satisfied if the statutory language is given fair meaning in accord with the
manifest intent of the General Assembly.”
Id. Instead, the majority here has
decided to forgo the fair meaning of the statute that furthers the overall intent and
objectives of the Securities Act. The majority has reached an impractical, illogical
result that is contrary to the public policy behind the Act.
2. R.C. 1707.44(B)(1) has been amended to read: Complying with this chapter, in regard to
registering securities by description.
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{¶ 19} Instead of looking at the phrase “registering securities by
description” as a term of art that exclusively means only those securities as
described in R.C. 1707.05, the majority should apply the phrase to all registrations
by description. A “transaction,” as that term in used in R.C. 1707.06, is a
transaction or a series of transactions, to sell securities. There is no need to do a
comparison to find that the terms are analogous as this court did in Sway or Warner.
Both the registration of a security in R.C. 1707.05 and the registration of a
transaction in R.C. 1707.06 involve the registering by description of securities that
are intended to be sold to the public.
{¶ 20} The anti-fraud provisions of the Securities Act must be liberally
construed. Columbus Skyline Securities, 74 Ohio St.3d at 498, 660 N.E.2d at 429.
The inclusion in R.C. 1707.44(B)(1) of the phrase “complying with sections
1707.01 to 1707.45 of the Revised Code” must not be ignored. Had the General
Assembly intended for R.C. 1707.44(B)(1) to apply exclusively to those securities
described in R.C. 1707.06, this would have been expressly set forth in the statute.
Instead, the broad scope of the phrase indicates that it applies to all securities
registered by description, whether it be a security in R.C. 1707.05, or a transaction
to sell securities in R.C. 1707.06.
{¶ 21} Appellee cries due-process violation on the basis that he has been
charged with violating R.C. 1707.44(B)(1), yet the statute does not mention the
activity in which he engaged, i.e., registering transactions by description. How
absurd that an experienced attorney, practicing in the area of securities, would
believe that the law prohibits lying on a registration form that registers securities
by description, but would believe there is no prohibition against lying on a form to
register a transaction of sales by description. The law requires registration in some
manner, unless a security is exempt from registration, and it is illegal to lie about a
material and relevant fact when registering or selling those securities. Appellee
knew this. His due-process concerns lack merit.
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{¶ 22} R.C. 1707.44(B)(1) applies to all registrations by description,
whether it be a security, or a transaction to sell securities. The underlying premise
of registration by description is registration of the securities to be sold. Despite its
narrowly focused analysis to the contrary, even the majority acknowledges that
appellee registered securities. The majority states in its first paragraph that “Hurd
registered the stocks to be sold by DSI on Form 6(A)(1).”
{¶ 23} Consequently, I dissent and would reverse the judgment of the court
of appeals.
RESNICK and COOK, JJ., concur in the foregoing dissenting opinion.
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