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[Copyrighted Material Omitted]
Douglas County District Court No. 12CR277 Honorable Paul A.
Cynthia H. Coffman, Attorney General, Nicole D. Wiggins,
Assistant Attorney General, Denver, Colorado, for
Douglas K. Wilson, Colorado State Public Defender, Elizabeth
Porter-Merrill, Deputy State Public Defender, Denver,
Colorado, for Defendant-Appellant.
1 Defendant, Steven Curtis Thompson, appeals the judgment of
conviction entered upon jury verdicts finding him guilty of
two counts of securities fraud and one count of theft. We
2 The People charged defendant based on transactions he had
entered into with the victims, Tom and Debbie Witt (the
Witts). Defendant was the sole member of SGD Timber Canyon
LLC, (SGD), which held an interest in sixty-three undeveloped
lots in the Timber Ridge subdivision. By October 2009, these
lots were in foreclosure, and in February
2010, SGD filed for bankruptcy. Defendant did not disclose
either of these facts to the Witts when he negotiated the
transactions that gave rise to this case.
3 The Witts loaned defendant $200,000 to acquire a lot in
Timber Ridge and another $200,000 for construction of a home
on the lot, with the understanding that the loans would be
repaid with a profit share of as much as $400,000 when the
home was sold to a prequalified buyer. In September 2010, the
Witts wired $400,000 to defendant's accounts.
4 Later, at defendant's urging, the Witts increased the
loan amount to $2.4 million and converted their investment
into a "bridge loan" to defendant, who represented
that the proceeds would be used for continued development of
Timber Ridge. Defendant told the Witts that the investment
would be "no risk" to them and that they would
receive a guaranteed profit. He suggested that the investment
was a "no brainer" because he would secure the loan
with other valuable property he owned. The Witts agreed to
the new arrangement because they felt it was a "safer
5 The Witts wired an additional $2 million to defendant's
account in October 2010, and the parties executed a
promissory note and guarantee agreement. Pursuant to the
documents, defendant agreed to repay the loan with a
"profit" of $240,000, all bank fees, and 8% annual
interest by January 2011. The promissory note was
"secured by" defendant's "primary and
second residences," with collateral to convert to
twenty-four lots in Timber Ridge "upon closing and final
purchase of Timber Ridge."
6 Defendant did not tell the Witts that the collateralized
properties were "heavily leveraged." He incorrectly
listed the address of his "second residence" on the
note. He represented the value of the Timber Ridge
development to be $31 million, but mortgagee Flagstar Bank
estimated the market value at $6.75 million. He did not
reveal that Flagstar had initiated foreclosure proceedings,
which had been delayed by SGD's bankruptcy petition. The
Witts testified that they would not have given any money to
defendant had they known his true financial condition.
7 Defendant used the money on items not related to Timber
Ridge, including payment of his own attorney fees, checks
made out to himself or for "cash," and paying off
the note on, and making improvements to, his "second
8 In December 2010, Flagstar Bank completed foreclosure
proceedings. Defendant did not tell the Witts of the
foreclosure and instead told them that he was "moving
forward" with the property. But he never developed the
property in Timber Ridge.
9 In January 2011, when the Witts' note came due,
defendant defaulted on the payment. He attempted to negotiate
a new note with them, offering additional collateral, but the
Witts refused. Defendant thereafter filed for personal
bankruptcy, and his "primary residence" was sold at
a public trustee sale. The Witts did not receive any money
from the sale. Defendant eventually repaid only $70,000 to
the Witts. The Witts brought a civil suit against defendant,
but did not recover any further monies from him.
10 The People charged defendant with two counts of securities
fraud, under sections 11-51-501(1)(b) and (1)(c), C.R.S.
2017, and one count of theft under section 18-4-401(1)(b),
C.R.S. 2017. Defendant's theory of defense was that he
lacked the mens rea for the charged offenses. He argued that
he was unable to repay the Witts because his business plan
11 A jury found defendant guilty of all three counts. The
trial court sentenced him to twelve years in the custody of
the Department of Corrections for each of the securities
counts, to be served concurrently, and eighteen years for the
theft conviction, to be served consecutively to the other
12 On appeal, defendant claims that (1) insufficient evidence
supports his securities fraud convictions; (2) the trial
court erred by tendering an inaccurate jury instruction
regarding the definition of a security; (3) insufficient
evidence supports his theft conviction; (4) the trial court
erred by admitting propensity evidence; (5) the two
securities convictions must be merged; and (6) his sentences
must all run concurrently. We address and reject each
contention in turn.
Sufficient Evidence of Securities Fraud
13 First, defendant claims that the evidence is insufficient
to support his securities fraud convictions because the
promissory note and guarantee he provided to the Witts do not
constitute a security. The jury was instructed, as relevant
here and pursuant to section 11-51-201(17), C.R.S. 2017, that
security "means any note, ... or ... guarantee of ...
any of the foregoing." Defendant correctly states that
securities fraud cannot occur absent a security and argues
that, despite the statutory definition, not all notes are
securities. See People v. Mendenhall, 2015 COA 107M,
363 P.3d 758.
Definition of a Security
14 The securities fraud statute requires that fraud must be
perpetrated in connection with the offer, sale, or purchase
of any security. § 11-51-501(1). At the time of
defendant's trial, the test for determining whether a
note was a security was "the presence of an investment
in a common enterprise that is premised on a reasonable
expectation of profits to be derived from the
entrepren[e]urial or managerial efforts of others."
People v. Milne, 690 P.2d 829, 833 (Colo. 1984);
see also Sec. & Exch. Comm'n v. W.J. Howey
Co., 328 U.S. 293, 301, 66 S.Ct. 1100, 90 L.Ed. 1244
(1946) ("The test is whether the scheme involves an
investment of money in a common enterprise with profits to
come solely from the efforts of others."). In
Milne, the court concluded that the notes issued by
the defendant were securities because the noteholders (1)
"entrusted money with the defendant in return for
`investment notes,' with the expectation of receiving
periodic interest payments in addition to repayment of the
principal amount"; (2) "invested with the primary
purpose of receiving profits"; and (3) "had no
ability to control or manage the funds they invested or
otherwise ensure that their promised return was actually
paid." 690 P.2d at 833-34.
15 The federal definition of securities, on which
Colorado's definition is based, is purposely broad
"to regulate investments, in whatever form they
are made and by whatever name they are called."
Reves v. Ernst & Young, 494 U.S. 56, 61, 110
S.Ct. 945, 108 L.Ed.2d 47 (1990). Recognizing "the
virtually limitless scope of human ingenuity, especially in
the creation of `countless and variable schemes devised by
those who seek the use of the money of others on the promise
of profits,'" Congress enacted a definition of
"security" sufficiently broad to encompass
virtually any instrument that might be sold as an investment.
Id. at 60-61, 110 S.Ct. 945 (citation omitted).
16 In 2015, the year after defendant's trial, a division
of this court held that the "family resemblance"
test adopted by the Supreme Court in Reves applies
to determine when a note is a security under the Colorado
Securities Act (CSA). Mendenhall, ¶
17 Under the family resemblance test, a note is presumed to
be a security, but that presumption may be rebutted by a
showing that the note strongly resembles instruments such as
notes delivered in consumer financing; notes secured by a
mortgage on a home; short-term notes secured by a lien on a
small business or some of its assets; notes evidencing a
"character" loan to a bank customer; short-term
notes secured by an assignment of accounts receivable; notes
which simply formalize an open-account debt incurred in the
ordinary course of business; and notes evidencing loans by
commercial banks for current operations.
Id. at ¶ 33. This showing may be established by
four factors, which we will describe and analyze below.
See id. at ¶ 34.
Standard of Review
18 Defendant did not argue at trial that his promissory note
was not a security, or that not ...