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People v. Baker

Court of Appeals of Colorado, Seventh Division

November 7, 2019

The People of the State of Colorado, Plaintiff-Appellee,
v.
Karl Christopher Baker, Defendant-Appellant.

          Jefferson County District Court No. 14CR2062 Honorable Philip J. McNulty, Judge

          Philip J. Weiser, Attorney General, Brittany L. Limes, Assistant Attorney General, Denver, Colorado, for Plaintiff-Appellee

          Megan A. Ring, Colorado State Public Defender, Rachel K. Mercer, Deputy State Public Defender, Denver, Colorado, for Defendant-Appellant

          OPINION

          J. JONES, JUDGE

         ¶ 1 Defendant, Karl Christopher Baker, appeals the judgment of conviction entered on jury verdicts finding him guilty of three counts of securities fraud (fraud in the sale of a security); three counts of theft ($20, 000 or more); and one count of filing a false tax return. Because we conclude that the prosecution's expert witness on securities impermissibly testified to conclusions solely within the jury's province, we reverse Baker's securities fraud and theft convictions and remand for a new trial on those counts. We affirm the conviction for filing a false tax return.

         I. Background

         ¶ 2 Baker and his business partner formed Aviara Capital Partners, LLC (Aviara), in late 2009, planning to buy a controlling interest in a bank, purchase the bank's distressed assets (mostly loans secured by real estate), and then sell those assets at a profit when the real estate market improved.

         ¶ 3 To fund this plan, Aviara needed investors. Baker sought out potential investors, including four people named as victims in this case: Donna and Lyal Taylor, Dr. Alan Ng, and Stanley Douglas. According to the indictment, each chose to invest in Aviara after Baker allegedly told them the following:

1. Their investments would go toward buying a distressed bank.
2. "Class A" investors - larger, corporate investors - were already lined up.
3. The amount of their investment that they could lose was capped. (The Taylors alleged that Baker said they could lose $30, 000 at most. Douglas said that he was told he could lose no more than 25% of his investment. Ng understood that, in a worst case scenario, he wouldn't make a profit.)
4. Baker wouldn't take a salary until Aviara was up and running or profitable.
5. Aviara would hold their money in escrow.
6. They would get their principal back quickly (within a year according to Ng and Douglas; within three to four months according to the Taylors).

         Donna Taylor also alleged that Baker told her his mother was going to invest in Aviara.[1]

         ¶ 4 After the People indicated that Lillian Alves, the Deputy Commissioner for the Colorado Division of Securities, would testify at trial, defense counsel filed a motion in limine to exclude her testimony, arguing (among other things) that her proposed testimony would usurp the jury's role as fact finder, would include determinations the jurors could make themselves, wouldn't be helpful, would misstate the law, and would serve "only to bolster and re-state the charges, which of course are not evidence." The district court denied that motion.

         ¶ 5 At trial, each investor testified that Baker had told them that larger investors were about to jump in, there would be a limit on their potential losses, Baker wasn't taking a salary, and Aviara would hold their investments in escrow. The Taylors and Douglas also testified that Baker told them that all, or at least some, of their investment would go directly toward purchasing the bank. And both the Taylors and Ng testified that Baker told them they would get their principal back quickly.

         ¶ 6 After the court qualified Alves as an expert in securities law, she testified about the Colorado Securities Act and its registration requirements, that securities law requires "full and fair disclosure," that Baker had an obligation to truthfully disclose material facts, and that the shares of Aviara that Baker sold were securities. She also testified at length about what statements or omissions Baker had made to the investors, and whether those statements and omissions were material. And she concluded that the things Baker said would happen never occurred. Defense counsel repeatedly objected to this testimony.

         ¶ 7 Baker didn't testify, but defense counsel vigorously attacked the investors' credibility, arguing that the statements attributed to Baker didn't make any sense, particularly in light of the comprehensive documents Baker had provided to the investors, which didn't include such statements.

         ¶ 8 A jury found Baker guilty of the charges noted above, but acquitted him ...


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