Submitted: March 19, 2014
Defendant's Motion to Dismiss – DENIED
Owen Lefkon, Esquire, Delaware Department of Justice, Attorney for the State.
Thomas A. Foley, Esquire, Attorney for Defendant.
On or about April 19, 2010, the Securities Division of the Delaware Department of Justice initiated an investigation into Defendant's business activities. The investigation led to the State filing a 23-count indictment, which was returned by the Grand Jury on March 18, 2013. Within the indictment are thirteen counts based on violations of the Delaware Securities Act and ten counts alleging theft and tax evasion during various times from October 2006 through the 2009 calendar year. During that period of time, Defendant allegedly induced multiple individuals to invest money in his house-flipping business by issuing them promissory notes and promising high rates of return.
During the time period of the allegations, Defendant was a Delaware-licensed real estate agent employed by Keller Williams Realty, Inc. Defendant also maintained two side businesses: Rapid Restorations, Inc. and D&B Acquisitions, LLC. Through these side businesses Defendant bought, renovated, and sold or leased residential property for a profit. To finance these purchases and renovations Defendant received money from four individuals named in the indictment. For the transactions relevant here, promissory notes were executed and the individuals were promised large payments and/or high rates of return on their loans/investments. The promissory notes also provided that they were secured by properties owned by Defendant; however, some of the properties were never owned by Defendant, and the securities were never perfected or were subject to prior existing liens.
The four individuals named in the indictment did not receive the promised returns and, in most cases, lost the entire value of their investments. Although both the State and Defendant provide detailed explanations of the specific transactions of each individual, the Court finds such recitation unnecessary here. The parties will be given ample time at trial to flesh out how and in what manner Defendant came upon the monies from the individuals named in the indictment, the promises made thereto, and the forms of the transactions made therewith. For purposes of the pending Motions, the Court finds such factual underpinning unnecessary for disposition and the disputed nature of those transactions will be left to the jury or the Court to sort out at trial.
Defendant's Motion to Dismiss involves two issues. First, whether the notes at issue are securities and, thus, whether Defendant is being properly pursued for securities fraud. Second, Defendant argues that the offenses occurred outside the statute of limitations and should be barred from prosecution. Each will be addressed in turn.
A. Securities Fraud
Defendant is being pursued for securities fraud charges arising under the Delaware Security Act. Within the Delaware Security Act, "security" is defined as:
any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable share; investment contract, including pyramid promotion which includes any plan or operation for the sale or distribution of property, services, or any other thing of value wherein a person for a consideration is offered an opportunity to obtain a benefit which is based in whole or in part on the inducement, by himself or herself or by others, of additional persons to purchase the same or a similar opportunity; voting-trust certificate; certificate of deposit for a security; certificate of interest of participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; options on commodities; viatical settlement investment; or, in general, any interest or instrument commonly known as a "security, " or any certificate of interest or participation in, temporary or interim certificate, for, receipt for guarantee of, or warrant or right to ...