                                                                      Sep 22 2015, 10:16 am




      ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
      Robert W. Hammerle                                         Gregory F. Zoeller
      Victoria L. Bailey                                         Attorney General of Indiana
      Indianapolis, Indiana
                                                                 Ellen H. Meilaender
                                                                 Deputy Attorney General
                                                                 Indianapolis, Indiana



                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Jerry A. Smith,                                            September 22, 2015
      Appellant-Defendant,                                       Court of Appeals Cause No.
                                                                 24A01-1501-CR-1
              v.                                                 Appeal from the Franklin Circuit
                                                                 Court
      State of Indiana,                                          The Honorable Clay M.
      Appellee-Plaintiff.                                        Kellerman, Judge
                                                                 Trial Court Cause No.
                                                                 24C02-1102-FB-44



      Barnes, Judge.


                                              Case Summary
[1]   Jerry Smith appeals his forty-year sentence and order of restitution following his

      convictions for five counts of Class C felony conducting business as a broker-
      Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015               Page 1 of 13
      dealer without registering with the Indiana Secretary of State. We reverse and

      remand.


                                                      Issues
[2]   The issues we address are:

              I.       whether the trial court properly ordered Smith to pay
                       $410,189.16 in restitution to the five victims; and


              II.      whether Smith’s forty-year sentence violates statutory
                       limits on sentences for a single episode of criminal
                       conduct.


                                                       Facts
[3]   We described the facts in Smith’s first appeal in this matter as follows:


              Between 2004 and 2010, Smith and Jasen Snelling (“Snelling”)
              ran a Ponzi scheme out of CityFund Advisory (“CityFund”) and
              Dunhill Investment Advisors Ltd. (“Dunhill”). Central
              Registration Depository records showed that Snelling was listed
              as the President of CityFund, and Smith was listed as the
              Secretary/Treasurer. CityFund’s investment advisor license with
              the U.S. Securities and Exchange Commission (“SEC”) was
              withdrawn in 2004, and Dunhill’s registered trust with the SEC
              was withdrawn in 2002. Smith has not been registered to sell
              securities since May of 2008 and was never registered to sell
              securities through CityFund or Dunhill. Of the securities sold
              through CityFund and Dunhill, none were registered as required
              by law.


              In December, 2011, the Franklin County Prosecutor’s Office filed
              a twenty-five count information against Smith related to this

      Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 2 of 13
        Ponzi scheme. Four victims, who were Indiana residents, were
        identified in the charges. Smith and Snelling told the victims that
        they were involved in day trading, were licensed to sell securities,
        and promised unusually high returns on the investments.


        A sealed federal indictment was filed against Smith by the United
        States Attorney’s Office for the Southern District of Ohio on
        June 4, 2012. The federal indictment charged Smith with
        conspiracy to commit mail and wire fraud, obstruction, and tax
        evasion. The indictment generally alleged that between 2003 and
        2011, in the Southern District of Ohio and elsewhere, Smith and
        Snelling conspired to commit mail fraud and wire fraud by using
        the U.S. Mail and interstate wire communications to execute a
        scheme to defraud investors in CityFund and Dunhill and to
        obtain money from investors by means of false and fraudulent
        promises and representations.


        Smith and Snelling were alleged to have told investors that they
        were involved in day trading, all investments were liquidated to
        cash at the close of each day, and that this strategy guaranteed
        profits of 10–15%. Smith and Snelling held themselves out as
        being licensed to sell securities. Those representations were false
        because neither was licensed to sell securities nor were the firms
        licensed brokerage firms, and the investors’ money was never
        invested in anything or used in day trading; instead, it was used
        to enrich Smith and Snelling. Smith and Snelling prepared and
        sent to investors, through both the mail and electronic mail,
        falsified quarterly statements for Dunhill and CityFund
        purporting to show positive account balances and fictitious
        earnings, all as part of the scheme. A total of approximately
        seventy-two investors in Ohio, Kentucky, and Indiana
        collectively lost over $8,900,000.00 in this investment scheme.


        Smith entered a guilty plea to the three federal charges against
        him on June 12, 2012. Smith signed an agreed statement of facts
        acknowledging the Ponzi day trading scheme in which he and
Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 3 of 13
              Snelling falsely represented that they were licensed to sell
              securities when they were not and the investors’ money was
              never invested. Smith acknowledged that he and Snelling
              performed the specific overt acts set forth in the indictment.
              After pleading guilty in federal court, Smith filed a motion to
              dismiss the Franklin County charges, contending that the State’s
              prosecution was barred by Indiana Code section 35-41-4-5, our
              statutory double jeopardy provision pertaining to prosecution by
              dual sovereigns. The Franklin Circuit Court dismissed Counts
              11 through 25 setting out the charges alleging that Smith
              committed securities fraud and securities fraud involving a victim
              over sixty years of age on the basis that the conduct alleged was
              the same or substantially the same as the conduct alleged in the
              federal indictment to which Smith pleaded guilty. However, the
              trial court denied Smith’s motion to dismiss Counts 1 through 10
              setting out the charges alleging that Smith engaged in unlawful
              acts related to the offer or sale of a security and alleging Smith’s
              failure to comply with the requirement of broker-dealer
              registration.


      Smith v. State, 993 N.E.2d 1185, 1187-88 (Ind. Ct. App. 2013), trans. denied.


[4]   On appeal, this court held the trial court erred in failing to dismiss counts 1

      through 5 of the information, which had alleged that Smith violated Indiana

      Code Section 23-19-3-1 by selling securities that had not been registered with

      the Indiana Secretary of State. Id. at 1190. However, we held that Smith could

      face prosecution under counts 6 through 10 for engaging in business as a

      broker-dealer without having registered as a broker-dealer. Id. at 1190-91.


[5]   On remand following the appeal, Smith elected to plead guilty to the remaining

      counts of the information, with sentencing left to the trial court. At the

      sentencing hearing, counsel for Smith noted that he had already been ordered to

      Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 4 of 13
      pay restitution to the Indiana victims of the Ponzi scheme in the federal

      proceeding and requested that Smith not be ordered to pay restitution twice.

      Counsel did not object to the State’s introduction of evidence related to

      restitution amounts for the Indiana victims. The trial court imposed maximum

      sentences of eight years for each conviction, to be served consecutively for a

      total term of forty years, with twenty years suspended to probation. It also

      ordered Smith to pay a total of $410,189.16 in restitution to the victims. Smith

      now appeals.


                                                    Analysis
                                                  I. Restitution

[6]   We first address Smith’s claim that the trial court erred in ordering him to pay

      restitution to the Indiana victims of the Ponzi scheme. Initially, the State

      claims Smith waived this argument by failing to object to the imposition of

      restitution. We acknowledge the existence of authority holding, “Generally,

      failure to object to an award of restitution constitutes waiver of a challenge to

      the award on appeal, unless a defendant argues that the award was

      fundamentally erroneous and in excess of statutory authority.” Morris v. State, 2

      N.E.3d 7, 9 (Ind. Ct. App. 2013) (citing Lohmiller v. State, 884 N.E.2d 903, 915–

      16 (Ind. Ct. App. 2008)). Nevertheless, a number of cases have emphasized

      this court’s preference for reviewing a trial court’s restitution order even absent

      an objection by the defendant, unless a defendant has affirmatively agreed to

      the imposition of restitution. See, e.g., C.H. v. State, 15 N.E.3d 1086, 1096 (Ind.

      Ct. App. 2014), trans. denied. In Iltzsch v. State, 972 N.E.2d 409, 412 (Ind. Ct.

      Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 5 of 13
      App. 2012), this court held that we should review unobjected-to restitution

      orders based upon our duty to bring illegal sentences into compliance with the

      law. Our supreme court granted transfer in this case but summarily affirmed

      this portion of our opinion. Iltzsch v. State, 981 N.E.2d 55, 57 (Ind. 2013). We

      elect to review the restitution order against Smith, even if he did not clearly

      object to the order.


[7]   We review a trial court’s order of restitution for an abuse of discretion. Bickford

      v. State, 25 N.E.3d 1275, 1279 (Ind. Ct. App. 2015), trans. denied. The purpose

      of restitution is to impress upon a defendant the magnitude of the loss he or she

      has caused, as well as to vindicate the rights of society. Id. A victim entitled to

      restitution is one who has suffered injury, harm, or loss as a direct and

      immediate result of the criminal acts of a defendant. Id. Restitution awards

      generally should not cover crimes to which a defendant does not plead guilty or

      is not convicted of, and for which the defendant does not explicitly agree to pay

      restitution. Morris, 2 N.E.3d at 9 (citing Polen v. State, 578 N.E.2d 755, 756-57

      (Ind. Ct. App. 1991), trans. denied); see also James v. State, 868 N.E.2d 543, 549

      (Ind. Ct. App. 2007).


[8]   Here, Smith pled guilty to five counts of failing to register as a broker-dealer.

      The statute in question states, “It is unlawful for a person to transact business in

      Indiana as a broker-dealer or agent unless the person is registered under this

      article as a broker-dealer or is exempt from registration as a broker-dealer . . . .”




      Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 6 of 13
      Ind. Code § 23-19-4-1(a).1 Prior to July 1, 2014, a knowing violation of this

      provision was a Class C felony. I.C. § 23-19-5-8.2 In Smith’s first appeal, we

      addressed whether this crime was the same as the offenses to which he had pled

      guilty in federal court for purposes of the statutory double jeopardy protection

      found in Indiana Code Section 35-41-4-5. We noted, “Both the federal

      indictment and the state charges arise from the overarching Ponzi scheme

      involving numerous victims in multiple states who were harmed by the actions

      of Smith and Snelling.” Smith, 993 N.E.2d at 1190. Additionally, we observed

      that the federal court’s judgment ordered Smith to pay restitution of $5 million,

      which specifically included restitution to the Indiana victims named in the state

      charges.


[9]   We ultimately held with respect to the statutory double jeopardy question:

                 The counts allege that Smith knowingly transacted business as a
                 broker-dealer without being registered as such with the Indiana
                 Secretary of State, Securities Division, as required by law, and
                 without being exempt from registration. In those counts the
                 offense is failing to register as a broker-dealer as required by law
                 before transacting business as such and does not involve the same
                 conduct as the conduct forming the basis for Smith’s federal
                 conviction, i.e., devising and participating in the scheme to
                 defraud investors.




      1
       Technically, one of the five counts of which Smith was convicted fell under now-repealed Indiana Code
      Section 23-2-1-8(a), which was in effect prior to July 1, 2008, and was worded substantially similar to current
      Indiana Code Section 23-19-4-1(a) for purposes of this case.
      2
          This offense is now a Level 5 felony.


      Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015                         Page 7 of 13
               There is no overlap between the failing to register counts in this
               proceeding and Smith’s federal conviction. On one hand, had
               Smith been registered as a broker-dealer, he would still have
               faced the federal prosecution for his fraudulent acts. On the
               other, had Smith sold legitimate securities, he would have still
               have faced prosecution in this proceeding for his failure to
               register as a broker-dealer.


       Id. at 1190-91.


[10]   “The law of the case doctrine provides that an appellate court’s determination

       of a legal issue binds both the trial court and the appellate court in any

       subsequent appeal involving the same case and substantially the same facts.”

       Murphy v. Curtis, 930 N.E.2d 1228, 1234 (Ind. Ct. App. 2010), trans. denied.

       Unlike res judicata, the law of the case doctrine is discretionary, and the matters

       decided in the earlier appeal must clearly appear to be the only possible

       construction of the appellate opinion. Id. “Thus, questions not conclusively

       decided in the earlier appeal do not become the law of the case.” Id.


[11]   The State fails to analyze or even mention our earlier opinion in this case. That

       opinion clearly held that Smith could face prosecution on state charges of

       failing to register as a broker-dealer because they were entirely different in

       nature than the federal convictions related to defrauding investors. Our first

       opinion is the law of the case on that question. Also, the federal charges led to

       restitution orders with respect to Smith’s Indiana victims. It was Smith’s

       conduct as charged in federal court that led to the victim’s losses, not his failure

       to register as a broker-dealer. The State fails to adequately demonstrate that


       Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 8 of 13
       there was anything about Smith’s failure to register as a broker-dealer that

       caused financial loss to the victims. Smith also did not explicitly agree to pay

       restitution with respect to these charges. As such, we conclude there is an

       inadequate legal and factual basis for awarding restitution under Smith’s failure

       to register as a broker-dealer charges.


[12]   We reverse the award of restitution in this case. Furthermore, this is not an

       instance in which there simply was a failure of proof regarding the amount of

       restitution, in which case we might remand for the State to have another

       opportunity to submit proof. See Iltzsch, 981 N.E.2d at 57. Rather, there is no

       legally tenable basis for awarding restitution in this case, and we will not

       remand for another hearing.


                                 II. Single Episode of Criminal Conduct

[13]   Next, we address Smith’s argument that his five convictions for failing to

       register as a broker-dealer constituted a single episode of criminal conduct

       subject to statutory limitations on sentencing for such crimes. Under Indiana

       Code Section 35-50-1-2(c), a defendant’s sentence for multiple felony

       convictions, other than for crimes of violence, arising out of single episode of

       criminal conduct shall not exceed the advisory sentence for a felony one class

       higher than the most serious felonies of which the defendant was convicted.3

       Here, all of Smith’s convictions were for Class C felonies. The advisory



       3
        Indiana Code Section 35-50-1-2(c) has undergone revision in recent years to reflect Indiana’s change from
       “classes” of felonies to “levels.”

       Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015                      Page 9 of 13
       sentence for a Class B felony was ten years. I.C. § 35-50-2-5(a). Smith received

       a sentence of forty years.


[14]   Whether a series of crimes is related in some way is not the relevant test for

       determining whether they constituted a single episode of criminal conduct.

       Reeves v. State, 953 N.E.2d 665, 671 (Ind. Ct. App. 2011), trans. denied. Rather,

       the “straightforward” statutory definition of an “episode of criminal conduct” is

       “‘offenses or a connected series of offenses that are closely connected in time,

       place, and circumstance.’” Reed v. State, 856 N.E.2d 1189, 1199 (Ind. 2006)

       (quoting I.C. 35-50-1-2(b)). “Citing the American Bar Association standard,

       Tedlock [v. State] refers to the ‘simultaneous’ and ‘contemporaneous’ nature of

       the crimes which would constitute a single episode of criminal conduct.” Smith

       v. State, 770 N.E.2d 290, 294 (Ind. 2002) (quoting Tedlock v. State, 656 N.E.2d

       273, 276 (Ind. Ct. App. 1995)).


[15]   In Tedlock, the defendant was an unregistered broker-agent who fraudulently

       sold securities to four different victims on four different dates and who was

       eventually convicted of four counts of Class C felony securities fraud. On

       appeal, we held the four counts did not constitute a single episode of criminal

       conduct and affirmed the imposition of consecutive sentences that resulted in a

       sentence in excess of ten years. Tedlock, 656 N.E.2d at 276-77. In Reeves, the

       defendant was engaged in a Ponzi scheme that included fraudulently selling

       different bonds to different sets of victims in separate transactions and he

       eventually was convicted of nine counts of Class C felony aiding, inducing, or

       causing securities fraud. We affirmed the imposition of consecutive sentences

       Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 10 of 13
       totaling fifty-four years because the offenses did not constitute a single episode

       of criminal conduct. Reeves, 953 N.E.2d at 671-72.


[16]   At first glance, the present case appears similar to Tedlock and Reeves. Smith

       was engaged in a Ponzi scheme by dealing in securities and made at least five

       sales of securities in Indiana on five different occasions to five different victims.

       However, Smith was not convicted of securities fraud here; those convictions

       were entered in federal court. As we explained above, he was convicted of the

       much different charge of transacting business without having registered as a

       broker-dealer. That charge does not require any proof of fraudulent conduct.

       Instead, the primary conduct it addresses is failing to register with the Indiana

       Secretary of State before holding oneself out as a broker-dealer.


[17]   In Study v. State, 602 N.E.2d 1062 (Ind. Ct. App. 1992), we addressed a similar

       statute regarding loan brokering in the context of a double jeopardy claim. The

       statute in that case, Indiana Code Section 23-2-5-4(a), prohibits a person from

       engaging “in the loan brokerage business in Indiana unless the person first

       obtains a loan broker license from the” Secretary of State’s securities

       commissioner. A knowing violation of the registration requirement is a felony.

       See I.C. § 23-2-5-16. In Study, the defendant held himself out as a loan broker

       and twice accepted money from a victim in exchange for unfulfilled promises to

       purchase certificates of deposit on the victim’s behalf. The defendant was

       convicted of two counts each of theft and for failing to register as a loan broker.

       On appeal, we held the defendant could only be convicted of one count of

       failing to register. We explained, “an individual who fails to register

       Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 11 of 13
       continuously commits an offense, i.e., by failing to register, the individual

       commits a criminal act that continues, and is continuous, until such time as the

       individual is prosecuted for the offense.” Study, 602 N.E.2d at 1068. Thus, the

       defendant committed only one violation of the registration requirement by the

       first act of loan brokering, “regardless of the number of subsequent acts of loan

       brokering.” Id.


[18]   We acknowledge that Study concerns double jeopardy principles, not a

       sentencing argument. Smith does not make a double jeopardy claim.

       Additionally, he pled guilty to the five offenses, which precludes any double

       jeopardy claim here. See Mapp v. State, 770 N.E.2d 332, 333 (Ind. 2002). Still,

       we find Study’s discussion of the continuous nature of a very similar crime to be

       instructive.


[19]   In light of Study’s language and our holding in Smith’s first appeal, we conclude

       that Smith committed one single episode of criminal conduct by failing to

       register as a broker-dealer with the Secretary of State and then knowingly

       proceeding to transact business without having done so. The precise number of

       times that Smith transacted business is not the gravamen of the offense; rather,

       it is his initial failure to register. That failure is a grievance against the Secretary

       of State and the State as a whole, which by itself did not result in direct harm to

       the victims. See Kahn v. State, 493 N.E.2d 790, 794 (Ind. Ct. App. 1986)

       (holding that crime of failing to obtain license to sell securities occurred in

       Marion County because Secretary of State’s office is located there), trans. denied.



       Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 12 of 13
[20]   Therefore, regardless of Smith’s subsequent acts of transacting business without

       having first registered as a broker-dealer, such acts constitute a single episode of

       criminal conduct for purposes of Indiana Code Section 35-50-1-2(c). As such,

       the total sentence Smith may receive is ten years, the advisory sentence for a

       Class B felony. We reverse the imposition of the forty-year sentence and

       remand for the trial court to craft a sentence that complies with this opinion,

       including recalculation of suspended time Smith may receive, if any. Also, by

       reducing Smith’s total sentence from forty to ten years, we believe it is

       unnecessary to address his additional argument that his forty-year sentence was

       inappropriate.


                                                  Conclusion
[21]   We reverse the restitution order against Smith in this case; of course, the federal

       court restitution order for these victims is still in place. We also conclude that

       Smith’s five offenses for failing to register as a broker-dealer constitute a single

       episode of criminal conduct. We reverse Smith’s sentence and remand for

       resentencing consistent with this opinion.


[22]   Reversed and remanded.


       Kirsch, J., and Najam, J., concur.




       Court of Appeals of Indiana | Opinion 24A01-1501-CR-1 | September 22, 2015   Page 13 of 13
