Wolfe v Federated States of Micronesia [1985] FMSC 17; 2 FSM Intrm. 115 (App. 1985) (17 September 1985)

THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite as Wolfe v. FSM, [1985] FMSC 17; 2 FSM Intrm. 115 (App. 1985)

[1985] FMSC 17; [2 FSM Intrm. 115]

CHARLES WOLFE,
Appellant,

vs.

FEDERATED STATES OF MICRONESIA,
Appellee.

APPEAL T6-1984
From FSM v. Wolfe, Cr. 1984-1522
Truk, Benson, J.,
Decided September 14, 1984

Cite as [1985] FMSC 17; 2 FSM Intrm. 115 (App. 1985)
Decided November 5, 1985
Argued September 17, 1985

Before:
Hon. Edward C. King, Chief Justice, FSM Supreme Court;
Hon. Mamoru Nakamura, Temporary Justice, FSM Supreme Court*

[2 FSM Intrm. 116]

Hon. Herbert D. Soll, Judge, Temporary Justice, FSM Supreme Court**

*Chief Justice, Supreme, Court of the Republic of Palau, sitting on this case by designation.
**Commonwealth Trial Court, Northern Mariana Islands sitting on this case by designation.

APPEARANCES:

For the Appellant: Gary Marr
Public Defender
Office of Public Defender
Moen, Truk 96942

For the Appellee: Maile Bruce
Assistant Attorney General
Office of the Attorney General
Federated States of Micronesia
Moen, Truk 96942

* * * *

HEADNOTES

Criminal Law and Procedure-theft
When existing facts having a material bearing upon the desirability of a proposed investment are intentionally misrepresented, the investor has been defrauded, even if the person who has induced the investors by false statements fervently hopes that profitability will be fulfilled. Wolfe v. FSM, [1985] FMSC 17; 2 FSM Intrm. 115, 120 (App. 1985).

Criminal Law and Procedure-theft
Where an obvious and unreasonable risk of loss was forced on investors, without their knowledge or consent, by defendant's intentional misstatement of facts, and the defendant thereby obtained money of the investors knowing that he was exposing the investors to risks beyond their knowledge, this is theft in violation of 11 F.S.M.C. 934. Wolfe v. FSM, [1985] FMSC 17; 2 FSM Intrm. 115, 120 (App. 1985).

Criminal Law and Procedure-theft
When a person makes statements calculated to create a false impression as to value in order to induce those who heard him to give him their money, and the statements did have that result, the person has purposely obtained property through deception within the meaning of 11 F.S.M.C. 932(6). Wolfe v. FSM, [1985] FMSC 17; 2 FSM Intrm. 115, 121 (App. 1985).

Criminal Law and Procedure-discovery
The burden of showing whether exceptional circumstances exist within the meaning of FSM Crim. R. 15 is upon the defendant. To obtain a court order for taking of a deposition, the defendant must show that the witness is

[2 FSM Intrm. 117]

unavailable to attend the trial, that the testimony of the witness would be material and that such testimony would be in the interest of justice. Wolfe v. FSM, [1985] FMSC 17; 2 FSM Intrm. 115, 122 (App. 1985).

* * * *

EDWARD C. KING, Chief Justice,

Charles Wolfe appeals here from his conviction for theft by deception arising out of the dashed hopes of a group of investors who relied upon Wolfe to establish an airline operation to serve the outer islands of Truk. He contends that he hoped to fulfill all the promises he made and that this should prevent his conviction for theft by deception.

Wolfe also argues that he did not receive a fair trial because he was unable to obtain the testimony of his former attorney. He contends that the trial court erred by denying his motion under Rule 15(a) of the Rules for Criminal Procedure for an opportunity to take the attorney's deposition in California.

I. Factual Background

Charles Wolfe harbored an ambition to establish an airline in Micronesia. He had been involved in trying to develop air service in the Marshall Islands and his friends from California and Hawaii vouch that he spoke incessantly of his dream of a Micronesian airline.

In September of 1982 Wolfe met Federated States of Micronesia Senator Raymond Setik of Truk, at the Pohnpei airport. This meeting led to a continued association and friendship between the two. On or about January 31, 1983 Wolfe arrived in Truk to discuss plans for establishment of an air line to service the outer islands of Truk State and Senator Setik arranged a party and invited several people in Wolfe's honor. The next day Setik escorted Wolfe around the island and he arranged for a meeting that night with potential investors. At the meeting Wolfe addressed these potential investors, many of whom were Setik's family members. The criminal charges in this case arise out of the representations made by Wolfe that night and other times during that brief visit to Truk, followed by his receipt from the investors of 460,000, for which they received little or nothing.

II. Procedural Background

Wolfe was arrested in Hawaii and the Hawaii Supreme Court eventually upheld an order providing for his extradition to Truk.

The day the trial was to begin in this Court's trial division in Truk, Wolfe's newly appointed attorney advised the trial court that she had learned that Wolfe's former attorney, one Jerry Abbott of California, had intended to testify on Wolfe's behalf but now would be unable to do so because of medical problems. She later moved for the opportunity to take Abbott's deposition in California at government expense. This motion was denied and the case proceeded to trial.

[2 FSM Intrm. 118]

Wolfe was convicted of theft by deception, that is, obtaining 460,000 through creation of a material false impression as to value, intention and state of mind, in violation of 11 F.S.M.C. 934. He was acquitted of charges that: (1) he subsequently re-enforced and failed to correct a material false impression which he had previously created, also under 11 F.S.M.C. 934; and (2) he had failed to make required disposition of funds in violation of 11 F.S.M.C. 939.

III. Theft By Deception

A. Facts

Many details are fuzzy but the evidence yields at least the following rough outline of the status of Wolfe's business affairs when he arrived in Truk.

Wolfe testified that he was the sole stockholder in a California corporation named Tradition Air Transport, Inc. This corporation, which we shall call TAT, had been granted the right to fly in and out of Kwajalein Atoll in the Republic of the Marshall Islands. According to Wolfe, TAT had exercised these Kwajalein landing rights for awhile under the name of Trans Pacific Airlines, shuttling goods and passengers between Kwajalein and Majuro.

TAT apparently was not engaged in active operations in 1983. Wolfe testified that TAT still retained the Kwajalein landing rights but there is no indication that these rights were being exercised in 1983 or any time thereafter. Wolfe's stated dream was that TAT eventually would couple its Kwajalein landing rights with rights to fly into the rest of Micronesia and that TAT would become a trunk line transport operation, linking the larger population and business centers in Majuro, Kosrae, Pohnpei, Truk and Yap. However, there is nothing in the record to indicate that TAT had any capacity to transform that dream into reality. There is no showing that, as of 1983, TAT had any substantial assets. So far as the record indicates, TAT was a dormant corporation with no financial wherewithal.

But it was not of TAT that Wolfe spoke to the investors in Truk on January 31, 1983. Instead, he emphasized Trans Pacific Airlines, which he characterized as an ongoing corporate operation prepared and willing to provide a shuttle service, using amphibious airplanes, between Moen Island, the capital of Truk State, and the outer islands of Truk.

Wolfe portrayed himself as President and owner of 60% of the equity of TPA. He stated his willingness to sell 40% of his share to the investors in Truk in order to permit Micronesian participation in the venture. The shares had a value, he said, of $750 each, and he would be willing to sell up to 40% of his share for that amount.

He suggested an original investment of $60,000, presumably in part because that was equal in value to 40% of Wolfe's existing stock, but also because that would be enough to offset the expenses of bringing the two

[2 FSM Intrm. 119]

amphibious planes to Truk from their locations at that time in Alaska and Canada. Wolfe indicated that if the necessary funds could be provided immediately, at least one of the planes could reach Truk, ready for action, by March 8, 1983.

Based upon these representations, the investors turned over money to Setik, who delivered $45,000 to Wolfe on their behalf on February 3, before Wolfe left Truk. Setik delivered an additional $15,000 to Wolfe in Honolulu on February 18. Astonishing and distressing as it may be, these payments were made with no apparent effort by Setik or any of the other investors to verify the accuracy of Wolfe's representations or the trustworthiness of Wolfe himself.

Unfortunately, this leap of faith did not land the investors on firm ground. The planes never arrived in Truk. In exchange for their $60,000 the investors in November, 1983 received a stock certificate representing ownership of 800 of the 100,000 authorized shares of two-cent par value common stock of Trans Pacific Airlines Inc., a new Hawaii corporation incorporated on October 26, 1983, some nine months after Wolfe talked to the investors in Truk.

The record reveals a chasm between the representations made by Wolfe to the investors in Truk on or about January 31, 1983 and the reality at that time. In the first place, there was no corporation named Trans Pacific Airlines on January 31, 1983 and it follows that there was no stock in any such corporation which could be sold to the investors.

Equally significant, there was no financial structure or background against which Wolfe's statements could be laid to justify his representations that if the group would invest $60,000, this would be roughly comparable to 40% of Wolfe's investment in the venture, which in turn was supplemented by other investments. The record indicates that as of January 31, 1983 there was no actual operation and no venture capital had been gathered or committed to start one. The financial empire over which Wolfe ostensibly presided was of little or no real value.

Finally, although there may have been airplanes in Alaska and Canada concerning which Wolfe may have had preliminary discussions looking toward their eventual use in Micronesia, it decidedly was not true that Wolfe or TPA somehow controlled those planes. The record reveals no apparent substance to Wolfe's representations that the only thing lacking to produce the planes in Truk was money to pay for their transport.

Despite all this, the record does not conclusively establish that Charles Wolfe was a charlatan simply trying to fleece the people of Truk. There is evidence that Wolfe had been involved in air transport operations in the Marshall Islands and that he had a long-held interest in trying to develop Micronesia-wide air operations. It also seems that he had talked to other potential investors in the United States. Presumably he was hopeful that if he could show Micronesian investment and support he might be able to persuade the United States investors to commit their funds.

[2 FSM Intrm. 120]

The record in this case is subject, then, to the interpretation that Wolfe intended to use the $60,000 to develop air operations in Truk and to generate additional investment. It is conceivable also that he anticipated treating the Truk investors fairly, arranging for issuance to them of an appropriate portion of any shares that might be issued by a corporation to be formed after additional investors had committed funds. From what we can glean from the record all of this would be consistent with Wolfe's dream of a Micronesia wide air service.

Finally, we recognize that the willingness of this group of investors to accept anything Wolfe might say, without even minimal attempts at verification, must have made them an especially enticing audience for the exposition of Wolfe's dreams.

B. Legal Analysis

But even this most sympathetic interpretation of Wolfe's actions can not erase the core truth. Wolfe portrayed his dreams as reality and through his misrepresentations of existing facts, deceived the investors in Truk as to the nature of the venture in which they were investing. The record fully supports the findings of the trial court that by his misrepresentations of existing facts, Wolfe was able to deceive the Truk investors, to obtain their funds, and to put those funds at risk in a way that they did not anticipate.

There can be no doubt that these facts constitute a violation of 11 F.S.M.C. 934. 1 The crime of theft by deception for which Wolfe was convicted is committed by one who "purposely obtains property of another by deception." 11 F.S.M.C. 934(1). Wolfe's statements were plainly calculated to create a false impression as to value in order to induce those who heard him to give him their money, and the statements did have that result. Thus Wolfe acted "purposely" or intentionally and thereby obtained "property," which is defined as "anything of value." 11 F.S.M.C. 932(6). 2

[2 FSM Intrm. 121]

Wolfe obtained this money through deception. As the trial court found, he purposely deceived the investors by creating in their minds false impressions as to: (1) the corporate existence of TPA; (2) the existence and value of TPA stock; and (3) control by TPA of two amphibious airplanes. These findings are all amply supported in the record.

In this appeal, Wolfe insists that he hoped and intended to fulfill his promises to initiate airline operations in Truk and to provide fair participation in that operation to the Micronesian investors. Much of Wolfe's argument in this regard seems to lose sight of the fact that his conviction is not based upon his statements of intention or promises of future action, but upon his misstatements of existing facts.

However, he makes an additional argument that if he actually intended to provide stock and participation in exchange for the funds obtained by his misrepresentations of fact, then he did not intend to deprive the investors of their funds and cannot be convicted of theft by deception.

As has already been stated here, Wolfe may honestly have hoped that he actually could establish a corporate structure of the sort he fabricated in his statements to the investors. Yet, while the possibility that Wolfe hoped to fulfill his promises stood in the way of his conviction for false promises, such dubious dreams can not provide a defense against criminal liability for his misrepresentations of existing facts.

One asked to invest money has a right to determine for himself whether the risk of a particular investment is acceptable. When facts having a material bearing upon the desirability of the investment are misrepresented, the investor has been defrauded, even if the person who has induced the investment by false statements fervently hopes that related promises of future actions, developments or profitability will be fulfilled.

Here, An obvious and unreasonable risk of loss was forced on the investors, without their knowledge or consent, by Wolfe's misstatement of facts. By intentionally misstating the facts Wolfe obtained the money of the investors. He did so knowing that he was exposing them to risk, much greater than they knew, that they would be permanently deprived of those funds. This is sufficient intention to deprive to fulfill the requirements of the crime. See Perkins & Boyce, supra note 2, at 382; Nelson v. United States, [1955] USCADC 442; 227 F.2d 21 (D.C. Cir. 1955).

IV. The Deposition
The other issue raised by Wolfe's appeal is the refusal of the trial court to grant defendant's motion under Rule 15 of the FSM Rules of Criminal Procedure to be permitted to take the deposition of Jerry Abbott in California. This motion was made by Wolfe's newly appointed counsel after questioning of the first witness in the trial had been completed.

In support of the motion, counsel filed her affidavit stating that Jerry

[2 FSM Intrm. 122]

Abbott had been the attorney for Wolfe's corporate affairs, that Abbott had informed her that "he had information that would aid the defendant," but that be had just learned of "suspicious spots on his spine" and therefore would need further medical evaluation.

Rule 15 of our Rules of Criminal Procedure provides in pertinent part as follows:

(a) WHEN TAKEN. Whenever due to exceptional circumstances of the case it is in the interest of justice that the testimony of a prospective witness of a party be taken and preserved for use at trial, the court may upon motion of such party and notice to the parties order that testimony of such witnesses be taken by deposition....

This rule is drawn from the United States Federal Rules of Criminal Procedure and it is therefore appropriate to consider the application of the rule in United States federal courts in determining our approach. Andohn v. FSM, [1984] FMSC 4; 1 FSM Intrm. 433 (App. 1984). The burden of showing whether "exceptional circumstances" exist is upon the defendant. Annot., 43 A.L.R. Fed. 865, 874 (1979). What must be shown is that the witness is unavailable to attend the trial, that the testimony of the witness would be material and that such testimony would be for the benefit of the moving party or in some other way in the interest of justice. Id.

Here, there was no clear showing that the witness would be unavailable for testifying. The affidavit states only that the witness's doctor said that x-rays had disclosed "suspicious spots" on Abbott's spine and "that he should undergo further medical evaluation of undisclosed or unknown duration." There was no direct statement that the need for such tests absolutely precluded Mr. Abbott from coming to Truk to testify. It was well within the discretion of the trial court to deny the motion on grounds that the unavailability of the witness had not been satisfactorily established.

We further find lacking any persuasive showing that the testimony of Mr. Abbott would have been material, or even helpful to the defendant, particularly as to the acts for which Mr. Wolfe ultimately was found guilty by the trial court. In explaining the importance of Abbott's testimony, Wolfe's counsel said:

We feel that his testimony Will be vital to the defense because it will tend to make it very clear to the court exactly what the corporate structure has been of Mr. Wolfe's companies, what his purpose was in setting up his companies the way he did, and also the fact that what he did is legal under the laws and also very simply that Mr. Abbott was present at meetings, where Mr. Wolfe was involved in fund raising, or

[2 FSM Intrm. 123]

trying to secure venture capital, for the projects which he has set up and testified to here in court.

Tr. 101-02.

Abbott was of course not present in Truk on or about January 31, 1983 when Wolfe made the misrepresentations which led to the convictions in this case. The record, including a subsequent affidavit by Mr. Abbott submitted to the trial court at the time of sentencing, is devoid of any suggestion that Abbott had information which-might have influenced the trial court's findings: (1) that Trans Pacific Airline was not incorporated at the time that Wolfe was selling shares in it; (2) that there was no basis for offering shares in that corporation at the rate of $750 per share; (3) and that neither Wolfe nor Trans Pacific Airlines, at the time that Wolfe was assuring that the corporation had airplanes which it would bring to Truk on March 8, actually had any control over or legal right to any airplanes.

Thus, the decision of the trial court that the requisite standards for establishing the need for a deposition under Rule 15(a) of the FSM Rules of Civil Procedure had not been met was fully justified on this record.

Conclusion

The findings of the trial court that Charles Wolfe intentionally created a false impression in the minds of various investors in Truk as to the existence of a corporation having stock, as to the value of that nonexistent stock, and as to the control of that nonexistent corporation and Mr. Wolfe over airplanes, is amply supported by the record. The record also reflects that Mr. Wolfe created these false impressions in the minds of Raymond Setik and the others in order to obtain money from them in the amount of $60,000, and that he was successful in obtaining their money through this deception.

Defendant's argument that Wolfe intended to provide air service and did not intend to permanently deprive the investors of their money is of no avail. The crucial point is that by creating the false impression he obtained their money knowing that the risk to them was far beyond any risk to which they would have exposed themselves had his representations been true. The obtaining of money under these circumstances, even though the person obtaining the money has fond hopes of some day making repayment or issuing stock of equal value, nevertheless constitutes theft by deception.

Finally, the trial court was justified in refusing to stop the trial for the deposition of Jerry Abbott. The defendant failed to establish clearly on the record either that Abbott could not and would not have come to testify upon the request of Wolfe, or that Abbott had information which would have been useful to Wolfe in this case.

The decision of the trial court is therefore AFFIRMED.

* * * *

Footnotes:
1. The language under which Wolfe was convicted is: "A person commits theft if he purposely obtains property of another by deception. A person deceives if he purposely: (a) creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind ..." 11 F.S.M.C. 934(1)(a). This provision, drawn directly from Section 223.3 of the Model Penal Code drafted by the American Law Institute, is part of the statutory consolidation of the traditional crimes of larceny, embezzlement, obtaining property by false pretenses and other similar crimes in the nature of theft.

2. "'Obtain' means: (a) in relation to property, to bring about a transfer or purported transfer of a legal interest in the property... " 11 F.S.M.C. 932(5). By acquiring possession of money, one receives apparent title, thereby "obtaining" the money. See R. Perkins & R. Boyce, Criminal Law 374 (3rd ed. 1982).