Prison Sentence for ND Investment Salesman UpheldA North Dakota Supreme Court ruling on a probation violation appeal may make it more difficult for businesses to raise investment money for projects, an attorney said Wednesday.
By: Dale Wetzel, Associated Press
BISMARCK, N.D. (AP) — A North Dakota Supreme Court ruling on a probation violation appeal may make it more difficult for businesses to raise investment money for projects, an attorney said Wednesday.
The high court affirmed East Central District Judge Wickham Corwin's decision to revoke the probation of Bruce Hager, who pleaded guilty in December 2007 to eight felonies for selling unregistered securities and for failing to meet a state registration requirement for salesmen.
Hager was initially sentenced to six months' home confinement and placed on 10 years' supervised probation. But after Hager finished his sentence, his probation officer said Hager violated his probation by keeping five guns and illegally marketing partnerships in an investment fund.
Hager admitted having the guns, but denied any securities violations. Prosecutors dropped those allegations because, they said, the gun possession was enough to revoke his probation, but Corwin's decision to impose a 30-month sentence were influenced by them, court documents say.
"If someone is on probation for a securities violation, or multiple securities violations, the last thing they should be doing is skating on the edge of the law," Corwin said at Hager's sentencing.
Daniel Frisk, one of Hager's attorneys, said Wednesday the ruling was appealed in an attempt to clarify the requirements that state regulators said Hager should have followed when he marketed the partnerships.
Hager contended that federal regulations exempted him from having to register with North Dakota's securities commissioner to sell partnerships in the investment fund because he was a part owner of the company, RAHFCO Management Group LLC of Sioux Falls, S.D., and was not paid a commission for his work.
Michael Daley, an assistant attorney general who represented Securities Commissioner Karen Tyler in the case, argued that the federal regulations did not trump the state's registration requirements. The North Dakota Supreme Court's ruling Tuesday agreed with Daley.
Frisk said the decision will put restrictions on company officials who want to raise money from investors to expand, buy equipment or undertake other ventures. Rather than doing it themselves, they will have to rely on outside securities sales people, which Frisk said was a costlier option.
"I think it's going to have a chilling effect on raising capital in this state," Frisk said Wednesday. "Issuing securities is difficult enough, and this just made it more difficult."
Daley said North Dakota's requirements protect investors. The North American Securities Administrators Association, which represents securities regulators, filed a brief supporting the North Dakota agency's arguments.
"A ruling ... limiting a state's authority to register or license persons selling securities will stand well outside the mainstream of state securities law (and) will make successful criminal prosecution of securities law violations much more difficult," the association's brief said. "As a result, in a very real sense, the citizens of North Dakota will be more vulnerable to fraud and abuse in the offer and sale of securities."