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State v. Bird

Court of Appeals of Utah

August 10, 2017

State of Utah, Appellee,
Lane D. Bird, Appellant.

         Second District Court, Farmington Department The Honorable Michael G. Allphin No. 111700523

          Derek G. Williams, Attorney for Appellant.

          Sean D. Reyes and William M. Hains, Attorneys for Appellee.

          Judge Jill M. Pohlman authored this Opinion, in which Judges Gregory K. Orme and Stephen L. Roth concurred.[1]

          POHLMAN, Judge.

         ¶1 Lane D. Bird appeals a restitution order, arguing that the trial court erred when calculating the restitution amount. We affirm.


         ¶2 After creating a skin care product and establishing a company to manufacture it, Omar Bonada arranged for Bird to help distribute the product. Eventually, Bonada and Bird together decided to dissolve Bonada's company and incorporate two companies in its place: Clarcon Labs Inc. and Clarcon Distribution Inc. (collectively, Clarcon).

         ¶3 In early 2007, Bird approached his neighbor (Neighbor) and his wife (collectively, Victims) about an investment opportunity in Clarcon. By March 2007, Bird had convinced Victims to invest a total of $247, 000. In exchange for this capital investment, Victims would acquire stock in Clarcon and thereby receive a share of future profits.

         ¶4 In convincing Victims to invest in Clarcon, Bird omitted many material facts and made numerous untrue statements. For example, Bird did not tell Victims about any of Clarcon's debts, and he did not disclose that he had prior tax liens and civil judgment liens against him, or that he had received two prior discharges in bankruptcy. Bird also falsely claimed that he had invested $500, 000 of his own money in Clarcon so that Victims would feel like Bird had "skin in the game."

         ¶5 Bird also led Victims to believe that their capital investment would be used to update production equipment to support the company's growth. Instead, a large portion of Victims' $247, 000 investment was used to pay debts and salaries while another portion was transferred to Powerslide, another of Bird's business ventures, purportedly to repay a loan from Powerslide. On June 1, 2007, shortly after Neighbor and Bonada discovered the funds transfer to Powerslide, Clarcon terminated Bird's involvement in the company.

         ¶6 After Bird left, Clarcon was dissolved and Neighbor and Bonada formed a new company, Clarcon Biological Chemistry Laboratory Inc. (CBCL), to produce and market the same product. When CBCL gained access to Clarcon's financial records, Neighbor discovered that Clarcon was mired in debt. It had high overhead expenses and "[v]irtually nothing in sales."[2]Over the next two years, Victims tried to make CBCL succeed and invested another $193, 000 into the venture. Notwithstanding those efforts, CBCL never made a profit. And eventually, the Food and Drug Administration (the FDA) found CBCL's product to be contaminated with bacteria, which led to federal authorities recalling and seizing the product inventory in the summer of 2009. Neighbor and Bonada dissolved CBCL shortly thereafter.

         ¶7 In 2011, Bird was charged with securities fraud and theft. After a bench trial, the trial court acquitted Bird of theft but found him guilty of securities fraud, a second degree felony. The trial court fined Bird $10, 000 and ordered him to serve one to fifteen years in prison, but it suspended both the fine and the prison term. The court then sentenced Bird to 180 days in jail and placed him on probation.

         ¶8 As a condition of probation, the trial court ordered Bird to pay restitution to Victims. The State requested complete and court-ordered restitution[3] in the amount of $247, 000, which represented Victims' original investment in Clarcon. Bird objected, arguing that "no restitution [should] be ordered as [Victims] have not suffered an actual loss" resulting from Bird's criminal activities. Victims suffered no pecuniary damages, Bird argued, because Neighbor retained Clarcon's product inventory and fixed assets that together exceeded the value of Victims' principal investment. In his objection, Bird urged the court to rely on his supporting documents and the testimony at trial in considering his objection. He did not request a hearing on the matter.

         ¶9 Without further proceedings, the trial court issued a written ruling and order on the State's request for restitution. In its ruling, the court found that Victims had "relied on [Bird's] representations and invested a principal sum of $247, 000" in Clarcon, on which they "did not receive a return." The court concluded that they would not have suffered pecuniary damages but for Bird's criminal conduct and that their damages "have a sufficient causal nexus in fact and in time with [Bird's] securities fraud." The court further found, however, that Bird had presented undisputed evidence that Neighbor "absorbed all of the assets of Clarcon . . . when forming" CBCL and that those assets had a total estimated value of $82, 276.83.[4] Because the State had not presented any contrary evidence, the court credited the value of the assets against the amount of Victims' principal investment.

         ¶10 The court next addressed Bird's attempt to seek further credit against the amount of Victims' principal investment based on the value of the product inventory. Bird estimated the product inventory "as having a value into the millions of dollars." Although Neighbor testified at trial, based on what he was told by Bird, that the estimated retail value of the product inventory was $1.5 million to $2 million in the spring of 2007, other witnesses testified that the product inventory had a retail value of $500, 000 at that time. But because federal authorities seized the product inventory in 2009 due to safety concerns, the ...

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