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State v. Brown

Court of Appeals of Utah

July 18, 2019

State of Utah, Appellee,
Tonia Schnae Brown, Appellant.

          Third District Court, Salt Lake Department The Honorable Vernice S. Trease No. 151902943

          Debra M. Nelson, Attorney for Appellant

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

          Judge Michele M. Christiansen Forster authored this Opinion, in which Judges Gregory K. Orme and Diana Hagen concurred.


         ¶1 Tonia Schnae Brown appeals her convictions on three counts of securities fraud, second-degree felonies. We affirm.


         ¶2 Two Utah residents, Victim and Friend, were introduced to Brown by a mutual friend (Advisor). Brown had informed Advisor that she had made a substantial amount of money as a commercial real estate broker prior to the financial crisis of 2008 but had moved her funds to offshore accounts at that time because she was concerned about the United States' financial system. She claimed to have just under $50 million in an account at InterBank, a bank operating out of Saint Vincent and the Grenadines, as well as $300, 000 in an account with the Bank of China in Hong Kong. Brown represented that she owed $59, 500 in value added taxes (VAT) to the Hong Kong government and that her accounts were frozen until she paid the money.

         ¶3 Brown signed a promissory note stating that she would pay Victim $1 million when her accounts were unfrozen if Victim would send Brown the $59, 500 for the VAT. Brown assured Victim that "there was no risk" and she could return her money "at any time." Victim took out a home equity loan in the amount of $59, 500 and wired the money as directed by Brown.

         ¶4 Instead of delivering the promised $1 million, Brown delivered a letter to Victim, purportedly from the Bank of China, stating that the VAT had increased and that an additional $80, 500 was needed to pay the VAT. Brown signed a new promissory note in which she committed to deliver $2 million in exchange for the total $140, 000 needed to pay the VAT, and Friend loaned Brown the additional $80, 500.

         ¶5 Once again, Victim and Friend received a letter, purportedly from the Bank of China, informing them that an additional $210, 000 was needed to release the frozen funds. Brown urged Victim and Friend to provide the additional funds, but instead Victim contacted the Federal Bureau of Investigation, the Securities and Exchange Commission, and a private attorney to report that she and Friend may have been defrauded by Brown. Victim and Friend made various attempts to recover the funds from Brown but were unsuccessful.

         ¶6 Victim also made her own inquiries, reaching out to the Hong Kong Monetary Authority (HKMA) and government authorities in Saint Vincent and the Grenadines, as well as hiring attorneys in Hong Kong to look into the validity of Brown's claims. She learned that Hong Kong does not have a VAT and that the documentation Brown had provided from both the Bank of China and the HKMA were likely not authentic. Victim also discovered that there was no record of InterBank in Saint Vincent and the Grenadines and that the address on InterBank's letterhead-appearing on a document provided by Brown-was invalid.

         ¶7 The State charged Brown with three counts of securities fraud in connection with this incident, all second-degree felonies. Brown elected to represent herself in the criminal case. But before the trial court allowed Brown to proceed pro se, it conducted a full colloquy regarding Brown's education, her understanding of the charges, her understanding of the law, and her constitutional right to have counsel appointed. The court "strongly urge[d]" Brown not to represent herself, but she elected to do so anyway. The court then accepted Brown's waiver of counsel, finding that it was knowing, voluntary, and intelligent.

         ¶8 The State called a securities expert, Bryan Allen, to testify at trial. Allen testified that "securities laws impose a requirement on . . . sellers of securities, to provide full and fair disclosure." He explained that disclosure is fraudulent if the seller fails to provide an investor with "all material facts related to the investment" or "omit[s] . . . any information that would make the statements . . . misleading." Allen further defined "material" as "any[thing] that a reasonable investor would find important in deciding to purchase . . . or sell the security."

         ¶9 During his testimony, Allen provided a list of "examples of what might be considered material facts or information in the securities industry," including (1) relevant information about the seller's business or industry; (2) information about the parties involved in the transaction, including their experience and education as well as any negative information about them, such as prior convictions, judgments against them, or prior bankruptcies; (3) how the money would be used and how it would be expected to generate a return for the investor; and (4) the risks involved in the investment.

         ¶10 When asked about his experience, Allen acknowledged that he was not an international lawyer and was not an expert in Hong Kong law. However, he asserted that he knew "enough about international finance" to recognize ...

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