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State v. Bowen

Court of Appeals of Utah

October 10, 2019

State of Utah, Appellee,
Kimberly Bowen, Appellant.

          Third District Court, Salt Lake Department The Honorable Randall N. Skanchy No. 091900778

          Emily Adams, Attorney for Appellant

          Sean D. Reyes and John J. Nielsen, Attorneys for Appellee

          Judge David N. Mortensen authored this Opinion, in which Judges Gregory K. Orme and Kate Appleby concurred.


         ¶1 Kimberly Bowen-a real estate agent and homebuilder- was convicted on five counts of communications fraud and one count of pattern of unlawful activity in connection with a failed real estate development. Bowen sold residential lots to five separate buyers. But there were problems: among other things, the lots had no access to culinary water, and therefore the buyers could not obtain building permits. The buyers who purchased lots from Bowen consequently lost their investments and land in foreclosure. Bowen argues that (1) she received ineffective assistance of counsel and (2) the trial court erred in admitting certain rebuttal testimony and denying Bowen's motion to arrest judgment. We reject Bowen's ineffective assistance claim, and we affirm on the remaining points.


         ¶2 In 2006, Bowen, Sandra Chapple, and Leon Harper set out to become homebuilders. Their business model was to purchase lots, get investors with good credit to buy those lots, have the investors finance the residential construction, build homes at a "reduced rate," then sell the homes and split the profits with the investors.

         ¶3 To carry out their business plan, Bowen, Chapple, and Harper formed several corporate entities: Empire Alliance, Empire Custom Homes, Sterling Mountain Properties, and Mountain Lake Ventures (collectively, Empire Alliance Companies). Empire Alliance was the corporate umbrella under which the other entities would operate. Sterling Mountain Properties would buy land from a developer; then Mountain Lake Ventures would take title to the land and sell it to investors. After investors secured construction loans, Empire Custom Homes would build the homes.

         ¶4 Bowen was in charge of the Empire Alliance Companies. She was listed as the president of Empire Alliance and Empire Custom Homes and a manager of Sterling Mountain Properties. Although Bowen was not a manager of Mountain Lake Ventures, she was a signatory on all its accounts.[2] Bowen also provided the start-up capital-$200, 000-to fund the Empire Alliance Companies. And she authorized all expenses and signed most checks on behalf of the companies. Bowen also picked the location for their first venture: an undeveloped parcel in Saratoga Springs, Utah, called Fox Hollow-specifically, a portion of Fox Hollow called "neighborhood 3" (Neighborhood).

         ¶5 Next, Bowen negotiated with Richard Wolper, a developer, to purchase lots in the Neighborhood. Wolper informed Bowen from the outset that the lots in the Neighborhood did not have access to culinary water. In fact, Saratoga Springs (City) initially informed Wolper that he would need to finish construction of the culinary water system before the City would record the Neighborhood plat map and issue building permits for Neighborhood lots. In the fall of 2006, however, the City allowed Wolper to record the Neighborhood plat despite not having finished building the culinary water system.

         ¶6 With the Neighborhood plat recorded, Bowen began selling lots. But because Bowen's company did not have the money to purchase the lots directly, she had to recruit investors. Each time Bowen located an investor, Sterling Mountain Properties would buy the lot, Mountain Lake Ventures would then take title to it, and then sell it to an investor at a $65, 000 mark up. Mountain Lake Ventures then sent that money to Empire Custom Homes. In total, Bowen's companies sold lots to five investors.

         ¶7 To attract investors, Bowen misrepresented facts and failed to disclose material information. In three sales from Mountain Lake Ventures to investors, Bowen acted as the real estate agent for both parties but she did not disclose her financial interest in Mountain Lake Ventures or the other Empire Alliance Companies. Bowen failed to disclose to the investors that the City would not issue building permits until Wolper completed the water system. Bowen also misrepresented that Empire Custom Homes was ready to build. In the end, Wolper and Bowen were not able to raise enough money to finance the water system. And as a result, the City did not issue building permits, homes were not built, and the investors lost their money and land through foreclosure.

         Criminal Proceedings

         ¶8 The State charged Bowen with five counts of communications fraud (one for each investor) and one count of pattern of unlawful activity, all second degree felonies. At trial, the State argued that Bowen (1) had a financial interest in her companies that she did not disclose to investors, (2) created Mountain Lake Ventures to "shield" her interests from being exposed, (3) misrepresented to investors that Empire Custom Homes "had subcontractors on notice ready to go," (4) knew, but failed to disclose, that the water system was incomplete and therefore the City would not issue building permits, and (5) caused one investor's earnest money to be deposited into the Empire Alliance company account rather than an escrow account.

         ¶9 Over the course of a seven-day trial, the State called twelve witnesses and introduced other evidence in support of its theories that Bowen had failed to disclose, or misrepresented, certain facts to investors. At least four witnesses-Wolper, Wolper's real estate agent, Harper, and one of the investors- testified that Bowen knew that the water system was not complete at the time the lots were sold to investors. And although the trial court recognized that Wolper had credibility issues, [3] it acknowledged that the jury could choose whether to believe him.

         ¶10 After the State rested, Bowen's defense counsel (Counsel) moved for a directed verdict on two grounds: (1) Wolper had been discredited on the water issue, without which there was not a crime, and (2) Bowen could not be liable for not disclosing an interest in Mountain Lake Ventures, because she was not a manager of that company. The State opposed the motion, arguing that the case involved more than the water; it was also about Bowen's undisclosed interest, her action of shielding her undisclosed interest by forming Mountain Lake Ventures, the lack of readiness to build, and one investor's money going into an improper account. The trial court denied Bowen's motion for a directed verdict and ruled that the State had presented "believable evidence that a reasonable juror" could convict on each of the charges.

         ¶11 In her defense, Bowen called several witnesses and introduced evidence to support her theory that she reasonably believed that the lots were buildable when she marketed and sold them to investors. Several of Bowen's witnesses testified that it was reasonable for her to believe that the lots were buildable due to the Neighborhood plat being recorded. Bowen also introduced evidence showing that Empire Custom Homes had an agreement with a licensed contractor (Contractor) to use his license for construction.

         ¶12 On rebuttal, the State called Contractor, who testified that he did have a license, but that Empire Custom Homes had actually listed his son as their contractor and his son did not have a contractor license. Counsel stated that he had no issue with allowing Contractor to testify about the license, but he objected to Contractor differentiating himself from his son because the State could have done that during its case-in-chief and the defense had not "discussed that aspect or anything in terms of its case-in-chief." The ...

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