Opinion
18-P-207
04-19-2019
JOHN A. PICINI v. SECURITIES DIVISION, OFFICE OF THE SECRETARY OF THE COMMONWEALTH.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
John A. Picini appeals from a Superior Court judgment affirming a final order of the Securities Division (division) of the Secretary of the Commonwealth in which the division concluded that Picini violated the Massachusetts Uniform Securities Act, G. L. c. 110A. We affirm.
1. Background. For over thirty years, Picini operated The Center for Senior Financial Planning and purported to offer financial planning services. In 2013, the United States Attorney for the District of Massachusetts filed a criminal information alleging that Picini committed mail fraud and tax evasion while engaged in two different business schemes. As alleged in the information, one scheme involved selling annuities, for which Picini fraudulently charged his clients fees even though he was compensated through commissions. In the other scheme, Picini advised his clients to liquidate their retirement funds and reinvest those funds in accounts that he supposedly managed. However, Picini did not invest the money entrusted to him and instead transferred it to savings and investment accounts that he controlled. As described by Picini in his own brief, he used the commissions that he received from selling annuities to offer some of his clients an account on which he paid three percent interest and then used his clients' money to pay for his own personal expenses. Picini ultimately pleaded guilty to the Federal charges.
Picini's schemes had also come to the attention of State authorities. In 2012, the enforcement section of the division filed an administrative complaint against Picini alleging violations of G. L. c. 110A. After Picini pleaded guilty in the separate Federal case, the enforcement section moved for summary decision and argued that the facts to which Picini pleaded guilty were sufficient to prove violations of G. L. c. 110A, §§ 101 and 102. The division agreed and granted summary decision with respect to those violations.
A motion for summary decision "is the administrative equivalent of a motion for summary judgment." Zoning Bd. of Appeals of Amesbury v. Housing Appeals Comm., 457 Mass. 748, 763 (2010).
While the division granted summary decision with respect to additional violations of G. L. c. 110A, Picini challenges the division's decision only with respect to violations of G. L. c. 110A, §§ 101 and 102. We thus limit our discussion to those sections.
2. Standard of review. "The division's decisions are reviewable in accordance with G. L. c. 30A, § 14(7)." Silvia v. Secretary of the Commonwealth, 61 Mass. App. Ct. 350, 358 (2004). Under that statute, we may set aside a decision if it is based on an error of law. G. L. c. 30A, § 14 (7) (c).
3. Discussion. Picini's main argument on appeal is that he did not sell securities. Because G. L. c. 110A, §§ 101 and 102, involve securities violations, Picini contends that he could not have violated either section. See G. L. c. 110A, § 101 (pertaining to sales and purchases); G. L. c. 110A, § 102 (pertaining to advisory activities). This question of law requires us to review the definition of "security" and then determine whether the undisputed facts are sufficient to prove that Picini sold securities.
Picini also argues that he was deposed by the enforcement section during its investigation and that the division should be compelled to produce a copy of that transcript. He further argues that this transcript, as well as his own affidavit and the affidavit of a postal inspector who assisted in the Federal investigation, establish genuine issues of material fact as to whether he sold securities. However, once Picini pleaded guilty to the Federal charges, he could not contest, in this proceeding, the validity of the facts necessary to support his conviction. Jones v. Maloney, 74 Mass. App. Ct. 745, 748 (2009). Because the additional evidence Picini cites goes to the veracity of those facts, we need not address these arguments further.
These sections include language making it unlawful, in connection with the offer or sale of a security or when receiving consideration from someone for advising them as to the purchase of a security, "to employ any device, scheme, or artifice to defraud." G. L. c. 110A, §§ 101 and 102. While not raised in his initial brief, Picini argues in his reply brief that the facts to which he pleaded guilty do not establish that he engaged in a scheme to defraud. See Boxford v. Massachusetts Highway Dep't, 458 Mass. 596, 605 n.21 (2010) (argument raised for first time in reply brief is not properly before us). We note, however, that Picini admitted that he advised his clients to invest in accounts that he managed but that, contrary to his representations, he did not invest the money entrusted to him. He instead transferred the money to his savings and investment accounts and used it to pay for his own personal expenses. Picini cannot now, in this forum, contest these facts (see note 3, supra).
The Massachusetts Uniform Securities Act defines "security" by listing examples of different types of securities. G. L. c. 110A, § 401 (k). This definition "is similar to the definition in the Securities Act of 1933, 15 U.S.C. § 77B(1) (1976). Thus, as a matter of statutory interpretation, decisions under the Federal act may be considered in construing § 401 (k)." Valley Stream Teachers Fed. Credit Union v. Commissioner of Banks, 376 Mass. 845, 857-858 (1978).
"'Security' means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting-trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under such a title or lease; or, in general, any interest or instrument commonly known as a 'security,' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. 'Security' does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or some other specified period." G. L. c. 110A, § 401 (k).
In looking at the different types of securities listed under § 401 (k), the division focused on whether the product that Picini sold was an investment contract. We begin our analysis there as well. "The touchstone [of an investment contract] is the presence of an investment in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others." Valley Stream Teachers Fed. Credit Union, 376 Mass. at 858, quoting United Hous. Found., Inc. v. Forman, 421 U.S. 837, 852 (1975). See 950 Code Mass. Regs. § 14.401 (2011) (defining "investment contract"). See also Securities & Exch. Comm'n v. Edwards, 540 U.S. 389, 393-394 (2004) (outlining history of term "investment contract"); Securities & Exch. Comm'n v. W.J. Howey Co., 328 U.S. 293, 298-299 (1946) (same). This definition "embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits." W.J. Howey Co., supra at 299.
Picini suggests that the money he received from clients should instead be viewed as loans to pay for consumer goods. However, the facts to which Picini pleaded guilty do not support this interpretation of events.
With this definition in mind, we turn to Picini's business schemes. As admitted to by Picini, he advised his clients to liquidate their retirement funds and reinvest those funds in accounts that he supposedly managed. These admissions are sufficient to prove investments in a common venture. While Picini contends that there was no common venture, or enterprise, because he did not pool his clients' money, Massachusetts law does not require the pooling of money. See 950 Code Mass. Regs. § 14.401 ("'common enterprise' means an enterprise in which the fortunes of the investor are interwoven with and dependent upon the efforts and successes of those seeking the investment"). Moreover, Picini's ability to pay the promised rate of return depended on his success in investing his clients' money or selling annuities. This is sufficient to prove that Picini's clients reasonably expected profits and that those profits would be derived from Picini's entrepreneurial efforts.
The terms "common venture" and "common enterprise" are used interchangeably in the relevant case law and regulations. See Valley Stream Teachers Fed. Credit Union, 376 Mass. at 858; 950 Code Mass. Regs. § 14.401.
Picini contends that any profits also had to result from the use of his clients' investments and that the profits here came from other sources. We need not pass on the legal merits of this argument, as it lacks a factual basis. Picini admitted that he advised his clients to invest their money in accounts that he supposedly managed. Any profits necessarily would have resulted from the use of that money.
4. Conclusion. Discerning no error in the division's conclusion that the product Picini sold was a security, we affirm.
Judgment affirmed.
By the Court (Vuono, Massing & Wendlandt, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk Entered: April 19, 2019.