Opinion
H045437
09-05-2018
THE PEOPLE, Petitioner, v. THE SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent; RICHARD LEE, Real Party in Interest.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. C1511502)
I. INTRODUCTION
The People petition for a writ of mandate directing the trial court to vacate its order granting defendant Richard Lee's Penal Code section 995 motion to dismiss 24 counts in an information alleging securities law violations, and to enter a new order denying the motion as to 12 of the counts. The People contend that the court erred because sufficient evidence was presented at the preliminary examination for probable cause to believe that defendant's transactions with the victims involved securities within the meaning of Corporations Code section 25019, and that defendant committed two counts of fraudulent practices in connection with offering to sell securities (§ 25541) and 10 counts of offering to sell securities by means of false statements or omissions (§§ 25401, 25540, subd. (b)).
All further statutory references are to the Corporations Code unless otherwise indicated.
For reasons that we will explain, we conclude that the trial court erred by dismissing 12 of the counts involving securities law violations. Therefore, we will issue a peremptory writ of mandate as requested by the People.
II. BACKGROUND
A. Preliminary Examination
A 51-count complaint was filed against defendant alleging grand theft, embezzlement, perjury, and violations of state securities law. The evidence at the preliminary examination regarding the alleged securities law violations included the following.
1. Transactions Involving EST
Defendant met a married couple at church in approximately 2011. The couple socialized with defendant and became friends with him.
The couple believed defendant was doing well financially. Defendant told the couple that he was a realtor and an investor. He stated that he had a company called EST Capital Group Incorporated (EST), which made short-term loans to small businesses that were unable to obtain a loan from a bank. Defendant offered the couple an opportunity to invest in EST. He indicated that the returns would be high, and that the "typical return" was 10 to 30 percent depending on the length of time the money was invested.
Defendant stated that an investment in EST for purposes of making such business loans was the safest investment he could provide. He indicated that he was "heavily insured," that his company would guarantee the investment, and that "he would be able to carry any transaction that didn't end up in the profit that he had promised."
Defendant claimed to have 15 investors. He told the couple that the investors were investing hundreds of thousands of dollars, and sometimes millions of dollars, into his company and that the investors were all doing well. Defendant asked the couple not to tell others because he was worried about being "bombarded" with other people wanting to invest with him.
The couple invested a total of approximately $183,000 with defendant. The investments were made through a series of seven written agreements—each titled "investor financing agreement"—that were signed by the husband of the couple and defendant, on behalf of EST, between 2010 and 2012. (Capitalization omitted.) Some of the agreements named a specific business or project that the invested money would be used for, while other agreements referred only generally to the financing of construction projects. The couple did not know the owners of the underlying businesses at the time they made their investments. Each agreement stated that, if the "project does not materialize or owner of said business fails to proceed or continue with said project EST will still pay Investor said agreed amount complete with interest on stated due date." Each agreement also provided that if the investor wanted to be reimbursed or wanted to terminate the contract, EST would reimburse the invested amount only. The seven agreements were as follows.
The first "investor financing agreement" was signed in the fall of 2010. (Capitalization omitted.) The agreement provided that the husband of the couple would deliver $20,000 to EST. In return, he would receive "the right to share in the profit of an investment/loan made by EST for the construction of a business in Milpitas CA owned by AGMIL, Corp." The agreement provided that he would receive a profit of 10 percent, plus the original investment, for a total of $22,000 by March 1, 2011.
The second "investor financing agreement," dated December 15, 2010, stated that the husband of the couple would invest $60,000 with EST for construction projects financed by EST regarding "Ageless International." (Capitalization omitted.) In return, he would receive a profit of $8,000, plus the original investment, for a total of $68,000. The amount was to be paid over the course of 10 months, starting on "February 15, 2010 [sic]." The couple later learned that Ageless International was owned by Mary Ann Laurel, who was involved in starting EST with defendant.
The third "investor financing agreement," dated February 11, 2011, stated that the husband of the couple would invest $50,000 with EST for construction projects financed by EST regarding "Eliminage International." (Capitalization omitted.) In return, he would receive a profit of $5,500, plus the original investment, for a total of $55,500 on August 15, 2011.
The fourth "investor financing agreement," dated June 15, 2011, stated that the husband of the couple would invest $50,000 with EST for construction projects financed by EST. (Capitalization omitted.) In return, he would receive a profit of $5,000, plus the original investment, for a total of $55,000 on December 1, 2011.
The fifth "investor financing agreement," dated August 23, 2011, stated that the husband of the couple would invest $89,000 with EST for construction projects financed by EST. (Capitalization omitted.) In return, he would receive a profit of 10 to 15 percent, depending on when the investment was repaid to the him between March 1 and September 1, 2012.
The sixth "investor financing agreement," dated November 15, 2011, stated that the husband of the couple would invest $65,000 with EST for construction projects financed by EST. (Capitalization omitted.) In return, he would receive a profit of 10 to 14 percent, depending on when the investment was repaid to him between April 15 and June 15, 2012.
The seventh "investor financing agreement," dated January 15, 2012, stated that the husband of the couple would invest $6,800 with EST for construction projects financed by EST. (Capitalization omitted.) In return, he would receive a profit of 5 or 10 percent, depending on whether the investment was repaid to him on April 15 or June 15, 2012.
As the maturity dates on the earlier agreements arose, the couple "rolled over" some or all the money into the later agreements. In March and April 2012, the later agreements had reached their maturity dates. By this time, the couple wanted to withdraw all their investments and start their own business.
Defendant tried to get the couple to reinvest their money in other projects, but they were not interested. In March of 2012, defendant gave them several checks, but he told them not to cash the checks because "he was in the process of moving money around." He also told them that his business partner had reinvested some of the money and that "he was working on fixing that to get the funds back into that account." Defendant further told the couple that the other investors had rolled the money into a coffee investment without his knowledge.
Defendant eventually paid the couple approximately $40,000. In 2012 and 2013, he promised in writing to pay additional amounts, reflecting the original investments plus profits. In the first written promise to pay, defendant stated that if he did not make the payment by December 18, 2012, "full financial responsibility and accountability for repayment will be transferred to RICHARD LEE, this will then become a personal loan of Richard Lee and will be fully accountable for the repayment of this amount." In the second written promise to pay, dated August 23, 2013, defendant stated that he would pay $153,840 on December 15, 2013. Defendant never paid the amount.
2. Transactions Involving Sehrein Group
A woman who worked at EST as a real estate agent knew defendant as the owner. She believed EST was his "business dealing with real estate." She was not aware of any investors in EST. While working for EST, she received commissions for her sales of real estate.
Defendant indicated to the real estate agent that he had nice cars, owned real estate, owned boats, had access to a private jet, and was wealthy. She saw defendant driving a "nice" Lexus. She became friends with defendant, and he advised her on financial and personal matters. She knew defendant was very involved with his church, which led her to believe that he was an honest and trustworthy person.
Defendant told the real estate agent that he had an investment group called Sehrein Group, and that he could help her make money. Defendant indicated that Sehrein Group made money by buying and selling commodities. He also claimed that there were other investors in Sehrein Group. He told the real estate agent, however, that he did not want her to talk about the opportunity with other people because he did not want to be "flooded with people seeking investments." Defendant also "kind of shut her down" when she tried to ask questions about the investment and the company. He told her that the more questions she asked, "the lower the chance there is to make money on the investment." Relevant here, the real estate agent made three investments with defendant.
The first investment occurred in July 2012, when the real estate agent paid $100,000 pursuant to a written "investor financing agreement" with defendant and "Sehrein International Corp." (Capitalization omitted.) The agreement stated that her investment was "in consideration of financing projects." She was to receive "the principal of $100,000" plus a profit of $20,000 to $200,000 within one year. Defendant signed the agreement as the "COO" of the corporation.
The real estate agent believed that her investment money would be used to purchase commodities at a lower price, and that the commodities would be sold at a higher price to generate profit. She understood that the amount of profit she would be paid—between $20,000 and $200,000—was at defendant's discretion. She did not play any role in the operation of the business.
Defendant gave the real estate agent two checks, including a check for $208,250, that purportedly represented the profit on her investment in January 2013. She was told to delay cashing the checks until June, and then was told to delay cashing them until October 2013. When she ultimately tried to cash the checks, she was unsuccessful in getting any money.
In the meantime, in January 2013, the real estate agent made a second investment of approximately $50,000 in Sehrein Group. The investment was comprised of (a) payments she made to defendant and (b) commissions that she agreed to forego for properties that she had sold for EST. She did not receive a promissory note for this investment. Based on her discussion with defendant, she believed the money would "increase the tier level of her investment which would generate a higher return on her investment." Ultimately, she did not receive the principal or the promised return on her investment.
At some point, defendant had given the real estate agent letters to show that her investment in Sehrein Group was a legitimate investment and so that she would "have faith in her investment." For example, one letter was addressed to defendant from an entity called "CLIMACORP.," which purported to have some business relationship with Sehrein Group and/or EST. The letter named an investor who had received a return of $568,887 for an investment in "Tier 7," and who had been "upgraded" to "Tier 8" for his investment of $750,000. The letter told defendant to "continue to monitor all investors," and stated that his "area of territory has 3 more eligible for upgrades," specifically naming the real estate agent and two other people. Another letter from "CLIMACORP." to defendant indicated that a "position" had been "reserved" for the "upgrade" of the real estate agent to "TIER 5," which required a $250,000 investment. The letter further stated that "[m]ultiple projects has [sic] been allocated for Tier 4 and up." A third letter from "CLIMACORP." to defendant purportedly reflected the purchase of commodities.
In March 2013, the real estate agent made a third investment of $15,000 with defendant regarding the purchase of a house in San Jose. Defendant told her that Sehrein Group was going to purchase a house at a short sale and then turn around and sell the house. The written agreement regarding the "investment" was on letterhead for "EST Capital Group, Inc.," stated that it was between defendant and the real estate agent, and was signed by both of them. The agreement stated that the real estate agent was to receive "1/3 of the net proceeds on the resale of the property." Ultimately, however, she did not receive the principal or any profit on the sale of the house.
At some point, the real estate agent discussed with defendant the fact that her own home was too small, and that, rather than selling the San Jose home for a profit, she could purchase it from Sehrein Group. The real estate agent and defendant agreed that she would pay $61,250 to Sehrein Group to purchase the home, and that Sehrein Group "would make up the difference." She thereafter paid $61,250 to Sehrein Group in October 2013, but she did not take possession of the home as she had expected. She learned from another real estate agent at EST that the home was owned by the real estate agent's cousin or brother, that Sehrein Group did not own the home, and that the home was never actually for sale. Ultimately, she never received the initial $15,000 she invested for the purchase of the home, nor any profit from a resale, nor repayment of the $61,250 she paid to buy the home for herself.
The real estate agent continually asked defendant for her money. Defendant indicated that he was a member of a "Filipino syndicate," and that her family would be in danger if she continued to try to get the money from him before he was able to pay her. At some point she contacted defendant's brother and found out that defendant had taken money from other investors and had not paid them.
Bank account records for Sehrein Group reflected checks from the real estate agent being deposited into the account but no check from any other investor. There were also no payments between Sehrein Group and "Climacorp." Similarly, bank account records for EST reflected checks from the married couple being deposited into the account but no check from any other investor. Several checks from Sehrein Group's or EST's bank account were used to pay the rent for defendant's personal residence. Money was also transferred from EST's bank account to defendant's personal bank account in 2011 and 2012. Defendant's personal bank account reflected payments to online gambling websites, including a website related to horse racing.
B. Charges
After a preliminary examination, defendant was held to answer on all 51 counts of grand theft, embezzlement, perjury, and violations of state securities law. An information subsequently charged defendant with 27 counts, including two counts of fraudulent practices in connection with offering to sell securities (§ 25541) and 10 counts of offering to sell securities by means of false statements or omissions (§§ 25401, 25540, subd. (b)). The two counts of fraudulent practices under section 25541 pertained to defendant's schemes involving EST (count 1) and Sehrein Group (count 17), while the 10 counts involving false statements or omissions under section 25401 pertained to the seven investor financing agreements with the married couple (counts 4, 6, 8, 10, 12, 14 & 16), the two investor financing agreements with the real estate agent (counts 20 & 22), and the March 2013 investment agreement with the real estate agent involving the house (count 24).
C. Penal Code Section 995 Motion
Defendant filed a motion pursuant to Penal Code section 995 to dismiss 24 counts, including the 12 counts at issue here, that is, two counts of fraudulent practices in connection with offering to sell securities (§ 25541; counts 1 & 17) and 10 counts of offering to sell securities by means of false statements or omissions (§§ 25401, 25540, subd. (b); counts 4, 6, 8, 10, 12, 14, 16, 20, 22 & 24). Regarding these 12 counts under the securities law, defendant contended that there was insufficient evidence to establish that he offered or sold a security as defined by section 25019. The People opposed the motion.
After a hearing, the trial court granted defendant's motion in its entirety, including as to the 12 counts at issue here. Regarding the issue of whether the investment agreements were securities, the court found that the agreements "more closely resemble[d]" those in People v. Black (2017) 8 Cal.App.5th 889 (Black), and thus were not securities.
D. Writ Proceedings
The People filed the instant petition for writ of mandate seeking to reinstate the 12 counts alleging violations of sections 25541 and 25401. The People contend that the trial court erred in dismissing these counts because the evidence produced at the preliminary examination established probable cause to believe that defendant's transactions with the victims involved securities within the meaning of section 25019. The People also requested a stay of the proceedings. We granted the stay request, requested opposition, and ultimately issued an order directing the trial court to show cause why a peremptory writ should not issue to reinstate the counts.
III. DISCUSSION
A. Standard of Review
"Penal Code section 995 allows a defendant to challenge an information based on the sufficiency of the record made before the magistrate at the preliminary hearing. [Citation.] In reviewing the [grant] of a Penal Code section 995 motion to set aside an information, we 'in effect disregard[] the ruling of the superior court and directly review[] the determination of the magistrate holding the defendant to answer.' [Citations.] Insofar as the Penal Code section 995 motion rests on issues of statutory interpretation, our review is de novo. [Citation.] Insofar as it rests on consideration of the evidence adduced, we must draw all reasonable inferences in favor of the information [citations] and decide whether there is probable cause to hold the defendants to answer." (Lexin v. Superior Court (2010) 47 Cal.4th 1050, 1071-1072.) In determining whether there is probable cause, "we ask only 'whether the evidence is such that "a reasonable person could harbor a strong suspicion of the defendant's guilt." ' [Citation.] This is an 'exceedingly low' standard [citation] . . . ." (People v. Superior Court (Sahlolbei) (2017) 3 Cal.5th 230, 245 (Sahlolbei).)
B. Securities Law Violations
Relevant to the instant petition, defendant was charged by information with violating sections 25541 and 25401. Section 25541 criminalizes the use of any scheme to defraud in connection with the offer or sale of a "security." (§ 25541, subd. (a).) Sections 25401 and 25540 criminalize the offer or sale of a "security" by means of any oral or written communication which either contains a false or misleading statements or omits a material fact. (§ 25401; see People v. Simon (1995) 9 Cal.4th 493, 496 (Simon).)
Section 25541, subdivision (a) states that "[a]ny person who willfully employs, directly or indirectly, any device, scheme, or artifice to defraud in connection with the offer, purchase, or sale of any security or willfully engages, directly or indirectly, in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the offer, purchase, or sale of any security" is guilty of a crime.
Section 25401 states: "It is unlawful for any person to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in the light of the circumstances under which the statements were made, not misleading." (See also Stats. 1968, ch. 88, § 2.) Section 25540, subdivision (b) sets forth the punishment for a willful violation of section 25401.
C. Whether a Transaction Involves a Security Under the Corporate Securities Law
1. Corporations Code section 25019
"The list of instruments which come within the statutory definition of a 'security' . . . is an expansive one." (People v. Figueroa (1986) 41 Cal.3d 714, 734 (Figueroa).) Section 25019 of the Corporate Securities Law (§ 25000 et seq.) defines security as including "any note; stock; . . . evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; . . . investment contract; . . . or, in general, any interest or instrument commonly known as a 'security' . . . ." Section 25019 further provides that "[a]ll of the foregoing are securities whether or not evidenced by a written document."
Section 25019 states in its entirety: " 'Security' means any note; stock; treasury stock; membership in an incorporated or unincorporated association; 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; viatical settlement contract or a fractionalized or pooled interest therein; life settlement contract or a fractionalized or pooled interest therein; voting trust certificate; certificate of deposit for a security; interest in a limited liability company and any class or series of those interests (including any fractional or other interest in that interest), except a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company; provided that evidence that members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability company, or the right to participate in management, shall not establish, without more, that all members are actively engaged in the management of the limited liability company; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under that title or lease; put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof); or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; any beneficial interest or other security issued in connection with a funded employees' pension, profit sharing, stock bonus, or similar benefit plan; 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. All of the foregoing are securities whether or not evidenced by a written document. 'Security' does not include: (1) any beneficial interest in any voluntary inter vivos trust which is not created for the purpose of carrying on any business or solely for the purpose of voting, or (2) any beneficial interest in any testamentary trust, or (3) any insurance or endowment policy or annuity contract under which an insurance company admitted in this state promises to pay a sum of money (whether or not based upon the investment performance of a segregated fund) either in a lump sum or periodically for life or some other specified period, or (4) any franchise subject to registration under the Franchise Investment Law (Division 5 (commencing with Section 31000)), or exempted from registration by Section 31100 or 31101." --------
2. The purpose of the Corporate Securities Law
To effectuate the purpose of the Corporate Securities Law, "the courts look through form to substance." (Silver Hills Country Club v. Sobieski (1961) 55 Cal.2d 811, 814 (Silver Hills) [analyzing former § 25008, the predecessor to § 25019].) Even if a transaction involves an instrument that is listed in section 25019, "[t]he crucial question nevertheless remains whether the [transaction] comes within the regulatory purpose of the" Corporate Securities Law. (Silver Hills, supra, at p. 814; accord, Figueroa, supra, 41 Cal.3d at pp. 734-735.) " '[I]t plainly was not the legislative intent that "every" note or evidence of indebtedness, regardless of its nature and of the circumstances surrounding its execution, should be considered as included within the meaning and purpose of the act.' [Citation.]" (Figueroa, supra, at p. 735.) " '[A] literal interpretation [of the statute] has been uniformly eschewed when to do so would appear to exceed any legitimate legislative purpose.' [Citations.]" (Id. at p. 734.)
"[T]he primary purpose of the Corporate Securities Law is to protect innocent investors." (Southern California First Nat'l Bank v. Quincy Cass Associates (1970) 3 Cal. 3d 667, 675.) A security is defined broadly by statute "to protect the public against spurious schemes, however ingeniously devised, to attract risk capital. [Citation.]" (Silver Hills, supra, 55 Cal.2d at p. 814, italics added.) The objective of California's securities law "is to afford those who risk their capital at least a fair chance of realizing their objectives in legitimate ventures." (Id. at p. 815, italics added.)
3. Factors for determining whether a transaction involves a security
The definition of a security under California law was modeled on the definition of a security under federal law. (Figueroa, supra, 41 Cal.3d at p. 727, fn. 14.) "As such, decisions interpreting the federal definition are helpful in resolving issues presented under the state law. [Citation.]" (Figueroa, supra, 41 Cal.3d at p. 727, fn. 14.) In determining whether a transaction involves a security, "California courts have applied, either separately or together, two distinct tests: (1) the 'risk capital' test described in Silver Hills Country Club v. Sobieski (1961) 55 Cal.2d 811, 815, and (2) the federal test described in SEC v. W.J. Howey Co. (1946) 328 U.S. 293, 298-299 (Howey). [Citations.] A transaction is a security if it satisfies either test. [Citation.]" (Reiswig v. Department of Corporations (2006) 144 Cal.App.4th 327, 334 (Reiswig); accord, Black, supra, 8 Cal.App.5th at pp. 900-901 & fn. 6.) We will set forth the two tests before considering the evidence in this case.
4. Silver Hills Country Club v. Sobieski (1961) 55 Cal.2d 811
and the concept of risk capital
In Silver Hills, the California Supreme Court "introduced the concept of 'risk capital' as a way to determine whether a transaction involves a 'security.' " (Figueroa, supra, 41 Cal.3d at p. 736.) The California Supreme Court stated in Silver Hills that, " 'as a general rule, the sale of "securities" that is condemned by the courts involves an attempt by an issuer to raise funds for a business venture or enterprise; an indiscriminate offering to the public at large where the persons solicited are selected at random; a passive position on the part of the investor; and the conduct of the enterprise by the issuer with other people's money.' (Dahlquist, Regulation and Civil Liability Under the California Securities Act, . . . 33 Cal.L.Rev. 343, 360.)" (Silver Hills, supra, 55 Cal.2d at p. 815, italics added.)
Later, in Figueroa, supra, 41 Cal.3d 714, the California Supreme Court further discussed the concept of risk capital and the characteristics of a security. The court explained that " 'where the investor receives adequate collateral, no risk capital is contributed to the managerial efforts of the promoter and such business transaction does not come within the Corporate Securities Law.' (. . . [S]ee, e.g., Hamilton Jewelers v. Department of Corporations [(1974)] 37 Cal.App.3d [330,] 336 [offer of sale of diamond with right to return it for full purchase price plus 5 percent interest not a security since no 'risk capital' placed with the jeweler; diamond itself served as adequate collateral].)" (Id. at p. 737.) In contrast, "[t]he return on any investment which has not been secured with adequate collateral depends on the success of the business. This is true whether the investment contemplates a percentage of the profits or a fixed return." (Id. at p. 738.)
The California Supreme Court further stated in Figueroa that whether the investor is passive or participates in the enterprise "is also a factor relevant to whether a security is involved. [Citation.]" (Figueroa, supra, 41 Cal.3d at p. 737.) The Corporate Securities Law was not intended to regulate " 'agreements with persons who expect to reap a profit from their own services or other active participation in a business venture.' " (Fox v. Ehrmantraut (1980) 28 Cal. 3d 127, 139.) "When an investor entrusts money . . . to a promoter . . . but retains substantial power to affect the success of the enterprise, he has not 'risked capital' within the meaning of the Corporate Securities Law. In such transactions, that law should not govern." (Figueroa, supra, at p. 739.) In contrast, a security may be involved if the arrangement involves a passive investor who is dependent on the efforts of the promoter for the success of the business. (Id. at pp. 737-739.)
In sum, "[t]he mere expectation of a return on an investment, together with the right of repayment, does not—without more—subject the transaction to security regulation. [Citation.] . . . However, a finding of inadequacy of collateral, in addition to the investors' dependency on the promoter's success for a return on the investment, will subject the superficial loan transaction to security regulation. [Citations.] [¶] But where the investor receives adequate collateral, no risk capital is contributed to the managerial efforts of the promoter and such business transaction does not come within the Corporate Securities Law. [Citation.]" (People v. Schock (1984) 152 Cal.App.3d 379, 386.)
Notwithstanding the " 'general rule' " set forth by the California Supreme Court in Silver Hills of what constitutes a security (Silver Hills, supra, 55 Cal.2d at p. 815), the court subsequently stated that "the corporate securities laws do not contain an 'all-inclusive formula by which to test the facts in every case. And the courts have refrained from attempting to formulate such a test. Whether a particular instrument is to be considered a security within the meaning of the statute is a question to be determined in each case. In arriving at a determination the courts have been mindful that the general purpose of the law is to protect the public against the imposition of unsubstantial, unlawful and fraudulent stock and investment schemes and the securities based thereon. [Citation.]' [Citation.]" (Figueroa, supra, 41 Cal.3d at p. 736, italics added; see People v. Smith (1989) 215 Cal.App.3d 230, 235-238 [holding that, notwithstanding the general rule in Silver Hills of what constitutes a security, the definition of a security under § 25019 does not include a requirement that there be an indiscriminate offering to members of the general public, and that the exclusion of this factor from jury instructions was not erroneous].)
5. The federal Howey test
The federal test for a security focuses on " 'whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.' " (SEC v. Edwards (2004) 540 U.S. 389, 393 (Edwards), quoting Howey, supra, 328 U.S. at p. 301.) " 'The touchstone 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.' [Citation.]" (Figueroa, supra, 41 Cal.3d at p. 737, fn. 28.) In determining whether the federal test is met, "form should be disregarded for substance and the emphasis should be on economic reality." (Tcherepnin v. Knight (1967) 389 U.S. 332, 336.)
D. The Parties' Contentions
The People contend that defendant's transactions involving (1) the married couple and EST, and (2) the real estate agent and Sehrein Group, were investment contracts that meet the federal Howey test and are therefore securities within the meaning of section 25019. The People contend that defendant's transactions with the victims are distinguishable from those in Black, supra, 8 Cal.App.5th 889, and Marine Bank v. Weaver (1982) 455 U.S. 551 (Marine Bank), in which the courts determined that the transaction at issue did not involve a security.
Defendant contends that none of the transactions in this case are securities based on the California risk capital test or the federal Howey test. Defendant also argues that under the reasoning of this court's opinion in Black, the transactions are not securities.
E. Analysis
1. Transactions involving the married couple and EST
Because the People make no argument that any of the transactions meet the risk capital test, we turn to the federal test first to determine whether the transactions at issue involve securities. As we set forth above, the federal test focuses on " 'whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.' " (Edwards, supra, 540 U.S. at p. 393, quoting Howey, supra, 328 U.S. at p. 301.) " 'The touchstone 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.' [Citation.]" (Figueroa, supra, 41 Cal.3d at p. 737, fn. 28.)
In this case, the couple entered into seven written "investor financing" agreements with EST. (Capitalization omitted.) Defendant signed the agreements on behalf of EST. Under the agreements, the couple made investments of money in EST, and EST was supposed to make loans to other businesses or otherwise finance construction projects by other businesses. The investor financing agreements provided that, in return, the couple would receive a share of the profits from the investments. The couple were passive investors. They had no role in the management or operation of EST, including with respect to EST making loans to other business. They did not know the owners of the companies in which EST was supposedly making loans. Some of the later agreements did not even specifically identify the businesses that EST would be financing. Based on the federal test for a security and the evidence presented at the preliminary examination, " ' "a reasonable person could harbor a strong suspicion" ' " (Sahlolbei, supra, 3 Cal.5th at p. 245) that the seven investor financing agreements involved " 'an investment of money' " by the couple in EST, " 'a common enterprise,' " " 'with profits to come solely from the efforts of others' " and not the couple (Edwards, supra, 540 U.S. at p. 393), and that the agreements were therefore securities within the meaning of section 25019. (Reiswig, supra, 144 Cal.App.4th at p. 334 [transaction is a security if it meets the federal test]; Black, supra, 8 Cal.App.5th at p. 900 [same].)
2. Transactions involving the real estate agent and Sehrein
We reach a similar conclusion regarding the real estate agent's investments in Sehrein Group and/or Sehrein International Corp. (collectively Sehrein) and/or EST. She initially invested $100,000 and later invested $50,000, with the understanding that the money would be used by Sehrein to buy and sell commodities. She believed that she would receive a portion of the profit. She did not have any role in the operation of Sehrein. Based on the federal test for a security and the evidence presented at the preliminary examination, " ' "a reasonable person could harbor a strong suspicion" ' " (Sahlolbei, supra, 3 Cal.5th at p. 245) that the two transactions involved " 'an investment of money' " by the real estate agent in Sehrein, " 'a common enterprise,' " " 'with profits to come solely from the efforts of others' " and not her (Edwards, supra, 540 U.S. at p. 393), and that the agreements were therefore securities within the meaning of section 25019. (Reiswig, supra, 144 Cal.App.4th at p. 334; Black, supra, 8 Cal.App.5th at p. 900.)
In March 2013, the real estate agent paid $15,000 to defendant, who indicated he was acting on behalf of Sehrein Group or EST, to buy and sell a house. The real estate agent was to receive one-third "of the resale net profit." Based on the federal test for a security and the evidence presented at the preliminary examination, " ' "a reasonable person could harbor a strong suspicion" ' " (Sahlolbei, supra, 3 Cal.5th at p. 245) that the $15,000 was " 'an investment of money' " by the real estate agent in Sehrein or EST, " 'a common enterprise,' " " 'with profits to come solely from the efforts of others' " and not her (Edwards, supra, 540 U.S. at p. 393), and that the March 2013 agreement was therefore a security within the meaning of section 25019. (Reiswig, supra, 144 Cal.App.4th at p. 334; Black, supra, 8 Cal.App.5th at p. 900.)
3. Marine Bank v. Weaver (1982) 455 U.S. 551 and
People v. Black (2017) 8 Cal.App.5th 889
Defendant makes several contentions as to why none of the transactions with the victims constitutes a security. First, he contends that there was no indiscriminate offering to the public at large. Rather, the couple and the real estate agent were his close friends. Second, he argues that there was no prospectus or any indication that the arrangements could have been traded publicly. Instead, the transactions were negotiated one-on-one between the parties. Third, defendant contends that some of the agreements involved fixed returns, and the couple in particular had the right to the return of their investment at any time. All the victims were also told that their investments were guaranteed. In making these contentions, defendant primarily relies on this court's opinion in Black, supra, 8 Cal.App.5th 889, which in turn relied on Marine Bank, supra, 455 U.S. 551. We will first consider Marine Bank and then Black with respect to defendant's contentions.
In Marine Bank, the United States Supreme Court determined that a business agreement between two families was not a security under federal securities laws. (Marine Bank, supra, 455 U.S. at p. 552.) One family, the Weavers, purchased a $50,000 certificate of deposit from a bank. They then pledged the certificate of deposit to the bank to guarantee a $65,000 loan made by the bank to a slaughterhouse company owned by the Piccirillos. (Id. at pp. 552-553.) At the time, the slaughterhouse already owed money to the bank. (Id. at p. 553.) In return, the Piccirillos agreed that the Weavers (1) would receive 50 percent of the slaughterhouse's net profits and $100 per month as long as they guaranteed the loan, (2) would be allowed to use the slaughterhouse's barn and pasture at the discretion of the Piccirillos, and (3) would have the right to veto future borrowing by the slaughterhouse. (Ibid.) The bank allegedly told the Weavers that the slaughterhouse would use the loan as working capital, but instead the loan was applied to the slaughterhouse's overdue obligations and the slaughterhouse went bankrupt a few months later. (Ibid.) The Weavers sued the bank for violating federal securities law. (Id. at p. 554.)
Although the agreement between the families gave the Weavers a share of the slaughterhouse's profits, which were the result of the efforts of the Piccirillos, the United States Supreme Court rejected the argument that the agreement constituted a security. The court explained: "Congress intended the securities laws to cover those instruments ordinarily and commonly considered to be securities in the commercial world, but the agreement between the Weavers and the Piccirillos is not the type of instrument that comes to mind when the term 'security' is used and does not fall within 'the ordinary concept of a security.' [Citation.] The unusual instruments found to constitute securities in prior cases involved offers to a number of potential investors, not a private transaction as in this case. In Howey, [supra, 328 U.S. 293] for example, 42 persons purchased interests in a citrus grove . . . . [Citation.] In [SEC v.] C. M. Joiner Leasing [Corp. (1943) 320 U.S. 344], offers to sell oil leases were sent to over 1,000 prospects. [Citation.] In C. M. Joiner Leasing, we noted that a security is an instrument in which there is 'common trading.' [Citation.] The instruments involved in C. M. Joiner Leasing and Howey had equivalent values to most persons and could have been traded publicly.
"Here, in contrast, the Piccirillos distributed no prospectus to the Weavers or to other potential investors, and the unique agreement they negotiated was not designed to be traded publicly. The provision that the Weavers could use the barn and pastures of the slaughterhouse at the discretion of the Piccirillos underscores the unique character of the transaction. Similarly, the provision that the Weavers could veto future loans gave them a measure of control over the operation of the slaughterhouse not characteristic of a security. Although the agreement gave the Weavers a share of the Piccirillos' profits, if any, that provision alone is not sufficient to make that agreement a security. Accordingly, we hold that this unique agreement, negotiated one-on-one by the parties, is not a security." (Marine Bank, supra, 455 U.S. at pp. 559-560, fn. omitted.)
Based on the evidence presented at the preliminary examination in this case, we do not believe defendant's transactions with the victims are sufficiently similar to Marine Bank such that the transactions cannot be considered securities under California law.
First, defendant's transactions with the victims do not appear to involve a "unique agreement, negotiated one-on-one by the parties." (Marine Bank, supra, 455 U.S. at p. 560.) None of the investment agreements possess a "unique character" like the agreement in Marine Bank, which allowed one family to use the barn and pastures of a slaughterhouse at the discretion of the other family. (Ibid.) Moreover, there was no evidence to suggest that the victims "negotiated one-on-one" with defendant any aspect of the agreements under which they made their investments, or that the agreements offered by defendant could not have been offered to the public at large. (Ibid.) To the contrary, defendant indicated to the victims that he had made the same or similar offers to other people regarding investment opportunities in EST and Sehrein.
For example, regarding each victim, defendant represented that he had an investment company that made money for other investors though (1) short-term loans to small businesses (EST) or (2) by buying and selling commodities (Sehrein). Regarding EST, defendant represented that other investors were investing hundreds of thousands of dollars, and sometimes millions of dollars, into his company and that all the investors were doing well. Regarding Sehrein, defendant gave letters to the real estate agent purportedly showing other investors being "upgraded" or being "eligible for upgrades" to a higher investment "[t]ier." One of the letters also referred to the existence of "[m]ultiple projects" being "allocated" to investment "Tier 4 and up." The letters thus suggested that the investment opportunities being offered to the real estate agent were not unique but instead were uniformly available to any investor. Regarding the transaction with the real estate agent involving the offer to buy and resell a house for a percentage of the profits, there was no direct evidence that Sehrein Group or EST had made the same offer to anyone other than the real estate agent. However, an inference could be made that, because it was being offered by defendant through one or both of his investment companies that purportedly made uniform investment offers to other investors, the same offer to buy and sell a house for a percentage of the profit could have been made available to others and was not a transaction individually negotiated with the real estate agent.
Second, unlike the agreement in Marine Bank, which gave the Weavers the right to veto future loans to the other family's slaughterhouse and thus gave the Weavers "a measure of control over the operation of the slaughterhouse not characteristic of a security," the victims in this case had no contractual right that gave them any control over the operations of EST or Sehrein. (Marine Bank, supra, 455 U.S. at p. 560.)
Black is likewise distinguishable from the transactions in this case and is instead similar to the unique agreement in Marine Bank. In Black, this court considered the defendant's transaction under both the risk capital test and the federal Howey test. (Black, supra, 8 Cal.App.5th at p. 902.) In Black, the defendant offered the victim, an acquaintance, the opportunity to invest in the purchase and development of property in Idaho. (Id. at pp. 892, 893.) The victim ultimately gave the defendant's company nearly $280,000. (Id. at p. 893.) In return, the victim received a promissory note and a series of written amendments (collectively, the promissory notes) that provided for the repayment of the amount, plus interest calculated as follows: (a) if the Idaho property was sold by the defendant's company, the interest would be based on a percentage of profits minus expenses from the sale, (b) if the defendant's company developed the property, the victim would receive part of the property, and (c) if neither condition occurred within a specified time, then interest would be 10 percent. (Id. at p. 892.) The initial promissory note, which was signed by the defendant as a " 'managing member' " of the company, also stated that the defendant's " 'separate property shall be bound hereby and that resort may be had to such property for the payment and enforcement of this Note.' " (Ibid.) The defendant arranged to buy the Idaho property for $8.8 million but the purchase never actually occurred. (Id. at p. 894.) The victim did not receive any money from the defendant. (Ibid.)
Two other individuals had also invested money for the Idaho property: (1) a person who invested $20,000, and (2) a real estate agent who knew the defendant from prior dealings and who had invested about $160,000. (Black, supra, 8 Cal.App.5th at pp. 894-895.) The real estate agent partnered with the defendant in trying to acquire the Idaho property. They agreed that the real estate agent would provide the "earnest money" to the property owners to keep the owners from selling the property to someone else, and that the defendant would pay for entitlement fees and land surveys. (Id. at p. 894.) The real estate agent told law enforcement that they did not intend to raise the money needed to buy the land themselves but were going to find an investor. The real estate agent knew the deal was risky with a potential for losing money. (Ibid.) The trial court granted the defendant's Penal Code section 995 motion to dismiss certain counts for securities law violations, and the People appealed. (Black, supra, at pp. 896-897.)
On appeal, this court determined that the promissory notes offered for the victim's investment in the real estate development scheme did not constitute securities within the meaning of the Corporate Securities Law, and that therefore the defendant could not be held to answer on the counts at issue. (Black, supra, 8 Cal.App.5th at p. 892.) This court indicated that the risk capital test could not be satisfied because there had not been " ' "an indiscriminate offering to the public at large where the persons solicited are selected at random." ' " (Id. at p. 902, citing Silver Hills, supra, 55 Cal.2d at p. 815.)
This court then applied the federal Howey test. In applying the test, this court observed that the transaction displayed certain characteristics of an investment contract, such as the victim's payment of money toward the proposed Idaho land deal and the victim's expectation of profits from the defendant's efforts. (Black, supra, 8 Cal.App.5th at p. 902.) However, this court found significant "the unique nature of the agreement between two associates, the terms of which provided for repayment regardless of whether the Idaho deal succeeded." (Ibid.) On the first point, this court referred to evidence showing that the victim's investment resulted from an "individually negotiated, one-on-one transaction" with the defendant, and noted that the two other investors, one of whom appeared to be the defendant's partner in the transaction, did not appear to have been recruited in a similar manner to the main victim. (Id. at p. 906 & fn. 8.) On the second point, this court found significant the contractual terms (1) providing for payment of the principal plus 10 percent interest if the land was not resold or developed as promised, and (2) binding the defendant's separate property for purposes of enforcing payment, both of which provided "an element of redress that would be unlikely to 'fall within "the ordinary concept of a security." ' [Citations.]" (Id. at p. 906; see id. at p. 907.)
Here, unlike the transaction in Black, the evidence from the preliminary examination indicates that the transactions with the victims were not the product of "individually negotiated, one-on-one transaction[s]" with defendant. (Black, supra, 8 Cal.App.5th at p. 906.) Rather, the evidence and reasonable inferences drawn from the evidence indicate that the victims were offered, based on defendant's representations, the same or similar investments that had also been offered to other people. There is no evidence that the victims negotiated any of the terms in the agreements under which they made their investments.
Some of the agreements did promise fixed returns to the victims. Contrary to defendant's assertion, however, this court did not hold in Black that the promise of a fixed return, such as in a promissory note, makes it "likely" that the transaction does "not fall within the ordinary concept of a security." This court instead stated that "the promise of a fixed return does not in itself remove the transaction from the protective sphere of the securities laws." (Black, supra, 8 Cal.App.5th at p. 906, italics added; see, e.g., People v. Walberg (1968) 263 Cal.App.2d 286, 293 ["a note may be a security even though it does not give the holder a proprietary interest or a share of profits"].)
This statement in Black is consistent with California and federal precedent. The California Supreme Court has indicated that, regardless of whether the return is fixed or variable, the pertinent factors include whether there is adequate collateral, whether there is investor participation, and whether the investor is dependent on the promoter's success. (Figueroa, supra, 41 Cal.3d at pp. 738-739.) As explained by the court, "[t]he return on any investment which has not been secured with adequate collateral depends on the success of the business. This is true whether the investment contemplates a percentage of the profits or a fixed return." (Figueroa, supra, 41 Cal.3d at p. 738.) "Both kinds of return, as well as a recoupment of principal," can be dependent on the success of the business, which in turn may depend upon the efforts of the promoter. (Id. at p. 739.) "Unsecured promissory notes are securities if the investor relies on the skill, services, solvency, success, and services of the issuer to ensure payment." (Simon, supra, 9 Cal.4th at p. 497, fn. 4.)
The United States Supreme Court has similarly held that "an investment scheme promising a fixed rate of return can be an 'investment contract' and thus a 'security' subject to the federal securities laws." (Edwards, supra, 540 U.S. at p. 397.) In Edwards, the investment scheme involved payphone packages that included a site lease, a 5-year leaseback and management agreement, and a buyback agreement. (Id. at p. 391.) The payphone packages could be purchased for approximately $7,000. (Ibid.) The purchasers were not involved in the day-to-day operation of the payphones they owned. (Id. at pp. 391-392.) Purchasers were to receive $82 per month, which was a 14 percent annual return. (Id. at p. 391.) Purchasers were also promised a refund of the full purchase price of the package at the end of the lease, or within 180 days of a request. (Id. at p. 392.)
The Edwards court explained that under the federal test, the requirement that " 'profits' must 'come solely from the efforts of others' " simply referred to the profits or financial returns that investors seek on their investment. (Edwards, supra, 540 U.S. at p. 394; see also id. at p. 396.) The court found "no reason to distinguish between promises of fixed returns and promises of variable returns for purposes of the test." (Id. at p. 394.) The court reasoned that "investments pitched as low risk (such as those offering a 'guaranteed' fixed return) are particularly attractive to individuals more vulnerable to investment fraud, including older and less sophisticated investors," and that "unscrupulous marketers of investments could evade the securities laws by picking a rate of return to promise." (Id. at pp. 394-395.) The court refused to "read into the securities laws a limitation not compelled by the language that would so undermine the laws' purposes." (Id. at p. 395.)
The Edwards court further held that the requirement that the return on the investment come " 'solely from the efforts of others' " could be met even if the purchasers had a contractual entitlement to a return. (Edwards, supra, 540 U.S. at p. 393.) The court stated, "The fact that investors have bargained for a return on their investment does not mean that the return is not also expected to come solely from the efforts of others." (Id. at p. 397.)
In this case, as in Edwards, some of the investment agreements included fixed returns and some provided for "reimburse[ment]" of the principal. These investments were also "pitched as low risk" to the married couple. (See Edwards, supra, 540 U.S. at p. 394.) Defendant stated that an investment in EST was the safest possible investment that he could provide. He indicated that EST would guarantee the investment, and that "he would be able to carry any transaction that didn't end up in the profit that he had promised." These pitches and terms in the investment agreements, however, are not sufficient to remove the transactions from the protection of the Corporate Securities Law. (See Figueroa, supra, 41 Cal.3d at pp. 738-739; Simon, supra, 9 Cal.4th 493 at p. 497, fn. 4; Edwards, supra, at pp. 394-395, 397.)
Moreover, other statements by defendant, such as being insured or personally promising to pay the amounts his company owed, appear to have been worthless or otherwise empty promises and thus did not reduce the riskiness of the transactions to the investors. For example, although defendant told the married couple that he was "heavily insured and so he would be able to carry any transaction that didn't end up in the profit that he had promised," a reasonable inference arises that no such insurance existed since the victims were not fully repaid and defendant made no mention of the availability of insurance once the victims sought to be paid. Further, although defendant in August 2013, after the payments to the couple were overdue, executed a handwritten note purporting to give the husband the right to payments under a life insurance policy upon defendant's death, there was no evidence that the life insurance policy was still in effect. Regarding evidence of defendant's other financial resources and personal ability to pay the victims, the evidence reflected that he was paying rent for his personal residence out of EST's and/or Sehrein Group's bank accounts, which contained deposits from the victims but no other investors, and that he was using his personal bank account for online gambling. An inference could arise from this evidence that defendant did not have the ability to pay the substantial sums he sought as investments from the victims nor the returns he promised. Under the circumstances, the various representations or promises defendant made at different times regarding insuring or guaranteeing payments by his companies or by him personally appeared to "echo hollow" rather than provide "an element of redress" for the victims. (Black, supra, 8 Cal.App.5th at pp. 907, 906; see People v. Davenport (1939) 13 Cal.2d 681, 684, 690 [contracts, which provided "protect[ion]" for payment by life insurance if the party died, were not securities].)
In sum, based on the evidence presented at the preliminary examination, we do not believe defendant's preexisting relationship with the victims, the lack of evidence of a widespread offering to the public, or the various promises and guarantees he made about making payments necessarily precludes a finding that the transactions were securities within the meaning of section 25019. In Marine Bank, the United States Supreme Court noted that, notwithstanding its determination that the business agreement between the two families was not a security, "[i]t [did] not follow that a . . . business agreement between transacting parties invariably falls outside the definition of a 'security' as defined by the federal statutes. Each transaction must be analyzed and evaluated on the basis of the content of the instruments in question, the purposes intended to be served, and the factual setting as a whole." (Marine Bank, supra, 455 U.S. at p. 560, fn. 11.) Similarly, the California Supreme Court has stated that, notwithstanding the " 'general rule' " that a security involves " 'an indiscriminate offering to the public at large where the persons solicited are selected at random' " (Silver Hills, supra, 55 Cal.2d at p. 815), "the corporate securities laws do not contain an 'all-inclusive formula by which to test the facts in every case. And the courts have refrained from attempting to formulate such a test. Whether a particular instrument is to be considered a security within the meaning of the statute is a question to be determined in each case. In arriving at a determination the courts have been mindful that the general purpose of the law is to protect the public against the imposition of unsubstantial, unlawful and fraudulent stock and investment schemes and the securities based thereon. [Citation.]' [Citation.]" (Figueroa, supra, 41 Cal.3d at p. 736; see Domestic & Foreign Petroleum Co. v. Long (1935) 4 Cal.2d 547, 557 [under former law, "elimination of the phrase 'offered to the public' . . . evinced a legislative intent to define as securities all instruments listed although disposed of in private transactions"].) And in Black, this court expressly stated that it was "not . . . finding that all one-on-one contracts are excluded as a matter of law from the definition of a security. Rather, the individualized nature of the transaction is one factor that must be considered in determining whether that transaction comes within the regulatory purpose and purview of the securities laws. [Citations.] It is consonant with the principle that courts interpreting Corporations Code section 25019 'must look to the substance of the transaction to determine whether protection of the securities laws is necessary.' [Citations.]" (Black, supra, 8 Cal.App.5th at p. 909, italics added.)
Even though the People rely on only the federal Howey test, we observe that each of the transactions at issue in this case appears to meet most of the factors set forth by the California Supreme Court as relevant in determining that a transaction involves risk capital and is a security. (Figueroa, supra, 41 Cal.3d at p. 736.) Specifically, defendant attempted to raise funds for a business venture or enterprise; the victims received no collateral in connection with the agreements under which they made their investments; and the victims were passive investors who were dependent on defendant's (and his companies') skill, services, solvency, and success to ensure payment. (See Silver Hills, supra, 55 Cal.2d at p. 815; Figueroa, supra, 41 Cal.3d at p. 737; Simon, supra, 9 Cal.4th at p. 497, fn. 4.) For example, the victims were dependent on the skill, success, and solvency of defendant/his companies in selecting suitable businesses to make loans (by EST) or suitable commodities to buy and sell (by Sehrein). Further, although there was no direct evidence of an indiscriminate offering to the public at large (Silver Hills, supra, at p. 815), the victims in this case were led to believe that defendant had made the same or similar offers to other people regarding investment opportunities in EST and Sehrein, the investment agreements at issue do not appear to include any unique features that would have precluded them from being offered to the public at large, and there is no evidence to suggest that the victims negotiated one-on-one with defendant any aspect of the agreements under which they made their investments. (See Black, supra, 8 Cal.App.5th at pp. 905-906; Marine Bank, supra, 455 U.S. at p. 560.)
Accordingly, we conclude that, based on the evidence at the preliminary examination, " ' "a reasonable person could harbor a strong suspicion" ' " (Sahlolbei, supra, 3 Cal.5th at p. 245) that the transactions with the victims were securities within the meaning of section 25019, and that defendant committed the two counts of fraudulent practices in connection with offering to sell securities (§ 25541; counts 1 & 17) and the 10 counts of offering to sell securities by means of false statements or omissions (§§ 25401, 25540, subd. (b); counts 4, 6, 8, 10, 12, 14, 16, 20, 22 & 24).
IV. DISPOSITION
Let a peremptory writ of mandate issue directing respondent court to vacate its order granting defendant's Penal Code section 995 motion in its entirety, and to enter a new order:
(a) granting the motion in part and dismissing counts 3, 5, 7, 9, 11, 13, 15, 19, 21, 23, 25, and 26 of the information, and
(b) denying the motion as to counts 1, 4, 6, 8, 10, 12, 14, 16, 17, 20, 22, and 24 of the information.
The temporary stay order is vacated.
BAMATTRE-MANOUKIAN, J. WE CONCUR: /s/_________
PREMO, ACTING P.J. /s/_________
GROVER, J.