Broker guilty in securities fraud case
A Florida man accused of bilking about 20 Hawaii investors of $1.2 million in a securities fraud case has been convicted.
An Oahu Circuit Court jury found Richard Morris guilty on Monday of securities fraud and prohibited securities practices. The jury also found co-defendant Robert Michutka, also of Florida, not guilty of the same charges.
Morris faces a mandatory 20 years in prison when sentenced Nov. 7 before Circuit Judge Richard Perkins.
The two were among three individuals indicted last May in connection with the sale of 21st Century Satellite Communications Inc. promissory notes from 1998 to 2000.
Local CPA and tax preparer Douglas Nonaka, who sold the notes, was indicted in 2003.
According to the state attorney general, the notes were for five years and promised 13 percent interest over their term. Morris, the general broker for the notes, was paid 30 percent commission off all notes sold.
The money from the notes was to be used for the purchase and installation of equipment. But new investors were being used to pay the interest on prior investors. The notes -- some $23 million was sold overall -- also were not secured. The company later declared bankruptcy in early 2001, and investors never received the interest or their principal.
Deputy Attorney General Dwight Nadamoto said that as a condition of the pleas obtained earlier from two other defendants, the state had requested that restitution be paid upfront.
Victims will be getting some money back, but not much, he said.
Robert Byrch, president and chief executive officer of 21st Century, and Nonaka both testified for the state at trial.
Byrch pleaded guilty earlier to securities fraud, prohibited securities practices, sale of securities by an unregistered person and sale of unregistered securities. He will be sentenced Oct. 17.
Nonaka pleaded guilty to prohibited securities practices, sale of securities by an unregistered person and sale of unregistered securities. He will be sentenced Oct. 3.