Can a jury instruction presume that a note is a security without violating due process? State v. Kelson Explained

In State v. Kelson, the Utah Supreme Court addressed a critical question about when jury instructions containing presumptions violate due process rights in criminal cases.

Background and Facts

Grace Kelson was convicted of multiple securities violations and racketeering related to an investment scheme involving promissory notes. Between 1999 and 2001, Kelson and co-conspirators solicited approximately $125,000 from investors through promissory notes, promising high returns with little risk. The notes were issued by S.D.C. Financial Services, which Kelson controlled. Instead of using the funds as promised, Kelson used $25,000 for personal expenses including clothing, groceries, and a condominium down payment. The investment scheme ultimately failed, and S.D.C. defaulted on all promissory notes.

Key Legal Issues

The central issue involved Jury Instruction 25, which stated that “a ‘note’ is presumed to be a security.” The instruction then provided exceptions and a four-part test for determining when notes might not be securities. The Utah Court of Appeals found this instruction created an impermissible burden-shifting presumption that violated Francis v. Franklin and In re Winship, and concluded that defense counsel was ineffective for stipulating to it.

Court’s Analysis and Holding

The Utah Supreme Court distinguished between impermissible evidentiary presumptions and permissible statutory presumptions that define criminal elements. The Court emphasized that Francis v. Franklin prohibits presumptions that shift the burden of proof on essential elements, but does not forbid presumptions that accurately reflect substantive criminal law. Here, Utah Code section 61-1-13(24)(a)(i)(A) defines “security” to include “any note,” making the instruction’s presumption an accurate statement of law rather than a burden-shifting device. The Court noted that legislatures have broad discretion to define criminal elements, including through presumptions, as long as they do not improperly shift the prosecution’s burden of proof.

Practice Implications

This decision clarifies the distinction between permissible and impermissible presumptions in jury instructions. Defense counsel must carefully analyze whether challenged instructions create improper evidentiary presumptions or simply reflect statutory definitions. The Court’s analysis also resolved the ineffective assistance of counsel claim, finding that reasonable counsel could properly stipulate to an instruction that accurately states the law. For prosecutors, Kelson confirms that statutory presumptions incorporated into jury instructions will withstand constitutional challenge when they accurately reflect the underlying criminal statute.