Rent-A-Husband Heads to Court

PORTLAND, Maine – Tomorrow morning, a Superior Court judge will hear arguments pertaining to Daniel G. Lilley’s motion to dismiss all criminal charges against Kaile R. Warren, Jr., founder of Rent-A-Husband franchise system. The Attorney General’s office filed the lawsuit after a grand jury issued a three-count indictment on securities fraud.

In his July 15 brief, defense attorney Lilley asserts that because there was a serious “defect in the institution of the indictment” on counts two and three, securities fraud and the sale of unregistered securities, respectively, those counts should be dropped. Regarding count one, he states because the grand jurors were not accurately advised regarding the mandatory culpable mental state, and proceedings of the grand jury were not recorded, it is likely that the misinformation may have tainted the charging decision on the first count, theft by deception.

The indictment had been triggered by a complaint filed with Maine’s Office of Securities by a Rent-A-Husband prospective franchisee and investor in Rent-A-Husband’s investment program, as Warren was ramping up for a partnership deal with ACE Hardware. Warren alleges his former law firm Preti Flaherty Beliveau & Pachios were at fault for not advising him correctly on the investment program. In a MaineBusiness.com article he said, “ "Preti Flaherty held my hand and shepherded me through this entire process. If there was anything that was done improperly, then I think we have to ask them why."

The investor, Joanne Grace, alleged that Warren did not give her the required subscription agreements for her two investments, showing the risks involved, nor the financials showing the health of the Rent-A-Husband system. Her investments were for $6,000 and $150,000, for which she signed.

Grace is now saying she never denied signing the subscription agreements. A keepmecurrent.com article today stated, “In response, Grace told the Lakes Region Weekly that she never denied signing a subscription agreement and had no idea why Warren is accusing her of it now, 10 months after criminal charges were brought forth.”

Lakes Region reports, "Contrary to Warren's statements, I never denied signing a subscription agreement, and it seems he only raised the issue in the lawsuit very recently," Grace said.

But Blue MauMau has documents from a lawsuit filed by Joanne Grace against Kaile Warren, May 26, 2010, in Superior Court stating on page 27, “Save one document in 2002 given to the Brennans, none of the other Plaintiffs were ever provided with such a disclosure nor did they ever sign a disclosure document.” A footnote adds, “This is the only document among the seven agreements signed by Plaintiffs containing any disclosures whatsoever of investment risk.”

Although Grace signed a receipt showing she received financials on Rent-A-Husband, the lawsuit states, “Neither Joanne, Josephine nor Patricia were told of RAH’s significant debt load . . . or the annual losses incurred by RAH.” And it states, “No one was given an investor disclosure statement.”

The investigation led to a grand jury indictment on three counts. The state concluded that Warren had created a false impression of his company, misrepresenting its valuation, and had not disclosed his company’s existing debt. The indictment charged him with theft by deception, securities fraud and the sale of unregistered securities, punishable for up to 20 year in prison.

Warren has emphatically denied all charges against him.

Reasons for Dismissal

In his motion to dismiss, Lilley states that it is clear that the indictment, as drafted, was issued by the grand jury as a result of misinformation given them by the state concerning the elements of counts 2 and 3, securities fraud and the sale of unregistered securities, respectively.  He asserts that the prosecutor presenting the case to the grand jury told them “no culpable mental state was required to the issue of whether the instruments at issue were securities, or whether they were registered.”

According to the transcript, the prosecutor stated: “The law is that we do not have to prove that he knew these had to be registered. We don’t have to prove that he knew these were securities . . .What has to be a knowing or intentional act on his behalf is selling the instrument, and that the instrument was not in fact registered, that’s the second element to prove the crime.”

Lilley asserts that the grand jury, therefore, applied incorrect legal principles to indict Warren. “Because there was never any evidence presented . . . to show that Defendant knew these instruments were unregistered, or otherwise knew they were not exempt from registration . . . it is clear that no indictment should have [been] issued based on the evidence presented.” Lilley stresses that the grand jurors were given misinformation as to whether the state was required to prove that Warren knew the instruments at issue were securities subject to registration requirements.

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Related Articles:

• Website releases documents on Kaile Warren case,The Independent
• Rent-A-Husband Fall from Grace
• Rent-A-Husband CEO Kaile Warren goes on the offense, The Independent
• Rent-A-Husband's Warren to have day in court