Judge Dismisses Pertinent Count in Rent-A-Husband Indictment

PORTLAND, Maine – After a decision was handed down Tuesday in a rare franchise criminal case, parties on both sides have expressed that they are pleased with a judge’s decision.

Superior Court Judge Thomas D. Warren dismissed the count that he said was most pertinent to defendant Kaile Warren, founder of Rent-A-Husband, on the sale of unregistered securities. 

The original indictment was issued in December 2009. After Warren was allowed to appear before the grand jury, the superseding indictment was filed on April 9, 2010 listing no new charges.

The indictment brought three counts against Warren; Count 1: Theft by Deception (Class B); Count 2: Securities Fraud (Class C); and Count 3: Sale of Unregistered Securities (Class C). 

Although the third count has been dropped, the Attorney General’s office said the theft charge carries a maximum prison sentence of ten years and the securities fraud a maximum of five years.

In his order, the Cumberland County judge stated that because Warren’s motion to dismiss squarely presented on the issues regarding the sale of unregistered securities offense, he wanted to address that first.

The judge explained that the grand jury indictment did not allege that Warren knew the promissory notes he sold to obtain financing for his company were unregistered securities. According to law, before a person can be guilty of that charge, he or she must have “intentionally and knowingly” sold the securities.

Judge Warren wrote, “. . . the indictment does not allege the required culpable mental state with respect to all elements necessary to establish criminal liability for sale of unregistered securities, defendant's motion to dismiss Count III of the indictment is granted.''

Warren’s attorney Daniel G. Lilley had argued that the entire case against Warren should be thrown out because he did not possess the required “culpable state of mind.” In his motion to dismiss, Lilley stated that it was 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 the securities fraud and the sale of unregistered securities counts. He asserted that the prosecutor in presenting his case told them, “no culpable mental state was required to the issue of whether the instruments at issue were securities, or whether they were registered.”

Judge Warren stated that in order to find any deficiency with respect to count two, the court would have to examine the proceedings before the grand jury and consider whether the grand jury was incorrectly instructed as to the legal elements of the offense. Because the grand jury proceedings are entirely secret, the judge said he had no choice but to deny the defendant’s motion to dismiss.

The judge disagreed with Warren’s argument that count one, theft by deception, should be dismissed because of errors with respect to the “culpable mental state” as to the alleged securities violations in the other counts. The court ruling said count 1 did not depend in any way on whether promissory notes allegedly sold by Warren were securities, whether he knew they were securities, whether they were registered as securities or whether he knew they were not registered. 

How did the handyman-turned-celebrity come to face these accusations, which could land him in prison?

Warren first ran into problems when he began to secure financing for his business, while ramping up for a partnership deal with ACE Hardware. In doing so, Warren enlisted the services of his former law firm Preti Flaherty Bellveau & Pachios to research and set up the investment program, assuring that they complied with securities regulations. Investors were required to sign subscription agreements advising of the risks involved in their investments. Although Warren was assured by the Preti attorneys that his program was sound and legally intact, he suddenly found himself at odds with some investors regarding investments.  

After one prospective franchisee/investor began aggressively pursuing an action by the state, the Office of Securities launched an investigation. That lead to an inquiry focusing on whether Rent-A-Husband provided investors with proper subscription agreements, disclosing of the company’s financial situation. A grand jury was then assembled which eventually resulted in the three-count indictment.

Joanne Grace, Warren’s main critic, successfully pursued the media with her accusations against the handyman guru. She later became a lead plaintiff in a civil case filed against Warren. After making allegations that she did not receive any disclosure prior to making her investment, her attorney presented a second affidavit claiming Grace made mistakes in her original testimony. Warren’s attorneys have now filed a motion to dismiss that civil case.

After the judge filed his order this week, Warren made a statement regarding his lead accuser. He said Joanne Grace has been caught giving four wildly different versions of what was disclosed when she and her family made their  investments.  “This is all documented with iron-clad documentation. If the state decides to pursue the remaining charges, I challenge it to pass what should be a basic litmus test for the prosecution. Come forward and "publicly" state that Ms. Grace is a credible witness,” Warren stated.

When Blue MauMau asked Assistant Attorney General Michael Colleran, prosecutor in the case, if Joanne Grace would be one of the state’s star witnesses, he said he would not confirm or deny that she was. “She is a victim and she along with other victims may be a witness at trial. We haven’t decided which witnesses we will call,” Colleran said in a statement last July.

Reaction to Judge’s Ruling

Warren said he was extremely pleased with the judge’s decision to dismiss the one count, the sale of unregistered securities. “It is reprehensible that the top securities lawyer at the Attorney General's office would fabricate a definition of a felony charge in order to indict an innocent person,” he said. 

But Colleran had a different take than Warren. He said they were pleased that the court disagreed with Warren on the felony theft and fraud counts and they are prepared to go forward on those charges. “The ruling on the less serious charge of sale of unregistered securities is an interpretation of law, not of fact, and is an interpretation with which we respectfully disagree.”

In a statement, Kaile Warren said the judge’s decision pulls the foundation out from under the state’s case. He strongly believes that if the law allowed the judge to look into the grand jury’s actions on counts one and two they too would have been thrown out.

“This case is a classic example of why the prosecutor dominated grand jury system needs to be abolished. Think about all of the people who have been indicted on this same charge here in Maine. Prosecutorial misconduct behind closed doors with a grand jury makes a despicable mockery of our justice system,” Warren stated.

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• Prosecutor Opposes Rent-A-Husband Motion
• Rent-A-Husband Heads to Court
• Judge to Rule in Coming Days on Rent-A-Husband
• Warren 'vindicated': Superior Court drops charge regarding sale of securities