state of indiana in the howard superior court
TRANSCRIPT
Filed: 5/28/2021 10:23 AMSuperior Court 2
Howard County, Indiana
STATE OF INDIANA)
IN THE HOWARD SUPERIOR COURT 2
COUNTY OF HOWARD)
2021 TERM
REBA L. CASLER,RICHARD MCCARTY,DOROTHY J. MCCARTY,TED MILLER, JANET MILLER,ROBERT LANE, and KATHY LANE,
Plaintiffs,
V. CAUSE NO. 34D02-2003-CT-000620
ASHLEY WYRICK, GARY W.GANGWER, CATHRYN L. GANGWERand GANGWER INSURANCEAGENCY INC.
Defendants.
VVVVVVVVVVVVV
PLAINTIFFS’ MEMORANDUM IN SUPPORT OF PARTIAL MOTION FORSUMMARY JUDGMENT AS TO LIABILITY AGAINST DEFENDANT ASHLEY
WYRICK
INTRODUCTION
Plaintiffs’ Indiana Securities Act (”ISA” 0r ”Act”) claims against Defendant
Ashley Wyrick are extremely simple, and there are no genuine disputes 0f fact as to her
liability. Most importantly, there is n0 genuine dispute that: (1) Wyrick sold
unregistered securities to the Plaintiffs; (2) Wyrick was not registered to sell securities at
all (whether said securities were registered 0r unregistered); and (3) Wyrick, at a
minimum, failed to disclose either of the foregoing facts t0 the Plaintiffs in connection
With their respective transactions. Wyrick’s liability is established as a matter 0f law and
Plaintiffs are entitled t0 summary judgment to that effect.
FACTUAL BACKGROUND
From 2012 through April of 2020, Ashley Wyrick (”Wyrick”) worked as a selling
agent for the Gangwer Insurance Agency, Inc. (”Gangwer Insurance” 0r ”Agency”)
Exhibit 1 Deposition 0f Ashley Wyrick Deposition (”Wyrick Dep.”) pp. 1129-23, 14:1-
17. Throughout the course 0f this relationship, Wyrick was licensed t0 sell a variety 0f
insurance-based products and focused much 0f her business upon assisting the
Agency’s clients in procuring life and health insurance coverage. See id. However,
Wyrick was never registered or licensed (in the State of Indiana or elsewhere) as: (1) a
broker-dealer of securities; (2) an agent of a securities broker-dealer; (3) an investment
adviser; (4) an investment advisor representative; or (5) an issuer (or agent 0f an issuer)
of securities. Exhibit 2, Indiana Securities Division Certification. Indeed, Wyrick has
never held any securities-related registrations or licenses at all. Exhibit 3, Wyrick
Interrogatory Responses (”Wyrick Int”) No. 3.
Nevertheless, the agency publicly advertised Wyrick as specializing in ”asset
protection” and ”wealth creation” and characterized Wyrick’s function with the agency
as a retirement ”c0ach[].” Exhibit 4 (at Deposition Exhibit (”Dep Ex.”) 5); see also
Exhibit 4 (at Dep Ex. 6); Exhibit 1 Wyrick Dep. pp. 10528-106220. The Agency’s website
indicated that Wyrick was licensed in ”retirement planning,” but she did not, in fact,
hold any such license. Id. Wyrick felt pressure to mold her practice to the Agency’s
expectations (and public descriptions) by developing unique options to address the
wants and needs 0f the Agency’s clients seeking financial guidance in retirement,
Wyrick’s purported specialty. Exhibit 1 Wyrick Dep. p. 21627-15. T0 that end, still in
the early term 0f her tenure with the Agency, Wyrick attended a conference in Utah
hosted by ”The Safe Money Group” during which a variety of both insurance-based
and non—insumnce-based investment products geared towards retirees were discussed. Id.
at pp. 11221-4, 231217-19, 24521-24721. The Agency not only knew that Wyrick attended
the conference, but further encouraged and facilitated her attendance by subsidizing the
costs of the trip. Id. at pp. 245221-2471.
One of the products Wyrick discovered during the Safe Money Group conference
entailed an investment in a mortgage investment fund known as ”Woodbridge.”
Exhibit 1, Wyrick Dep. pp. 245221-2471; id. at p. 231:17-19. In exchange for an
investment in Woodbridge, investors received promissory notes purportedly secured
by a first-priority mortgage lien 0n some real estate of their choosing, With said notes
being issued by some affiliate 0f the Woodbridge enterprise. See Exhibit 5, Casler Notes;
Exhibit 6, Lane Notes; Exhibit 7 McCarty Notes; Exhibit 8 Miller Note (referred to
3
collectively with Exhibit 5, Exhibit 6, Exhibit 7 and Exhibit 8 as ”Plaintiffs’ Notes”) 1;
Exhibit 1, Wyrick Dep. pp. 95221-9624. Prior t0 this conference, Wyrick had absolutely
n0 knowledge 0r experience regarding non-insurance-based products. Exhibit 1
Wyrick Dep. p. 231217-19. However, the Agency never instructed Wyrick that she could
not offer or sell non—insurance—based products to the Agency’s clients, and she believed
that Woodbridge presented a ”safe” option for retirement investment ”because it was
based in real estate.” Id. at pp. 57:16-58:10, 17826-11.
Eventually, Wyrick began advising the Agency’s retiree clients about the
Woodbridge investment and, in many instances, effected sales 0f Woodbridge
promissory notes t0 them. See e.g. Exhibit 1, Wyrick Dep. pp. 32:22—33:10, 16923-18;
Exhibit 4, Dep. Ex. 27 (a Woodbridge marketing pamphlet similar to what Wyrick
provided t0 Agency clients); Plaintiffs’ Notes. Wyrick represented the Woodbridge
II ll
opportunity as a ”safe and secure alternative investment” Which would allow risk-
averse investors t0 shield their retirement savings from the ”roller coaster” 0f the stock
market. Exhibit 1, Wyrick Dep. pp. 84:11-24, 110:20—111:8, 129:4-14, 13421-13524, 178:2-
5, 180:8-11. Indeed, Wyrick assured the Agency’s clients that this real estate-backed
investment was very safe. Id. at pp. 95221-9624, 110:20—11128, 129:4-14, 1787:2-5. She even
went so far as to represent to investors that the principal amount of their respective
investments in Woodbridge was ”guaranteed.” Exhibit 9, Casler Aff. 115; Exhibit 10
1 The Woodbridge promissory notes generally provided for monthly interest payments until the notes
reached a maturity date which was typically a little over a year from the issue date. Plaintiffs’ Notes.
Investors would then have the option of reinvesting in another year long note or receiving all moniesowed pursuant t0 the note. In the event 0f a default on the payment obligation by Woodbridge, the notes
provided for escalating interest rates so long as the default persisted. See id.
4
Miller Aff 115; Exhibit 11 Lane Aff. 116; Exhibit 12 McCarty Aff. 114; see also Exhibit 1,
Wyrick Dep. p. 178:6-11 (Wyrick does not deny this representation).
For her efforts in presenting and effectuating the sale 0f Woodbridge promissory
notes t0 the agency’s clients, Wyrick earned compensation based upon a percentage of
the total investment made by any given investor she represented. See e.g. Exhibit 1,
Wyrick Dep. pp. 14423—14524? Surprisingly, this arrangement was never reduced to
any written agreement between Wyrick and Woodbridge, but having had no experience
in selling ”anything outside 0f the insurance market” prior t0 Woodbridge, Wyrick
simply assumed (without any real basis) that the lack of a memorialized agreement was
of n0 cause for concern. Id. at pp. 100:21-102z2. In any case, Wyrick earned a
commission 0n each investment calculated by subtracting the interest rate applicable in
a given note from a wholesale rate 0f nine (9) percent. Id. at pp. 136210-137zl4. For
example, if a client invested $100,000 in exchange for a note bearing five (5) percent
interest, Wyrick would receive $4,000 in compensation from Woodbridge (Le. an
amount equal to four (4) percent of the investment). Id.; see also id. at pp. 150:1-152:6.
Wyrick’s typical compensation was somewhere between three (3) and four (4) percent
of the principal investments made by the agency’s clients. Id.
2 Wyrick has, at times, taken the position that the compensation she received was a ”referral fee” and not
a ”commission.” Exhibit 1, Wyrick Dep. pp. 14423-14524. However, she did reluctantly admit in her
deposition that the compensation arrangement she had with Woodbridge was consistent with the
common and ordinary meaning and usage of the word ”commission.” Id. Moreover, in emails she
exchanged with Woodbridge well before this lawsuit, Wyrick, herself, referred to her compensation as a
”commission.” See Exhibit 4, Dep. Ex. 37. In any case, whatever label Wyrick might attach to the
compensation she received, the fact remains that she was paid in connection with each and every
investment she assisted the agency’s Clients in completing, and that the greater the investment, the
greater her compensation was. Id.
Wyrick’s early experiences in effecting investments in Woodbridge by the
Agency’s clients went (more 0r less) according to plan. Indeed, Wyrick had a number
0f Clients reinvest in Woodbridge upon the maturity date 0f their respective notes. See
e.g. Exhibit 1 Wyrick Dep. pp. 149:14-22, 15322-23, 19327-19423; Exhibit 2, Dep. Exhibit
23 (at p. 3); see also e.g., Exhibit 12 McCarty Aff. 1117. Notably, in the event of
reinvestment, Wyrick would receive om additional commission based upon the same
methodologies described above (i.e. a percentage - typically three (3) or four (4) percent
- 0f the total reinvestment). Id.
The foregoing is not intended t0 suggest that there were no worrying signs that
Woodbridge may not be quite so reliable as Wyrick represented t0 the Agency’s clients.
As one very glaring example, Wyrick knew by no later than April 0f 2016 that
Woodbridge was embroiled in more than one legal battle spanning across at least a
couple 0f different states. See Exhibit 13 April 20, 2016 email from Wyrick to Robert
Lane. This knowledge notwithstanding, Wyrick never openly disclosed Woodbridge’s
legal problems to her Clients unless directly confronted with questions regarding them
(as was the case With the Lanes). Exhibit 9, Casler Aff. 1113; Exhibit 10 Miller Aff. 1114;
Exhibit 12 McCarty Aff. 1114; see also Exhibit 11, Lane Aff. 117. Critically, with the sole
exception of the McCartys, there can be n0 dispute that Wyrick was aware 0f
Woodbridge’s legal woes at the time 0f each 0f the Plaintiffs’ respective investments.
Exhibit 13 April 20, 2016 email from Wyrick t0 Robert Lane; Exhibit 14, Wyrick Supp.
Int. Resp. No. 7.
The long and short of the Woodbridge story is that it turned out t0 be an
approximately $1.2 billion Ponzi scheme which relied heavily upon inexperienced and
unknowledgeable insurance agents along with bad apple securities brokers from across
the country t0 market and sell unregistered and fraudulent securities t0 unwitting
investors (particularly unsophisticated retirees). Exhibit 15, SEC Complaint. 3 Wyrick
admits that each of the Plaintiffs in this action were victims 0f the Woodbridge scheme.
Exhibit 1, Wyrick Dep. pp. 72:10-73:44 And as With most Ponzi schemes, by the time
the jig was up, most 0f the ill-gotten money was gone. Thus, while Woodbridge is
currently undergoing liquidation in a bankruptcy setting, years into the process
Plaintiffs have recovered only a portion of what they expected and understood they
would receive based upon Wyrick’s representations. Exhibit 9 Casler Aff. 1116; Exhibit
m, Miller Aff. 1117; Exhibit 11 Lane Aff. 1117; Exhibit 12, McCarty Aff. 1118. The
prospects 0f any further recovery from the bankruptcy proceedings are, at best,
uncertain. Indeed, even Wyrick admits that Plaintiffs have effectively (in the aggregate)
3 While the details of the scheme are not materially relevant t0 this case, in essence, Woodbridge did not
actually use all of the funds it received from investors in the manner that investors were told and, instead,
siphoned the money away to its top executives, particularly CEO Robert Shapiro, who is now serving a
twenty-five—year prison sentence for his role as architect of the fraud. Those investors who were lucky
enough to exit the investment early (before it started t0 unravel) were paid off using funds invested into
Woodbridge by new investors. Those who maintained an investment as 0f the time the fraud wasunearthed and new investments stopped were stuck with an interest in a bankrupt company which wasworth far less than investors’ respective principal contributions.
4 Interestingly, Wyrick claims that she, too, is a victim of the Woodbridge Ponzi scheme. Exhibit 1,
Wyrick Dep. pp. 72:10-73z4. However, Wyrick admits that she did not directly lose any money aside fromsome unpaid ”referral fees” which Woodbridge never paid her. Id. Of note, Woodbridge identified
Wyrick as an excluded party ineligible to receive any distributions from its liquidation in bankruptcybecause 0f her participation in its fraudulent activities. See Exhibit 4 Dep. Ex. 26; see also Exhibit 1,
Wyrick Dep. pp. 160:15-161:2.
lost hundreds 0f thousands of dollars by way 0f their Woodbridge investments.
Exhibit 1, Wyrick Dep. pp. 124212-22.
Additional facts will be supplied where appropriate below.
ARGUMENT
I. The Woodbridge notes purchased by Plaintiffs were ”securities.”
The term ”security” is defined very broadly under the ISA. See LC. § 23—19—1—
2(28). The Act’s definition includes an ”illustrative” (although not exhaustive) list 0f
numerous items that are within its bounds. Reinhart v. Boeck, 918 N.E.2d 382, 392 (Ind.
Ct. App. 2009). Conveniently to the present case, the definition ”begins its litany of
examples by stating that ’security’ means Late [0r] evidence 0f indebtedness.”
Reinhart, 918 N.E.2d at 392 (quoting an earlier version of the ISA with substantively the
same definition of ”security” as in the current iteration) (emphasis supplied); see also
I.C. § 23-19-1-2(28); Mmms v. Skolm'k, 666 N.E.2d 1236, 1242 (Ind. Ct. App. 1996) (also
noting that a ”security” is defined t0 include inter alia ”a note”). On a broader,
conceptual level, ”[t]he word ’security’ is ordinarily used as a synonym for
III’investment, and generally
”[t]he ’investment 0f money With the expectation 0f profit
through the efforts 0f other persons’ is Within the Act’s definition 0f ’security.’”
Reinhart, 918 N.E.2d at 392.
There can be no genuine dispute that Plaintiffs’ Notes constitute ”securities”
under the ISA. The Act’s definition specifically includes ”note[s]” as an example 0f a
”security,” and there is n0 basis upon Which the Woodbridge notes might be excepted
from this general rule of inclusion in the latter term. See LC. § 23—19—1—2(28). Wyrick
8
presented the Woodbridge opportunity as an ”alternative investment,” Exhibit 1,
Wyrick Dep. p. 180:8-11, and the Plaintiffs understood their respective transaction to be
one in which they would (or expected to) earn profits solely by Virtue of their
commitment of the funds and through no further effort of their own. Exhibit 9, Casler
Aff. 116; Exhibit 10 Miller Aff. 117; Exhibit 11, Lane Aff. 118; Exhibit 12 McCarty Aff. 116.
This is the very sort of arrangement t0 Which the label 0f ”security” (as used in the ISA)
is intended to attach. See Reinhart, 918 N.E.2d at 392 (”security” ordinarily used as
synonym for investment); Halloway v. Thompson, 42 N.E.2d 421, 424-425 (Ind. Ct. App.
1942) (same; also providing a discussion connecting the policy and purpose of securities
legislation t0 the construction 0f the term ”security”). Indeed, courts from other
jurisdictions examining the Woodbridge notes against similar definitions 0f ”security”
have affirmed this conclusion without any difficulty. See e.g. SEC v. Davis, 2019 U.S.
Dist. LEXIS 219536 *14-15 (CD. Cal. Oct. 15, 2019) (noting the court had ”no difficulty”
concluding that the Woodbridge notes were securities); Ham'g v. Kornfield, 339 F.Supp.
3d 1323, 1335-1336 (SD. Fla. 2018) (court had ”no trouble” concluding the notes were
securities). As a matter 0f law, the Woodbridge notes were securities and, therefore,
regulated by the ISA.
II. erick sold Woodbridge notes to Plaintiffs.
Direct liability under the ISA often turns largely upon unlawful conduct by one
acting in the capacity of a seller 0f a security. See LC. § 23—19-5—9(a). In examining a
predecessor version of the Act substantially the same as the current one, the Indiana
Supreme Court approvingly described a construction 0f ”seller” Which imposes liability
9
under the ISA upon those who pass title 0r ”successfully solicit” a purchase and are
motivated at least in party by a desire to serve their own financial interests. See Kirchofi‘
v. Selby, 703 N.E.2d 644, 650 (Ind. 1998). Thus, the word ”seller” is not synonymous With
the word ”issuer” under Indiana securities law; the fact that Plaintiffs may ultimately
have received their notes from or paid their money to Woodbridge does not foreclose
Wyrick’s status as a seller 0f their notes. See id. If she solicited Plaintiffs’ investments
and financially benefitted from the transactions, she was a ”seller” under Indiana law.
Id.
Although Wyrick has unsurprisingly attempted to characterize her involvement
in each of Plaintiffs’ investments differently, there is n0 genuine dispute that, as a
matter 0f law, she did, indeed, act as a seller 0f the Woodbridge notes by engaging in
conduct intended t0 effect Plaintiffs’ purchases 0f Woodbridge securities. Wyrick
presented Woodbridge as an ”alternative investment” t0 her clients Who were
concerned with having their retirement savings tied to the stock market. Exhibit 1,
Wyrick Dep. pp. 84:6-24, 180:8-11. She routinely provided such clients with
informational documents about Woodbridge to promote the opportunity. Id. at p. 85:5-
18. She considered herself to have superior knowledge of retirement investments
compared t0 any 0f the Plaintiffs and expected that Plaintiffs’ investment decisions as t0
Woodbridge would turn primarily upon their review and consideration of information
she provided them. Id. at pp. 86:22—87:22. She never specifically advised any 0f the
Plaintiffs t0 seek further review of the Woodbridge opportunity from a qualified
and/ 0r duly licensed stockbroker, investment adviser, 0r financial adviser, and none 0f
10
them did so. Id. at pp. 88:13-89:12; Exhibit 9 Casler Aff. 1111; Exhibit 10, Miller Aff. 1112;
Exhibit 11 Lane Aff. 1113; Exhibit 12 McCarty Aff. 1112.
Moreover, when her clients expressed interest in pursuing a Woodbridge
investment, Wyrick acted as their liaison to Woodbridge, taking care of all of the
”logistics,” receiving and printing transactional documents which required signature,
assisting her Clients in reviewing, completing, and executing the necessary forms,
logging into a non-public Woodbridge website (in her own name) t0 which such
transactional forms were submitted 0n behalf 0f her clients, and even signing
transactional documents as a witness. Exhibit 1 Wyrick Dep. pp. 85:24-86z6, 89:13-95z9,
96:14-98:18, 130:16-131217, 132:10-14, 132:18-134z3, 14121-9; Exhibit 3 Wyrick
Interrogatory Responses Nos. 13, 18; Exhibit 4 Dep. Ex. 16; Exhibit 4, Dep. Ex. 32 (at
handwritten page 7; example 0f Wyrick witnessing execution 0f document); Exhibit 4,
Dep. Ex. 33 (same); Exhibit 4, Dep. Ex. 35 (same); Exhibit 4, Dep. Ex. 36 (same); Exhibit
4, Dep. Ex. 38 (same); Exhibit 4 Dep. Ex. 40 (same). To be sure, Plaintiffs had n0 direct
contact with anyone at Woodbridge; Wyrick (and members of her support staff) acted
as their exclusive spokesperson. Exhibit 1 Wyrick Dep. pp. 99:7-100:14; Exhibit 9,
Casler Aff. 118; Exhibit 10, Miller Aff. 119; Exhibit 11 Lane Aff. 1110; Exhibit 12, McCarty
Aff. 119; see also e.g. Exhibit 4, Dep. Ex. 39 (Wyrick emails with Woodbridge regarding
McCarty investment and renewal). And, as mentioned, Wyrick was compensated for
her efforts by way 0f a commission based 0n a percentage 0f her clients’ total
investment. Id. at pp. 100221-10121, 126:10-12721, 12721-12823, 135219-137214, 144211-
14524; Exhibit 4, Dep. Ex. 15; Exhibit 4 Dep. EX. 19.
11
Wyrick’s spurious assertion that the foregoing facts leave even a scintilla 0f
doubt as t0 her status as a seller must be rejected. That Wyrick may have presented
other options to Plaintiffs (and she did not5) and that the Plaintiffs voluntarily chose to
pursue a Woodbridge investment based upon Wyrick’s sales pitch does not lend itself
to any reasonable inference to the contrary. By way of analogy, consider the scenario of
a car salesman who shows a potential purchaser three (3) different vehicles before the
customer makes their selection and consummates the purchase. Applying Wyrick’s
logic, the salesman wasn’t a salesman at all simply based upon the presentation 0f
multiple options and the inability to compel a purchase 0f any particular vehicle.
Indeed, with these disqualifying criteria, literally anyone could evade being labeled
seller in any given transaction. This is, quite frankly, absurd.
Wyrick solicited Plaintiffs’ purchases 0f the Woodbridge notes and there is no
dispute that she profited from their transactions. See Exhibit 1, Wyrick Dep. pp. 127212-
12823; Exhibit 4 Dep. Ex. 37. As a matter 0f law, she was a seller 0f the Woodbridge
notes in each 0f Plaintiffs’ respective investment transactions. Kirchofi, 703 N.E.2d at 650.
There can be n0 genuine assertion to the contrary.
III. Wyrick’s sale of the Woodbridge notes to Plaintiffs violated Indiana Code §23-19-4.
The Act defines the term ”broker-dealer” as including ”a person engaged in the
business 0f effecting transactions in securities for the account 0f others.” LC. § 23-19-1-
2(3). It defines an ”agent” as ”an individual, other than a broker—dealer, who represents
5 Exhibit 9 Casler Aff. 114; Exhibit 10 Miller Aff. 116; Exhibit 11 Lane Aff. 115; Exhibit 12 McCarty Aff. 115.
1 2
a broker-dealer in effecting 0r attempting t0 effect purchases 0r sales 0f securities or
represents an issuer in effecting 0r attempting t0 effect purchases 0r sales 0f the issuer’s
securities.” LC. § 23-19-1-2(1). The ISA generally renders it unlawful for a person t0
transact business in this state as a ”broker-dealer” 0r as an ”agent” unless the person is
registered as such or is exempt from registration. I.C. § 23—19—4—1(a); LC. § 23—19—4—2(a);
Holloway, 42 N.E.2d at 423; Manns v. Skolnik, 666 N.E.2d 1236, 1247 (Ind. Ct. App. 1996).
As already discussed above, Wyrick most certainly ”engaged in the business 0f
effecting transactions in securities for the account 0f others.” LC. § 23-19-1-2(3). None of
the Plaintiffs even knew anything about Woodbridge until Wyrick presented it to them
and encouraged them t0 invest in it as a ”safe and secure” retirement asset. See e.g.
Exhibit 1, Wyrick Dep. pp. 86:14-89:12, 111:5-8; Exhibit 9, Casler Aff. 115; Exhibit 10,
Miller Aff. 115; Exhibit 11, Lane Aff. 116; Exhibit 12, McCarty Aff. 114. When they decided
t0 invest, Wyrick took care 0f Virtually every aspect 0f the transaction. Exhibit 1
Wyrick Dep. pp. 89:13-9529, 96:14-9926. Indeed, With Wyrick’s assistance, all the
Plaintiffs had t0 d0 was sign their name 0n necessary documents and provide the
funds. Id.; see also id. at pp. 99:7-100214 (Plaintiffs never even had communications with
Woodbridge); Exhibit 9, Casler Aff. 118; Exhibit 10, Miller Aff. 119; Exhibit 11, Lane Aff.
1110; Exhibit 12 McCarty Aff. 119. Wyrick understood that her compensation was to pay
for all the time and effort she expended in carrying out Plaintiffs’ transactions.m1, Wyrick Dep. pp. 100:21-101:1.
T0 be sure, the undisputed evidence overwhelmingly establishes the Wyrick
”effect[ed]” Plaintiffs’ Woodbridge investments. Consequently, Wyrick might
13
ostensibly be labeled as either a ”broker-dealer” 0r an ”agent” Within the definitions set
forth above both of which center upon such effectuation. LC. § 23-19-1-2(3); I.C. § 23-19-
1-2(1). Documents in the record could theoretically lend support t0 either conclusion.
See e.g. Exhibit 4 Dep. Ex. 14 (at p. 3, identifying Wyrick as an agent in connection with
establishing Provident account where investment in Woodbridge would be made);
Exhibit 4, Dep. Ex. 15 (email sent t0 Wyrick referred t0 her payment as ”agent
compensation”); Exhibit 1, Wyrick Dep. p. 136210-15 (Wyrick confirms that ”agent
compensation” referenced in prior cite is her ”referral fee” Which she later admits was a
commission); Exhibit 4, Dep. Ex. 16 (at p. 2, listing Wyrick’s information in a
transactional summary email under ”Broker Information”) (emphasis supplied); Libit
4, Dep. Ex. 17 (transactional summary again identifying Wyrick as ”broker”); Exhibit 4,
Dep. Ex. 18 (same); Exhibit 4, Dep. Ex. 19 (same); Exhibit 4, Dep. Ex. 20 (same);M4, Dep. Ex. 21 (same); Exhibit 4 Dep. Ex. 22 (same); Exhibit 4 Dep. Ex. 23(same);
Exhibit 4, Dep. Ex. 24 (same); Exhibit 4, Dep. Ex. 25 (Woodbridge bankruptcy filing
regarding ”excluded parties” identifies Wyrick as ”broker”).
However, any dispute regarding the distinction between Wyrick’s potential
status as a ”broker-dealer” 0r an ”agent” is immaterial both for purposes of Plaintiffs’
claims and this motion (as they respectively relate to Wyrick) for two reasons. First,
Wyrick readily admits that she never held any securities-related license 0r registration.
Exhibit 1 Wyrick Dep. p. 125:18-20; Exhibit 3 Wyrick Interrogatory Responses Nos. 3,
22 (showing that Wyrick only ever held insurance-related licensing in the last decade).
Second, the liability exposure (as well as the statutory defense to such exposure) is the
14
same regardless 0f Whether she was a ”broker-dealer” 0r an ”agent” Within the
meaning 0f the Act. See LC. § 23-19-5-9.
The only lingering question then as to Whether Wyrick violated Indiana Code §
23-19-4 is whether Wyrick was exempt from registration as either a broker-dealer or an
agent. Generally, the burden of proving the applicability 0f an exemption under
securities laws falls on the party asserting it, and the ISA is no exception. I.C. § 23—19—5—
3; Tremps v. Ascot Oils, Ina, 561 F.2d 41, 47 (”[t]he Indiana Securities Law expressly
places the burden 0f proving entitlement t0 any exemption 0n the party claiming the
benefits 0f the exemption”); Starr v. lhey, Ina, 2003 U.S Dist. LEXIS 8698 *10-11 (”[t]he
burden of demonstrating that an exemption applies rests upon the party invoking the
exemption, and [a plaintiff] need not plead facts to demonstrate that it does not apply”);
SEC v. Asset Mgmt. Corp, 1979 U.S. Dist. LEXIS 8080 *27 (SD. Ind. 1979). Notably,
Wyrick did not assert any exemption as an affirmative defense in her Answer, nor has
she made any contention as to the applicability 0f any exemption t0 date. See generally
Exhibit 16 Wyrick Answer. This omission is rendered unsurprising by even a cursory
review 0f the stated exemptions, which reveals that none might apply to Wyrick. See
I.C. § 23-19-4—1(b); I.C. § 23-19-4-2(b). As a matter of law, Wyrick violated Indiana Code
§ 23-19-4.
IV. erick’s sale of the Woodbridge notes to Plaintiffs violated Indiana Code §23-19-3-1.
Regardless of who sells 0r offers to sell a security, the ISA renders it unlawful to
engage in such activities unless the security, itself, is registered in Indiana or is
15
otherwise exempt from registration. LC. § 23-19-3-16; Holloway, 42 N.E.2d at 423; Lean v.
Reed, 876 N.E.2d 1104, 1107 (Ind. 2007); Manns, 666 N.E.2d at 1246. There is no genuine
dispute that the Woodbridge notes were not registered for sale in Indiana. Exhibit 2,
Indiana Securities Division Certification. And again, although it is Wyrick’s burden t0
assert and establish the applicability 0f any exemption t0 the ISA’s registration
requirements as t0 the Woodbridge notes, she has never claimed that one applies. See
I.C. § 23-19-5-3; Tremps, 561 F.2d at 47. Any attempt t0 do so would be futile. It is plain
that none 0f the exemptions t0 the ISA’s requirement t0 register securities would apply
t0 the Woodbridge notes and, therefore, that Wyrick violated to the Indiana Code § 23-
19-3-1 as a matter of law. See LC. § 23-19-2—1 (exemptions based upon characteristics 0f
security); I.C. § 23-19-2-2 (transaction—based exemptions); LC. § 23-19-2—3 (rule-based
exemption).
V. erick’s sale of the Woodbridge notes to Plaintiffs violated Indiana Code §23-19-5-1.
Indiana Code § 23-19-5-1 provides that [i]t is unlawful for a person in
connection with the offer, sale, 0r purchase of a security, directly or indirectly:
(1) t0 employ a device, scheme, or artifice t0 defraud;
(2) t0 make an untrue statement 0f a material fact 0r t0 omit to state a
material fact necessary in order to make the statement made, in light of
the circumstances under Which they were made, not misleading; or
(3) to engage in an act, practice, or course of business that operates or
would operate as a fraud or deceit upon another person.
6 While the statute indicates that there are three alternative conditions for the proper sale of a security in
Indiana, a federal covered security exemption is included within the exemptions listed within the ISAprovisions referenced in this particular statute. Thus, a federal covered security is exempt fromregistration under the Act.
16
As t0 subparts (1) and (3), it should be noted that the concept 0f ”fraud” Within the
context 0f the ISA is not coextensive with fraud at common law. See LC. § 23-19-1-2(9).
Indeed, the former entails a broader array 0f conduct than the latter. Id. It may include a
”misrepresentation 0f material fact, a promise, representation, 0r prediction not made
honestly or in good faith, or the failure t0 disclose a material fact necessary in order to
make the statements made, in light 0f the circumstances under Which they were made,
not misleading.” Id. T0 remove any doubt, the statute unequivocally states that ”fraud”
and its related terms ”are not limited t0 common law deceit.” Id.
As t0 subpart (2), ”[t]he central consideration in determining materiality [of a
misrepresentation or omission] is whether a reasonable investor would attach
importance to the information when deciding his course of action.” Arnold v. Dirrim, 398
N.E.2d 426, 433 (Ind. Ct. App. 1979); Aronoflv. DiBruno, 2005 U.S. Dist. LEXIS 16942 *26
(SD. Ind. July 1, 2005). However, the requirement 0f materiality is not accompanied by
any element of investor reliance. Arnold, 398 N.E.2d at 435. Indeed, Indiana courts reject
such reliance as a prerequisite to liability under the ISA. Id.
Also related t0 subpart (2) and the Act’s modified definition 0f ”fraud” (and its
related terms) is that the ISA does not strictly require knowledge of (a) falsity or (b) an
omission of material information relative to a given transaction for liability t0 attach. See
Manns, 666 N.E.2d at 1248. At its core, the Act ”requires that material information be
disclosed,” and a Violation may, thus, ”turn[] entirely 0n whether the information
disclosed was accurate, if disclosed at all.” Id. (emphasis supplied). Quite simply, ”[i]f
17
material information is either misrepresented or omitted entirely, then the [Act] has
been violated,” and that is true regardless ofany intent t0 deflaud. Id. (emphasis supplied).
Wyrick’s failures t0 disclose that (a) she was not registered 0r licensed t0 sell
securities and (b) that the Woodbridge securities, themselves, were not registered in
Indiana both constitute material omissions Within the meaning 0f the Act. See Manns,
666 N.E.2d at 1249; see also Exhibit 1, Wyrick Dep. p. 125:18—20, 179:4—13; Exhibit 3
Wyrick Interrogatory Responses (”Wyrick Int”) N0. 3. The following passage from the
Manns opinion succinctly explains Why:
A reasonable investor would consider the broker’s registration With the division
important in making the investment decision because the registration serves as a
means to verify the experience, legitimacy, and veracity 0f the broker. In
addition, the fact that the security was not registered with the division wouldreflect 0n the validity of the transaction. Accordingly, this information [is]
material and [its] omission, therefore, constitutes a violation 0f the statute.”
Id. at 1249 (citations omitted). On this basis alone, Wyrick violated Indiana Code § 23-
19-5—1 as a matter of law.
There are, however, numerous other examples 0f actionable misrepresentations
and omissions by Wyrick established by the undisputed evidence. They include, but are
not necessarily limited to:
Material Misrepresentation or Omission Evidence
Wyrick misrepresented t0 Plaintiffs that the Exhibit 1, Wyrick Dep. pp.
Woodbridge investments were ”very safe and 11023-11128, 17822-5.
secure” simply because they were ”real estate
products” (which representation, itself, was only a
half-truth).
Wyrick went so far as to misrepresent to some Exhibit 1, Wyrick dep. p.
Plaintiffs that their principal investments in 17826-11; Exhibit 9, Casler Aff.
18
Woodbridge were ”guaranteed.” 115; Exhibit 10, Miller Aff. 1] 5;
Exhibit 11 Lane Aff. 116;
Exhibit 12 McCarty Aff. 114.
Wyrick omitted that she was earning a commissionon each investment in Woodbridge equaling
somewhere between 3% and 4% 0n each
Woodbridge transaction (including reinvestment)
she effectuated.
Exhibit 1, Wyrick Dep. p.
127213-20, 136:16-137214,
14421144524, 149:12-22, 153:2-
23; 180212—19.
Wyrick omitted that she had ”minimal” training
which might allow her t0 differentiate between a
security and a non-security for purposes of advising
as t0 the validity and/ 0r legality of Plaintiffs’
investments in Woodbridge.
Exhibit 1, Wyrick Dep. p.
70:11-13.
Wyrick omitted that investing in alternative
investments like the Woodbridge notes may not be
suitable for investors in or near their retirement
years.
Exhibit 1, Wyrick Dep. p.
178224-1793.
Wyrick omitted that, prior to Woodbridge, she hadno knowledge or experience as to the sale of non-
insurance products.
Exhibit 1, Wyrick Dep. pp.
101:13-102:2
Not only was Wyrick not registered to sell securities,
but further, she was not registered as an investment
adviser in Indiana, meaning her ability t0 provide
investment advice concerning securities was, at a
minimum, heavily restricted.
Exhibit 1, Wyrick Dep. 180:3-
77
Wyrick had n0 license in ”retirement planning,” the
contrary representations on the Gangwer website
notwithstanding.
Exhibit 1, Wyrick Dep.
10822-10922; Exhibit 4 Dep.
Ex. 6 [Website page claiming
”retirement planning” license]
Wyrick omitted the fact that Woodbridge wasinvolved in a number of lawsuits at the time
Plaintiffs invested in Woodbridge.
Exhibit 13 [April 20, 2016
Email from Wyrick to Lanes];
Exhibit 14 Wyrick Supp. Int.
7 Although Plaintiffs have not addressed it at length herein (and need not d0 so t0 succeed 0n their claims 0r 0n
summary judgment), the Act generally renders it unlawful to transact business as an investment adviser in Indiana
Without being registered as such or exempt from registration. I.C. § 23-19-4-3; see also LC. § 23-19-1-2(15)
(defining “investment adviser”).
19
Resp. No. 7; Exhibit9 Casler
Aff. 1113; Exhibit 10, Miller
Aff. 1114; Exhibit 11, Lane Aff.
117; Exhibit 12, McCarty Aff.
1114.
In the case of the Lanes, Wyrick misrepresented the Exhibit 13 [April 20, 2016
nature and seriousness of the lawsuits in which Email from Wyrick to Lanes]
Woodbridge had been involved, provided a
nonsensical explanation to the effect that the Indiana
Department of Insurance and its associated
regulatory scheme removed any cause for concern,
and/ 0r omitted to mention that she lacked
knowledge 0r expertise t0 opine as t0 any impacts
Woodbridge’s legal problems had 0n its Viability or
quality as an investment.
Regardless of whether any 0f the foregoing entailed knowing misrepresentations
or omissions, they are nevertheless (at least on a prima facie basis) actionable under the
ISA. Manns, 666 N.E.2d at 1248 (”for a Violation 0f [Indiana Code § 23-19-5-1’5
predecessor] to occur, an individual must only make material misrepresentations or
omit material information, regardless 0f intent”). Each entailed material information
which the Act demands be accurately provided t0 investors. See id. at 1250 (risks of
transaction entailed material information and the fact that said risks were never
discussed constituted a material omission, notwithstanding defendant’s claim that she
”didn’t think there was a risk involved”); Arnold, 398 N.E.2d at 433 (material
information is that to which a reasonable investor would attach importance). In order t0
make a fully informed decision as t0 the Woodbridge notes, the Plaintiffs were entitled
t0 an accurate account of a_ll material information. Id. There is n0 genuine dispute that
Wyrick failed to provide such and consequently violated Indiana Code § 23-19-5-1.
20
VI. As a matter of law, Wyrick cannot establish the ISA’s statutory defense.
Indiana Code § 23-19-5-9(a) imposes direct liability upon a person who violates
the Act in connection with the sale of a security unless said person establishes: (1) that
he or she did not know, and in the exercise of reasonable care could not have known of
the Violation; or (2) the purchaser knowingly participated in the Violation. As the plain
language of the statute itself evinces, the burden of proving one 0f these defenses rests
with the defendant asserting it. Id. As a matter 0f law, Wyrick cannot establish either.
Some 0f Wyrick’s discovery requests suggest that she (like many ISA defendants)
misconstrues 0r misapprehends what knowledge she must show that she (a) lacked and
(b) could not have obtained had she exercised reasonable care in order t0 succeed on the
first affirmative defense contemplated by Section 9(a) of the Act. See e.g. Exhibit 18,
Wyrick’s Request for Admissions t0 Plaintiffs. The ISA ”imposes liability 0n those Who
know (0r could know) the applicable facts Without regard to their knowledge of the
law.” Arnold, 398 N.E.2d at 434-435 (emphasis supplied); Lean, 876 N.E.2d at 1113-1114
(confirming that burden is to show that knowledge of ”facts constituting the Violation”
was not attainable) (emphasis supplied); Poyser v. Flora, 780 N.E.2d 1191, 1198 (Ind. Ct.
App. 2003) (defendant’s mere assertion that defendant was ”unaware that the law
attached any regulation t0 the facts as they existed d[id] not constitute an affirmative
defense under [Indiana Code § 23-19-5-9’5 predecessor]”). Approvingly quoting a
decision from the Eastern District 0f New York, the Indiana Court of Appeals opinion in
Arnold confirms that there isMg t0 indicate that the drafters of the uniform
securities laws (from Which the ISA is derived) ”intended t0 d0 away With the common
21
law rule that ignorance 0f the law is n0 defense.” Arnold, 398 N.E.2d at 435 (quoting
Moerman v. Zipco, Ina, 302 F. Supp. 439 (ED. N.Y. 1969)). To be sure, there is no ”good
faith defense” within the ISA which immunizes Violators Who simply did not know
their conduct was illegal. Id. Instead, if they knew 0r could have known 0f the facts
which give rise to the violation, they are liable under the Act. Id.
While it should come as n0 surprise that What constitutes ”reasonable care” is
often a question of fact, the Indiana Supreme Court has recognized that conduct may
certainly be unreasonable as a matter 0flaw in the context 0f an ISA claim. Lean, 876
N.E.2d at 1113—1114. Lean considered conduct of a corporate director8 by which he
simply ”assumed [a] transaction complied With applicable law,” Without reliance upon
any ”respectable authority” to that effect. Id. The Lean court readily dispelled any notion
that such conduct might even arguably suffice to evade liability under the Act:
A director Who makes this assumption does not meet the standard required bythe IS[A] that in the exercise 0f reasonable care he could not have known of the
facts constituting the violation. Reasonable inquiry, 0r receipt of reasonable
assurance, is one thing. But blind assumption that all is well [does not suffice].9
This was particularly true in Lean Where the ”rudimentary facts” about the security in
question ”b[0re] multiple indicia 0f a problematic investment.” Id.
8 While the liability 0f said director was premised upon the derivative (rather than direct) liability
imposed by the ISA upon a corporate director, the affirmative defenses available under the Act t0 a
defendant in either a derivative liability or a direct liability scenario are the same. Compare LC. § 23-19-5-
9(a) with LC. § 23-19-5-9(d)(2).
9 The Lean Court expanded upon the role of directors rather than getting directly t0 the bracketed point, but the spirit
of its message is unchanged by this modification 0f the quote.
22
Also noteworthy is that Lean implicitly reflects approval of the notion that the
reasonable care inquiry entails something of a sliding scale approach. See 876 N.E.2d at
1111. The more direct the role a given individual has t0 a transaction, the higher the
reasonable care standard becomes. Id. So, as t0 Wyrick who was directly presenting,
advocating for, and ultimately selling the Woodbridge securities, the logic of Lean
dictates that that she was quite Clearly not entitled to simply assume ”all [was] well”
with the Woodbridge investments. 1d,; see also id. at 1113-1114. Rather, she had an
obligation t0 proactively seek reasonable and reliable assurances that the investments
(and/ or her sale thereof) did not present any problems. Id. She absolutely failed t0 d0
that.
Unfortunately, unquestioning (and self-interested) assumption is all that Wyrick
had in assuring Plaintiffs that a Woodbridge investment was a sure thing. Wyrick had
never sold a non-insurance product (which she recognized the Woodbridge notes to be)
and she knew she had inadequate knowledge and training t0 be able t0 discern, With
any degree of certainty, whether the notes might be a security. Exhibit 1, Wyrick Dep.
pp. 67:8-68:10, 70:11-13, 71:3-8, 101:2-102z2, 122:1-123zl4. Nevertheless, she admits that
she did not carefully check the definition of ”security” under Indiana law prior t0
selling Plaintiffs’ Notes and that, had she done so, she would have seen that the
definition included ”note[s]” (Le. exactly the instrument she sold to Plaintiffs). Id. at pp.
12221-123214. Even more, she admits that she never spoke with someone knowledgeable
about Indiana securities laws about whether the notes might be regulated. Id. at p.
69:15—21. In fact, she did not seek the consult 0f any disinterested, unbiased,
23
knowledgeable individual at all; she simply relied upon the opinions 0f out-of-state
insurance agents as well as Woodbridge employees and assumed that their opinions
were reliable regardless 0f their credentials and regardless 0f the disincentives they had
t0 suggest the notes might be subject to securities laws and regulations. Id. at p. 6921-21.
Like the director in Lean, Wyrick did not seek out any ”respectable authority” t0 ensure
the legitimacy 0f these transactions and simply relied upon her ”blind assumption that
all [was] well.” Lean, 876 N.E.2d at 1113-1114. As a matter 0f law, this is not enough t0
avoid liability under the ISA. Id.
It also bears mentioning that Wyrick’s ”blind[ness]” was, in at least some
respects, willful. See Lean, 876 N.E.2d at 1113-1114. She ignored and swept aside
concerns about the lawsuits in Which she knew Woodbridge was entangled at the time
of Plaintiffs’ investments. Exhibit 13 April 20, 2016 Email from Wyrick to Lanes. She
paid no mind t0 the lack of any formal, written agreement as t0 her compensation from
Woodbridge, a Circumstance which she had never before encountered in her
professional career. Exhibit 1 Wyrick Dep. pp. 101:2-102z2. She glossed over
Woodbridge’s reference t0 her as a ”broker” 0r ”financial planner” in transactional
documents relating to her clients’ investments without ever questioning 0r protesting
said labels. See e.g. Exhibit 4 Dep. Ex. 25 (p. 9, referring to her as a financial planner);
Exhibit 4, Dep. Ex. 16 (at p. 2, identifying Wyrick as a broker); Exhibit 1, Wyrick Dep.
pp. 140:18-25, 15621-15727. Any 0f these ”rudimentary facts bear[ing] multiple indicia
0f a problematic investment,” Lean, 876 N.E.2d at 1113-1114, should have prompted
Wyrick to further evaluate Woodbridge. Instead, she did nothing but persist in her
24
”blind assumption” that nothing even might be amiss. Id. As a matter of law, that is not
reasonable care. Lean, 876 N.E.2d at 1113-1114.
And, 0f course, Wyrick knew at all times that she was not licensed to sell
securities in Indiana. Exhibit 2, Indiana Securities Division Certification. She also knew
that the Woodbridge notes were not insurance products and were investments in which
Plaintiffs expected to earn profits through no action of their own aside from simply
contributing the funds. See Exhibit 1 Wyrick Dep. pp. 67215-6821, 70214-7128, 96:14-18,
11023-11128, 12924-14, 17822-5. Implicit in her claimed belief that the Woodbridge notes
were not securities at all is her knowledge that they were not registered as securities in
Indiana. See Exhibit 2, Indiana Securities Division Certification. That she was mistaken
about the legal ramifications of these facts does not render her immune from ISA
liability. Arnold, 398 N.E.2d at 435.
The foregoing removes any genuine dispute as t0 whether Wyrick may prevail
0n the first affirmative defense contemplated by the ISA, and there is similarly n0
dispute that she cannot prevail as to the second. The Plaintiffs did nothing to knowingly
participate in any violation 0f Indiana securities law, and Wyrick has never asserted the
contrary. Exhibit 9 Casler Aff. 1114; Exhibit 10, Miller Aff. 1115; Exhibit 11, Lane Aff.
1115; Exhibit 12 McCarty Aff. 1115. None were sophisticated in investment matters and
all placed trust and confidence that Wyrick was forthright in her presentation of the
Woodbridge opportunity and qualified to endorse its legitimacy. Exhibit 9, Casler Aff.
1115; Exhibit 10 Miller Aff. 1116; Exhibit 11, Lane Aff. 1116; Exhibit 12 McCarty Aff. 1116.
25
She was not, and undertook n0 reasonable effort t0 place herself in such a position. As a
matter 0f law, she cannot establish the ISA’s statutory defense.
VII. erick is liable to Plaintiffs under Indiana Code § 23-19-5-9(a).
Indiana Code § 23—19—5—9(a) affords an ISA plaintiff a right t0 recover the
following:
(1) consideration paid for the security (Le. the principal investment here) less the
amount of any income received on the security;
(2) interest at the greater of eight percent (8%) per annum 0r the rate provided for
in the security from the date of the purchase;
(3) costs;
(4) reasonable attorney’s fees determined by the court.
There is n0 dispute that Wyrick’s Violation 0f the ISA subjects her t0 this liability. The
only question relates t0 the amounts associated With each category, Which information
the Plaintiffs are still compiling. The Court should find that Wyrick is liable to Plaintiffs
as a matter of law and establish a date by Which Plaintiffs shall submit proof and
quantification of damages.
CONCLUSION
Wyrick sold unregistered securities without a license and without disclosing
either her 0r the investment’s unregistered status. As a matter 0f law, this conduct
violated the Indiana Securities Act. Plaintiffs are entitled to summary judgment.
26
Respectfully submitted,
/s/ Iacob M. O'Brien
Jacob M. O’Brien, I.D. #31445-09
Scott L. Starr, ID. # I.D. 1601-09
Starr Austen & Miller, LLP201 South Third Street
Logansport, IN 46947
(574) 722-6676
(574) 753-3299
ATTORNEYS FOR PLAINTIFFSREBA L. CASLER, RICHARD MCCARTY,DOROTHY J. MCCARTY, TED MILLER,JANET MILLER, ROBERT LANE,and KATHY LANE,
CERTIFICATE OF SERVICE
Ihereby certify that on the 28th day of May, 2021, a true and accurate copy of the
above and foregoing Plaintiffs’ Memorandum in Support of Partial Motion for
Summary Judgment as to Liability Against Defendant Ashley Wyrick was served upon
Phillip M. Triplett, Esq., Rya Moore Cook Triplett & Albertson LLP, 257 S. Main Street,
Frankfort, IN 46041 and Alejandra Reichard, Esq. and Monica Brownewell Smith, Esq.,
Barnes 8: Thornburg LLP, 11 S. Meridian Street, Indianapolis, IN 46204 Via E-Service
through the Indiana E-Filing System or by depositing the same in the United States Mail
with sufficient first-class postage affixed.
596300.000/Wyrick Memo iso S]
/s/Iacob M. O’Brien
Jacob M. O'Brien
27