## Facts

- Robert Harlan Gunnison, Jr. was president of Arizona Realty and Mortgage Trust, which managed several financially troubled development-related companies.
- Gunnison oversaw liquidation of assets and mortgages for Consolidated Mortgage Corporation; many mortgages were sold to Equitable Mortgage Company, which sold them to the public.
- A Pima County grand jury indicted Gunnison and others for numerous securities-law violations and conspiracy; Gunnison was charged in 148 of 173 counts.
- At trial, Gunnison offered evidence that he acted in good faith based on advice that the transactions were lawful to rebut the required mental state.
- The trial court excluded the good-faith evidence on the view that the conspiracy charge did not require proof that Gunnison knew the conduct was unlawful.
- A jury convicted Gunnison on five securities-related counts, including conspiracy (Count 1) and securities fraud (Count 2).

## Issues

1. In a criminal prosecution for conspiracy to sell securities in violation of A.R.S. § 44-1991(2), must the State prove scienter (a culpable mental state) as to the defendant conspirator?

## Decision

- The Arizona Supreme Court granted review only to decide whether scienter is required for conspiracy to violate A.R.S. § 44-1991(2).
- The court held that the State must prove scienter to establish criminal conspiracy to sell securities under A.R.S. § 44-1991(2).
- The court agreed with the court of appeals’ overall disposition: affirmance of the conspiracy count and the securities-fraud count, and reversal of three other counts.

## Legal Principles

- “Scienter,” in the criminal context, refers broadly to the mental state necessary to make conduct a criminal offense, ranging from awareness of actions to intentional wrongdoing.
- Criminal conspiracy is not treated as a strict-liability offense; it requires proof of a culpable mental state connected to the agreement and unlawful objective.
- When a statute authorizes criminal punishment in a regulatory field, courts generally presume a mens rea requirement unless the legislature clearly eliminates it.
- Evidence offered to negate the required culpable mental state, including good-faith reliance on advice that conduct was lawful, is relevant when scienter is an element.

## Conclusion

The court held that prosecuting conspiracy to sell securities under A.R.S. § 44-1991(2) requires proof of scienter, confirming that criminal conspiracy in this setting demands a culpable mental state rather than near strict liability.


State v. Gunnison, 127 Ariz. 110 (Ariz. 1980)