Opinion No. CP98-01
BEFORE THE NEVADA COMMISSION ON ETHICS
IN THE MATTER OF THE REQUEST FOR OPINION CONCERNING
ALLEGATIONS THAT BRIAN KROLICKI, candidate for State Treasurer,
IMPEDED THE SUCCESS OF THE CAMPAIGN OF
KEN SANTOR, candidate for the Office of State Treasurer
This Opinion is in response to a request for opinion filed pursuant to NRS 294A.345 and 281.477 with the Nevada Commission on Ethics (Commission) by Ken Santor against Brian Krolicki. A hearing on the opinion request was held on August 27, 1998, in Reno, Nevada. Mr. Krolicki was represented by Todd Bader, and Mr. Santor was represented by David Horton. The Commission heard testimony from Mr. Santor, Mr. Krolicki, and Suzanne Santor and received several exhibits. At the conclusion of the hearing, the Commission deliberated the matter and reached a decision. The Commission now issues the Findings of Fact and Opinion which follows.
FINDINGS OF FACT
1. On June 15, 1988, the Second Judicial District Court of the State of Nevada entered Findings of Fact, Conclusions of Law, and Judgment in the case of Precision Rolled Products, Inc. v. Nev-Tex Oil and Gas, Inc. (Case No. 83- 8295). In this case, Mr. Santor was named as an individual party. Pertinent to this matter, the district court concluded:
4. That PRP relied upon the representations of KENNETH SANTOR that:
(a) The Well showed a high probability of commercial production for gas;
(b) The gas showing on the mud logs went off the chart; and
(c) His experts recommended completion of the Well to the nine hundred (900) foot level.
All of which were known to MR. SANTOR to be false and/or which he had insufficient basis for making such representations and that in reliance upon such representations, which such reliance was intended by MR. SANTOR, PRP released Fifty-Eight Thousand Dollars ($58,000.00) to NEV- TEX to its detriment.
5. That MR. SANTOR intentionally misrepresented material facts to PRP, with the intent to defraud PRP, and such action justifies punitive damages being awarded to PRP.
6. That NEV- TEX is the alter ego of KENNETH SANTOR.
Mr. Santor was personally ordered to pay to Precision Rolled Products (PRP) the sum of $58,000.00 as damages, $5,000.00 as punitive damages, and PRP's costs of suit.
2. Mr. Santor appealed the district court's order to the Nevada Supreme Court. On November 27, 1989, the Nevada Supreme Court issued its order. Nev-Tex Oil & Gas, Inc. v. Precision Rolled Products, 105 Nev. 685, 782 P.2d 1311 (1989). Pertinent to this matter, the Supreme Court held:
The district court found that Santor intentionally misrepresented material facts to respondent and that respondent was damages in the amount of $58,000 because of those misrepresentations. An agent who fraudulently makes representations is liable in tort to the injured person although the fraud occurs in a transaction on behalf of the principal. See e.g. Carrel v. Lux, 420 P.2d 564, 576 (Ariz. 1966); Pentacost v. Harward, 699 P .2d 696, 699 (Utah 1985). Thus appellant Santor is liable to respondent regardless of whether the corporate veil was correctly pierced.
Id at 686.
3. In 1998, Mr. Krolicki and Mr. Santor are both Republican candidates for state treasurer. Because there are no Democratic candidates, the result of the primary on September 1, 1998 will, for all intents and purposes, determine who the next treasurer of Nevada will be.
4. In furtherance of his candidacy, Mr. Krolicki prepared three 30-second radio advertisements. Two of the advertisements featured the endorsements of Mr. Krolicki by Bob Seale and Darrell Daines. The third advertisement (hereinafter "the Santor ad") was read by a female voice, and the text of this advertisement was as follows:
WHY DOES A PERSON FOUND GUILTY OF FRAUD WANT TO BE YOUR NEXT STATE TREASURER? THE STATE TREASURER HANDLES BILLIONS OF DOLLARS IN TAXPAYER MONEY. BUT KEN SANTOR W AS FOUND GUILTY BY THE NEVADA SUPREME COURT OF CHEATING A LOCAL COMPANY OUT OF TENS OF THOUSANDS OF DOLLARS. NO POSITION REQUIRES MORE HONESTY AND INTEGRITY THAN STATE TREASURER. CAN WE AFFORD TO RISK OUR MONEY WITH SOMEONE GUILTY OF FRAUD? PAID FOR BY BRIAN KROLICKI FOR STATE TREASURER. (Emphasis in original.)
5. Though Mr. Krolicki's instructions to various radio stations were that the Santor ad was not to be run until August 21, 1998, the evidence showed that the Santor ad ran on K-BUL beginning on August 17, 1998.
6. On August 23, 1998, an advertisement by Mr. Krolicki ran in the Reno Gazette-Journal that compared two lists of accomplishments, one for Mr. Krolicki and one for Mr. Santor. In the list of Mr. Santor's accomplishments, the advertisement stated that Mr. Santor was, "Found guilty of fraud by Nevada Supreme Court..."
OPINION AND ANALYSIS
The Commission has jurisdiction over this matter and these parties pursuant to NRS 294A.345 and 281.477 because they are both candidates as defined in NRS 294A.005.
At issue in this matter was NRS 294A.345(1)(c), which provides:
1. A person shall not, with actual malice and the intent to impeded the success of the campaign of a candidate, cause to be published a false statement of fact concerning the candidate, including, without limitation, statements concerning:
(c) Whether the candidate committed, was indicted for committing or was convicted of committing a felony or other crime involving moral turpitude, dishonesty or corruption. (Emphasis supplied.)
According to NRS 281.477(7), the person who makes the request (in this case Mr. Santor) bears the burden of proving the elements of the offense under NRS 294A.345 by clear and convincing evidence.
In this matter, Mr. Santor did not carry his burden of proof. The evidence showed that Mr. Santor was found personally liable for defrauding PRP, causing damages of $58,000.00, and that the fraud was sufficiently serious that the trial court imposed punitive damages of $5,000.00 against Mr. Santor personally. The Supreme Court affirmed the judgment against Mr. Santor, and changed the basis for the personal judgment against him because, in the Supreme Court's opinion, Mr. Santor could be liable personally for the judgment without the necessity of piercing Nev- rex's corporate veil.
The Nevada Supreme Court has stated in its opinions that people may be "guilty" of torts. Black's Law Dictionary similarly also states that the word "guilty" can be used to describe liability for a tort. Other courts, including the United States Supreme Court, have also described a person found liable for a tort to be "guilty" of the tort.
We must conclude that Mr. Krolicki's statements in his advertisements that Mr. Santor was found "guilty" of fraud by the Nevada Supreme Court are true. Mr. Santor's arguments that the Nevada Supreme Court is not a trial court, and, therefore, could not "find" anybody "guilty" is misplaced. By affirming the trial court's finding that Mr. Santor was guilty of the tort of misrepresentation or fraud, the Supreme Court did, de fact and de jure, find that Mr. Santor had committed fraud.
Because the Supreme Court did find that Mr. Santor had committed fraud, Mr. Krolicki's statement that Mr. Santor "was found guilty by the Nevada Supreme Court" of fraud is a true, albeit advocative, statement of fact. Mr. Krolicki did not violated N AS 294A.345.
Based upon the record, the Commission concludes the Mr. Krolicki did not violated NRS 294A.345 by stating in his political advertisements that Mr. Santor was found guilty of fraud by the Nevada Supreme Court.
It is specifically noted that the foregoing Opinion applies only to these specific facts and circumstances. The provisions of the Nevada Revised Statutes quoted and discussed above must be applied on a case-by-case basis, with results which may vary depending on the specific facts and circumstances involved.
DATED: August 28, 1998.
NEVADA COMMISSION ON ETHICS
By: /s/ MARY E. BOETSCH, Chairwoman