author: HUSPENI, Judge.

text:
    DAKOTA BANK, Appellant, v. Carl EIESLAND, et al., Respondents.
    No. C0-01-1941.
    Court of Appeals of Minnesota.
    June 11, 2002.

      Susan E. Barnes, Sarah B. Stroebel, Lindquist & Vennum, Minneapolis, MN, for appellant.
    Thomas P. Kane, Hinshaw & Culbertson, Minneapolis, MN; and Edward J. Rolwes, Rosenblum, Goldenhersh, Silver-stein & Zafft, P.C., St. Louis, MO, admitted pro hac vice, for respondents.
    Considered and decided by HANSON, Presiding Judge, SCHUMACHER, Judge, and HUSPENI, Judge.
   OPINION

HUSPENI, Judge.

Appellant bank’s claims of respondent accountants’ negligent and intentional misrepresentations, based on reliance on information contained in financial compilations prepared by respondents, were dismissed by the district court for failure to state claims on which relief can be granted. Appellant, in challenging that dismissal, argues that (a) the disclaimer should not shield accountants who knew or should have known the information was false and (b) where accountants affirmatively represent that they have complied with specific professional standards, they should be held liable for failure to comply with those standards. Because appellant’s complaint fails to state a claim of negligent misrepresentation on which relief can be granted, but does state a claim of intentional misrepresentation upon which relief may be granted, we affirm in part, reverse in part, and remand.

FACTS

E.T. Technologies, Inc. (ETT), an equipment supplier, was owned by Eric Eies-land. On March 21, 1997, ETT and Eric Eiesland entered into several agreements with appellant Dakota Bank (Dakota), including a $500,000 draw note and a commercial loan agreement. Eric Eiesland personally served as a guarantor of the loan and represented to Dakota that he needed financing to purchase equipment inventory. ETT’s business consisted in large part, however, of brokering equipment or taking equipment on consignment; the business did not often directly purchase equipment to resell.

The loan agreement required that [a]ll information that has been provided to Lender by or on behalf of [ETT and Eric Eiesland] is true and correct and does not and shall not omit any material fact necessary to make such information not misleading.

Before drawing on the available credit under the loan, ETT certified its current accounts receivable and inventory to Dakota. It could then borrow up to 70% of that amount.

At all times relevant to the complaint, respondents McCarthy, Pacilio, Eiesland & Gibbert, P.C. (MPEG), and Carl Eiesland, as a partner of MPEG, acted as certified public accountants for ETT. ETT’s owner, Eric Eiesland, is the son of Carl Eiesland. Carl Eiesland and MPEG knew that ETT’s financing was through Dakota, knew that ETT and Eric Eiesland were providing to Dakota financial statements that had been prepared by MPEG, and knew that Dakota relied on these financial statements when providing funds under the loan. Each of the compiled financial statements regarding ETT that were provided to Dakota included a cover letter that stated:

A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statement and, accordingly do not express an opinion or any other form of assurance on them.

The cover letter also stated that MPEG was “not independent with respect to [ETT].”

Carl and Eric Eiesland talked about ETT’s business “quite often,” “maybe once every couple weeks.” Carl Eiesland and MPEG knew that ETT was required to certify to its accounts receivable in order to draw on the credit line.

The original note, issued on March 21, 1997, was renewed several times. The first renewal, on March 23, 1998, was based on a compiled financial statement for ETT dated February 10, 1998, for the period ending December 31, 1997. Respondents prepared that statement “in accordance with statements on Standards for Accounting and Review services issued by the American Institute of Certified Public Accountants.” Dakota relied on that statement in extending credit by examining ETT’s accounts payable and receivable, and inventory listed on the statement. The next three renewals of the note did not refer to the compiled financial statements, but relied on representations of ETT and Eric Eiesland about ETT’s collateral value and Eric Eiesland’s net worth. Dakota renewed the note on July 29, 1998, August 21, 1998, and October 8, 1998, based on those representations. Dakota extended the note through January 21, 1999, and ultimately through May 20, 1999.

ETT defaulted on the note on May 21, 1999. Dakota was notified that ETT’s collateral market value was, at most, $120,500, which was substantially less than the collateral market value of $931,147 reported in MPEG’s financial compilation statement dated February 22, 1999. Subsequently, Eric Eiesland’s debts, except for his personal guarantee on the note, were discharged in bankruptcy.

Dakota brought an action against MPEG and Carl Eiesland, alleging both intentional and negligent misrepresentation, and claiming that amounts represented on the non-audited compiled financial statements as accounts receivables were not true receivables or amounts that were ultimately owing or belonging to ETT.

The complaint alleges that Eiesland and MPEG knew or should have known that an inventory of consigned or brokered equipment was worth significantly less than inventory owned by a company; that the personal and business statements and other documents prepared by MPEG and submitted by Eric Eiesland and ETT to Dakota contained representations about the financial condition of ETT and Eric Eiesland relating to net worth, accounts receivable and payable, inventory, and other assets that were materially false when made; that because of Carl Eiesland’s close familial ties and frequent contact with ETT’s owner, Carl Eiesland and MPEG knew or should have known that those representations were materially false; and that Carl Eiesland and MPEG made the representations in the financial statements with the purpose and intention of deceiving Dakota to induce it to continue to extend or renew credit to ETT and to abate potential collection efforts.

The district court granted respondents’ motion to dismiss for failure to state a claim on which relief can be granted under Minn. R. Civ. P. 12.02(e). This appeal followed.

ISSUE

Did the district court err by dismissing a complaint for failure to state a claim when the complaint states that the accountants knowingly made misrepresentations to a foreseeable third party in unaudited financial statements? '

ANALYSIS

A complaint failing to state a claim on which relief can be granted must be dismissed. Minn. R. Civ. P. 12.02(e). We review a complaint dismissed for that reason to determine “whether the complaint sets forth a legally sufficient claim for relief.” Elzie v. Comm’r of Pub. Safety, 298 N.W.2d 29, 32 (Minn.1980) (emphasis omitted).

A claim prevails against a motion to dismiss if it is possible on any evidence which might be produced, consistent with the pleader’s theory, to grant the relief demanded.

Geldert v. Am. Nat’l Bank, 506 N.W.2d 22, 25 (Minn.App.1993) (citations omitted), review denied (Minn. Nov. 16, 1993). We must accept the allegations contained in the complaint as true. Elzie, 298 N.W.2d at 33. It is immaterial to our analysis whether the plaintiff can prove the alleged facts. Id. at 32.

Dakota has alleged both that respondents’ actions constituted negligent misrepresentation and that they constituted intentional misrepresentation. We shall address each of these claims in turn.

With regard to negligent misrepresentations, Dakota relies on Bonhiver v. Graff, 311 Minn. 111, 248 N.W.2d 291 (1976), to argue that unaudited accounting records can be deemed representations by accountants. In Bonhiver, the Minnesota Supreme Court applied section 552 of the Restatement (Second) of Torts to establish an accountant’s liability to third parties for negligent misrepresentation. Id. at 121— 22, 248 N.W.2d at 298-99. That section, entitled “Information Negligently Supplied for the Guidance of Others,” provides:

(1) One who, in the course of his * * * profession * * *, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and '
(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

Restatement (Second) of Torts § 552 (1976) (emphasis added).

We agree with respondents that Bonhiver does not aid Dakota’s argument on negligent misrepresentation. The Bonhiver court found liability where the third party (the department of insurance, which was examining the books of a company at the same time as the defendant accountants) relied on the working paper of the accountants, which did not rise to the level of a finalized report. Bonhiver, 311 Minn, at 119-20, 248 N.W.2d at 297. The accountants in Bonhiver spoke directly with the department’s employees while they were working on the examination of documents, however, and told the department’s employees that the information was correct. Id. at 122-23, 248 N.W.2d at 299. That situation does not exist here. Dakota’s reliance on Bonhiver is misplaced.

There is no Minnesota law on point addressing whether a third party justifiably relies on unaudited, compiled financial statements in which the accountants have expressed no opinion. Several foreign jurisdictions have dealt with the matter, however, and have held that third parties do not justifiably rely on unaudited compiled financial statements where the statement contains a disclaimer. In First Nat’l Bank of Newton Cty. v. Sparkmon, the Georgia Court of Appeals held that under the Restatement (Second) of Torts § 552, professional liability for negligence is extended to foreseeable persons for whom the information was intended, either directly or indirectly, but that the duty to professionals may be

limited by appropriate disclaimers which would alert those not in privity with the supplier of information that they may rely upon it only at their peril.

First Nat’l Bank of Newton Cty. v. Sparkmon, 212 Ga.App. 558, 442 S.E.2d 804, 805 (1994) (citation omitted) (emphasis omitted). Similarly, in Evans v. Israeloff, Trattner & Co., 208 A.D.2d 891, 617 N.Y.S.2d 899, 900 (1994), the New York Supreme Court, Appellate Division, held that in a fraud claim brought by third party, that party’s reliance on unaudited financial statements containing alleged misrepresentations by accountants was not justified as a matter of law where the statements contained a disclaimer.

Here, our research has uncovered two cases that conflict with Sparkmon and Evans. In Liberty Finance Co. v. BDO Seidman, 123 N.C.App. 515, 473 S.E.2d 13, 13-14 (1996), the third-party plaintiff lent money to a corporation based on the value of accounts receivable as reflected in unaudited financial statements prepared by the defendant-accountant for the corporation. Those statements provided no opinion on their accuracy and contained a disclaimer limiting the scope of the report. Id. at 14. The North Carolina Court of Appeals held that it was error to dismiss the claim, based on an accountant’s negligence, for failure to state a claim because defendant-accountant could not prove, as a matter of law, that plaintiff did not justifiably rely, under the Restatement (Second) of Torts § 552, on the unaudited statements. Id. at 14-15.

Similarly, in ML-Lee Acquisition Fund, L.P. v. Deloitte & Touche, 320 S.C. 143, 463 S.E.2d 618 (1996), aff'd in part and rev’d in part on other grounds, 327 S.C. 238, 489 S.E.2d 470 (1997), the South Carolina Court of Appeals held that an accountant’s “comfort letter,” provided to a third-party lender by the accountant’s client to satisfy a condition of a loan that certain financial issues be explained, did not require a finding as a matter of law that the lender’s reliance on the letter was not justified under the restatement section 552, despite the fact that it contained a disclaimer.

Here, the district court dismissed Dakota’s negligent misrepresentation claim because, as a matter of law, Dakota could not predicate its claim on justifiable reliance on a financial compilation where a disclaimer is attached that states:

A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statement and, accordingly do not express an opinion or any other form of assurance on them.

We find Sparkmon and Evans to be the more persuasive authority on the issue of negligent misrepresentation. Unlike an audit, a compilation, by its very nature, does not involve an independent examination by the accountant of the financial information on which the financial data provided by the client is based. Unaudited financial statements are merely compilations of information obtained from the audited party and, as such, do not reflect the professional opinion of the compiling party. In this instance, the disclaimer, in clear and unambiguous language, warned any party seeking to rely on the compiled information of the severe, if not complete, limitations placed on such reliance.

By contrast, we do not find Liberty Finance and ML-Lee persuasive. In both cases, the courts did not analyze the language contained in the disclaimer. Further, in ML-Lee, the comfort letter was written specifically for the third-party loan by the accountant. 463 S.E.2d at 630. We find that the language in the disclaimer here is specific and warned the bank of the very problem of which it complains. Minnesota law recognizes the validity of specific disclaimers. See, e.g., Carlock v. Pillsbury Co., 719 F.Supp. 791, 830 (D.Minn.1989) (franchises did not justifiably rely upon franchisors’ representations regarding costs, in light of specific disclaimer in offer concerning variances in those costs and advice to prospective franchisees to contact qualified professionals to make independent survey of those expenditures).

We cannot conclude our discussion of negligent misrepresentation without addressing a further argument raised by Dakota. MPEG explicitly stated in its unaudited financial statements that it abided by the standards established by the American Institute of Certified Public Accountants (AICPA). Section 100.07 of the AICPA Professional Standards provides:

The accountant should possess a level of knowledge of the accounting principles and practices of the industry in which the entity operates that will enable him or her to compile financial statements that are appropriate in form for an entity operating in that industry.

Dakota argues that respondents failed to recognize that in the business operated by ETT and Eric Eiesland, inventory of consigned or brokered equipment is worth significantly less than inventory owned by the company. Therefore, argues Dakota, respondents did not possess or employ a sufficient level of knowledge of ETT’s industry.

Section 100.09 of the standards provides:

The accountant is not required to make inquiries or perform other procedures to verify, corroborate, or review information supplied by the entity. However, the accountant may have made inquiries or performed other procedures. The results of such inquiries or procedures, knowledge gained from prior engagements or the financial statements on their face may cause the accountant to become aware that information supplied by the entity is incorrect, incomplete, or otherwise unsatisfactory. In such circumstances, the accountant should obtain additional or revised information. If the entity refuses to provide additional or revised information, the accountant should withdraw from the engagement.

Dakota argues that under section 100.09 respondents failed to comply with the duty to obtain additional information.

With regard to the claim of negligent misrepresentation, we conclude that Dakota’s argument of noncompliance with AIC-PA standards must fail. While we do not adopt the reasoning of the district court that these standards are aspirational only, and therefore could not have been violated , we do agree with the court’s conclusion that even if the AICPA standards could be and were violated, the disclaimers that accompanied the compilations in this case prevented any justifiable reliance by Dakota on the representations contained in those compilations. See Sparkmon, 442 S.E.2d at 805-06 (disclaimer precluded justifiable reliance claim for negligent failure to comply with AICPA standards for compilations despite fact that accountants stated in compilations that they complied with standards). Therefore, we conclude that the district court correctly dismissed Dakota’s claim of negligent misrepresentation on the part of respondents.

The question of whether the district court also correctly dismissed the intentional misrepresentation claim re-mains, however, and is a troubling one. Sparkmon and Evans offer scant assistance to us on this issue. Sparkmon involved a claim of negligent misrepresentation only. It is not clear whether the claim in Evans included intentional misrepresentations on the part of the accountants. This case involves a claim based on the intentional misrepresentation of the accountants. Notably, this case also involves a close familial relationship between Carl Eiesland, the accountant working on the compilations, and Eric Eiesland, the owner of the company for which the compilations were being prepared.

We find support for our position in Ashland Oil, Inc. v. Arnett, 875 F.2d 1271 (7th Cir.1989). Although the jurisdiction in which the case arose did not follow the restatement rule in determining the liability of professionals to third parties, the Seventh Circuit held that a fraud claim could stand where the accountant knew the statement was fraudulent and would be relied on as accurate, despite the fact that an accountant’s “special accrual statement” was not audited and contained a disclaimer disavowing any assurance of accuracy. Id. at 1284-85.

MPEG prepared financial statements on behalf of ETT and Eric Eiesland. The accountant who worked on the financial statements was the father of the owner of that closely held corporation. The complaint asserts that Eric Eiesland and his father, the accountant, had close personal contact regarding the nature of the business, Eric Eiesland’s business practices regarding inventory and accounts payable and receivable, and Dakota’s loans. The complaint alleges that because of the father/son relationship, the frequent contacts between the accountant and the company’s owner, and the special knowledge gained from discussions about the son’s business, MPEG knew that those financial statements contained false information about the value of ETT’s inventory and accounts receivable, and Eric Eiesland’s net worth. The complaint also alleges that MPEG had actual knowledge that the statements were going to be relied on by Dakota in its credit determinations.

As noted, for purposes of a rule 12 motion to dismiss, allegations in a complaint must be accepted as true. Elzie, 298 N.W.2d at 33. Whether Dakota can produce evidence to substantiate those allegations is not a question properly addressed at this early stage of a proceeding. Id. at 32. We conclude that under the particular circumstances of this case, however, Dakota is entitled to go forward with discovery and other further proceedings in an attempt to meet its burden of showing intentional misrepresentation.

Further, the disclaimer, which was so important in our analysis of negligent misrepresentation (and to the relevancy of compliance with AICPA standards) will not absolve MPEG of liability against the intentional misrepresentation allegations. See Ashland Oil, 875 F.2d at 1284-85 (court held that whether third party’s reb-anee on compilation was justifiable was a jury question despite accountant’s disclaimer; “[a] disclaimer cannot relieve an accountant from the duty to refrain from knowingly being party to fraud.”); see also Hydra-Mac, Inc. v. Onan Corp., 430 N.W.2d 846, 852 (Minn.App.1988) (in dispute involving contract to purchase, it would be a “distortion of law” if a cause of action for fraud could not be asserted despite fact that contract validly disclaimed ab warranties), aff'd in part and rev’d in part on other grounds, 450 N.W.2d 913 (Minn.1990); St. Croix Printing Equip., Inc. v. Rockwell Int’l Corp., 428 N.W.2d 877, 881 (Minn.App.1988), review denied (Minn. Nov. 16, 1988) (law would be “distorted” if, under the U.C.C., an action for fraud could not stand because of warranty disclaimer).

Finally, recognizing that a financial compilation, by its nature, is more limited than a review or an audit, and provides a less expensive accounting method for small businesses to efficiently gather and summarize financial information, we address a public policy concern raised by respondents. They urge that permitting this case to go forward would “require a clear expansion of Minnesota law, unprecedented in any other jurisdiction in the nation and well beyond the facts in Bonhiver.” We do not intend for this decision to create such widespread consequences. Instead, the reach of our decision should be quite limited. This case presents unique circumstances that would normally not be present in an arm’s-length aceoun-tant/client relationship. The presence of those unique circumstances in the context of a claim for intentional misrepresentation precludes, we believe, a rule 12 dismissal. The intentional misrepresentation claim here should be reinstated and Dakota should be permitted to go forward with its burden to prove the allegations set forth in the complaint.

DECISION

Dakota’s claim for negligent misrepresentation was properly dismissed for failure to state a claim. Dakota was a third party relying on unaudited compiled financial statements that contained disclaimers clearly stating that the statements were based on the unaudited representations of the company’s management and that the accountants did not express an opinion on them. Dakota, as a matter of law, was not entitled to rely on those statements. Dismissal of Dakota’s intentional misrepresentation claim is reversed. The complaint’s allegations of respondents’ knowledge that the audited company’s financial condition was different from the condition represented by management and knowledge that Dakota would rely on those statements to extend loans are sufficient to permit Dakota to proceed in an attempt to provide evidence to prove the truth of those allegations.

Affirmed in part, reversed in part, and remanded.

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

      . The parties, while noting in their appeal briefs the presence of this statement, raise no issue nor make any argument with reference to it. Accordingly, we do not address it.

      . On December 1, 1998, after the note had been extended through January 21, 1999, Dakota received a compiled financial statement prepared by MPEG for the period ending September 30, 1998. Dakota alleged in the complaint that it "relied on this MPEG statement in determining to continue its relationship with [ETT].” On January 20, 1999, Dakota extended the note through May 20, 1999, without having yet received a later compilation dated February 22, 1999. The complaint alleged that this final extension was based on misrepresentations by ETT and Eric Eiesland and that Dakota "relied upon this [February 22, 1999] MPEG statement in continuing its relationship with [ETT]-”

      . Dakota argues that although the AICPA standards are not mandatorily imposed on accountants, accountants who voluntarily represent that they have adhered to the standards should be held to that representation. We do not reach the question of whether AICPA standards can be violated, and if so, what consequences might ensue.

      . Intentional misrepresentation claims require plaintiffs to allege that the defendant
      (1) made a representation (2) that was false (3) having to do with a past or present fact (4) that is material (5) and susceptible of knowledge (6) that the representor knows to be false or is asserted without knowing whether the fact is true or false (7) with the intent to induce the other person to act (8) and the person in fact is induced to act (9) in reliance on the representation (10) that the plaintiff suffered damages (11) attributable to the misrepresentation.

        M.H. v. Caritas Family Servs., 488 N.W.2d 282, 289 (Minn.1992) (citation omitted). Misrepresentations may be made by either making an affirmative statement that is itself false, or concealing or not disclosing certain facts that render the facts that are disclosed misleading. Id. An actionable misrepresentation requires proof either that the misrepresenter acted dishonestly or in bad faith, i.e., with fraudulent intent or, alternatively, acted negligently. Plorenzano v. Olson, 387 N.W.2d 168, 173 (Minn.1986).


source: Caselaw Access Project

author: PORITSKY, Judge.

license: Public Domain

text:
    STATE of Minnesota, Respondent, v. Montell Andre DeSHAY, Appellant.
    No. C9-01-1128.
    Court of Appeals of Minnesota.
    June 11, 2002.

      Mike Hatch, Attorney General, John B. Galus, Assistant Attorney General, St. Paul, and Alan L. Mitchell, St. Louis County Attorney, Duluth, for respondent.
    John M. Stuart, State Public Defender, Michael C. Davis, Special Assistant Public Defender, St. Paul, for appellant.
    Considered and decided by HANSON, Presiding Judge, SCHUMACHER, Judge, and PORITSKY, Judge.
   OPINION

PORITSKY, Judge.

This is an appeal from a conviction of and sentence for conspiracy to commit first-degree controlled-substanee crime, committed for the benefit of a gang. Appellant argues that (1) the “crime committed for the benefit of a gang” statute violates equal protection, (2) the evidence presented is insufficient to prove the offense, (3) the district court erred by admitting expert testimony based on the ten-point gang-identification criteria, (4) the district court abused its discretion by de-dining to depart downward at sentencing, and (5) the district court erred by failing to suppress a tape recording of a conversation between DeShay and a paid police informant. We affirm.

FACTS

In 1998, Robert Jackley, a paid informant for the Duluth police, became acquainted with a group of individuals involved in the sale of crack cocaine and heroin, which the individuals were transporting from Milwaukee to Duluth. Although there is no evidence that appellant Montell Andre DeShay was involved in transporting drugs, Jackley testified that DeShay sold crack cocaine once to Jackley. Another witness, Robin Raymond, testified that she purchased drugs from DeShay approximately six to eight times. Jackley and other witnesses testified that they observed DeShay sell crack cocaine to other individuals as well and that they observed DeShay associate with known gang members.

The amended complaint charged DeSh-ay with one count of third-degree controlled-substance crime, committed for the benefit of a gang, a violation of Minn.Stat. §§ 152.023, subd. 1(1), 609.229, subd. 2 (1998), and one count of conspiracy to commit first-degree controlled-substanee crime, committed for the benefit of a gang, a violation of Minn.Stat. §§ 152.021, subd. 1(1), 152.096, subd. 1, 609.229, subd. 2 (1998). The jury convicted DeShay of both counts.

Prior to his sentencing, DeShay filed a motion in which he sought a downward-sentencing departure and challenged the constitutionality of Minn.Stat. § 609.229 (1998) (crime committed for the benefit of a gang statute) under the Minnesota Constitution. The district court denied DeSh-ay’s motion and sentenced him to an executed term of 98 months. This appeal followed.

ISSUES

I. Does Minnesota Statute § 609.229 (1998), the “crime committed for the benefit of a gang” statute, violate the equal protection clause of the Minnesota Constitution?

II. Was the evidence presented sufficient to support the jury’s verdict in which it found DeShay guilty of conspiring to commit first-degree controlled-substance crime for the benefit of a gang?

III. Did the district court err by admitting expert testimony based on the ten-point gang-identification criteria?

IV. Did the district court abuse its discretion by declining to depart downward at sentencing?

V. Did the district court err by failing to suppress a tape recording of a conversation between DeShay and a paid police informant?

ANALYSIS

I.

DeShay argues that Minn.Stat. § 609.229 (1998) violates the Minnesota Constitution’s guarantees of equal protection. Specifically, he argues that because there is no rational basis for distinguishing “criminal gangs” from other organized groups, the statute’s provision for enhanced sentences for individuals convicted of committing crimes for a gang’s benefit violates his right to equal protection.

This court recently held that Minn.Stat. § 609.229 does not violate equal protection guarantees. State v. Frazier, 681 N.W.2d 432, 437 (Minn.App.2001), review granted (Minn. Sept. 26, 2001). Because “[t]he doctrine of stare decisis directs that we adhere to former decisions in order that there might be stability in the law,” we decline to reconsider the question. Oanes v. Allstate Ins. Co., 617 N.W.2d 401, 406 (Minn.2000) (citation omitted). Furthermore, the parties agree that if the supreme court affirms this court’s holding in State v. Frazier, that holding will be dispositive of this issue.

II.

DeShay also argues that the evidence did not establish that he conspired to sell ten or more grams of cocaine for a gang’s benefit because the evidence was insufficient to prove the quantity of drugs that the conspiracy intended to sell.

In considering a claim of insufficient evidence, an appellate court’s review is limited to a thorough analysis of the record to determine whether the evidence, when viewed in the light most favorable to the conviction, is sufficient to allow the jurors to reach the verdict that they did. State v. Webb, 440 N.W.2d 426, 430 (Minn. 1989). The appellate court must assume that the jury believed the state’s witnesses and disbelieved any evidence to the contrary. State v. Moore, 438 N.W.2d 101, 108 (Minn.1989). The appellate court will not disturb the verdict if the jury, acting with due regard for the presumption of innocence and the requirement of proof beyond a reasonable doubt, could reasonably conclude that the defendant was guilty of the charged offense. State v. Alton, 432 N.W.2d 754, 756 (Minn.1988).

When considering the sufficiency of circumstantial evidence, an appellate court will give it as much weight as any other kind of evidence, as long as the evidence and the reasonable inferences that can be drawn from it are consistent with the hypothesis of the defendant’s guilt and inconsistent with any other rational hypothesis. State v. Walen, 563 N.W.2d 742, 750 (Minn.1997). This means that the circumstantial evidence must

form a complete chain which, in light of the evidence as a whole, leads so directly to the guilt of the accused as to exclude, beyond a reasonable doubt, any reasonable inference other than that of guilt.

Webb, 440 N.W.2d at 430 (quotation omitted).

To prove the crime of conspiracy, the state must show “(1) an agreement between two or more people to commit a crime[,] and (2) an overt act in furtherance of the conspiracy.” State v. Kuhnau, 622 N.W.2d 552, 556 (Minn.2001); see Minn. Stat. § 609.175, subd. 2 (1998).

DeShay was convicted of conspiring to sell ten or more grams of cocaine within a 90-day period. See Minn.Stat. §§ 152.021, subd. 1(1), .096, subd. 1 (1998). DeShay does not contend that the evidence is insufficient to prove an overt act in furtherance of the conspiracy. Instead, he argues that because the only direct evidence presented shows that he sold .01 grams of crack cocaine to Jackley during a controlled buy, the evidence is insufficient to prove that he conspired to sell ten or more grams of cocaine. A review of the record, however, shows the following evidence: (1) Jackley testified that in additional to the controlled buy, he saw DeSh-ay sell drugs to other individuals on one or more occasions. (2) Paul Taylor testified that the group used his apartment as an outlet to sell drugs for approximately four months between November 1999 and the beginning of February 2000. During the same time frame, he also saw members of the group, including DeShay, selling drugs from Animal’s (DeShay’s uncle) apartment. (3) Taylor testified that drugs were sold 24 hours per day, seven days per week from his residence, and that the hours of business at Animal’s residence were slightly less than those at Taylor’s home. (4) Taylor testified that he observed DeShay selling drugs approximately four days per week from Animal’s residence during a one-month period around December 1999 to January 2000.(5) Taylor also testified that, together, the group sold approximately 14 grams of crack cocaine every day and one-half to three days, and one to one and one-half grams of heroin per day. (6) Taylor testified that during the same time frame he drove other members of the group to Milwaukee six to eight times to pick up cocaine or heroin to bring back to Duluth. He testified that each time they picked up seven to 28 grams of cocaine, and five to ten grams of heroin. (7) Robin Raymond testified that she went on three trips to Milwaukee with various members of the group in late 1999 and early 2000. She testified that on those three trips they brought back approximately 50 grams of crack cocaine and ten grams of heroin. (8) Raymond also testified that when she did not have drugs available to sell to others, she would notify Animal, and then DeShay would deliver drugs to her. She testified that DeShay delivered crack cocaine or heroin to her six to eight times shortly after Christmas of 1999, and each time he brought crack cocaine packaged in $25 rocks and heroin in .01-gram bags.

The conspiracy statute does not require that the state prove DeShay personally sold ten or more grams of cocaine within a 90-day period; only that he participated in an agreement to sell ten or more grams of cocaine within a 90-day period. According to the evidence, the group was bringing substantial quantities of cocaine and heroin to the Duluth area between November 1999 and January 2000, and DeShay participated in the sale of that cocaine and heroin. We conclude that the circumstantial evidence and the rational inferences that can be drawn from it support the jury’s finding that a conspiracy to sell ten grams or more of cocaine within a 90-day period existed, that DeShay participated in the conspiracy, and that the evidence does not support any other rational hypothesis.

III.

DeShay argues next that the district court erred by admitting testimony of Special Investigator Scott Jenkins on the question of whether an individual is a member of a gang, contending that the ten-point gang-identification criteria, on which the testimony was based, do not create a sufficiently reliable standard to support an expert opinion.

Initially, we note that DeShay’s challenge on this point is to the witness’s methodology; that is, the set of observations and conclusions making up the ten-point gang criteria on which the witness relied in giving his opinion that De Shay and others were gang members. This does not concern the facts or data on which the witness relied; the phrase “facts or data” in this context refers to the facts in the particular case in which the witness is testifying and that the witness has accepted as true in giving his opinion. Facts or data are to be distinguished from the methodology the witness applied in giving his opinion. In this case, facts or data include, for example, Jackley’s testimony that members of the group transported crack cocaine and heroin from Milwaukee to Duluth, and Raymond’s testimony that she bought drugs from DeShay.

The district court ruled that the ten-point gang criteria are a sufficiently reliable standard, which Jenkins could utilize in giving his opinion. On appeal DeShay challenges this ruling.

We agree with the state that this issue is not subject to the Frye-Mack test. In Goeb v. Tharaldson, 615 N.W.2d 800, 814 (Minn.2000), the supreme court, in affirming the continued application of the Frye-Mack test in Minnesota, stated that “when novel scientific evidence is offered, the district court must determine whether it is generally accepted in the relevant scientific community.” (Emphasis added.) We agree with the state that the gang criteria are not scientific in the sense of the Frye-Mack test as reaffirmed by Tharaldson.

Nevertheless, before any expert testimony can be admitted, the proponent must make a showing that the testimony is reliable. Id. (“Finally, as with all testimony by experts, the evidence must satisfy the requirements of Minn. R. Evid. 402 and 702 — be relevant, be given by a witness qualified as an expert, and be helpful to the trier of fact.”) As to appellate review, in Tharaldson the supreme court stated that under the Frye-Mack test, the appellate court makes a de novo review of the district court’s ruling on a challenge to the expert’s methodology. Id. Although we have concluded that an expert’s use of the ten-point gang criteria is not subject to the Frye-Maek test, we note that the use of the criteria is a novel technique. We conclude that the same reasoning that led the supreme court to apply a de novo review to novel scientific issues should apply to a review of the reliability of the gang criteria.

At trial, Officer Jenkins testified about the ten-point gang-identification criteria and testified that DeShay was a member of a gang known as the Black Gangsters.

The criteria are that an individual: (1) admits gang membership or association; (2) is observed to associate on a regular basis with known gang members; (3) has tattoos indicating gang membership; (4) wears gang symbols to identify with a specific gang; (5) is in a photograph with known gang members and/or using gang-related hand signs; (6) has his name on a gang document, hit list or gang-related graffiti; (7) is identified as a gang member by a rehable source; (8) is arrested in the company of identified gang members or associates; (9) corresponds with known gang members or writes and/or receives correspondence about gang activities; and (10) writes about gangs on walls (graffiti), books, or paper. We note that either seven or eight of the ten criteria (that is, excepting numbers 6, 7, and, depending on the circumstances, 8) are forms of self-identification.

To be considered a gang member, a person must satisfy at least of three of the criteria. MinmStat. § 299C.091, subd. 2(b)(1) (1998). According to Officer Jenkins, DeShay met three of the gang criteria: he associated regularly with gang members; Melissa Sabrowski, a reliable police informant, identified him as a gang member; and he was arrested in the company of gang members. Officer Jenkins also identified seven other named individuals who participated in the group, set forth which of the criteria the seven individuals met, and identified the crimes, if any, of which they had been previously convicted.

We conclude that there is an ample showing of the reliability of the ten-point gang criteria, sufficient to allow an expert to utilize them in forming an opinion on whether an individual is a member of a gang. The criteria were authorized by the legislature. Minn.Stat. § 299A.64, subd. 2(b) (2000). Although the precise issue of allowing an expert to base an opinion on the gang criteria has not been ruled on, Minnesota courts have admitted evidence of gang membership. See, e.g., State v. Matelski, 622 N.W.2d 826, 832 (Minn.App.2001) (allowing evidence of gang membership to prove that the defendant committed the crime for the benefit of a gang), review denied (Minn. May 15, 2001); State v. Chuon, 596 N.W.2d 267, 270 (Minn.App.1999) (allowing evidence of crimes committed by criminal gang members other than the defendant), review denied (Minn. Aug. 25, 1999). It is also apparent from Officer Jenkins’s testimony that law-enforcement experts in the field also rely on the gang-identification criteria.

Furthermore, while other jurisdictions’ gang-identification criteria vary to a slight degree from those of Minnesota, it is common practice for experts, whether legislative, executive or judicial, in the field of criminal gangs to rely on similar criteria when forming opinions on the subject. See, e.g., Ariz.Rev.Stat. Ann. § 13-105.8 (West 2000) (requiring satisfaction of two of seven criteria, six of which are similar to Minnesota’s); Fla. Stat. Ann. § 874.03(2) (West 2000) (requiring satisfaction of two of eight criteria, six similar to Minnesota’s); S.D. Codified Laws § 22-10-14(2) (Michie 1998) (requiring satisfaction of two of seven criteria, six of which are similar to Minnesota’s); TenmCode Ann. § 40-35-121(a)(2) (1997) (requiring satisfaction of two of seven criteria, corresponding to five of Minnesota’s); People v. Valdez, 58 Cal. App.4th 494, 503, 506-07 & n. 11, 68 Cal. Rptr.2d 135 (1997) (allowing an officer’s expert gang-membership opinion testimony based on the formal gang-identification criteria adopted by the San Jose Police Department, which requires satisfaction of two of six criteria, five of which are similar to Minnesota’s), rev. denied (Cal. Feb. 3, 1998); State v. Tran, 252 Kan. 494, 847 P.2d 680, 684-86 (1993) (allowing officer’s gang-membership opinion testimony based on the six gang-identification criteria established by the Los Angeles police gang unit, five of which are similar to Minnesota’s); Utz v. Commonwealth, 28 Va.App. 411, 505 S.E.2d 380, 387-88 (1998) (allowing police detective to testify regarding gang-identification criteria based on six criteria used in Arlington County, three of which are similar to Minnesota’s). Thus, it is clear that the ten gang-identification criteria are of a type relied on by experts in the field.

DeShay compares the ten-point gang-identification criteria to the drug-courier profile and urges that we follow the supreme court’s reasoning in State v. Williams, 525 N.W.2d 538, 547-48 (Minn. 1994). But the cases are too dissimilar for Williams to be persuasive here. In Williams, the supreme court pointed out that the drug-courier profile was a form of character evidence, i.e., evidence offered to prove a trait of character in order to allow the inference that a person acted in conformity with that trait on a specific occasion. Id. at 548. Such evidence is not generally admissible. Minn. R. Evid. 404(a). Here, there was no need for an inference to prove DeShay’s actions; there was direct evidence on that point. The evidence of the gang criteria was offered to prove an element of the offense; that the crime was for the benefit of a gang. In fact, DeShay does not assert that the criteria are being used as character evidence; instead he attacks them as being an improper basis for an expert opinion.

Moreover, in Williams, the supreme court found the profile objectionable as substantive evidence of guilt because the profile is so elastic that everyone fits it. See Williams, 525 N.W.2d at 546-47 (illustrating the potential absurdity of the drug-courier profile). The gang criteria focus on a much narrower group of persons. While the drug-courier profile consists of external criteria, used to identify people who do not want to be identified, the gang-identification criteria are primarily elements of self-identification for people who have an interest in being identified with a group.

DeShay further argues that the gang-identification criteria are too broad because they could potentially describe “fringe members or wannabes,” that is, persons who aspire to be gang members, but have not yet achieved that goal. But merely being a gang member is not an offense, nor is it an element of an offense. The element that gang criteria goes to prove is that the underlying crime was committed for the benefit of a gang. Either way, whether a person is a full gang member or merely aspiring to be a member, evidence of gang criteria is equally relevant to the issue of whether the crime was committed for the benefit of a gang. Thus, even assuming an aspiring gang member may be misidentified as a full gang member, the possible prejudice or confusion this may cause does not substantially outweigh its probative value. See Minn. R. Evid 403 (“Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice [or] confusion of the issues”).

In short, because the drug-courier profile and the gang-identification criteria are so dissimilar, we decline to apply the supreme court’s reasoning in Williams to the present case. We conclude that Minnesota’s ten-point gang-identification criteria make up a reliable standard that an expert may utilize in giving an opinion that an individual is a member of a gang. Therefore, the trial court did not err when it allowed Officer Jenkins to express the opinions that certain individuals, including DeShay, were members of a gang.

IV.

DeShay argues that the court abused its discretion by declining to depart downward, both dispositionally and durationally.

“[A district] court has no discretion to depart from the sentencing guidelines unless aggravating or mitigating factors are present.” State v. Spain, 590 N.W.2d 85, 88 (Minn.1999) (citation omitted). If the district court determines that such factors are present, the decision to depart from sentencing guidelines rests within its discretion and an appellate court will not reverse absent a clear abuse of that discretion. State v. Givens, 544 N.W.2d 774, 776 (Minn.1996). To justify a departure, the aggravating or mitigating factors must be “substantial and compelling.” State v. Schmit, 601 N.W.2d 896, 898 (Minn.1999) (citation omitted). “Substantial and compelling circumstances are those circumstances that make the facts of a particular case different from a typical case.” State v. Peake, 366 N.W.2d 299, 301 (Minn.1985). An appellate court will rarely reverse a sentencing court’s refusal to depart. State v. Kindem, 313 N.W.2d 6, 7 (Minn.1981)

DeShay argues that the district court should have granted his request for downward departure because he played a minor role in the conspiracy. See Minn. Sent. Guidelines II.D.2.a.(2), (5) (stating that the district court may depart downward when “[t]he offender played a minor ⅜ * * ra[e jn ^he crime” or when other mitigating factors are present). DeShay asserts that he played a minor role in the conspiracy because (1) he was not a gang member; (2) even if he was a member of a gang, he did not hold a leadership role; and (3) he never participated in the drug runs to Milwaukee. DeShay characterizes his role as a mere “go-between” or “mule,” that is, one who goes between the drug suppliers and the drug sellers. DeShay notes that other jurisdictions have considered an individual’s role as a “mule” to be a mitigating factor. But the cases DeShay cites for support are not applicable to the present case because, according to the evidence, DeShay was not a “mule”: he was one of the drug sellers.

DeShay also contends that the district court erred by failing to consider other mitigating factors and cites State v. Trog, 323 N.W.2d 28, 31 (Minn.1982) for support. In Trog, the supreme court stated that some of the factors the sentencing court may consider when imposing a downward departure include the defendant’s age, whether the defendant has a prior criminal record, whether the defendant is remorseful, whether the defendant cooperated with law-enforcement authorities, and whether the defendant has family support. Id. DeShay asserts that because of his youth and his minimal contact with crime, he is not amenable to incarceration. See State v. Patton, 414 N.W.2d 572, 575 (Minn.App. 1987) (stating that the district court properly considered a defendant’s amenability to probation, and affirming the downward departure where the district court expressed concerns regarding the 19-year-old defendant’s immaturity and the appropriateness of incarceration).

According to the evidence, DeShay was only 20 years old at the time of sentencing, he has a minimal juvenile criminal record and no criminal-history points, he completed his G.E.D. while he was in jail, he expresses remorse, and he cooperated with law enforcement officials. Conversely, while his family appears supportive, several of his family members are involved in drug-sale operations.

While the record contains evidence that could support a downward durational or dispositional departure, the abuse-of-discretion standard allows the district court broad discretion in its sentencing decisions. Givens, 544 N.W.2d at 776. This is not the rare case in which the district court abused its discretion in declining to depart dispositionally or durationally. See Kindem, 313 N.W.2d at 7.

V.

In his pro se brief, DeShay argues that the district court erred by failing to suppress evidence of a recorded communication between DeShay and a paid police informant because the informant did not obtain DeShay’s consent and the police did not have a warrant for the interception. But, as the state points out, it takes only one party to the recording to agree to being recorded, and here, the informant agreed to being recorded. See State v. Olkon, 299 N.W.2d 89, 102-03 (Minn.1980) (holding that a defendant’s constitutional right to privacy was not violated where one of the parties to the conversation voluntarily consented to the recording of oral or telephone communications). Thus, the district court did not err by failing to suppress the recording communication.

DECISION

Because (1) Minn.Stat. § 609.229 (1998), the crime committed for the benefit of a gang statute, is constitutional, (2) the state presented sufficient evidence to prove DeShay conspired to commit first-degree controlled-substance crime for the benefit of a gang, (3) the district court properly admitted the testimony of an expert who utilized the ten-point gang-identification criteria, (4) the district court acted within its discretion by declining to depart downward at sentencing, and (5) the district court properly admitted the tape recording of a conversation between DeShay and an informant, wb affirm DeShay’s conviction and sentence.

Affirmed.

       Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const, art. VI, § 10.

      . An individual commits a third-degree controlled-substance crime by unlawfully sell[ing] one or more mixtures containing a narcotic drug. Minn.Stat. § 152.023, subd. 1(1) (1998).

      . An individual commits a first-degree controlled-substance crime by selling 10 grams or more of cocaine within a 90-day period. Minn.Stat. § 152.021, subd. 1(1) (1998).

      . Frazier was a separately charged co-defendant of DeShay.

      . See Bertrand Poritsky, Minnesota Evidence TrialBook 4-2 — 4-10 (1987 & Supp.2001), noting the distinction between “bases” — the facts in the particular case that the expert accepts as true and on which the expert bases an opinion — and “expertise” — which includes the methodology utilized by the expert in arriving at his or her opinion.

      . See Frye v. United States, 293 F. 1013 (D.C.Cir.1923); State v. Mack, 292 N.W.2d 764 (Minn.1980).

      . Officer Jenkins testified that the gang is also known as the New Breed, New Breed Disciples, BG, 27, and Trey Ls. He also explained the gang's origin, geographic span, power structure and splits, and derivations and interconnectedness of its various names.