PORTLAND – A judge has dismissed one of the three felony charges against Kaile Warren Jr. of Windham, founder of the Rent-a-Husband chain of handyman franchises.

In Tuesday’s ruling in Cumberland County Superior Court, Justice Thomas D. Warren said the state never alleged that Kaile Warren knew he was selling unregistered securities when he sold promissory notes to finance his business.

Under the law, it is illegal to “intentionally and knowingly” sell securities that should have been registered. The indictment did not say that Kaile Warren knew the promissory notes were securities and should have been registered, the judge said.

The other charges, that Kaile Warren misled or defrauded investors and stole money by deception, do not have the same deficiencies, the judge said. He denied the motion to have them dismissed.

Justice Warren said that, had he been able to review the testimony before the grand jury, he could have explored whether the jurors were given proper instructions. But he said the motion to dismiss failed to show he had authority to review transcripts of the secret proceedings.

Kaile Warren has pleaded not guilty to the charges and has criticized the state for bringing them, saying that he didn’t knowingly do anything wrong, and that the government’s case is based on a lone, unreliable witness.

He founded Rent-A-Husband in 1996 and gained national media attention for his franchise concept.

He said in an e-mail that the judge’s decision to drop one charge “pulls the foundation out from under the state’s case,” and if the judge had been allowed to review grand jury testimony, he might have dismissed the other charges.

Assistant Attorney General Michael Colleran, the prosecutor in the case, said he was pleased that the judge allowed the charges of theft and securities fraud to stand.

“As to the count that was dismissed, the issue of what mental state we have to prove for securities crimes has not been addressed previously in a court opinion,” he said. “We are studying the court’s ruling on that issue and considering our options.”

Colleran said there is evidence that Kaile Warren knew he was selling securities that had to be registered, but the state did not think it had to prove that so it did not try to include that in the indictment.

State securities regulators accuse Warren of duping investors by claiming that Rent-A-Husband was successful, when in fact it was losing hundreds of thousands of dollars a year.

Warren allegedly used some of the money from investors to pay for restaurant meals and other personal expenses, and failed to inform new investors about money owed to prior investors.

According to the state, Warren owed $240,000 on promissory notes in 2003; by August 2009, that figure was more than $1.6 million, owed to dozens of investors.

Staff Writer David Hench can be contacted at 791-6327 or at:

dhench@pressherald.com