New York City, more than anywhere in the nation, is the venue for criminal prosecutions of financial professionals such as investment bankers, Wall Street traders, and compliance professionals. These kinds of cases might as well be considered a completely separate area of law from the more typical criminal practice involving the defense of charges such as Assault, Burglary, Criminal Possession of a Weapon, and the like. For one, understanding the financial markets and how they are regulated is often critical, as well as understanding the kinds of collateral consequences that such a person faces, as with FINRA, that may not be present in the context of the “average” arrest and criminal defendant. Whether you hold a series 3, series 6, series 7 or another certification, you, and more importantly your criminal attorney, must be aware of the legal and professional consequences before, not after, your case comes to a close.
The criminal charge of Scheme to Defraud in New York often arises in the context of intricate and large-scale thefts. As such, there is typically a Grand Larceny or other theft-related offense accompanying the Scheme to Defraud charge on a felony complaint or indictment. While it is tempting to see this overlap and view a Scheme to Defraud charge as just another form of larceny, doing so can have disastrous consequences for any criminal defense. Scheme to Defraud is quite clearly a distinct charge, with its own unique nuances, related statutory rules, and methods of proof that you must fully address with you or criminal defense attorney. One such issue is the idea of “moral certainty” in the context of either an NY PL 190.65 or NY PL 190.60 arrest.
Financial crimes such as New York Scheme to Defraud and charges under the New York Martin Act are notoriously complex and difficult to understand and interpret. This complexity only becomes more significant when there are, as is typically the case with such criminal charges, hundreds of thousands of pieces of documentary evidence. In those circumstances, it is easy for prosecutors to make glaring oversights or unintentionally misrepresent the facts, and just as easy for criminal defense attorneys to let those negligent misdeeds go unnoticed. The question then becomes, “How does the Court deal with these prosecutorial errors when they become apparent.” This was exactly the question faced by by the New York County Supreme Court, Criminal Term in People v. Thompson, et al., 2016 NY Slip Op 50777(U) (N.Y. Co. Sup. 2016).
In Thompson, a white-collar criminal case involving a penny stock pump-and-dump scheme, the prosecutor presented numerous documents to the Grand Jury to obtain an indictment, including marketing emails to potential investors. Importantly, the prosecutor omitted highly relevant disclaimers that the defendants had included in those promotional emails, which were highly exculpatory with regard to the defendant’s intent. The Court found that the prosecutor should clearly have included the entire contents of those emails. While prosecutors are not generally obligated to to present all, or even any, evidence that is favorable to an accused person to the Grand Jury, the Court held that the prosecutor does have a duty of fairness to the accused which should prevent them from selectively omitting critical portions of a document that they are already presenting to the Grand Jury.
However, the Court in Thompson then gave the answer to the question above, which was that the indictment should still not be dismissed because, in this particular case, the Court did not believe that the prosecutor deliberately misled the Grand Jury, and those particular documents were just some of many that were presented, and not a critical part of the Grand Jury presentation.
In what can be described as an interesting twist on an increasingly common crime, Queens prosecutors have charged Delloyd Hill, a.k.a., Tom Hill, with multiple counts of Grand Larceny, Identity Theft and Scheme to Defraud for allegedly defrauding a half-a-dozen physicians. Hill’s arrest stems from an investigation by the NYPD and the Queens County District Attorney’s office into Hill’s alleged scheme where he posed as a Harvard graduate and convinced numerous doctors to invest in an allegedly bogus medical facility. Further, it is claimed by law enforcement that Hill convinced these doctors that he was interviewing them for particular positions at the alleged fictitious facility.
According to prosecutors, between April 23, 2012, and September 25, 2012, Hill is alleged to have opened three lines of credit with the medical equipment financing company, TCF Equipment Finance Inc. The three lines of credit were opened using personal identifying information of unknowing physicians totaling in excess of $400,000. These lines allegedly totaled $215,000, $200,000, and an undetermined amount respectively. In addition to the lines of credit, District Attorney Brown believes that Hill defrauded his landlord and another individual to invest a total of $65,000 into the claimed bogus business venture.
In in a previous blog entry I addressed what constitutes a New York Scheme to Defraud under Penal Law 190.60 and 190.65. Experienced New York Grand Larceny defense attorneys, specifically those familiar with white-collar theft and fraud crimes, know that a Scheme to Defraud indictment often comes hand-in-hand with the charge of Grand Larceny. Many times, this Grand Larceny is premised in “false promises.” Logically, a Scheme to Defraud must be set into action by a lie; the scheme is predicated on a false promise or false representation. Thus, if you are involved in a Scheme to Defraud in Manhattan, Brooklyn, Queens, the Bronx or Westchester County, you likely may also be charged with “larceny by false promise” as defined under New York Penal Law 155.05(2)(d). Remember, that such a larceny is the manner in which the crime is perpetrated. The potential punishment or degree of the offense is still dictated by the value or amount of the actual theft.
In the context of Scheme to Defraud, a false promise is a representation that the schemer makes promising some future conduct will occur. This if often part of an overarching Scheme to Defraud (whereby the schemer ultimately steals property), without the intention to ever follow through with promised conduct. For instance, suppose I run a business that is going bankrupt. In a scheme to defraud, I tell a twenty investors that my company is gaining significant profits and they will surely receive a high amount of return in the next fiscal quarter. I fully intend to take their money and head for my villa in the south of France. In this hypothetical, I have committed a larceny by false promise and a Scheme to Defraud. The investors were never actually going to receive any profits from my failing business, and I never intended to give them any return on their investment as I promised.
New York is no stranger to white-collar crime. In this recession, post-Madoff era it is no wonder that District Attorney’s throughout the greater New York City area are coming down hard on white-collar criminals. In today’s blog post I’d like to discuss one of the laws often at the center of many white-collar prosecutions: Scheme to Defraud. New York Penal Law 190.65 defines Scheme to Defraud in the First Degree (summarizing in my own language – follow the highlighted link for our legal our more detailed legal analysis) as an ongoing plan to obtain property by false pretenses/fraud from multiple people. Usually, the schemer devised the plan with the express purpose of gaining property from multiple victims and executes the plan continuously (often over an extended period of time).
Now, for purposes of the Scheme to Defraud law, property does not have to be a tangible thing (e.g. money, antique stamps or electronics). Case law throughout the years has expanded what constitutes property under NY Penal Law 155.00 to include intangibles. For instance, some intangibles that constitute property are: contractual rights (e.g. a contract to renovate a hotel), a tenant’s legal right to posses an apartment, the right to conduct business (e.g. right of a waste management company to service a restaurant), and a right to be employed (e.g. a union official’s right to a position that he held). However, there are limits as to these intangibles that are included, and today I’d like to discuss one such limitation.