Published on:

Under the People’s overbroad construction, these Penal Law sections would apply to every loan

In this criminal case, defendants have been indicted on charges growing out of an alleged scheme to steal from charities serving Brooklyn and from the City of New York. The charges include conspiracy, grand larceny by false pretenses, grand larceny by misappropriation, offering a false instrument for filing, falsifying business records, and issuing a false financial statement.

A King County Grand larceny attorney said that the alleged victims of the larcenies and false documents were several offices and government agencies in New York. At the time of the alleged crimes, the first defendant was the executive director of one of the alleged victim corporation, and the second defendant was the executive director of another alleged victim corporation.

After the defendants moved for discovery, a bill of particulars, and a dismissal of the indictment, the Court on its own motion ordered additional particulars to assist it in ruling on the motions to dismiss and to clarify and simplify the issues if the case goes to trial.
The Court has inspected the voluminous evidence before the grand jury and makes the following findings.

The most substantial question arising from the indictment relates to three counts of falsifying business records in the first degree, class E felonies, charged against the first defendant.
Section 175.10 of the Penal Law provides that a defendant is guilty of falsifying business records in the first degree when the defendant commits the crime of falsifying business records in the second degree, and the defendant’s intent to defraud includes the intent to commit another crime or to aid or conceal its commission. A person commits falsifying business records in the second degree when, with intent to defraud, he or she “makes or causes a false entry in the business records of an enterprise”

“Enterprise” includes an entity performing charitable activity. The question is the extent to which those sections apply to false entries relating not to the financial condition of the enterprise whose records are alleged to have been tainted, but the financial condition of a different enterprise in this case, the enterprise managed by the defendant. The question arises from the following language in the three counts and in the corresponding supplemental bill of particulars.

Count 39 charges that the first defendant, “with intent to defraud, made and caused a false entry in the business records of an enterprise, namely, the Association of Black Charities [sic ], and defendants’ intent to defraud included an intent to commit another crime, namely, larceny, and to conceal the commission thereof”.

Count 44 charges defendant with falsifying business records by causing a false entry in the business records of the company. The supplemental bill of particulars alleges that the “false entry” was a document purporting to be an independent statement of the company’s finances submitted to the other company in support of it’s request for a loan; the audit was fictitious. The larceny was the theft of that $10,000 by false pretenses from the company.
Thus, one of the allegations in counts 39, 40, and 44 is that defendant submitted a false document.

On that narrow point, the three counts are supported by the evidence before the grand jury: The defendant submitted to those charities documents containing or consisting of fictitious or false statements. The crime of falsifying business records can be committed by an outsider’s submission of a document containing false statements to a charity or other enterprise; the defendant need not be an officer or employee of that enterprise. “Section 175.10 of the Penal Law, by its plain language, is not limited to employees or others having bookkeeping responsibilities. It applies also to those who supply erroneous information which results in false records”

In the present case, the counts in question allege that the falsified records were “business records of charities” or “business records of the fund company. Penal Law § 175.00(2) defines “business records” as any writing kept by an enterprise “for the purpose of evidencing or reflecting its condition or activity”. This means that to sustain these counts, the evidence before the grand jury must show that the falsified records evidenced or reflected the activity of the enterprise named in the counts. The People concede this, but maintain that the documents do reflect the membership and funding activity of the company and the loan activity of the fund company.

But the evidence before the grand jury shows that the documents purport to reflect the condition and activity, its financial condition and financial activity, not the condition and activity of the charities that gave the funds to the company.

Only in the tautological sense that every piece of paper submitted to an enterprise by a person seeking to do business with it reflects the activity of that enterprise do the documents at issue here come within these statutes. It is therefore true, as the People urge, that the documents here reflect the membership activity of the company and the loan activity of the fund company. But those portions of the documents are not “false.” The crime of falsifying business records is committed by causing written statements of the condition or activity of an “enterprise” that are “false.”

Under the People’s overbroad construction, these Penal Law sections would apply to every loan application containing a false statement about the borrower that the bank or other lender puts in its files. (That would follow even if the loan were disapproved.) In the long history of these statutes and their predecessors in the former Penal Law, there is not one reported case on such facts.

In contrast, uttering a false audit would constitute the crime of offering a false instrument for filing, as is alleged in count 27, which charges Banks with submitting one of the false audits to the Comptroller. That would also violate § 175.45, issuing a false financial statement, as is alleged in count 42, which charges defendant with issuing the false audit to the fund company. Also, since the fictitious audit does purport to be a reflection of company’s financial condition, placing that document among the business records would violate the Penal Law sections dealing with falsifying business records; if the “enterprise” alleged in the count, the count would be supported by the evidence. That is precisely the situation with count 28, which charges Banks with falsifying business records by filing among them one of the false audits. Those counts are amply supported by the evidence before the grand jury.

Criminal cases should be entrusted to learned and skilled lawyers like our Kings County Criminal attorneys here in Stephen Bilkis and Associates. If you have something to consult, don’t hesitate to call us now. We are willing and eager to hear your dilemma.

Contact Information