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International Mortgage Servicing Company (IMSC)

Defendants ST, a Queens County resident, and International Mortgage Servicing Company (IMSC), a New Jersey limited liability company in which ST owns a half interest, were indicted by a New York County grand jury on 34 counts arising from an alleged scheme to steal millions of dollars through the imposition of allegedly inflated mortgages on Ocean House Center, a Queens County not-for-profit adult home for residents with mental disabilities.

On this appeal, defendants challenge New York County’s jurisdiction to prosecute five of these counts, each of which charges defendants with the class E felony of offering a false instrument for filing in the first degree; jurisdiction as to the remaining 29 counts, including the class B and C felonies of grand larceny in the first and second degrees, is uncontested. The challenged counts are based on defendants’ filing of allegedly false New York State and City tax returns, which did not reflect certain interest income derived from the mortgages held by IMSC on Ocean House.

Inasmuch as the evidence before the grand jury did not establish that defendants’ tax returns were either mailed from or received in Manhattan, or that defendants committed any other act in Manhattan establishing an element of the relevant offenses, the People relied on a theory of particular effect jurisdiction in order to establish venue in New York County with respect to these counts.1 This theory permits a criminal court of a particular county to exercise geographical jurisdiction, or venue, over an offense when even though none of the conduct constituting the offense occurred within that county such conduct had, or was likely to have, a particular effect upon such county or a political subdivision or part thereof, and was performed with intent that it would, or with knowledge that it was likely to, have such particular effect therein. Conduct constituting an offense has a particular effect upon a county when it produces consequences which, though not necessarily amounting to a result or element of such offense, have a materially harmful impact upon the governmental processes or community welfare of the particular county, or result in the defrauding of persons in such county.

After Supreme Court denied their motion to dismiss the five tax-related criminal counts, made on the ground that jurisdiction did not lie in New York County, defendants brought this CPLR article 78 proceeding, seeking a writ of prohibition to enjoin prosecution of those counts.2 The Appellate Division denied the petition, concluding that defendants’ filing of the allegedly false New York City tax returns had a particular effect on New York County. We disagree, and now reverse.

At the outset, we emphasize that, in order for prosecutorial jurisdiction to lie in New York County, it is that county, and not the City generally, that must suffer a particular effect as a result of defendants’ alleged conduct. The statutory requirement that the conduct have a materially harmful impact may thus be satisfied only by a concrete and identifiable injury or the welfare of the county’s community. Moreover, to be materially harmful, the criminal impact must be more than minor or incidental, and the conduct must harm the well being of the community as a whole, not merely a particular individual. In addition, because the jurisdiction of the county seeking to prosecute must be established before the grand jury, the type of personal injury or offense contemplated by the particular effect statute must be perceptible and of the character and type which can be demonstrated by proof before a Grand Jury. Because particular effect jurisdiction is to be applied only in limited circumstances, it has been rarely invoked.

There is no dispute that criminal defendants’ conduct, if true, had a materially harmful impact on the governmental processes or community welfare of New York City as a whole. By underreporting income on their New York City tax returns, defendants deprived the City of revenue that would otherwise have been available to meet its financial obligations and fund its governmental operations. Such a loss of revenue, which could lead to cuts in city services or increases in taxes, clearly constitutes a perceptible injury to the City of New York. The question presented, however, is whether the evidence before the grand jury establishes a concrete and identifiable injury suffered specifically by New York County. We conclude that it does not.

The People’s theory of venue is based on New York County’s status as the seat of City government, and the resultant processing of city income tax revenue in that county. Under this theory, defendants’ alleged tax evasion has a particular effect on New York County because New York City taxes are processed and remitted to the City through the Transitional Finance Authority, which is located in New York County, and through city bank accounts also located there. Further, these fraud accounts are controlled by the New York City Commissioner of Finance, whose office is located in New York County, as is the Department of Finance’s Bureau of Treasury, which oversees the collection and management of the City’s tax revenue.

We conclude, however, that in a prosecution whose gravamen is the deprivation of revenue from New York City the location of city agencies and bank accounts is alone insufficient to establish a particular effect on the county in which they happen to be located.

In Steingut, the defendants were indicted for corrupt use of position or authority, based on a meeting held in Manhattan at which defendants allegedly conspired to corrupt an election to be held in Kings County for city councilmember-at-large. Although Kings County was in some measure affected by this criminal conduct, we held that the mere fact that the allegedly tainted election was to take place in Brooklyn was insufficient to establish particular effect jurisdiction in Kings County. As is readily apparent, the conspiracy to corrupt the election in Steingut bore a closer relationship to Kings County, where the election was to take place, than the false larceny filing here bears to New York County.

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