Categories
Audio Posts and Shared Links Audio Sources - Full Text Articles

The Broad Scope of “Intent to Defraud” in the New York Crime of Falsifying Business Records

socialmedia.jpg

Part of Just Security’s coverage of the Manhattan DA investigation and work on accountability and corruption.

As many greet the Manhattan District Attorney’s indictment of a former president as a step toward accountability and the equal application of the rule of law, that thesis will be tested by the strength of the case itself. It is accordingly proper, indeed necessary, to evaluate whether the criminal statute at issue is a close match for the alleged conduct in the case. In that regard, an important question is whether maintaining false business records to conceal hush money payments in a political campaign meets the “intent to defraud” element of the Falsifying Business Records statute, New York Penal Law § 175.05 and 175.10

As we explain in this essay, the law is firmly on the side of the DA, and we do not think this question will give the DA’s office or Justice Juan Merchan much pause. Indeed, the jurisdiction in which this case will be brought – the First Department of New York – has settled law on the issue that defines “intent to defraud” in broad terms that cover the allegations in the Trump case. The most important expression of a contrary view was issued by a lower court in a different jurisdiction and on a basis that is demonstrably flawed. 

We should note at the outset that some legal experts might assume “intent to defraud” has a narrow construction – limited to deprivation of money or property, or other pecuniary loss – given U.S. Supreme Court decisions to that effect in recent years. But that is a category mistake. The U.S. Supreme Court was interpreting federal fraud statutes, and this case is about New York courts interpreting New York state statutes. 

What’s more, the U.S. Supreme Court has not only expressly noted the distinction between the federal and state level, but also recognized states’ prerogative to fill in the gap. In a 2020 opinion, the Justices explained that due to their narrow construction of the federal criminal statutes, “federal fraud law leaves much public corruption to the States (or their electorates) to rectify.” Kelly v. United States, 140 S. Ct. 1565, 1571-73 (2020). 

So, how does New York State law define the “intent to defraud” for the criminal offense of falsifying business records? A long line of New York state court cases supports an expansive conception with respect to § 175.00 crimes – namely, that intent can be established when a defendant acts “for the purpose of frustrating the State’s power” to “faithfully carry out its own law.” People v. Kase, 76 A.D.2d 532, 537–538, 431 N.Y.S.2d 531, 534 (N.Y. App. Div., 1st Dept. 1980), aff’d53 N.Y.2d 989, 441 N.Y.S.2d 671, 424 N.E.2d 558 (1981)

On this standard, the law does not require prosecutors to show “pecuniary or potential pecuniary loss” to the government or otherwise. Id. Indeed, New York Jurisprudence (Second Edition 2023) in a section titled, “Indictment or information charging falsification of business records,” states: “In an indictment for first degree falsification of business records, the grand jury presentation is not required to establish commercial or property loss.”

Applying this broad concept of “intent to defraud” in false business records cases, New York state courts have found such intent in a wide range of cases including when a defendant: made covert contributions to a political campaign, covered up an alleged rape, misled the relatives of a patient about the individual’s treatment, operated a motor vehicle without a license, obtained credit cards through false documents but with no proof of intention to miss payments, frustrated the regulatory authorities of the New York City Transit Authority, and much more. We detail all these judicial opinions below. 

If as expected the DA charges former President Donald Trump with falsifying business records to conceal hush money payments as campaign finance or election law violations, that will fit the test, with government authorities being frustrated in their ability to regulate elections. Nor is the harm limited to them. 

Falsifying hush money payments as legal services frustrated New York State authorities’ more broadly. New York firms are required to “keep correct and complete books and records of account” for the purposes of state regulators and tax authorities, N.Y. Bus. Corp. Law § 624 (McKinney). Indeed, New York Tax Law allows for tax commissioners “to examine or to cause to have examined…any books, papers, records or memoranda” of a corporation “bearing upon the matters to be required in the return.” N.Y. Tax Law § 1096(b)(1) (McKinney). Thus any book or record kept by a private corporation is subject to public exposure, and New York law requires these books to be accurate. 

In short, the Manhattan DA’s case rests on firm legal footing.

I. “Intent to Defraud”

“Intent to defraud” is an element of both the misdemeanor (second degree) and felony (first degree) violations of Falsifying Business Records in New York. 

Under New York Penal Law § 175.05 (the misdemeanor offense), 

“A person is guilty of falsifying business records in the second degree when, with intent to defraud, he: 

    1. Makes or causes a false entry in the business records of an enterprise; or 
    1. Alters, erases, obliterates, deletes, removes or destroys a true entry in the business records of an enterprise; or
    1. Omits to make a true entry in the business records of an enterprise in violation of a duty to do so which he knows to be imposed upon him by law or by the nature of his position; or
    1. Prevents the making of a true entry or causes the omission thereof in the business records of an enterprise.

New York Penal Law § 175.10 (the felony offense), adds to the language of an “intent to defraud” the following requirement:

A person is guilty of falsifying business records in the first degree when he commits the crime of falsifying business records in the second degree, and when his intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.

As noted by McKinney’s Penal Law §175.05, “there is no Penal Law definition of ‘intent to defraud.’” Instead, McKinney’s refers to McKinney’s Penal Law § 15.00 for further practice commentary on “intent to defraud,” which, in so far is relevant, states:

Although a significant number of penal statutes require an “intent to defraud,” there is no Penal Law definition of that culpable mental state. It has been suggested that an intent to defraud should be “for the purpose of leading another into error or to disadvantage.” People v. Briggins, 50 N.Y.2d 302, 309, 428 N.Y.S.2d 909, 406 N.E.2d 766 (1980) (concurring opinion) (Jones, J.). See also Black’s Law Dictionary (6th ed. 1990) (“Intent to defraud means an intention to deceive another person, and to induce such other person, in reliance upon such deception, to assume, create, transfer, alter or terminate a right, obligation or power …”); Carpenter v. United States, 484 U.S. 19, 27, 108 S.Ct. 316, 321, 98 L.Ed.2d 275 (1987) (finding that the words “to defraud” meant “wronging one in his property rights by dishonest methods or schemes, and usually signifying the deprivation of something of value by trick, deceit, chicane or overreacting”).

While an “intent to defraud” is often directed at gaining property or a pecuniary benefit, it need not be so limited. See People v. Kase, 53 N.Y.2d 989, 441 N.Y.S.2d 671, 424 N.E.2d 558 (1981), affirming for reasons stated at 76 A.D.2d 532. In Kase, a prosecution for the filing of a false instrument, an intent to defraud was found where a person intentionally filed a false statement with a public office for the purpose of frustrating the State’s power to fulfill its responsibility to faithfully carry out its own law.

(emphasis added; unless otherwise indicated, bolded text throughout this essay signifies the same). 

Absent a definition of “intent to defraud” in the New York penal code, case law has developed to define its parameters.

II. The Case Law

The First Department decision in Kase established the broad conception of “intent to defraud” – that it does not require an intent to deprive another person of money, property rights or a pecuniary interest – in a matter concerning the crime of Offering a False Instrument for Filing in the First Degree (§ 175.35). The defendant was charged with filing a false statement in an application for a liquor license. According to the court, an intent to “frustrat[e] the State’s power to fulfill [its obligation to carry out the law] violates the statute.” 76 A.D.2d at 537–538, 431 N.Y.S.2d at 534. The decision was affirmed by the highest New York court, the New York Court of Appeals.

There is no need to guess how Justice Merchan would rule as to whether that standard applies in the falsification of business records statutes. The First Department has long said the Kase test applies to §§ 175.05 and 175.10, most recently in 2018 in People v. Sosa-Campana, 167 A.D.3d 464, 89 N.Y.S.3d 75, (N.Y. App. Div., 1st Dept. 2018), leave to appeal denied, 2019 N.Y. Slip Op. 97967, 33 N.Y.3d 981, 101 N.Y.S.3d 257, 124 N.E.3d 746 (N.Y. 2019); see also Morgenthau v. Khalil, 73 A.D.3d 509, 902 N.Y.S.2d 501 (N.Y. App. Div., 1st Dept. 2010). 

In Sosa-Campana, the First Department reaffirmed that “intent to defraud” under §175.05-10 is much broader than deprivation of money or property — or indeed causing any financial harm. The defendant in the case had provided a fraudulent driver’s license, in the name of another real person, when stopped for a traffic violation. His intent was to deceive the state authorities to escape government sanctions. He was charged with falsifying business records in the first and second degree, identity theft in the second degree, and aggravated unlicensed operation of a motor vehicle in the third degree. The court found: 

The evidence was legally sufficient to establish the element of intent to defraud, as required for the convictions of identity theft and falsifying business records. When defendant was stopped for a traffic violation and presented a fraudulent driver’s license in the name of another actual person, defendant acted with at least two forms of fraudulent intent, each falling within the plain meaning of “defraud.” Defendant intended to escape responsibility for the violation by causing the officer to issue a summons to the wrong person, and also intended to conceal his additional offense of unlicensed driving. In order to prove intent to defraud, the People did not need to make a showing of an intent to cause financial harm (see People v. Kase, 76 A.D.2d 532, 537–38, 431 N.Y.S.2d 531 [1st Dept. 1980] (construing intent-to-defraud element of analogous statute), affd 53 N.Y.2d 989, 991, 441 N.Y.S.2d 671, 424 N.E.2d 558[1981]; see also Morgenthau v. Khalil, 73 A.D.3d 509, 510, 902 N.Y.S.2d 501 [1st Dept. 2010]).

The First Department in another decision, People v. Reyes, demonstrated that an intent to conceal a crime could be a sufficient basis to establish the requisite “generalized ‘intent to defraud.’” Reyes involved a corrections officer charged with first- and second-degree falsifying business records, both based on the same conduct. The court held that, given the “exclusive theory” of prosecutors that the defendant had “falsely indicated in the logbook that he was off-post during the inmates’ mealtime, in order to hide the fact that he had raped the complainant during that time frame,” 

[T]here would be no way for the jury to acquit defendant of first-degree falsifying business records—entailing a rejection of an intent to conceal a rape—but still convict him of the second-degree count. The People simply did not afford the jury any basis, other than intent to conceal the alleged rape, to support any finding of the generalized “intent to defraud.” 

Under the facts, either defendant’s intent was to conceal the alleged rape, or he had no fraudulent intent at all. As such, only the higher count of first-degree falsifying business records should have been submitted to the jury. 

69 A.D.3d 537, 538–539, 894 N.Y.S.2d 43, 44–45 (N.Y. App. Div., 1st Dept. 2010). 

In a similar case also decided by the First Department, a nurse was charged with falsifying business records by omitting information in her nursing notes recording mistreatment which preceded the death of her patient. People v. Coe, 131 Misc.2d 807, 812, 501 N.Y.S.2d 997 (N.Y. Sup. Ct. 1986). The court explained that the target of the intent to defraud need not be the geriatric center, but “might just as well have been [the patient’s] relatives, defendant’s supervisors or others. Intent to defraud anyone is sufficient.” The opinion was affirmed on appeal, with the the Court of Appeals simply stating that the “remaining contention pertaining to her conviction for falsifying business records (see, Penal Law § 175.05) is without merit.” 126 A.D.2d 436, 510 N.Y.S.2d 470 (N.Y. App. Div., 1st Dept. 1987), aff’d, 71 N.Y.2d 852, 522 N.E.2d 1039 (1988).

The 2010 First Department decision in Morgenthau v. Khalil, 73 A.D.3d at 510, 902 N.Y.S.2d at 502, is also consistent with this line of cases. In that instance, the defendant challenged a civil forfeiture action in an underlying criminal action arising out of an illegal check scheme, arguing that the prosecutors could not prove there was a substantial likelihood of securing a conviction for falsifying business records in the first degree because the indictment did not allege the intent to defraud a particular person or business entity out of money, property, or pecuniary value. The First Department rejected the defendant’s claim. Citing Ramirez (from the Fourth Department) and Elliassen (a lower court in the Second Department), the court in Morgenthau v. Khalil ruled:

Defendant argues that because the underlying indictment does not allege, and the People cannot prove, that he acted with intent to defraud a particular person or business entity—as opposed to the government or the public at large—out of money, property, or something of pecuniary value, plaintiff fails to demonstrate the requisite substantial likelihood of securing a conviction for falsifying business records in the first degree (see Morgenthau v. Citisource, Inc., 68 N.Y.2d 211, 222, 508 N.Y.S.2d 152, 500 N.E.2d 850 [1986] ). We do not view the meaning of “intent to defraud” in Penal Law § 175.10 to be so limited (see People v. Ramirez, 168 A.D.2d 908, 909, 565 N.Y.S.2d 659 [1990], lv. denied 77 N.Y.2d 965, 570 N.Y.S.2d 499, 573 N.E.2d 587 [1991]; People v. Elliassen, 20 Misc.3d 1143[A], 2008 N.Y. Slip Op. 51841[U], *2–3, 2008 WL 4193166 [2008]).

Morgenthau v. Khalil dismissed the argument that intent under §175.10 required either (1) a person or business as the intended victim, or (2) that the intent must be to defraud someone or something out of money or something else of pecuniary value. 

This understanding of the law – from Kase through to false business records jurisprudence – has also been adopted elsewhere throughout the state in cases arising under §§ 175.05 and 175.10. People v. Ramirez, 168 A.D.2d 908, 909, 565 N.Y.S.2d 659, 660 (N.Y. Sup. Ct., 4th Dept. 1990), leave to appeal denied, 77 N.Y.2d 965, 573 N.E.2d 587 (N.Y. Ct. App. 1991); People v. Schrag, 147 Misc.2d 517, 558 N.Y.S.2d 451 (Rockland County Ct. 1990); People v. Elliassen, 20 Misc.3d 1143(A), 873 N.Y.S.2d 236 (N.Y. Sup. Ct., Richmond County 2008); People v. Headley, 37 Misc. 3d 815, 951 N.Y.S.2d 317 (N.Y. Sup. Ct., Kings County 2012), opinion adhered to on reargument, 36 Misc. 3d 1240(A), 960 N.Y.S.2d 51 (N.Y. Sup. Ct., Kings County 2012). See also, McKinney’s on §175.05; N.Y. Penal Law § 15.00 (McKinney)

The 1990 Fourth Department case of People v. Ramirez, for example, also approved the trial court’s jury direction on this definition of “intent to defraud.” The defendant allegedly used false information to apply for credit cards to purchase store merchandise. The court held that the defendant could not be prosecuted for petit larceny because there was no proof that she did not intend to pay. Despite there being no proof that the defendant caused or intended to cause any financial loss, the court upheld her conviction for falsifying business records. The Fourth Department held:

We reject defendant’s argument that the evidence was insufficient to convict her of the crimes of falsifying business records and issuing a false financial statement. Citing People v. Saporita (132 A.D.2d 713, 715, lv. denied 70 N.Y.2d 937), defendant contends that an element of those crimes, “intent to defraud”, requires that a person “be deprived of property or a thing of value or a right” and no person was deprived of property or a thing of value or right. In People v. Saporita (supra), the court charged a definition of “intent to defraud” which was not met by the evidence offered by the People. Here, however, the court, in its charge, gave a different definition of intent to defraud, which was met by the evidence produced. The evidence shows that defendant intended to defraud various store owners by applying for and obtaining credit cards in the name of another person when she could not get credit in her own name and that she intended to deceive those stores and induce them to extend credit to her, which, but for her misrepresentation, they would not have done. That evidence proved defendant’s “intent to defraud” as defined by the court’s charge. 

168 A.D.2d at 909, 565 N.Y.S.2d at 660 (NY. App. Div., 4th Dept. 1990). The defendant tried to appeal the Fourth Department decision, but leave to appeal was denied by the Court of Appeals.

In the 2008 decision People v Elliassen, the Richmond County Supreme Court (within the Second Department) held that the intent to defraud required no pecuniary loss, and that interference with the legitimate public administration of the NYPD sufficed. The court stated:

Counts Two through Thirteen, Falsifying Business Records in the First and Second Degrees, charge the defendants with not preparing and filing the juvenile log report or the UF 250 stop and frisk report relating to their interaction with Rayshawn Moreno. These statutes require defendants to have an “intent to defraud”. It is not necessary to show a property or pecuniary loss from the fraud, and, in this case, it is sufficient to show that the NYPD’s legitimate official actions and purposes were impeded. See, People v Schrag, 147 Misc 2d 517 (County Court, Rockland County, 1990); People v Coe, 131 Misc 2d 807, 812 (Supreme Court, New York County, 1986) (“…. the target of the intent to defraud could have been defendant’s supervisors, defendant’s employer or the victim ….”).



D
efendants contend that Counts Fourteen through Twenty-Five, Falsifying Business Records in the First and Second Degrees (involving defendants’ failure to properly follow NYPD Communications Division radio procedures), likewise are legally insufficient because there is no evidence of defendants’ “intent to defraud”.



T
he inaccuracy of the records has ramifications beyond general business practices. Likewise, the failure of police personnel to promptly notify the Communications Division dispatcher of their whereabouts and current status vis a vis handcuffed prisoners, adversely affects the agency’s ability to carry out its mission. It meets the standard of “intent to defraud”, since defendants’ actions “intentionally defrauded” or deprived the Police Department of valuable information and knowledge that were critical to its public safety mission

20 Misc. 3d 1143(A), 873 N.Y.S.2d 236 (N.Y. Sup. Ct., Richmond County 2008). The Kings County Supreme Court’s 2012 decision in People v. Headley provides a useful account of the broad intent to defraud standard under the falsifying business records statute. 37 Misc. 3d 815, 951 N.Y.S.2d 317 (N.Y. Sup. Ct., Kings County 2012). Headley was a case about ambulance chasing. The defendant, who served as outside counsel for the New York City Transit Authority [NYCTA] in pursuit of personal injury lawsuits, used a fictitious name for his company in order to fraudulently obtain paid assignments from NYCTA to procure independent medical examinations of personal injury claimants who had sued NYCTA. He was charged with first-degree falsifying business records and first-degree offering a false instrument for filing, among other crimes.

The court reviewed relevant precedent–including Kase, Schrag, and Elliassen–and held that “the term ‘intent to defraud’ does not require an intent to deprive the state of money or property, but rather intent to frustrate legitimate state interests and processes. Maintaining a fair vendor selection process free of any potential conflicts of interest is a legitimate function of the NYCTA.” Id. (internal citations omitted).  

The court in Headley usefully outlined the law in New York regarding the intent to defraud:

The lesser included charge of Falsifying Business Records in the Second Degree requires simply “intent to defraud.” The term “intent to defraud” in article 175.00 crimes has been held to be broader than an intent to deprive another of property or money. See Donnino, Practice Commentary, McKinney’s Cons. Laws of N.Y., Book 39, PL § 175.05, pp.408-409. In People v. Schrag, 147 Misc.2d 517, 558 N.Y.S.2d 451 (Rockland Co.1990), defendant was a police officer charged with Falsifying Business Records in the First Degree for filing a false police report. He argued that no intent to defraud was proved before the grand jury. The court found that Penal Law article 175 did not limit the term “intent to defraud” to property or pecuniary loss, and noted that the interests of an entity in keeping accurate business records goes beyond economic concerns and extends to rights of others which may be infringed by false records. The court in Schrag cited People v. Kase, 76 A.D.2d 532, 431 N.Y.S.2d 531 (1st Dept. 1980), in which the defendant was charged with Offering a False Instrument in the First Degree, in support of its conclusion that it was sufficient to show that the Government’s legitimate official action and purpose were impeded.

In Kase, the defendant argued that there was no intent to defraud because the instrument in question, an application to transfer a liquor license in connection with the sale of a tavern, did not have the potential to cause pecuniary loss to the State or political subdivisions thereof. The Appellate Division disagreed. “Whoever intentionally files a false statement with a public offense or public servant for the purpose of frustrating the State’s power to fulfill [its obligation to carry out the law] violates the statute.” Kase at 537-538, 431 N.Y.S.2d 531.

In People v. Elliassen, 20 Misc.3d 1143(A), 2008 WL 4193166 (Sup. Ct. Richmond Co. 2008), the defendants, police officers, were charged with falsifying business records in the first and second degrees for failing to prepare and fill required reports and for failing to follow NYPD procedures. The defendants argued that the evidence was insufficient to establish an “intent to defraud.” The court held that, “[I]t is not necessary to show a property or pecuniary loss from the fraud, and, in this case, it is sufficient to show that the NYPD’s legitimate official actions and purposes were impeded.” The defendants’ conduct inhibited the Police Department’s ability to perform its duties and carry out its mission. The court noted that the inaccuracy of the records had ramifications beyond general business practices.

Given this precedent, this court does not agree with the view that defendant was not proved to have an “intent to defraud” sufficient to justify trial on the lesser second degree offense under Counts 13 and 14. 

37 Misc. 3d at 829–830, 951 N.Y.S.2d at 329. The 1990 Rockland County Court decision in Schrag also noted, “When the Legislature intended to limit the scope of a fraud statute it has done so (i.e., Penal Law §§ 195.20, 190.60). While several Penal Law fraud statutes are directed specifically to preventing property or pecuniary loss, the fraud crimes in article 175 of the Penal Law are not so delimited and therefore the ‘intent to defraud’ terminology must be interpreted so as to effectuate their object, spirit and intent.” 147 Misc. 2d 517, 518, 558 N.Y.S.2d 451 (Rockland County Ct. 1990).

A case of election law violations and false business records is also instructive here. In People v. Norman, 6 Misc. 3d 1035(A), 800 N.Y.S.2d 353 (N.Y. Sup. Ct., Kings County 2004), the  Supreme Court of Kings County held that a defendant causing false information to be entered by a campaign committee and the Board of elections was sufficient to satisfy intent for falsifying business records. The court explained: 

Since it is a crime indeed a felony for a person ‘acting on behalf of a candidate or political committee [to] knowingly and willfully … solicit any person to make [expenditures in connection with the nomination for election or election of any candidate] for the purpose of evading the contribution limitations of [article 14 of the Election Law],’ Election Law § 14-126(4), this evidence is also sufficient to establish that the defendant concealed these solicitations and contributions from the treasurer and thus prevented the making of a true entry, and caused the omission of a true entry in the records of both the [campaign] Committee and the Board of elections with ‘intent to defraud includ[ing] an intent to commit another crime or to aid or conceal the commission thereof.’ Penal Law § 175.10.

Our discussion here focuses on the jurisprudence interpreting the scope of the falsification of business records statute. We should note the practice of district attorneys prosecuting cases under these statutes may also be instructive. See, for example, the 2017 indictment of Richard Brega for falsification of business records in creating a scheme of covert payments to benefit a political campaign. 

Of course, the intent to defraud must involve an intent to deceive that is material to another’s interest. In People v. Keller, the trial court held that the creation of false documentation did not amount to deception because it was immaterial. Defendants who ran an escort service did not intend to defraud a credit card company by falsely billing clients for “limousine service” instead of escort services on charge slips. 176 Misc. 2d 466, 673 N.Y.S.2d 563 (N.Y. Sup. Ct. 1998). The judge explained: “The defendants did not intend for American Express to be deceived by the writing. They knew and expected that the particular falsity of this writing would be of no moment to American Express.” Id. at 469; see also id. at 469 (“Their intention was for American Express to obtain their usual remuneration for a credit card transaction, and there is no evidence that they did not.”). While the recipient of the false document suffered no financial loss, that fact was incidental. 

Contrary cases

Two cases have been cited for the proposition that the intent to defraud is limited to depriving a person of money or property, but there are significant flaws in relying on these cases. The two cases are: a Second Department decision in People v. Saporita (1987) and a Kings County Criminal Court one in People v. Hankin (1997). In Saporita, the court explained that the prosecutors had not objected to a jury instruction on this element of the crime and – whether that instruction was flawed or not – the government was stuck with it on appeal. 132 A.D.2d 713, 715, 518 N.Y.S.2d 625, 627 (N.Y. App. Div., 2nd Dept. 1987) (“No objection was taken by the People to this part of the court’s charge and they became bound by it.”). Notably, Saporita was focused on the element of depriving “another person,” not necessarily on the issue of deprivation of money or property. Indeed, the jury instruction read: “The term defraud means to cheat or deprive another person of property or a thing of value or a right.” 132 A.D.2d at 715; id. (“in the instant record, there is no evidence that ‘another person’ was deprived of any property or right as a result of the defendants’ conduct regarding the public records”). 

The Hankin trial court misconstrued Saporita, citing it for the proposition of law described in the jury instruction, thus failing to recognize the highly limited reason for the Second Department’s decision. 

Other courts in the Second Department have not misconstrued Saporita. For example, in the 1990 decision of People v. Schrag, the Rockland County Court emphasized the peculiarity of the Saporita decision having been predicated on the government’s failure to oppose the jury instructions and explained that those jury instructions were, in fact, erroneous. The Schrag court emphasized the broad definition of “intent to defraud” set forth by Kase and others. It is worth quoting the Schrag court’s analysis at length:

The court found that conduct [in Saporita] to be insufficient to establish an “intent to defraud” as charged since there was no evidence that “another person” was deprived of any property or right as a result of the defendant’s actions. A review of the Article 175 crimes illustrates that the use of the term “intent to defraud” is not qualified by any language which limits their applicability to property or pecuniary loss.



A
lthough CJI [Criminal Jury Instructions] refers to the object of the intent to defraud as being “another person,” there seems to be no basis in law to require the defrauded entity to be a person. In fact, because the crime involves the false entry or omission of information from business records, the defrauded party is most likely to be a business entity rather than a person. (See, Penal Law § 175.00 [1].) The decision in People v Saporita (supra) appears to rely heavily upon the fact that the trial court gave the CJI instruction without objective by the People, so that the People were then limited to showing that another person was intended to be defrauded. Since the instant matter has not yet proceeded to trial, and this court does not believe the CJI instruction at issue correctly defines the statutory language, a dismissal of count 1 on this ground is not warranted.

Similarly, the language in the CJI instruction which refers to depriving another of “property or a thing of value or a right” is language which should be given more than just a commercial meaning. The enterprises which can be the victims of the falsification of business records include “any entity of one or more persons, corporate or otherwise, public or private, engaged in business, commercial, professional, industrial, eleemosynary, social, political or governmental activity.” Penal Law § 175.00(1). The interest of these various entities in keeping accurate business records goes far beyond their economic concerns and certainly extends to the rights of the entities and others which may be infringed by false records. In People v. Kase, 76 A.D.2d532, 537, 431 N.Y.S.2d 531 (1st Dept., 198); aff’d 53 N.Y.2d 989, 441 N.Y.S.2d 671, 424 N.E.2d 558, the Court favorably cited the federal rule that, in a prosecution for filing a false instrument, it is not necessary to show that the government suffered a property or pecuniary loss from the fraud citing Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 512, 68 L.Ed. 968. It was sufficient to show that the government’s legitimate official action and purpose were impeded. Accordingly, this Court will impose no requirement that the Grand Jury presentation establish a commercial or property loss. 

147 Misc. 2d at 518–519, 558 N.Y.S.2d at 452–453 (Rockland County Ct. 1990). Subsequent case law in the Second Department has adopted the broad definition of intent to defraud in line with the Kase test and Schrag. See People v. Elliassen (Richmond County Sup. Ct. 2008), which we discussed at length above. See also People v. D. H. Blair & Co., Inc. (New York County Sup. Ct. 2002) (rejecting Hankin and stating that “prior cases which have defined the statutory scope of a falsifying business records charge have not limited the statute to encompass only the intention to defraud the entity, whose business records were falsified. Rather, the reach of the statute includes the falsification of records, which are designed to thwart possible regulatory scrutiny”). 

Conclusion

In sum, the New York case law offers clear guidance on the broad scope of the “intent to defraud” for the offense of falsifying business records. While there are other legal hurdles for the Manhattan DA to cross in the indictment of the former president, this element of the relevant offenses poses no obstacle based on the known facts in the case.

IMAGE: The New York County Supreme Court building on Foley Square in Manhattan, New York City, USA. (Getty Images) 

The post The Broad Scope of “Intent to Defraud” in the New York Crime of Falsifying Business Records appeared first on Just Security.

WP Radio
WP Radio
OFFLINE LIVE