Close
Updated:

Defendant on Trial for Larceny by Embezzlement

An Armored Courier Corp. warehouse in Bronx County was burglarized and robbed of some $11 million by individuals unconnected to the company, who were later apprehended and prosecuted. In the aftermath of the robbery, the Bronx County District Attorney’s office focused its attention on the company’s-own business practices. A series of indictments charging the company and its principals with various counts of grand larceny and misapplication of property ensued. A New York Criminal Lawyer said he question presented for consideration is whether the indictments’ allegations concerning the companies handling of the money entrusted to their care would, if proven, support convictions for the crimes charged.

The six indictments collectively charge the company officials, the Armored Courier Corp. and the Investigations Corp. with several counts of grand larceny in the second degree and misapplication of property. At the time the indictments were issued, the company was principally engaged in transporting and storing large sums of cash and performing related services on behalf of its clients. The company officials include the president of the Armored Courier Corp., the senior vice-president of that corporation, and the vice-president and cashier of the Valley National Bank, which played a role in one of the alleged misappropriation schemes.
The case has a complex factual and procedural history. The grand larceny and misapplication charges arose out of four separate courses of conduct, which the State of New York claim demonstrate the accused parties’ criminal mishandling of their clients’ funds. The first Grand Jury to consider the State’s evidence handed up five indictments. Of the five, three were dismissed entirely with leave to re-present. The other two indictments were sustained against the company president and senior vice-president but dismissed against the only named corporate opponent, the Armored Courier Corp. The second Grand Jury handed up four new indictments, naming the company president, the senior vice-president, the Armored Courier Corp. and the Investigations Corp. as opponents. All six outstanding indictments were dismissed by the Presiding Judge on the ground that the proof before the Grand Jury was legally insufficient. Two of the indictments, which named the company president and senior vice-president as opponents, were reinstated on the State’s appeal to the Appellate Division, and the State, as well as the company president and senior vice-president were granted leave to take cross appeals to the court.

The Criminal Procedure Law provides that a Grand Jury may indict a person when the evidence before it both establishes all the elements of the crime and also establishes reasonable cause to believe that the accused committed the crime to be charged.

Furthermore, on a motion to dismiss an indictment, the inquiry of the reviewing court is limited to the legal sufficiency of the evidence; the court may not examine the adequacy of the proof to establish reasonable cause, since that inquiry is exclusively the province of the Grand Jury. Legally sufficient evidence means competent evidence which, if accepted as true, would establish every element of an offense charged and the opponents’ commission thereof.

Taken in the light most favorable to the State, the evidence before the Grand Jury showed the company had an agreement with its Bank client, under which it was to pick up from the Bank’s Water Street offices certain bulk deposits that it received from its commercial customers. A Brooklyn Criminal Lawyer said the company was to count the money in their warehouse and deliver it within 72 hours to the Bank’s account at the Federal Reserve Bank in lower Manhattan, reporting any overages or shortages discovered in the counting process. In fact, the company was able to perform the fine counting task in approximately 24 hours, considerably less time than the 72 hours agreement the client allowed.

Reluctant to retain all of the cash on the company’s premises for the full 72-hour period, the company president met with an officer of the National Bank, and arranged for the fine counted money to be delivered to the National Bank’s account at the Federal Reserve Bank, with the funds to be credited to the company’s newly created escrow account with the National Bank. Once the funds were delivered, an employee of the company was to call the Bank and specify the amount that was to be used to buy repurchase agreements from that bank. Under the repurchase agreements, which were analogous to loans or bonds, the National Bank was given the right to invest the money, while the company’s account was debited in an appropriate amount. The loan was secured by A-rated bonds held in the Bank’s Federal Reserve Bank vault. At the conclusion of the 72-hour period the company had to deposit the Bank’s money in its Federal Reserve account, the National Bank would repurchase the bonds by crediting escrow account with the principal amount plus a portion of the interest earned on its investments. On telephone orders from the company’s employee, the Bank would then wire transfer the principal amount to the Bank’s account at the Federal Reserve Bank, leaving the company’s account enriched by the amount of the interest payment.

The repurchase agreement plan was implemented in July of 1981. By late August, the Bank had noticed that its funds were being routed through the National Bank and demanded an explanation. Although an officer of the company told the Bank’s representative that the rerouting had been initiated for insurance purposes, the Bank was evidently unsatisfied and directed the company, both orally and in writing, to deliver the fine counted money directly to the Bank’s account at the Federal Reserve Bank. Despite the admonition, the company continued its practice of routing the money through the National Bank until November of 1981, when the Bank decided it could fine count its bulk deposits internally. During the period when its arrangement with the National Bank was in effect, the company gained a total of nearly $17,000 in interest earned on over 40 repurchase agreements. The full amount of the principal belonging to the Bank, however, was always returned to its owner within the allotted 72-hour time frame. While the company’s conduct may have provided a basis for civil liability in some form, the conduct did not constitute criminal larceny.

The crime of larceny consists of an unauthorized taking, coupled with the intent to deprive another of property or to appropriate the same. The terms deprive and appropriate are specifically defined in the Penal Law.

Another set of charges against the company president and the senior vice-president arises from a second business arrangement the company had with the Bank. Under the arrangement, the company kept a rolling inventory of the Bank’s dollar bills and coins in a segregated area of its money room. The money was to be delivered to various branches of a Supermarket, the Bank’s customer, whenever a need for additional cash arose. The opponents allegedly took some $100,000 out of the rolling inventory and deposited it in a compensatory balance account at a commercial bank. The apparent purpose in opening the account was to enable the company to obtain a lower interest rate on a refinanced equipment loan it had with the commercial bank. There were no restrictions on the company’s use of the compensatory balance account, and the company’s principals had full access to its funds at all times.

In late 1982, discrepancies began to appear in the amount of coins in the rolling inventory that the company was storing for the Bank. An audit revealed substantial shortages in the rolling inventory, and, as a consequence, the chairman of the company’s board of directors attempted to withdraw the funds in the commercial bank account. The commercial bank, however, refused the request and instead called in the demand portion of the company’s equipment loan, freezing the compensatory balance account in an apparent preliminary attempt to set off its claim against the opponent. On January 11, 1983, the company returned the Bank’s rolling inventory with a shortage of over $122,000. An additional $25,000 in dimes was returned the following day, but the Bank never recovered the remaining $97,000.

The company president was also charged with having committed second degree larceny by failing to remit insurance proceeds to the intended beneficiaries. The charge was dismissed but reinstated on appeal to the Appellate Division. The Appellate Division’s disposition of the charge was incorrect and that the indictment against the company president should be dismissed.
On September 3, 1982, one of the company’s armored cars was robbed of more than $231,000 after having made several cash pick-ups. About two months after the robbery, which does not appear connected to the later warehouse robbery, the company Investigations’ insurer sent it a $20,985.54 check in full settlement of its insurance claim. The check represented payment for the losses sustained by three of the company’s clients. The company reimbursed one of the clients, a Farm Products company, for the full amount of its $18,620 loss, but did not distribute the remainder of the insurance proceeds to its other two clients, each of which had sustained losses in excess of the $2,365 balance and had submitted proof of loss. Instead, the company retained the excess proceeds for itself, an act which led to the present second degree grand larceny charge against the company president.

As the named holder of the insurance policy, the company was the legal owner of the funds paid to it by the insurer. While its clients may have had a civil claim against them, and even a right in the funds superior to the creditors, they did not have a right superior to that of the company to possess the proceeds of the company’s insurance policy. Moreover, if the insurer had wanted assurance that the funds would be given directly to the companies that had actually sustained loss, it could have simply issued individual checks jointly payable to them and the accused company. In any event, there was no unlawful taking of funds from their rightful owner, and the indictment charging the company president with larceny because of his failure to pay all of the insurance proceeds to their clients should not have been reinstated.

The Grand Jury was entitled to conclude from the evidence presented concerning the repurchase agreement scheme in particular, and the company’s gross mismanagement of funds entrusted to its care, in general, that the repurchase agreement transactions created a risk of loss to the Bank within the meaning of the misapplication statute.

There was sufficient evidence before the Grand Jury to permit it to find that the insurance proceeds belonged to the injured parties and that, contrary to their rights, the opponents misappropriated some of the funds to their own use.

There was evidence that the company was contractually obligated to reimburse its clients for their losses, as well as documentary proof that the insurer had made the payment in accordance with the proof of loss submitted by those clients. The evidence was sufficient to establish legitimate complaint that the insurance proceeds were paid to the company in trust for the bailor-clients who had sustained losses in the robbery, and that the opponents intentionally withheld them from the bailor claimants. Given the evidence of a trust existing by operation of law, the alleged conversion by the company president of a portion of the insurance proceeds for his own use or his company’s use would support a conviction for larceny by embezzlement.

Trust is hard to earn but easy to betray when money is involve. People engage to crimes that would enable them to earn money the easy way. If your company was robbed and you want to make sure that the thieves are punished accordingly, contact a New York Criminal Lawyer together with the NYC White Collar Crime Attorney at Stephen Bilkis and Associates. Whether you have been charged with sex crimes, fraud or white collar crime, they are there to help.

Contact Us