People v. Sala
| Citation | 695 N.Y.S.2d 169,258 AD2d 182 |
| Parties | The PEOPLE of the State of New York, Appellant-Respondent, v. Roger V. SALA and John W. Donovan, Respondents-Appellants. and Roger C. Sala, Respondent. |
| Decision Date | 29 July 1999 |
| Court | New York Supreme Court Appellate Division |
Eliot Spitzer, Attorney-General (Joseph J. Hester of counsel), New York City, for appellant-respondent.
Eugene P. Devine, Public Defender (Theresa M. Suozzi of counsel), Albany, for Roger V. Sala, respondent-appellant.
Daniel G. Moriarty, Albany, for John W. Donovan, respondent-appellant.
Jeffrey S. Berkun, Albany, for Roger C. Sala, respondent.
Before: CARDONA, P.J., MERCURE, PETERS and SPAIN, JJ.
Appeals (1) from a judgment of the Supreme Court (Sheridan, J.), rendered January 8, 1997 in Albany County, upon a verdict convicting defendant John W. Donovan of the crimes of scheme to defraud in the first degree, fraud in the sale of securities (16 counts) and grand larceny in the third degree (six counts), (2) from a judgment of said court, rendered January 8, 1997 in Albany County, upon a verdict convicting defendant Roger V. Sala of the crimes of scheme to defraud in the first degree, fraud in the sale of securities (16 counts), grand larceny in the third degree (six counts), failure to register as a commodity broker-dealer and failure to register as a commodity investment advisor, and (3) from an order of said court, entered January 8, 1997 in Albany County, which partially granted defendants' motions to set aside the verdict and dismissed certain counts of the indictment.
Following an investigation into the investment activities of codefendant First Meridian Planning Corporation, defendants and several other First Meridian officers and sales personnel were charged in a 39-count indictment with various crimes arising from the sale of financial plans consisting of numismatic coin portfolios, art portfolios and condominiums located in Florida and Indiana. Defendant Roger V. Sala (hereinafter the president) was First Meridian's president and chief operating officer, while defendants John W. Donovan and Roger C. Sala (hereinafter Sala), the president's son, worked with First Meridian in promoting the coin and art investment programs, respectively.
The indictment alleged that defendants, who served on First Meridian's "investment advisory board", posed as objective financial planners qualified to provide each client with a personalized financial plan tailored to individual financial objectives. The brochures distributed to potential investors advertised that First Meridian's advisory board was "composed of experts [who were] disciplined and certified in various fields of financial counseling * * * to give our clients an objective analysis of their current financial situation and the direct route to achieving their goals", and that the advisory board's investment recommendations were "scrutinized by an independent attorney and accountant". Invariably, however, the advisory board recommended the identical financial plan to all clients.
In marketing these financial plans to potential investors, First Meridian and its sales personnel represented leveraged purchases of rare coins, artwork and condominiums as low-risk, high-yield investments which could be purchased by placing a down payment and permitting First Meridian to arrange for the financing of the balance. The sales personnel consistently concealed from investors certain fees associated with the transactions, the large commissions received by First Meridian, the nonliquidity of the investments and the risks associated with the markets in rare coins, condominiums and artwork. In marketing the artwork portfolios, First Meridian represented that it controlled the artwork market through exclusive contracts with several artists who were managed by First Meridian's subsidiary, codefendant Meridian Arts, and whose works were offered as a part of First Meridian's financial plans. The art portfolios sold by First Meridian were portrayed as having "no risk" and a projected appreciation rate of 38% per year, a figure which, according to the People's art expert, lacked any factual basis. Investors were advised that they could sell or donate the artwork for a profit at the end of a three to five-year period, but were not informed of the limited resale market or that 65% of the purchase price was ultimately received by First Meridian as a commission (50%) and kickback from the artist (15%).
Furthermore, with regard to the condominiums sold to investors, First Meridian failed to divulge that a 12% commission was built into the sales price, that as co-broker of the sale it received a 9% commission from the provider of the condominiums and that many investors were being placed into negative amortization schedules without their knowledge. Moreover, First Meridian advised investors that the condominiums would appreciate in value by a specified percentage despite the market data showing decreases in the developers' and resale markets.
Similarly, the numismatic coin portfolios were marketed to investors using profit projection sheets claiming appreciation rates in excess of 25%, as well as brochures advertising the coins as "rare" and the "best high-yield low-risk [investment] vehicle". First Meridian further claimed that in addition to impressive returns, its rare coin investments offered such benefits as high liquidity and limited supply. What First Meridian did not reveal, however, was that most of the coins sold to investors were readily available common date coins, that the coin market was actually depreciating and somewhat risky, that the coins were purchased at retail prices but could only be resold at wholesale prices, and that hidden mark-ups such as auction fees would further decrease any returns received on the investment. Meanwhile, First Meridian provided coin investors with updated appraisals showing increasing retail values of their coin portfolios, giving the false impression that the appraisal represented the portfolio's resale value. Of those investors who chose to liquidate their coin portfolios following the recommended three to five-year holding period, many were able to recoup only half of their initial investment.
Defendants moved to, inter alia, dismiss the first count of the indictment charging them with the crime of scheme to defraud in the first degree and County Court (Marks, J.) granted the motion. Upon the People's appeal, we reversed and reinstated the charge (see, 201 A.D.2d 145, 614 N.Y.S.2d 811) and the Court of Appeals affirmed (see, 86 N.Y.2d 608, 635 N.Y.S.2d 144, 658 N.E.2d 1017). A joint jury trial ensued and, following the presentation of the People's case, defendants each moved pursuant to CPL 290.10 for trial orders of dismissal. Supreme Court (Sheridan, J.) initially denied the respective motions. At the conclusion of all of the evidence, however, the court granted reargument with regard to Donovan's motion, withdrew its previous ruling and reserved decision on the motion. Thereafter, the jury rendered a guilty verdict as to all defendants for the crime of scheme to defraud in the first degree. As relevant to this appeal, the president and Donovan were also found guilty of 16 counts of fraud in the sale of securities (General Business Law § 352-c ) and 16 counts of varying degrees of grand larceny.
After the verdict was rendered, Supreme Court granted Sala's renewed CPL 290.10 motion with respect to the scheme to defraud count and granted Donovan's and the president's renewed CPL 290.10 motions with regard to 10 of the grand larceny counts. The People appeal from the orders setting aside the guilty verdicts and dismissing the aforementioned counts of the indictment, and the president and Donovan each appeal from their respective judgments of conviction. The appeals were joined for this court's determination.
Initially addressing the People's appeal, the People contend that Supreme Court erred in granting trial orders of dismissal with regard to the scheme to defraud count against Sala and the 10 grand larceny counts against the president and Donovan. We agree. A motion for a trial order of dismissal may be granted where the trial evidence, if accepted as true without considering questions as to the quality or weight of the evidence, is legally insufficient to establish every element of the offense charged (see, People v. Sabella, 35 N.Y.2d 158, 167, 359 N.Y.S.2d 100, 316 N.E.2d 569). In determining whether the verdict is supported by legally sufficient evidence, Supreme Court must view the evidence in the light most favorable to the prosecution and determine "whether any valid line of reasoning and permissible inferences could lead a rational person to the conclusion reached by the fact finder on the basis of the evidence at trial" (People v. Williams, 84 N.Y.2d 925, 926, 620 N.Y.S.2d 811, 644 N.E.2d 1367; see, CPL 70.10; People v. Grassi, 250 A.D.2d 944, 673 N.Y.S.2d 753, affd. 92 N.Y.2d 695, 685 N.Y.S.2d 903, 708 N.E.2d 976).
First addressing Sala's motion for a trial order of dismissal, in order to establish his guilt of the crime of scheme to defraud in the first degree, the People were obligated to prove that he "engage[d] in a scheme constituting a systematic ongoing course of conduct with intent to defraud * * * by false or fraudulent pretenses, representations or promises" (Penal Law § 190.65 [b] ). Fraudulent intent is usually not susceptible of proof by direct evidence and must ordinarily be inferred from circumstantial evidence such as the defendant's knowledge of the misleading or deceptive nature of the particular business practices employed (see, People v. White, 101 A.D.2d 1037, 472 N.Y.S.2d 730).
Acknowledging that considerable deference should be given to Supreme Court's assessment of the evidence (see, People v. Ford, 88 A.D.2d 859, 862, 451 N.Y.S.2d 753) and that Sala's knowledge may not have extended to every detail of...
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