People v. Vanguard Meter Service, Inc.
| Decision Date | 04 March 1994 |
| Parties | The PEOPLE of the State of New York, v. VANGUARD METER SERVICE, INC., Robert E. Bates, E. Douglas Kenna, III, Kenneth Correll and William B. Clark, Defendants. |
| Court | New York Supreme Court |
Newman & Schwartz, New York City (Gustave H. Newman, Richard A. Greenberg, William Shields, of counsel), for the defendant Robert Bates.
Buchwald & Kaufman, New York City (Alan R. Kaufman, of counsel), for the defendant William Clark.
Christy & Viener, New York City (Arthur H. Christy, Frank E. Derby, of counsel), for the defendant E. Douglas Kenna, III.
Papa, DePaola & Brounstein, Flushing (Steven L. Brounstein, of counsel), for the defendant Kenneth Correll.
Robert M. Morgenthau, Dist. Atty., New York City (Elizabeth Karas, of counsel), for People.
The defendants, Robert E. Bates, E. Douglas Kenna, III, Kenneth Correll and William B. Clark ("the defendants") 1, have moved for discovery and inspection of the grand jury minutes and dismissal of the indictment. Alternatively, they seek a further bill of particulars and discovery.
This case arises out of the New York City Universal Water Metering Program.
In 1986, although the installation of individual water meters was required in commercial and industrial buildings, 630,000 one and two family homes were unmetered and billed for water on an arcane basis unrelated to usage and predicated on property frontage. The City decided to meter these homes and to do so through a municipal installation project rather than by requiring the individual homeowners to install them. The City would use a competitive bidding process, and award contracts according to the boundaries of the City's community boards. As is common in such contract bidding processes, the City prepared bid packages for prospective bidders. In addition to technical information and cost estimates, the bid package informed prospective bidders that they would be required to calculate labor costs in accordance with Labor Law Section 220, which requires contractors performing public works projects to pay the workers the prevailing wage. The bid packages let out in 1989 and 1990 also required that the contracting party would have to perform certain work known as pre-plumbing work. The bid package indicated in this regard:
[preplumbing work was] governed by the New York City Building Code including but not limited to Title 27-126, which defines In essence, the contracts with the City would require that preplumbing work be supervised by a licensed master plumber.
the role of licensed master plumbers. Strict compliance with this section will be rigidly enforced and failure to comply will result in default of contract procedures being instituted
After conducting prebid conferences, the City circulated an addendum to the bid specifications which set forth the specific wages that the bidders would be required to pay their employees. The defendants received this addendum. After the bids were publicly opened, the lowest bid was determined and the contracts were awarded to the defendants. The defendants executed formal contracts, to which were annexed the bid information and the wage schedules, which were also incorporated by reference.
Each contract provided:
The wages to be paid and the supplements to be provided, for a legal day's work, to laborers, workmen or mechanics employed by the Contractor shall not be less than the prevailing wages and supplement required to be paid to such employees, as ascertained and prescribed by the Comptroller in the Specifications attached hereto.
The annexed appendix then specified exactly how much Vanguard was to pay each category of its workers per hour. Through 1990, Vanguard had won approximately two thirds of the thirty seven contracts awarded.
The indictment charges larceny by false promise, larceny by false pretenses, scheme to defraud, filing of a false instrument, conspiracy, and perjury. The thrust of the indictment is that the defendants never intended to comply with the prevailing wage and preplumbing master plumber requirements. Among other evidence which was presented to the Grand Jury was that the defendants calculated their bids based on piecework rather than hourly costs, that they promised workers the higher of piecework or hourly rate, but only paid a piecework rate that resulted in a lower wage than an hourly rate at the prevailing wages, that the defendants arranged with a licensed plumber to falsely make it appear that a licensed plumber was supervising preplumbing work, and that the defendants submitted false and perjurious forms to the City certifying they had complied with the contracts.
In count two, the defendants are charged with the crime of scheme to defraud in the first degree. (Penal Law § 190.65). Specifically, the defendants are charged with engaging in a scheme constituting a systematic ongoing course of conduct with intent to defraud ten or more persons by false and fraudulent pretenses, representations, and promises, to wit, soliciting meter installers by promising they would be paid at an hourly wage, and so obtained property from one or more of such persons. In response to a request for a bill of particulars, the People assert that the "property" obtained from the installers by means of the alleged scheme was "money, labor and the right to be paid the prevailing wage".
The defendants argue that they obtained nothing from the installers, and certainly not "property". Also, they claim that if they did obtain property, it was not by deception. The People respond that the defendants cheated their workers by advertising a high hourly wage. Then the installers were promised the higher of the prevailing hourly wage or of a piecework rate. Only when they began to work and received their first paychecks did the installers realize that they were only being paid piecework for meters actually installed. This rate of pay was considerably less than the prevailing hourly wage, because, although the pay at piece rates for installing one meter was more than the pay for one hour at the prevailing hourly wage, it usually took an installer several hours to install a meter, but the defendants falsified the records to show that only one hour was spent to install each meter. The People further contend that the defendants employed deceptive methods to keep their labor costs down. The People urge that defendants benefitted: (1) by receiving many hours of uncompensated work from the installers; (2) by withholding wages earned by the installers and to which they were entitled by statute and by contract; and (3) The essence of the defendants' argument that property was not taken from the installers is that the installers' labor cannot be considered property, and that the installers' right to be paid the prevailing wage created no more than a debtor/creditor relationship between the defendants and the installers, which could not be the basis for a larceny prosecution.
by depriving the installers of their statutory and contractual right to be paid at the prevailing wage for every hour they worked.
The principal basis for the defendants' suggestion that labor cannot constitute property for purposes of the scheme to defraud statute is that the larceny statute excludes labor from the definition of property which can be stolen. See Penal Law Sections 155.00(1) and 155.00(8).
As the People point out, however, the scheme to defraud statute was enacted in part to permit prosecution of conduct which skirted the larceny statute. Further, the definition of property is not limited to the definition under the larceny statute. The Court agrees with the People that the definition of property for purposes of the crime of scheme to defraud is broad enough to encompass the services provided by the installers. See Penal Law Section 195.20 and People v. Tansey, 156 Misc.2d 233, 593 N.Y.S.2d 426 (Sup.Ct.1992) ().
As to the defendant's suggestion that the installers were not deceived, sufficient evidence was presented to the Grand Jury to the effect that the installers were deceived by the defendants' words and conduct, including alleged misleading advertisements, and misstatements to trainees and installers. The sum total of this conduct constitutes a pattern of behavior calculated to deceive persons of ordinary prudence and comprehension. People v. Block & Kleaver, 103 Misc.2d 758, 764, 427 N.Y.S.2d 133 (Monroe Co. 1980).
Accordingly, the motion to dismiss count two is denied.
The defendants attack the sufficiency of Counts three to fourteen on many grounds, including whether they may properly be charged with stealing the government contracts they entered into. Specifically, these counts alleged that the defendants committed grand larceny by stealing from the City 12 contracts for the installation of water meters. Each larceny allegedly occurred when the City executed the contract. Specifically, larceny by false promise is alleged in that when defendants signed the contracts, they did not intend to keep their covenant to comply with Section 7.5 of each contract (pertaining to the methodology of paying wages) and Section 10.3, (requiring the use of master plumbers to supervise certain preplumbing work under the contracts).
Larceny by false promise is committed when a person "pursuant to a scheme to defraud ... obtains property of another by means of a representation, express or implied, that he or a third person will in the future engage in particular conduct ... when he does not intend to engage in such conduct." Penal Law Section 155.05[2][d]. The law recognizes the dangers inherent in the loose application or unbridled expansion of this criminal statute:
"There is a very real danger that ordinary business transactions might be inhibited due to the risk of...
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