State v. Fagan, A-1030-19
| Court | New Jersey Superior Court – Appellate Division |
| Writing for the Court | PER CURIAM |
| Parties | STATE OF NEW JERSEY, Plaintiff-Appellant/ Cross-Respondent, v. THOMAS FAGAN, Defendant-Respondent/ Cross-Appellant. |
| Docket Number | A-1030-19 |
| Decision Date | 22 July 2022 |
STATE OF NEW JERSEY, Plaintiff-Appellant/ Cross-Respondent,
v.
THOMAS FAGAN, Defendant-Respondent/ Cross-Appellant.
No. A-1030-19
Superior Court of New Jersey, Appellate Division
July 22, 2022
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
Argued March 16, 2022
On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Indictment No. 13-05-0098.
William P. Cooper-Daub, Deputy Attorney General, argued the cause for appellant/cross-respondent (Matthew J. Platkin, Attorney General, attorney; William P. Cooper-Daub, of counsel and on the briefs).
Peter T. Blum, Assistant Deputy Public Defender, argued the cause for respondent/cross-appellant (Joseph E. Krakora, Public Defender, attorney; Peter T. Blum, of counsel and on the briefs).
Brian F. McDonough, Assistant Attorney General, argued the cause for amicus curiae Christopher W. Gerold (Matthew J. Platkin, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Brian F. McDonough, Victoria A. Manning, Evan A. Showell, Andrew H. Yang, Deputy Attorneys General, on the brief).
Before Judges Gilson, Gooden Brown, and Gummer.
PER CURIAM
Defendant Thomas Fagan was the Chief Executive Officer of two companies engaged in the research and development of medical devices. A jury convicted him of ten counts of failure to file individual and corporate tax returns in violation of N.J.S.A. 54:52-8 and -10. The jury could not reach a verdict on four second-degree charges arising from other alleged malfeasance: misapplication of entrusted property, N.J.S.A. 2C:21-15 (count twelve); theft, N.J.S.A. 2C:20-3(a) (count thirteen); money laundering, N.J.S.A. 2C:21-25(b)(2)(a) (count fourteen); and misconduct by a corporate official, N.J.S.A. 2C:21-9(c) (count fifteen).
Thereafter, the trial court dismissed counts twelve to fourteen, reasoning that they were barred by principles of double jeopardy. The court dismissed count fifteen, finding that it was moot because of the dismissals of counts twelve to fourteen. The State appeals, contending that the trial court erred in dismissing counts twelve to fifteen.
Defendant appeals, arguing that the trial court erred in not charging a lesser-included offense related to the charges for failure to file tax returns. He also contends that the court erred in not granting his motion to acquit and dismiss his two convictions for failure to file corporate tax returns for 2011, arguing that he had ceased having authority at the companies before those returns were due to be filed.
We reject defendant's lesser-included-offense arguments and affirm eight of his convictions for failure to file individual and corporate tax returns. We hold that the trial court erred in not granting defendant a judgment of acquittal on the charges that he had failed to file corporate tax returns in 2011 because there was no evidence that he had responsibility for the tax filings for that year. We also hold that the trial court erred in dismissing the four counts on which the jury did not reach a verdict. Defendant waived his double-jeopardy argument and, even if it is considered, the criminal charges are not precluded by separate civil claims that the State had brought against defendant. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.
I.
We discern the facts from the evidence at trial. In 1999, defendant established a company that was ultimately named Energex Systems, Inc.
(Energex). In 2009, defendant formed a limited liability corporation to acquire Arbios Systems, Inc. (Arbios). Energex and Arbios were both start-up companies working to develop medical devices. Accordingly, neither company generated profits, and they relied on investors to provide the funds for their operations.
Defendant served as the Chief Executive Officer (CEO) and principal operating officer for both Energex and Arbios. In those capacities, he was involved in raising monies from investors. He was also the only person authorized to control the companies' bank accounts, and he made all financial decisions for the companies.
Following investigations, defendant was prosecuted both civilly and criminally for actions and omissions related to his conduct in operating Energex and Arbios. In 2011, the Attorney General, on behalf of the Chief of the Bureau of Securities (the Bureau), filed a civil complaint against defendant and others. The civil complaint charged defendant with making material misstatements or omissions in connection with securities transactions, N.J.S.A. 49:3-52(b); engaging in fraud or deceit in connection with securities transactions, N.J.S.A. 49:3-52(c); acting as an unregistered securities agent, N.J.S.A. 49:3-56(a); selling unregistered securities, N.J.S.A. 49:3-60; and unjust enrichment. The
civil complaint also alleged that Energex and Arbios had employed defendant as an unregistered securities agent.
In 2012, the trial court in the civil action granted partial summary judgment against defendant, holding that he had acted as an agent without registration and had sold unregistered securities. The following year, in May 2013, the parties to the civil securities litigation agreed to a consent judgment resolving that action. Under the civil consent judgment, defendant agreed to pay a $1 million civil penalty under N.J.S.A. 49:3-70.1 and to be permanently enjoined from certain securities-related activities. The consent judgment also stated that Energex and Arbios would pay over $10 million in restitution to investors.
In April 2013, a month before the consent judgment was filed in the civil action, a grand jury indicted defendant for four criminal charges related to the failure to file tax returns and for filing a fraudulent tax return. In a superseding indictment returned in May 2013, defendant was charged with fifteen crimes: three counts of third-degree failure to file a personal tax return for the years 2007, 2008, and 2009, N.J.S.A. 54:52-8 (counts one through three); third-degree filing a fraudulent personal tax return for the year 2010, N.J.S.A. 54:52-10 (count four); four counts of third-degree failure to file corporate tax returns for
Energex for the years 2008, 2009, 2010, and 2011, N.J.S.A. 54:52-8 (counts five through eight); three counts of third-degree failure to file corporate tax returns for Arbios for the years 2009, 2010 and 2011, N.J.S.A. 54:52-8 (counts nine through eleven); second-degree misapplication of entrusted property, N.J.S.A. 2C:21-15 (count twelve); second-degree theft, N.J.S.A. 2C:20-3(a) (count thirteen); second-degree money laundering, N.J.S.A. 2C:21-25(b)(2)(a) (count fourteen); and second-degree misconduct by a corporate official, N.J.S.A. 2C:21-9(c) (count fifteen).
The criminal trial was conducted in 2016. At trial, the State presented evidence that defendant took hundreds of thousands of dollars from Energex and Arbios beyond his disclosed compensation. Defendant used that money for personal expenses, including paying gambling debts and making political contributions. While defendant was taking monies out of Energex and Arbios, the companies were having financial difficulties in paying employees and expenses.
Defendant did not file personal New Jersey income tax returns for the years 2007, 2008, and 2009. A State tax agent testified that, based on his calculation, defendant owed the State over $53,000 in unpaid taxes, penalties, and interest.
Energex did not file New Jersey corporate tax returns for the tax years 2008, 2009, 2010, or 2011. Arbios did not file New Jersey corporate tax returns for the tax years 2009, 2010, or 2011. The State presented evidence that defendant was the corporate official responsible for filing tax returns up to 2010. In the summer of 2011, however, defendant was removed as CEO of Energex and Arbios.
After hearing the evidence presented at trial, the jury convicted defendant of ten counts of failure to file personal and corporate tax returns (counts one to three and five to eleven). The jury acquitted defendant of filing a fraudulent personal tax return in 2010 (count four). The jurors were unable to reach a unanimous verdict on the four second-degree charges against defendant in counts twelve to fifteen.
At the end of the State's case, defendant moved for acquittal. The trial judge deferred ruling on that motion until after the jury rendered its verdict. The judge ultimately denied the acquittal motion.
In March 2018, defendant was sentenced to an aggregate term of five years of probation with forty-five hours of community service. He was also ordered to pay restitution of $53,919.96.
In May 2019, defendant moved to preclude a new trial on the four counts on which the jury had been unable to reach a verdict. He argued that the remaining counts were barred by principles of double jeopardy.
On October 22, 2019, a motion judge, who was not the trial judge, granted defendant's motion and dismissed counts twelve through fifteen. The motion judge reasoned that counts twelve, thirteen, and fourteen were barred by principles of double jeopardy. The judge also reasoned that those charges should have been joined with the civil charges in the civil litigation under the entire controversy doctrine. The motion judge dismissed count fifteen as moot, reasoning that the corporate-misconduct allegations relied on proof of the charges in counts twelve through fourteen. The State appeals from the order dismissing counts twelve through fifteen. Defendant appeals challenging his convictions.
II.
The State filed its notice of appeal first. Defendant filed his notice of appeal a few days later. We address defendant's arguments first.
On defendant's appeal, he...
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