| People v Michaels |
| 2015 NY Slip Op 07705 [132 AD3d 1073] |
| October 22, 2015 |
| Appellate Division, Third Department |
[*1]
| The People of the State of New York, Respondent, vNorman J. Michaels, Jr., Appellant. |
Zuckerman Spaeder, LLP, New York City (Paul Shechtman of counsel), forappellant.
John M. Muehl, District Attorney, Cooperstown (Michael F. Getman of counsel), forrespondent.
Peters, P.J. Appeal from a judgment of the County Court of Otsego County(Lambert, J.), rendered July 21, 2014, upon a verdict convicting defendant of the crimesof grand larceny in the second degree and scheme to defraud in the first degree.
Defendant, an insurance broker of nearly 40 years, was charged with crimesstemming from his involvement in an allegedly fraudulent scheme in which more than400 people were enrolled in health insurance policies for which they were purportedlynot eligible. The trial evidence established that, in January 2008, the Otsego CountyChamber of Commerce (hereinafter the Chamber) and MVP Health Insurance Companyentered into an agreement whereby members of the Chamber could purchase healthinsurance from MVP under the Chamber's group policy. The "Eligibility" provision ofthe agreement provided that, in order to be eligible for coverage, an individual or entity"must satisfy [the Chamber's] eligibility requirements." Notably, the agreement did notpurport to define such eligibility requirements; instead, it expressly stated that theChamber would establish the criteria for insurance under its group policy.[FN1]
[*2] In the fall of 2008, defendant and codefendant RobertR. Robinson, the chief executive officer of the Chamber, entered into an arrangementwhereby defendant's company became the broker of record for the Chamber. Pursuant tothat arrangement, defendant agreed to perform customer service for those individualswho had purchased MVP insurance policies through the Chamber, in return for which hewould receive a brokerage commission from MVP of five percent of the premiums that itcollected. In 2010, a new class of Chamber members arose—referred to as"associate members"—who only took advantage of the Chamber's insurance plan.According to defendant, Robinson explained to him that any member organization thatbecame a member of the Chamber could access for its own constituents the benefitsassociated with membership in the Chamber regardless of the individual's connection toOtsego County. Testimony showed that a number of organizations and associationsthereafter joined the Chamber and began marketing MVP insurance to their members.Members of such organizations who elected to purchase MVP insurance through theChamber group policy became "associate members" of the Chamber and were charged amonthly $5 Chamber membership fee and a $5 administrative fee in addition to theirhealth insurance premiums. By September 2010, defendant had enrolled more than 400associate members in MVP insurance though the Chamber's group policy, as a result ofwhich he was paid approximately $63,000 in commissions from MVP. Upon discoveringthat individuals who had no connection to Otsego County were being enrolled throughthe Chamber group policy, MVP cancelled all insurance policies that had been issuedthrough the Chamber agreement, regardless of their legitimacy.
Almost three years later, defendant and Robinson were charged by indictment with,as relevant here, grand larceny in the second degree, grand larceny in the third degree andscheme to defraud in the first degree.[FN2] The bill of particulars specified thatdefendant enrolled applicants into MVP insurance plans offered through the Chamberknowing that those individuals were ineligible for such coverage because they were notlegitimate members of the Chamber, and that defendant and Robinson wrongfully createda new class of "[a]ssociate [m]embers" in the Chamber to promote this allegedlyimpermissible arrangement. Defendant's case was severed from that of Robinson and,following a jury trial, he was acquitted of grand larceny in the third degree but convictedof grand larceny in the second degree and scheme to defraud in the first degree. CountyCourt sentenced him to six months in jail, five years of probation and 500 hours ofcommunity service, and imposed a $5,000 fine.
Defendant appeals, asserting that his convictions for grand larceny and scheme todefraud are not supported by legally sufficient evidence. A person is guilty of grandlarceny in the third degree when he or she, "with intent to deprive another of property orto appropriate the same to himself [or herself], . . . wrongfully takes, obtainsor withholds such property from an owner" and the value of the property exceeds$50,000 (Penal Law § 155.05 [1]; see Penal Law§ 155.40 [1]; People v Waugh, 52 AD3d 853, 854 [2008], lvdenied 11 NY3d 796 [2008]). Larcenous intent " 'is rarely susceptible ofproof by direct evidence, and must usually be inferred from the circumstancessurrounding the defendant's actions' " (People v Brown, 107 AD3d 1145, 1146 [2013], lvdenied 22 NY3d 1039 [2013], quoting People v Russell, 41 AD3d 1094, 1096 [*3][2007], lv denied 10 NY3d 964 [2008]). In aprosecution for larceny by trespassory taking, it is a defense "that the property wasappropriated under a claim of right made in good faith" (Penal Law§ 155.15 [1]). A good faith claim of right negates larcenous intent, and thePeople have the burden of disproving such defense beyond a reasonable doubt (see People v Zona, 14 NY3d488, 492-493 [2010]; People v Green, 5 NY3d 538, 542 [2005]).
In analyzing the legal sufficiency of a conviction, we must view the evidence in alight most favorable to the People and "determine whether there is any valid line ofreasoning and permissible inferences which could lead a rational person to theconclusion reached by the jury on the basis of the evidence at trial and as a matter of lawsatisfy the proof and burden requirements for every element of the crime charged"(People v Bleakley, 69 NY2d 490, 495 [1987] [citation omitted]; see People v Lee, 129 AD3d1295, 1297 [2015]). Here, the People's entire case rested upon the theory that theapproximately 400 individuals enrolled by defendant, having no connection to OtsegoCounty, were ineligible to receive MVP insurance coverage through the Chamber grouppolicy. To that end, the People presented the testimony of two MVP employees whostated that, in addition to being a member of the Chamber, MVP required that anindividual or entity have some residential or business connection to Otsego County inorder to receive insurance under the Chamber group policy. However, the agreementbetween MVP and the Chamber does not contain any such geographic restriction. Rather,as noted, the contract expressly grants to the Chamber the power to determine eligibilityrequirements for insurance through its group policy. The testimony as to what MVP mayhave intended, but failed to expressly state in the agreement, cannot serve to elevatedefendant's conduct to a crime, as "[t]he written terms and conditions of a contract definethe rights and obligations of the parties" (Matter of Ongweoweh Corp., 130 AD3d 1291, 1292[2015] [internal quotation marks and citation omitted]; see W.W.W. Assoc. vGiancontieri, 77 NY2d 157, 162 [1990]).
Although the establishment of eligibility requirements for insurance under the grouppolicy was left to the Chamber, it does not appear that such requirements have ever beenmemorialized or otherwise formally documented, and the People's witnesses failed toprovide consensus as to eligibility. Moreover, no documentary evidence concerningChamber membership eligibility was presented. Even if a rational jury could find thateligibility for MVP insurance under the Chamber group policy was contingent uponChamber membership, that only individuals or businesses with a connection to OtsegoCounty could become a full member of the Chamber, and that "associate members" werenot legitimate members of the Chamber because this category of membership had notbeen formally authorized by the Chamber, it was unreasonable for jury to conclude thatthe People proved beyond a reasonable doubt that defendant did not have a subjective,good faith basis for believing that associate members were legitimate members of theChamber and, thus, eligible to receive coverage under the group policy (see People v Rios, 107 AD3d1379, 1382 [2013], lv denied 22 NY3d 1158 [2014]; see generallyPeople v Zona, 14 NY3d at 492-494).
Defendant was fully aware that the contract between MVP and the Chamber vestedthe Chamber with the right to determine the eligibility requirements for insurance underits group policy, and it was his understanding that, as the chief executive officer of theChamber, Robinson had the authority to determine who became a member of theChamber and what the necessary qualifications were. No evidence was presented tosuggest that defendant should have questioned Robinson's assurances that associatemembers qualified for insurance under the Chamber's group policy, especially in theabsence of any documented eligibility requirements. Further, defendant explained thatonly after confirming with Robinson that an applicant was a member of the Chamberwould he process the application for MVP insurance through the group policy. Notably,there is no evidence that defendant ever submitted any false or inaccurate [*4]information to MVP when he enrolled associate membersin the Chamber group policy. Thus, viewing the evidence in the light most favorable tothe People (see People vDanielson, 9 NY3d 342, 349 [2007]), a finding that defendant acted withlarcenous intent when he enrolled associate members in MVP insurance through theChamber group policy would be based upon "mere conjecture or suspicion" (People vCastillo, 47 NY2d 270, 277 [1979]; see People v St. Andrews, 82 AD3d 1356, 1357-1358[2011]; People v King, 265 AD2d 678, 680 [1999], lv denied 94 NY2d904 [2000]; People v Wager, 199 AD2d 642, 642 [1993], lv denied 83NY2d 811 [1994]). Accordingly, his conviction for grand larceny in the second degreemust be reversed.
We reach a similar conclusion with respect to defendant's conviction for scheme todefraud in the first degree. That crime required proof that defendant "engage[d] in ascheme constituting a systematic ongoing course of conduct with intent to defraud ten ormore persons or to obtain property from ten or more persons by false or fraudulentpretenses, representations or promises, and so obtain[ed] property from one or more ofsuch persons" (Penal Law § 190.65 [1] [a]; see People v First MeridianPlanning Corp., 86 NY2d 608, 616 [1995]). Similar to the grand larceny count, thescheme to defraud charge rested upon the supposition that defendant and Robinson,acting in concert, enrolled individuals as associate members of the Chamber knowingthat "there was no such thing" as an associate member, as a result of which each suchmember paid $10 a month in fraudulent fees. However, like the grand larceny count,there was not legally sufficient evidence from which it can be inferred that defendantshared the criminal intent or purpose of Robinson (see Penal Law§ 20.00; see also People v Brigham, 261 AD2d 43, 50-52 [1999],appeal dismissed 94 NY2d 900 [2000]; compare People v Monteiro, 93 AD3d 898, 899-900[2012], lv denied 19 NY3d 964 [2012]). To the extent that the People attemptedto show that, irrespective of the legitimacy of the monthly fees, associate members hadnot been informed that such fees were included in their premiums, their proof waslikewise inadequate. Neither the contract of insurance nor any documentation supplied tothe associate members in connection with their purchase of MVP insurance through theChamber policy was introduced into evidence. The single statement of the sole associatemember who testified at trial that he was not "aware" that he was paying the fees waswoefully insufficient to establish that such fees were not, in fact, disclosed.
Defendant's remaining arguments have been rendered academic by our decision.
Lahtinen, McCarthy and Lynch, JJ., concur. Ordered that the judgment is reversed,on the law, and indictment dismissed.
Footnote 1:The only conditionsplaced on the eligibility requirements were that they be established in a manner consistentwith state and federal laws and regulations, applied in a fair and consistent manner, andsimilar to those adopted for other health care options.
Footnote 2:A count of theindictment charging defendant with insurance fraud in the second degree was dismissedprior to trial.