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Identifying and Defining Molineux Evidence: The N.Y. Court of Appeals’ Latest Iteration


People v Frumusa

2017 NY Slip Op 04495

NY Court of Appeals

Decided on June 8, 2017

white collar crime

 

Issue: Whether the trial court abused its discretion by admitting into evidence a contempt order issued in a civil action involving the same funds the defendant was criminally charged with stealing.

 

Holding: The New York Court of Appeals held that the contempt order did not constitute Molineux evidence and the trial court did not abuse its discretion at the pretrial hearing in concluding that the evidence was admissible because it was relevant to defendant’s larcenous intent and its probative value was not substantially outweighed by the danger of undue prejudice to defendant.

 

Facts: The defendant and Hernandez entered a joint business venture to construct and open a hotel. The defendant owned 75% while Hernandez owned 25% in exchange for a $1 million investment. After the hotel opened, Hernandez discovered that some of the hotel’s proceeds were being transferred into accounts of other businesses owned by the defendant and Hernandez made a civil action against the defendant. The defendant was also indicted on grand larceny in the second degree.

 

Several orders were entered by the Supreme Court in the civil action and were admitted into evidence during the criminal trial without objection by the defendant. Hernandez and the defendant were ordered to transfer control of the business to an appointed receiver. The court also barred them from collecting any money on behalf of the business and ordered them to pay over any assets from the business that were in their possession.

 

It was soon discovered that the defendant opened bank accounts in names of other businesses and was transferring proceeds from the hotel into those accounts and a civil action ensued. A new contempt order was issued on defendant’s other businesses for failing to obey the prior court order.

 

The People contended that the contempt order was relevant to the defendant’s intent in failing to return the funds that he was ordered to turn over. The defendant opposed the motion, arguing that the jury might afford undue weight to the order and that the burden of proof was “completely different” in a civil case. The court granted the People’s Molineux application.

 

The defendant asserted that he did not act with larcenous intent, but that he only took the funds to ensure continued operation of the business. The People presented evidence that the defendant opened the accounts before a receiver was appointed and that he started transferring money to those accounts two days after the receiver was appointed. The appointed receiver also testified that he had no knowledge of the existence of those accounts. A jury returned a verdict of guilty.

courtt

 

 

Analysis: As an initial matter, the Court of Appeals concluded that the contempt order was not Molineux evidence because here, “the evidence at issue is relevant to the very same crime for which the defendant was on trial.” If the evidence at issue had been evidence used to induce the jury to base a finding of guilt on collateral matters or to convict a defendant because of his past, that evidence would be excluded. However, the Court found that not to be the case here and that “there is no danger that the jury will draw an improper inference of propensity because no separate crime or bad acthas been placed before the jury.”

 

At trial, the People were required the show that the defendant intended to “deprive” the business of its property. Pursuant to Penal Law section 155.00(3), “to deprive another of property means (a) to withhold it or cause it to be withheld from him permanently or for so extended a period or under such circumstances that the major portion of its economic value or benefit is lost to him, or (b) to dispose of the property in such manner or under such circumstances as to render it unlikely that an owner will recover such property.” In other words, the People needed to demonstrate that the defendant transferred the funds without legal authority and without intending to benefit the business, as the defendant claimed he was doing.

 

The Court of Appeals held that the Appellate Division correctly found that the contempt order was relevant to prove larcenous intent because it showed that the defendants conduct did not just constitute poor management, but it intended to deprive the business of the diverted money permanently. The defendants failure to return the funds after the contempt order made it less likely that he took the funds to benefit the business and more likely that he intended to permanently deprive the business of the funds.

court-room-judge-verdict-scales-of-justice1

 

Noting that although relevant evidence “may be excluded in the exercise of the trial court’s discretion if its probative value is substantially outweighed by the potential for prejudice,” the Court of Appeals affirmed that the trial court did not abuse its discretion in allowing the contempt order into evidence. The Court held that the trial court “must weigh the probative value of the evidence against the danger of unfair and undue prejudice to the defendant,” and the probative value is not automatically outweighed by prejudice just because the evidence is compelling.

 

The Court of Appeals concluded that the contempt order was ultimately not unduly prejudicial to the defendant because the order was not entered against the defendant himself but, rather, against the business, the defendant conceded at trial that he took the funds and transferred them to other business accounts without legal authority to do so, and the contempt order was relevant to the defendant’s larcenous intent.


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