NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0472-18T2
STATE OF NEW JERSEY,
Plaintiff-Appellant,
v.
EVAN PESCATORE, FRANK PESCATORE, and JANICE PESCATORE,
Defendants-Respondents. ______________________________
Argued June 4, 2019 – Decided June 26, 2019
Before Judges Yannotti, Gilson and Natali.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Indictment No. 17-04- 0069.
Jennifer E. Kmieciak, Deputy Attorney General, argued the cause for appellant (Gurbir S. Grewal, Attorney General, attorney; Jennifer E. Kmieciak, of counsel and on the brief).
Edward C. Bertucio, Jr. and Jessica A. Wilson argued the cause for respondents (Kalavruzos Mumola Hartman & Lento LLC, attorneys; Edward C. Bertucio, Jr. and William Les Hartman, of counsel and on the brief; Jessica Ann Wilson, on the brief).
PER CURIAM
The State appeals from the Law Division's dismissal of an indictment
charging defendants Evan Pescatore, and his father, Frank Pescatore, with: (1)
first-degree conspiracy to commit financial facilitation of a criminal activity,
contrary to N.J.S.A. 2C:5-2 and N.J.S.A. 2C:21-25; (2) second-degree
conspiracy to commit theft by deception, contrary to N.J.S.A. 2C:5-2 and
N.J.S.A. 2C:20-4; (3) second-degree conspiracy to commit insurance fraud,
contrary to N.J.S.A. 2C:5-2 and N.J.S.A. 2C:21-4.6; (4) second-degree financial
facilitation of a criminal activity, contrary to N.J.S.A. 2C:21-25 and N.J.S.A.
2C:2-6; (5) second-degree insurance fraud, contrary to N.J.S.A. 2C:21-4.6 and
N.J.S.A. 2C:2-6; and (6) second-degree theft by deception, contrary to N.J.S.A.
2C:20-4(a) and N.J.S.A. 2C:2-6. In addition to the aforementioned charges,
Evan was also charged with first-degree financial facilitation of a criminal
activity, contrary to N.J.S.A. 2C:21-25. Finally, Janice Pescatore, Evan's
mother, was charged with first-degree conspiracy, contrary to N.J.S.A. 2C:5-2;
and second-degree financial facilitation of a criminal activity, contrary to
N.J.S.A. 2C:21-25 and N.J.S.A. 2C:2-6. We reverse and remand for entry of an
order reinstating the indictment.
A-0472-18T2 2 I.
We glean the following facts from the testimony at the April 12, 2017
grand jury proceeding in this matter. Evan is a licensed insurance intermediary
in New Jersey. Between 2011 and 2015, he worked as a life insurance agent for
numerous life insurance companies, including Allianz Life Insurance Company
(Allianz). During that time period, Evan placed eighteen life insurance policies
with eight insurance companies involving thirteen insureds.
Detective Natalie Brotherston, a detective with the Division of Criminal
Justice, Office of the Insurance Fraud Prosecutor, was assigned to investigate
Evan, Frank, and Janice in April 2012, after receiving a referral from Allianz
reporting that it believed a policy brokered by Evan was "rebated." As
Brotherston explained, rebating occurs "when something of value is given in
order to sell a policy that would not have been provided in the policy itself[,]
. . . [such as] cash, a gift, service, [or] employment." Allianz alleged that an
insured misrepresented that he was not offered "inducement in the form of free
insurance," by falsely informing Allianz on the application, as well as in a
telephonic interview, that he would be paying the premium himself when, in
fact, a third-party financing company had been arranged to pay the premium.
A-0472-18T2 3 Brotherston also learned during her investigation that seven other
insurance companies that issued insurance policies originating with Evan also
claimed he offered "rebated" policies. After speaking with representatives from
the eight companies, Brotherston learned that Evan placed eighteen insurance
policies that contained material misrepresentations regarding how the premiums
were paid, similar to the false information contained on the Allianz application .
The insurer representatives advised Brotherston that had they known that the
eighteen insureds did not intend to pay their own insurance premiums, the
insurers "would have declined to make effective any policies for any of the
[eighteen] applications for life insurance."
During her investigation, Brotherston met with twelve of the thirteen
insureds directly and spoke with the husband of the thirteenth, regarding the
circumstances surrounding placement of the insurance. The majority of these
individuals reported that they were acquainted socially with Frank, who
introduced them to Evan "as his son and a life insurance agent."
Brotherston testified that "Frank and/or Evan" discussed the opportunity
to obtain "free" insurance with the proposed insureds, and met with the
individuals to fill out the life insurance applications. Most of the insureds
reported to Brotherston that they "never read the applications and merely signed
A-0472-18T2 4 the application where and when Frank and/or Evan . . . instructed him or her to
do so."
All of the insureds reported that they did not intend to pay the premiums
themselves, and a majority of them were told by "Frank and/or Evan" that a
group of investors would pay their premiums. Further, "a couple" of the insureds
admitted to Brotherston that "Evan and/or Frank . . . told them to lie to the
insurance company about who was paying their premiums when . . . contacted
. . . for a telephone interview . . . ." The insureds also told Brotherston they
would not have applied for life insurance with "Evan or Frank if they had to pay
the premiums themselves."
Brotherston testified that twelve of the insureds referred to Evan and
Frank collectively. Accordingly, Brotherston stated that she repeatedly
referenced "Frank and/or Evan," during the grand jury proceedings as they were
"so entwined in th[e] enterprise."
The insureds also stated that because they were closer in age to Frank and
knew him first, most contacted him with questions regarding the policies.
Further, one of the insureds reported to Brotherston that he believed Janice was
present when he first discussed purchasing a life insurance policy with Evan or
Frank.
A-0472-18T2 5 The documentary evidence presented to the grand jurors included the
insurance applications that Evan signed which "certif[ied] that the information
provided by the applicants [was] true and . . . accurately recorded." Frank, who
was not a licensed insurance producer, did not sign the applications, but as
Brotherston testified, he helped prepare all eighteen applications.
Brotherston stated that she reviewed each of the eighteen insurance
applications, and in each application, the prospective insured stated that he or
she did not intend to finance any of the premium payments through financing or
loan agreement. Further, in thirteen of the applications, the insureds
affirmatively stated that no "compensation or other inducement[,] including
offers or discussions of free insurance had been offered directly or indirectly to
the applicant to apply for the policy."
Brotherston informed the grand jurors that despite the aforementioned
express representations, she discovered that "Evan and/or Frank" arranged for
the insureds' premiums to be paid by four different third-party lending sources.
She testified that through a review of the lending sources' and the insureds' bank
records, and the insureds' insurance files, the Office of the Insurance Fraud
Prosecutor (OIFP) was able to determine that "the payment for th[e] premium[s]
directly originated from one of the[] four lending sources." However, the
A-0472-18T2 6 insureds made the premium payments from their own accounts, "ma[king] it
appear that the funds were their own."
Some of the insureds who were interviewed by Brotherston reported that
they provided their banking information to "Evan or Frank," and then waited for
the funds to be transferred to their accounts from the lending source. Thereafter,
the insureds passed the funds transferred by the third party lending source to the
insurance company, thereby acting as a "conduit by which money for the
premium payment goes to the insurance company."
Once the insurance companies received an application, other necessary
documentation, and the premium payment, they paid Evan a commission as the
originating insurance agent. Brotherston testified that in general, the greater the
premium paid to the insurance company, the greater the commission received
by an insurance agent. The eight insurance companies at issue reported agents,
like Evan, are paid an initial commission payment of 70% to 120% of the
policy's first year premium.
Upon Evan's receipt of the commissions, a portion was "forwarded or
passed . . . along to the lending source[s]," to pay back the premiums.
Brotherston testified that Evan had two bank accounts, one of which was jointly
owned by Janice. Additionally, Janice had three other bank accounts, one of
A-0472-18T2 7 which was jointly owned by Frank. In its review of these accounts, the State
traced the flow of commissions from the insurance companies into one of these
bank accounts, and then back to the lending sources that paid the original
premium payments. According to Brotherston, the money "was going around in
a circle."
An analyst from the OIFP created a diagram shown to the grand jurors
which detailed how the alleged conspiracy was financed, and profits were
earned. Brotherston explained that the "left side of the diagram represent[ed]
the circular flow of money from the lending source to the insured to the
insurance company to Evan . . . and then back to the lending source." The right
side depicted how profits were made through "hierarchy" commissions.
Brotherston testified that an insurance agent can have "one or many supervising
agents assigned to each policy." She explained that commissions were also paid
out to Evan's hierarchy, or his supervising agents, and that Evan received a
percentage of those hierarchy commissions.
Brotherston quantified that Evan earned over $500,000 in commissions,
and would forward a portion of those commissions to Janice. In support of this
claim, the grand jurors were presented with checks made out to Janice from Evan
after Evan received a commission. The checks stated "commission," and some
A-0472-18T2 8 identified the name of a particular insured on the memo line. By the time of the
grand jury proceeding, only six of the eighteen insurance policies were still in
effect, two of which were in a grace period due to non-payment of premiums
owed on the policies.
Defendants moved to dismiss the indictment claiming primarily that the
State: (1) failed to inform the grand jurors that premium financing is legal in
New Jersey; and (2) improperly referred to defendants collectively, rather than
individually. After hearing oral arguments, the court granted the motion in an
August 24, 2018 order.
In an accompanying written opinion issued the same day, the court
concluded that the grand jury "was not presented with a full and accurate picture
of the case against" the defendants. Specifically, the court noted that the "crux"
of the State's case was based on the notion that "a third party lender is unable to
finance the premiums for another's insurance." The court determined that "the
State implied to the grand jury that the process of third party financing was
illegal," when, in fact, it is not a crime in the State of New Jersey.
Additionally, the court found troublesome the State's "collective
presentation of the defendants as a group rather than individuals." The court
noted that "the State referred collectively to 'Frank and/or Evan Pescatore,' 'Evan
A-0472-18T2 9 and/or Frank Pescatore,' 'Frank and Evan Pescatore,' or 'Frank or Evan Pescatore'
as the individuals who committed the crimes." The court also observed that on
forty-one occasions, the State described all three defendants as "the Pescatores."
Particularly concerning to the court was the State's presentation involving
Janice, as the court concluded that the State "failed to present a prima facie case
that Janice . . . had any knowledge of her husband['s] and son's transactions."
The court stated that "[i]n order to present a prima facie case, the State needs to
set forth which individual committed which parts of the crime."
After the court dismissed the indictment, the State filed this appeal in
which it argues:
POINT I
THIS COURT SHOULD REVERSE THE MOTION COURT'S RULING AND REINSTATE INDICTMENT NO. 17-04-00069-S BECAUSE THE STATE PRESENTED A PRIMA FACIE CASE IN SUPPORT OF ALL EIGHT COUNTS.
POINT II
THE STATE HAD NO OBLIGATION TO INSTRUCT THE GRAND JURY THAT THIRD-PARTY PREMIUM FINANCING IS NOT A CRIME BECAUSE SUCH AN INSTRUCTION WOULD NOT HAVE DIRECTLY NEGATED DEFENDANTS' GUILT OF THE CRIMES ALLEGED
A-0472-18T2 10 POINT III
THE STATE ESTABLISHED A PRIMA FACIE CASE WITH RESPECT TO ALL THREE DEFENDANTS FOR THE RELEVANT CHARGES
II.
"[T]he decision whether to dismiss an indictment lies within the discretion
of the trial court, and that exercise of discretionary authority ordinarily will not
be disturbed on appeal unless it has been clearly abused." State v. Hogan, 144
N.J. 216, 229 (1996) (citation omitted). "However, if a trial court's discretionary
decision is based upon a misconception of the law, a reviewing court owes that
decision no particular deference." State v. Zembreski, 445 N.J. Super. 412, 424
(App. Div.2016) (quoting State v. Lyons, 417 N.J. Super. 251, 258 (App. Div.
2010)).
"The grand jury's role is not to weigh evidence presented by each party,
but rather to investigate potential defendants and decide whether a criminal
proceeding should be commenced." Hogan, 144 N.J. at 235. Accordingly, a
prosecutor seeking an indictment is required to "present a prima facie case that
the accused has committed a crime." Id. at 236. An indictment should not be
dismissed "as long as 'some evidence' on each of the elements of the offenses is
presented and there is nothing that detracted from the fairness of the grand jury
A-0472-18T2 11 proceeding." State v. Scherzer, 301 N.J. Super. 363, 428 (App. Div. 1997).
Additionally, grand jury proceedings carry a "presumption of validity," as
prosecutors enjoy "broad discretion in presenting a matter to the grand jury."
State v. Smith, 269 N.J. Super. 86, 92 (App. Div. 1993).
Prosecutors have a limited duty to present exculpatory evidence to a grand
jury. Such proofs must be presented if the evidence: (1) "directly negate[s] [the]
guilt" of the accused; and (2) is "clearly exculpatory." Hogan, 144 N.J. at 237.
In this regard, "unless the exculpatory evidence at issue squarely refutes an
element of the crime in question, that evidence is not within the prosecutorial
duty." Ibid.
Further, "in determining the sufficiency of the evidence to sustain the
indictment, every reasonable inference is to be given to the State." State v. N.J.
Trade Waste Assoc., 96 N.J. 8, 27 (1984). Therefore, "a defendant who
challenges an indictment must 'demonstrate that evidence is clearly lacking to
support the charge.'" State v. Graham, 281 N.J. Super. 413, 417 (App. Div.
1995) (quoting McCrary, 97 N.J. at 142). Applying these guiding principles, we
conclude that the motion judge mistakenly exercised his discretion by
dismissing the indictment.
A-0472-18T2 12 III.
We agree with the State that it was under no obligation to present the grand
jury with information that third-party financing is legal in New Jersey, as such
evidence is neither clearly exculpatory, nor does it directly negate any of the
defendants' guilt. See Hogan, 144 N.J. at 237. Although defendants correctly
note that under the Insurance Premium Finance Company Act, N.J.S.A.
17:16D-1- to -16,1 financing of insurance premiums is legal in New Jersey,
contrary to the court's conclusion, the "crux" of the State's case was not
predicated on the fact that a lender is not permitted to finance an insured's
premium.
Rather, the State's theory of the Pescatores' crimes was fairly simple.
Essentially, the State presented a prima facie case, giving it all reasonable
inferences, that Evan, with Frank's and Janice's knowledge and participation,
1 The Act provides in pertinent part that: [n]o person shall engage in the business of financing insurance premiums in this State without first having obtained a license as a premium finance company from the Commissioner of Banking and Insurance, except that any State or national bank authorized to do business in this State shall be authorized to transact business as a premium finance company, subject to all the provisions of this act, except that it shall not be required to obtain a license or pay a license fee . . . . [N.J.S.A. 17:16D-4] A-0472-18T2 13 placed the eighteen policies for one simple reason – to ensure the receipt of
commissions that would not otherwise have been paid if the insurers had not
been misled by false, material misstatements of fact concerning the policies . To
accomplish that goal, the State presented evidence that Evan and/or Frank told
certain insureds that they would be receiving "free insurance," which Evan then
falsely stated about when asked by the insurance companies in thirteen of the
applications. In addition, the evidence before the grand jury showed that Evan
and/or Frank arranged for third-party financing for each insured, lied about that
fact, and further hid that the policies were being financed by taking secr etive
steps to funnel the third-party payments into the insureds' bank accounts before
having the insureds pay the premium.
Thus, defendants' arguments that the State should have informed the grand
jurors that New Jersey law permits a third-party premium finance company to
pay a premium on an insured's behalf, and that certain of the insurance
companies allegedly defrauded actually provide for such financing, misses the
point for at least two reasons. First, those claims have no effect on the State's
proofs that Frank and Evan promised "free" life insurance to thirteen insureds,
without properly disclosing to the insurance companies the third-party financing
arrangement, and complying with any applicable rules established by the
A-0472-18T2 14 insurance companies regarding such financing. Second, that New Jersey law
permits third-party premium financing has no impact on Brotherston's testimony
that, had the eight insurance companies known that the thirteen insureds did not
intend to pay their own premiums, they would not have issued the policies.
IV.
We also agree with the State that it established a prima facie case with
respect to each defendant on all relevant charges, and that the court erred in
dismissing the indictment based on the State's reference to the defendants
collectively. We first conclude that the references to "Frank and/or Evan"
during the grand jury proceeding were appropriate because they were "so
entwined" in the scheme that the insureds frequently referred to them together
during their interviews with Brotherston.
Additionally, with respect to the State's collective references to "the
Pescatores," we note that Frank and Evan were charged with second-degree
conspiracy to commit theft by deception, second-degree conspiracy to commit
insurance fraud, and first-degree conspiracy to commit financial facilitation of
a criminal activity. Janice was also charged with first-degree conspiracy.
Pursuant to N.J.S.A. 2C:5-2:
A-0472-18T2 15 A person is guilty of conspiracy with another person or persons to commit a crime if with the purpose of promoting or facilitating its commission he:
(1) Agrees with such other person or persons that they or one or more of them will engage in conduct which constitutes such crime or an attempt or solicitation to commit such crime; or
(2) Agrees to aid such other person or persons in the planning or commission of such crime or of an attempt or solicitation to commit such crime.
Accordingly, as the State alleged that defendants were acting collectively to
engage in a conspiracy to commit various offenses; the State's references to
defendants together with respect to their joint actions were appropriate, and not
improper.
Further, the State presented sufficient evidence to support each of the
charges against Evan and Frank. As detailed above, the State presented evidence
at the grand jury proceeding that Evan, a licensed insurance broker, signed the
eighteen insurance applications, certifying that the information represented
therein was true and accurate. The State demonstrated that the applications
contained material misrepresentations regarding whether the premiums would
be paid by third-party financing, and whether the insureds were offered free
insurance. The State further presented financial records showing that Evan
A-0472-18T2 16 received unwarranted commission payments from the insurance companies, and
then reimbursed the third-party lenders for the premiums.
Additionally, Brotherston testified that most of the insureds knew Frank
first, and he introduced them to Evan "as his son and a life insurance agent."
Brotherston's testimony described Frank's close involvement in preparing the
insurance applications, and discussing and answering questions about the
insurance policies with the insureds. Further, the financial records presented by
the State established that on at least two instances, a third-party lender was
reimbursed from a bank account jointly owned by Frank and Janice.
Accordingly we conclude the State presented sufficient evidence to support each
element of the charges against Evan and Frank of conspiracy, financial
facilitation of a criminal activity, insurance fraud, and theft by deception.
With respect to Janice's charges, as noted, Brotherston testified that one
of the insureds reported that he believed that Frank first discussed the
opportunity to obtain life insurance while "having dinner or at the Pescatore's
house," while Janice was present. The State also presented financial records
establishing Janice's receipt of a portion of Evan's commissions, specifically,
checks issued from Evan to Janice. Some of the checks contained the word
"commissions" and an insured's name. Additional financial records
A-0472-18T2 17 demonstrated that certain third-party lenders were reimbursed from a bank
account jointly owned by Evan and Janice, an account jointly owned by Frank
and Janice, and, in at least one instance, and an account solely owned by Janice.
As such, the State presented sufficient evidence to support each element of the
conspiracy and financial facilitation of criminal activity charges against Janice. 2
To the extent not specifically addressed, defendants' remaining arguments
are without sufficient merit to warrant discussion in a written opinion. R.
2:11-3(e)(2).
Reversed and remanded for entry of an order reinstating the indictment
and for further proceedings consistent with our opinion. We do not retain
jurisdiction.
2 We note that conspiracy may be proven by circumstantial evidence, as "the conduct and words of co-conspirators is generally shrouded in 'silence, furtiveness and secrecy.'" State v. Samuels, 189 N.J. 236, 246 (2007) (quoting State v. Phelps, 96 N.J. 500, 509 (1984)). A-0472-18T2 18