Court Opinion

ID: 4428175
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:01:59.510143+00
Date Added: 2024-06-11T14:50:48.270719
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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.

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                                       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.

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                                       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

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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.

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                                       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

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                                          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

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                                         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

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                                         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.

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                                       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]
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                                        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

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                                       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

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                                      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

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                                       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)).
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                                        18