STATE OF NEW JERSEY VS. JOSEPH J. TALAFOUS, JR.(16-05-0072, HUDSON COUNTY AND STATEWIDE) ( 2017 )

RECORD IMPOUNDED
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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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-1838-16T1
STATE OF NEW JERSEY,
Plaintiff-Appellant,
v.
JOSEPH J. TALAFOUS, JR.,
Defendant-Respondent.
_____________________________
Submitted May 23, 2017 – Decided June 13, 2017
Before Judges Reisner and Mayer.
On appeal from the Superior Court of New
Jersey, Law Division, Hudson County,
Indictment No. 16-05-0072.
Christopher S. Porrino, Attorney General,
attorney for appellant (Joseph A. Glyn, of
counsel and on the brief).
Miller, Meyerson & Corbo, attorneys for
respondent (Gerald D. Miller, of counsel and
on the brief).
PER CURIAM
By leave granted, the State appeals from an October 13, 2016
order granting defendant's motion to dismiss Count One of
Superseding Indictment No. 16-05-0072-S, which charged defendant
with first-degree money laundering, N.J.S.A. 2C:21-25(b)(2)(a),
and from a November 14, 2016 order denying reconsideration. We
affirm both orders.
In the nineteen-count indictment, the State charged
defendant, an attorney, with a litany of offenses arising from his
alleged theft of funds from clients.1 The top count of the
indictment charged defendant with allegedly "laundering" the
stolen funds, by depositing them or directing that they be
deposited into either his attorney trust account or his attorney
business account "knowing that the transactions were designed in
whole or in part to conceal or disguise the nature, location,
source, ownership or control of the said client monies" in an
amount "in excess of $1,500,000."
Before discussing the Grand Jury evidence, it is helpful to
consider the money laundering statute, and the case law construing
it. The section with which defendant was charged prohibits a
person from "engag[ing] in a transaction involving property known
1
The indictment also included multiple counts of second-degree
theft by unlawful taking, N.J.S.A. 2C:20-3; second-degree theft
by failure to make required disposition of property, N.J.S.A.
2C:20-9; second-degree misapplication of entrusted property,
2C:21-15; second-degree theft by deception, N.J.S.A. 2C:20-4; and
third-degree filing a false or fraudulent gross income tax return,
N.J.S.A. 54:52-10. Prior to the indictment, defendant had been
disbarred by consent after admitting that he knowingly
misappropriated client funds. In re Talafous, 222 N.J. 127 (2015).
2 A-1838-16T1
. . . to be derived from criminal activity . . . knowing that the
transaction is designed in whole or in part . . . to conceal or
disguise the nature, location, source, ownership or control of the
property derived from criminal activity[.]" N.J.S.A. 2C:21-
25(b)(2)(a).
As expressed in N.J.S.A. 2C:21-23, the money laundering
statute was designed to "stop the conversion of ill-gotten criminal
profits, . . . and punish those who are converting the illegal
profits, those who are providing a method of hiding the true source
of the funds, and those who facilitate such activities." The
Legislature emphasized the "need to deter individuals and business
entities from assisting in the 'legitimizing' of proceeds of
illegal activity." N.J.S.A. 2C:21-23(e).
The money laundering statute is intended to be construed
broadly to serve its purposes. State v. Diorio, 216 N.J. 598, 625
(2016). However, it requires proof of something more than an
underlying crime. Id. at 622. "[T]the statute requires two
'transactions,' (1) the underlying criminal activity generating
the property, and (2) the money-laundering transaction where that
property is either (a) used to facilitate or promote criminal
activity, or (b) concealed, or 'washed.'" State v. Harris, 373
N.J. Super. 253, 266 (App. Div. 2004), certif. denied, 183 N.J.
257 (2005). The Supreme Court recently reaffirmed that analysis
3 A-1838-16T1
in Diorio, supra, 216 N.J. at 622 (quoting Harris, supra, 373 N.J.
Super. at 266).
The federal courts have interpreted the federal money
laundering statute similarly. See 18 U.S.C.A. § 1956(a)(1). The
statute does not prohibit "non-money laundering acts such as a
defendant's depositing the proceeds of unlawful activity in a bank
account in his own name and using the money for personal purposes."
United States v. Conley, 37 F.3d 970, 979 (3d Cir. 1994).
Money laundering must be a crime distinct from
the crime by which the money is obtained. The
money laundering statute is not simply the
addition of a further penalty to a criminal
deed; it is a prohibition of processing the
fruits of a crime or of a completed phase of
an ongoing offense.
[United States v. Abuhouran, 162 F.3d 230, 233
(3d Cir. 1998) (citing Conley, supra, 37 F.3d
at 980).]
In this case, the motion judge reasoned that placing the
money in defendant's attorney trust account (ATA) was not a crime,
because ATA money is by definition not the attorney's money and
is held for the client's benefit. She further reasoned that
defendant's crime was taking the money out of the account and
using it for himself, and the State had not presented evidence of
a subsequent crime. Hence, she found that the State failed to
present evidence establishing each element of the money laundering
charge. See State v. Morrison, 188 N.J. 2, 12 (2006) ("A trial
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court . . . should not disturb an indictment if there is some
evidence establishing each element of the crime to make out a
prima facie case."). The judge stated:
[A]s to the money laundering Count . . . I
don't see that . . . [some] evidence is there
. . . analyzing it under Harris, because an
attorney trust account is where that money
should have been. It should have . . .
remained there until it went for the benefit
of the beneficiary. But the simple act of
taking it and misappropriating it, or stealing
it, . . . [is] a crime for which he is charged
. . . and he will have to answer to those
charges. But I just don't see . . . [some]
evidence for the money laundering.
Unless the trial court acts under a "misconception of the
law," the "decision to dismiss an indictment is left to the sound
discretion of the trial court, and will only be overturned upon a
showing of a mistaken exercise of that discretion." State v.
Lyons, 417 N.J. Super. 251, 258 (App. Div. 2010) (citation
omitted). We conclude that the motion judge reached the correct
result and therefore we find no abuse of discretion here.
We do not necessarily agree with the judge that, in all of
the cases presented to the Grand Jury, placing the money in
defendant's ATA was appropriate. In some of the cases, that
transfer in itself constituted theft or misappropriation, because
defendant had no lawful reason to transfer the money from the
client's accounts to any of his accounts and there was some
5 A-1838-16T1
evidence of his unlawful purpose in making the transfer. In other
cases, where defendant initially properly placed funds in his ATA,
we agree with the judge that his subsequent theft of the money
from his ATA was not money laundering. Most importantly, while
the State presented some evidence that defendant stole or
misappropriated his clients' money in all of the cases, the State
failed to present evidence that he laundered the funds in any of
the cases. A brief review of the State's Grand Jury evidence will
illustrate our conclusion.
In the first case, the State presented evidence that defendant
held a power of attorney (POA) for Peter Pasinosky, an
incapacitated person, and used the POA to wrongfully transfer
money from Pasinosky's bank accounts into defendant's ATA or
attorney business account (ABA). After Pasinosky's death,
defendant used his position as co-executor of Pasinosky's estate
to misappropriate estate funds, which he placed in his ATA or ABA.
The State did not produce evidence that defendant moved money from
his ATA into his ABA, but only that he took Pasinosky's funds and
put it into one or the other of those accounts and then used the
money for his own purposes. As in all of the cases, the State
produced no evidence of what those purposes were or what became
of the money after it left defendant's ATA or ABA.
6 A-1838-16T1
In answer to a question from one of the Grand Jurors, the
prosecutor told the Grand Jury that "it's not so relevant . . .
that it's the attorney trust account or the attorney business
account. These were accounts maintained by [defendant] and he had
full control of these accounts." She explained that, for purposes
of the theft charges, what was important was "that money is removed
from [the victim's accounts] and moved to accounts that [defendant]
had control over." The State presented no evidence that the theft
was concealed (as opposed to committed) through placement of the
money in defendant's accounts.
The next matter involved the Jared Sharengo Trust, which
contained the proceeds of a settlement for a minor, resulting from
a lawsuit over his father's death. Defendant controlled the trust
funds and misappropriated some of the money. However, the State
produced no evidence that any money was moved from defendant's ATA
into his ABA, or that he used either account to "launder" any
funds. Rather, the State simply produced testimony that defendant
took about $400,000 of the Sherango Trust money and, in the
detective-witness's conclusory terms, used it "for his own
purposes." As presented to the Grand Jury, there was no evidence
that defendant committed any crime beyond the initial theft or
misapplication of the entrusted funds, which under the facts
presented, was completed when he transferred the money to his own
7 A-1838-16T1
accounts without any legal justification and with an unlawful
purpose.
Similarly, the State presented evidence to the Grand Jury
that defendant stole about $316,000 from the Estate of Mildred
Colavito, while he was the estate executor. Again, the State
presented evidence that defendant transferred money from the
Estate into either his ABA or his ATA. There was no evidence of
any second transaction, between the two accounts or from either
account to a third account belonging to defendant. There was no
evidence as to how placing the money in either the ABA or ATA
facilitated or concealed the theft of the money from the Estate,
or that defendant committed any further crime which the prior
deposits helped to conceal or facilitate. To the contrary,
according to the proofs the State presented, transferring the
money into those accounts, without legal justification,
constituted the misapplication or theft of the funds.2
The State next presented evidence that defendant stole funds
from the Estate of Michael Zaccaria while serving as the estate's
attorney. Defendant was hired by the decedent's family to collect
2
The State also presented evidence that defendant committed tax
fraud by telling his accountant that some of the deposited funds
were "loans" from the Estate. However, there was no evidence that
putting the money in the ATA or ABA made that story more plausible
or otherwise facilitated or concealed the tax fraud.
8 A-1838-16T1
the proceeds of several life insurance policies. Defendant did
so and deposited some of the proceeds in his ATA. He disbursed
some of the money to the beneficiaries. However, he moved about
$183,000 of those funds into his ABA, noting on some of the checks
that they represented partial payment for his fees or reimbursement
of expenses. However, he never billed the estate or the
beneficiaries for those amounts. He also used about $222,000 of
the insurance proceeds, which he had deposited in his ATA, for his
personal use.
The State produced no testimony or other evidence that it was
wrongful or illegal for defendant to have initially placed the
collected funds in the ATA. As presented to the Grand Jury, the
crimes he committed consisted of wrongfully taking the money out
of the ATA, either to pay for phantom "fees" which were deducted
and placed in the ABA, or directly taken from the ATA and spent
for defendant's benefit in unspecified ways.
The State also presented evidence that, while acting as the
attorney for the Estate of Maria Matarazzo, defendant stole money
from her estate. According to the State's evidence to the Grand
Jury, defendant stole the money by convincing the estate executor
that he needed about $335,000 to pay either his own legal fees or
to pay other fees that he would expend on behalf of the estate.
The Grand Jury testimony was somewhat vague, but construing it
9 A-1838-16T1
most favorably to the State, it would support inferences that the
estate was involved in litigation over property in New York and
defendant falsely represented to the estate executor that the
"fees" were needed to pay counsel in that litigation. Instead of
using the money for the New York litigation, defendant used the
money for his own purposes. Again, there was no evidence that
putting the money in his ABA facilitated or concealed defendant's
theft of the money.
On this appeal, the State acknowledges that N.J.S.A. 2C:21-
25(b) requires proof of two transactions, the initial crime,
followed by the "laundering." See Harris, supra, 373 N.J. Super.
at 266. The State argues that defendant engaged in two
transactions, because when he stole the money from his clients'
estate or trust accounts, he placed the funds in his attorney
trust or business accounts "to give the stolen money an air of
legitimacy." However, the State produced no evidence before the
Grand Jury to establish that putting money in either account served
to "conceal or disguise the nature, location, source, ownership
or control of the property derived from criminal activity."
N.J.S.A. 2C:21-25(b)(2)(a). In fact, in most of the cases, the
State's evidence, as presented and explained to the Grand Jurors,
was that defendant stole the money when he placed it in his own
10 A-1838-16T1
accounts rather than leaving it in the clients' trust or estate
accounts.
Notably, the Grand Jurors twice asked for clarification as
to how defendant's conduct constituted money laundering. At one
point, a juror asked: "Can you explain the rationale for the
money laundering? What's the rationale for the first indictment
[count one]? It's not very clear." The prosecutor did not answer
the questions, other than by referring to the statute in general
terms and telling the jurors to read the indictment.
Because the State did not present some evidence to support
each of the elements of the money laundering charge, the trial
court did not abuse its discretion in dismissing Count One of the
superseding indictment. See Morrison, supra, 188 N.J. at 12.
Affirmed.
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