This action is brought to recover reasonable counsel fees and expenses incurred by plaintiff in the defense of criminal litigation against him in the Federal District Court of New Jersey. The action is bottomed upon a claim of indemnity by plaintiff, as a member of the Board of Education of Union City, pursuant to the provisions of N.J.S.A. 18A:12-20, which in pertinent part provides:
Whenever * * * a criminal action has been brought against any person for any act or omission arising out of and in the course of the performance of his duties as a member of a board of education, and in the case of a criminal action such action results in final disposition in favor of such person, the cost of defending such action, including reasonable counsel fees and expenses, * * * shall be borne by the board of education.
See similar provisions for officers and employees of a board of education, N.J.S.A. 18A:16-6 and 6.1, and for employees of state educational institutions, N.J.S.A. 18A:60-4 and 5.
Plaintiff was indicted under several counts, along with four codefendants, charging them with violations of 18 U.S.C.A. § 1951 in that, through "the wrongful use of fear of financial injury," they extorted moneys from several contractors who did business with the Union City Board of Education, and, further, conspired to commit such wrongs. The essence of the proofs offered by the government at the criminal trial was that all the defendants participated in a pattern or practice which required most business concerns furnishing products or services to the board to pay kickbacks for their use and benefit, in return for the privilege of doing business and assuring prompt payment of invoices.
The most damaging inculpatory evidence against Powers came from the mouth of an unindicted coconspirator, Dr. Philip F. Castorino, who testified that Powers participated with him each month in counting the funds from the kickbacks and dividing them among the board members, including Powers. Castorino also testified that Powers had advised him of a 10% kickback due on two particular contracts. These allegations of Castorino were categorically denied by Powers, and testimony was offered in defense affecting the credibility of Castorino.
For present purposes it is not essential to review all the testimony at the criminal trial except to note that the litigation involved allegations of unlawful acts occurring which Powers was a member of the board of education and stemming from the business relationship between the board and its suppliers. The allegations were denied by Powers. The jury acquitted him on all counts of the indictment, while two of his co-defendants were convicted.
The acquittal is conclusive for the purpose of determining the right of indemnity under the statute. Hence, the court is not called upon to make a finding of guilt or innocence as a precondition for application of the statute.
Powers commenced his service as a board member on October 27, 1968 and is still serving in that capacity. He has served on several committees, including the maintenance committee
which has the responsibility of recommending the award of contracts to the board as an entity, whether on bid or sales solicitation. In addition, he had some degree of responsibility for communication with Anthony Genovese, the architect for the construction of school additions, whose contract and alleged kickbacks were part of the factual complex of the criminal charge.
The basic issue to be determined is whether the criminal charge of which defendant was acquitted was "for any act or omission arising out of and in the course of the performance of his duties as a member of a board of education," within the intendment ...