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State v. Pritchard

Decided: November 9, 1979.


MacKenzie, J.s.c.


[172 NJSuper Page 579] Charles H. Pritchard, Jr. and his brother, William G., were indicted by the state grand jury in an 111-count indictment charging them with violations of N.J.S.A. 2A:102-3 (conversion of some $5.5 million of corporate funds by officers between 1973 and 1975), of N.J.S.A. 2A:111-14 (fraudulent use of two corporations to facilitate this conversion), and of N.J.S.A. 2A:102-5 (embezzlement of funds belonging to insurance companies). Prior to trial Charles H. Pritchard, Jr. moved to dismiss the

indictment on the authority of N.J.S.A. 2C:1-1c(3).*fn1 William G. Pritchard joined in the motion without filing a written notice or offering any separate argument. This opinion is an amplification of an oral decision rendered on November 9, 1979.


Counts 1 through 39 charge Charles H. Pritchard, Jr., with converting moneys of Pritchard and Baird Intermediaries Corporation ("Intermediaries"), a New York corporation which was authorized to engage in the business of reinsurance brokerage in New Jersey. Counts 60 through 109 charge similar illegal conduct on the part of his brother. The books and records of Intermediaries openly set forth cash withdrawals by Charles Pritchard of almost $2 1/2 million as "loans" between March 21, 1973 and January 27, 1975. In the same manner William G. Pritchard withdrew over $3 million from Intermediaries over virtually the identical period. The proofs in the grand jury record indicated that the two Pritchards were the sole shareholders of the corporation during these years. Based on these factors these conversion counts were dismissed by another judge who found that the grand jury record did not establish any fraud by Charles H. Pritchard, Jr. against the corporation owned by the two brothers.*fn2 The Appellate Division affirmed in State v. Pritchard , 160 N.J. Super. 310 (1978). The Supreme Court summarily reversed the judgment of the Appellate Division. 79 N.J. 462 (1978).

On remand, and with an expanded record, the 39 counts were reinstated when proofs established that Charles H. Pritchard, Sr., the father of defendants, was also a shareholder of Intermediaries until his death in December 1973 and that his stock holdings were devised to his widow. Both parents were found to have been stockholders and directors during the period covered by the indictment. The State persuaded the court that a factual record existed from which a reasonable jury could find that Charles H. Pritchard, Jr. defrauded the corporate entity by converting to his own use money which was the property of Intermediaries.

The present motion to dismiss is bottomed on the premise that the statutory offenses set forth in the indictment were not carried over into the New Jersey Code of Criminal Justice, N.J.S.A. 2C:1-1 et seq. Both statutes were specifically repealed by N.J.S.A. 2C:98-2. The effect of the repealer is the issue here. Charles H. Pritchard, Jr. urges that the prosecution should be dismissed pursuant to the provisions of N.J.S.A. 2C:1-1c(3). The State contends that the conduct proscribed by N.J.S.A. 2A:102-3 and by N.J.S.A. 2A:111-14 is still unlawful.

N.J.S.A. 2A:102-3 provided that any officer of a corporation who fraudulently converts property of the corporation is guilty of a misdemeanor.*fn3 A breach of the trust owed by an officer to his corporation and reliance by the corporation on an officer to its injury are the cornerstones of the statute.*fn4 In the conversion counts of the indictment the State charges that Charles H. Pritchard, Jr., as president of Intermediaries, issued or caused to be issued from the corporation checking account on 39 separate occasions a check payable to himself in various designated

amounts; that he deposited the checks into his personal checking account, and that thereby he did unlawfully and fraudulently take, misapply and misuse money of the said corporation with the intent to defraud the corporation.

In the new Code N.J.S.A. 2A:102-3 is cross-referenced to N.J.S.A. 2C:20-9 and 2C:21-15. N.J.S.A. 2C:20-9 imposes criminal liability on those who commit theft by failure to make required disposition of property received. This new statute makes illegal the failure to make specific disposition or payment after obtaining the property when subject to a known legal obligation to make specified payment or other disposition. The elements of the new offense are: purposeful obtaining or retention of property subject to a known legal obligation, failure to make the required disposition or payment, and conversion of the property to the defendant's use.

The section is not restricted in its application to public officials as defendant argues; it applies to corporate officers, as was defendant, and others who receive property while under a duty to pay out. Property may include commingled funds held by such a corporation, including premiums paid by ceding insurance companies or loss payments sent by assuming companies to ceding companies through a reinsurance broker.*fn5 By practice and custom ...

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