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State v. Childs

Decided: July 3, 1990.


On appeal from Superior Court of New Jersey, Law Division, Essex County.

Brody, Muir, Jr. and Skillman. The opinion of the court was delivered by Brody, J.A.D.


The State appeals from an order in which the trial judge dismissed this three-count State grand jury indictment charging thefts, on the ground that a deputy attorney general infringed upon the grand jury's independent judgment. The judge also dismissed the first count of the indictment on the ground that it is duplicitous. We reverse because in our view the deputy attorney general's conduct did not infringe upon the grand jury's independent judgment and because N.J.S.A. 2C:20-2b(4), which permits aggregating the amounts involved in thefts committed pursuant to one scheme or course of conduct, saves the first count from being duplicitous.

The indictment charges defendant Richard Childs (defendant) with deceptive fund-raising activities for Supreme Newark, Inc. (corporation), a corporation he owned and controlled.*fn1 Our recitation of the facts assumes, solely for the purpose of this appeal, that the testimony given before the grand jury is true.

The corporation operated several stores that sold furniture on credit to poor people. The typical mark-up was 300%. The corporation factored the credit paper, with recourse, to two commercial factors at substantial discounts.*fn2

Although the total amount of furniture sales was high and the stores were busy, the corporation always operated at a loss because the uncertain long-term credit payments of its customers did not enable it to meet the insistent short-term credit demands of the factors.

In order to raise cash for his corporation, defendant borrowed money by continually issuing short-term unsecured notes of his corporation, bearing high interest, to an ever widening circle of friends and friends' relatives and friends. Noteholders could, and many did, allow the notes to "roll over" as they matured. Defendant made the notes more attractive by assuring prospective holders that they could demand repayment of all or part of their loans at any time without penalty. Holders frequently took advantage of this feature thereby increasing the drain on the corporation's meager cash reserves. Defendant further induced prospective noteholders to lend the corporation cash by making false representations that the notes were rated AAA, that the corporation was profitable, that its debts were no greater than its liquid assets, that Seton Hall University was a major investor and that the noteholders would somehow be protected by insurance.

Count One of the indictment charges that "between on or about January 1, 1982 and on or about August 31, 1984" defendant used these misrepresentations to commit thefts by deception from twenty named noteholders, totalling an aggregate of $319,605, a second-degree crime. N.J.S.A. 2C:20-4; N.J.S.A. 2C:20-2b(1)(a). Although the indictment does not state each noteholder's loss, it appears from the grand jury minutes that each lost between $500 and $75,000 so that each theft, unaggregated, was a third-degree crime. N.J.S.A. 2C:20-2b(2)(a).

Charles Provini, defendant's former associate in an investment business, and his wife, Susan, were another source of cash for the corporation. Defendant persuaded the Provinis to factor what he represented to be the corporation's better credit

paper. He assured the Provinis that the corporation would segregate the paper for them and collect customers' payments. The Provinis formed a corporation, Chalis, Inc., which conducted these factoring transactions for over a year and a half. As he had with the noteholders, defendant assured the Provinis that they could withdraw their cash at any time, and Chalis made withdrawals from time to time. Contrary to his representations to the Provinis, defendant was factoring all the corporation's credit paper of value to the commercial factors, leaving none for Chalis.*fn3

Count Two of the indictment charges that "between on or about April 7, 1982 and on or about January 4, 1984" defendant deceived Chalis, Inc. by misrepresenting that it was factoring credit paper that in fact did not exist, thereby unlawfully stealing from Chalis an aggregate of $328,082.86, a second-degree crime.

Count Three, the last count of the indictment, charges that defendant forged Charles Provini's name on a guarantee, a violation of N.J.S.A. 2C:21-1a(2).

Defendant's financial bubble burst when Charles Provini asked to withdraw some of his money and learned that defendant's corporation had neither cash nor credit paper to give him. When defendant was unable to attract more noteholders, ...

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