December 27, 2007
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
LARRY BARASCH, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Indictment No. 02-03-0437.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 12, 2007
Before Judges A.A. Rodríguez, Collester and C.S. Fisher.
In this appeal, we reject defendant's argument that a 2005 bankruptcy court order, which fixed defendant's debt to the State at $61,000, required the granting of post-conviction relief because defendant's 2003 conviction was dependent on the jury's finding that he failed to remit collected sales taxes of $75,000 or more, N.J.S.A. 54:52-15. We also reject defendant's other arguments and affirm.
We previously recounted the facts underlying this criminal prosecution in our published opinion on defendant's direct appeal. State v. Barasch, 372 N.J. Super. 355 (App. Div. 2004). In 1994, defendant opened Great Feeling Spas, Inc., which engaged in the business of selling and installing spas. Id. at 357-58. As the business grew and expanded, its existing tax problems worsened:
By September 29, 1998, the business had incurred a $235,039.33 sales and use tax liability. This liability expanded by almost $40,000 as the State, in September 1998 and February 1999, noticed the deficiency and demanded payments within ninety days. By July 1999, the State had obtained a judgment against Great Feeling Spas and defendant personally.
In November 1999, defendant entered into an installment payment plan with the State. Defendant agreed to pay $628,226 in one down payment of $50,000 and thirty-six payments of $20,493 beginning December 1999. Defendant, at this time, also promised to pay all future taxes in a timely fashion.
Unfortunately, in October 2000, defendant developed two hernias and underwent surgery in January 2001. Because of the surgery, defendant was unable to return to work until March. During defendant's absence from the business, his wife Ann, who had been the bookkeeper, expanded her functions in an effort to cover defendant's absence.
Great Feeling Spas again fell into tax problems. It filed an untimely return for the fourth quarter of 2000, resulting in the addition of interest and penalties to defendant's twenty-first or twenty-second installment payment made under defendant's 1999 payment plan. The agreed December 2000 monthly payment was not made until January 27, 2001, but when made also included January's monthly payment.
For the first, second and third quarters of 2001, Great Feeling Spas's tax returns were late and deficient in amount. Consequently, the State voided the 1999 payment plan, although defendant was permitted to continue making payments to reduce liability. Defendant failed to pay January, March and April 2001 installments, but paid these arrears by May. Delinquency on his regular filings also triggered a notice and demand for payment in July 2001 and a final warning visit from a Division of Taxation field investigator and his supervisor in August 2001.
A new payment schedule for $222,229 which was then owed by defendant was developed, but the State would only acquiesce to the plan if defendant paid $81,595 for the third quarter of 2001, by November 20, 2001. The amount requested by the State constituted the sales taxes defendant had just collected from the third quarter. Defendant failed to pay by November 20 and instead, on November 21, filed a Chapter 11 bankruptcy petition.
Defendant was arrested in December 2001 and indicted in March 2002. [Id. at 358-59 (footnote deleted).]
The indictment charged defendant with second-degree theft from his customers, N.J.S.A. 2C:20-9, and second-degree failure to remit taxes collected or withheld in the amount of $75,000 or more, N.J.S.A. 54:52-15. At the conclusion of an eleven-day trial, defendant was acquitted of the former but convicted of the latter. Judge Patricia Del Bueno Cleary sentenced defendant to a five-year prison term and ordered him to make restitution in the amount of $187,742.46.
Defendant appealed, arguing that: (1) the trial judge mistakenly interrupted jury deliberations; (2) the trial judge erroneously instructed the jury regarding the elements of N.J.S.A. 54:52-15; (3) the trial judge erred in limiting customer testimony to the theft charge; (4) his trial attorney was ineffective; and (5) his sentence was excessive. State v. Barasch, supra, 372 N.J. Super. at 357. We affirmed, and, in our published opinion, explained in depth why the first two arguments were without merit; we found insufficient merit in the other three arguments to warrant discussion in a written opinion. Ibid.
Defendant thereafter filed a petition for post-conviction relief, which Judge Cleary denied without an evidentiary hearing. Defendant now appeals that determination, presenting for our consideration the following arguments:
I. THE DEFENDANT WAS DENIED THE EFFECTIVE ASSISTANCE OF COUNSEL IN VIOLATION OF THE SIXTH AMENDMENT.
A. Defendant Was Denied Effective Assistance When His Trial Counsel Did Not Argue That The State Had Misapplied The Payments That He Made.
B. Defendant Was Denied Effective Assistance Of Counsel When His Trial Counsel Did Not Seek A Change Of Venue Based On The Highly Prejudicial Publicity That Occurred During The Trial Which Prejudiced Defendant's Right To A Fair Trial.
II. THE CONVICTION FOR SECOND DEGREE TAX EVASION SHOULD BE REDUCED TO A THIRD DEGREE CONVICTION CONSISTENT WITH THE ORDER OF THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA.
III. THE TRIAL COURT ERRED BY NOT DISMISSING THE INDICTMENT BASED ON THE MISCONDUCT OF THE PROSECUTOR IN PRESENTING THE MATTER TO THE GRAND JURY.
IV. DEFENDANT'S PROSECUTION FOR TAX EVASION SHOULD BE DISMISSED AS VIOLATIVE OF THE AUTOMATIC STAY IMPOSED BY THE BANKRUPTCY COURT.
V. DEFENDANT SHOULD NOT BE PROCEDURALLY BARRED FROM RAISING THESE CLAIMS AS A MANIFEST INJUSTICE HAS BEEN COMMITTED AGAINST HIM AND HE CAN ONLY VINDICATE THESE CLAIMS THROUGH A POST CONVICTION RELIEF PROCEEDING.
VI. THE SUPREMACY CLAUSE BARRED THE COUNTY OF MONMOUTH FROM PROSECUTING CRIMINAL CHARGES FOR TAX EVASION WITHOUT ADHERING TO THE AUTOMATIC STAY PROVISIONS OF THE BANKRUPTCY CODE.
We find it unnecessary to reach or discuss defendant's argument, contained in Point V, that he should not be procedurally barred from arguing he was denied the effective assistance of counsel because we choose to consider the merits of Point I. We conclude, however, that there is insufficient merit in Point I or any of defendant's other arguments to warrant discussion in a written opinion. R. 2:11-3(e)(2). We add only the following comments regarding defendant's contentions that: this criminal prosecution was barred by defendant's filing of a bankruptcy petition prior to indictment; the bankruptcy court's order, which quantified the State's claim against defendant, undermines the validity of the conviction; and he was deprived of the effective assistance of counsel because his trial attorney failed to persuade the jury that defendant did not evade the payment of taxes in an amount greater than $75,000.
Defendant argues that the bankruptcy petition, which was filed on November 21, 2001, barred this criminal prosecution because of 11 U.S.C.A. § 362(a), which contains the automatic stay provisions of the Bankruptcy Code. This statute, which generates an automatic stay of civil proceedings involving the debtor, was designed to shield a debtor from financial pressure during the pendency of a bankruptcy proceeding. See Winters v. George Mason Bank, 94 F.3d 130, 133 (4th Cir. 1996); Laughlin v. United States IRS, 912 F.2d 197, 198 (8th Cir. 1990); H & H Beverage Distribs. v. Dep't of Revenue of Pa., 850 F.2d 165, 166 (3d Cir.), cert. denied, 488 U.S. 994, 109 S.Ct. 560, 102 L.Ed. 2d 586 (1988); In re Stringer, 847 F.2d 549, 551-52 (9th Cir. 1988). But Congress did not intend to bar state criminal prosecutions against debtors upon their filing of a bankruptcy petition. See Barnette v. Evans, 673 F.2d 1250, 1251 (11th Cir. 1982) (stating that the "purpose of bankruptcy is to protect those in financial, not moral, difficulty"); In re Perrin, 233 B.R. 71, 74 (Bankr. D.N.J. 1999) (observing that bankruptcy laws are not intended to provide "a haven for criminal offenders"). Accordingly, Congress excepted criminal prosecutions from the broad automatic stay provisions contained in the Bankruptcy Code. See 11 U.S.C.A. § 362(b)(1) (exempting the "commencement or continuation of a criminal action or proceeding against the debtor," from those matters that are automatically stayed upon the filing of a bankruptcy petition). Thus, there is no merit in defendant's contention that the filing of a bankruptcy petition enjoins a criminal prosecution. This is true even when the prosecution is motivated by a complaining witness's desire to collect a debt. Gruntz v. County of Los Angeles, 202 F.3d 1074, 1084-86 (9th Cir. 2000).
We also agree with Judge Cleary that the February 1, 2005 bankruptcy order, which awarded the State $61,000 on its claim against defendant, cannot serve to undermine the jury's findings. As Judge Cleary observed, the State did not oppose the motion that led to the entry of this order, and the bankruptcy judge appears to have made no findings or otherwise expressed any reasons for the order's entry. The order itself does not indicate when the $61,000, which was awarded, became due from defendant nor did it delineate the period of time that the award covered. Moreover, the record on appeal does not contain any papers that may have been submitted to the bankruptcy judge in this regard, and, thus, there is nothing in the record from which we might gain an understanding as to what it was that the bankruptcy court intended to quantify. As a result, we reject defendant's contention that the $61,000 default order entered by the bankruptcy court in 2005 should override the jury's 2003 determination, after an eleven-day trial, that defendant evaded state taxes in an amount in excess of $75,000.
Lastly, we find no merit in defendant's contention that he was deprived of the effective assistance of counsel guaranteed by the Sixth Amendment. Defendant, in part, claims that his trial attorney failed or was unable to convince the jury that "it was possible to apportion the payments to produce a result in which the debt was less than $75,000."
At trial, the State called two representatives of the Division of Taxation. They testified that defendant's tax liability as of November 21, 2001 was nearly $684,000 and that he had paid $601,814.38 against that obligation. Based on this testimony, the State argued at trial that this $82,000 shortfall demonstrated that defendant evaded taxes in an amount that exceeded $75,000 -- the threshold for a second-degree offense. Defendant contends that effective counsel would have been able to demonstrate that the State had applied his payments in an unfair or inequitable manner, and, if the payments had been fairly applied, the tax liability would have been revealed to be less than $75,000.
Counsel's performance is judged by an "objective standard of reasonableness." Strickland v. Washington, 466 U.S. 668, 688, 104 S.Ct. 2052, 2064, 80 L.Ed. 2d 674, 693 (1984). In making that assessment, we "must be highly deferential," and make "every effort . . . to eliminate the distorting effects of hindsight." Id. at 689, 104 S.Ct. at 2065, 80 L.Ed. 2d at 694. Accordingly, we are required to "indulge a strong presumption that counsel's conduct falls within the wide range of reasonable professional assistance; that is, the defendant must overcome the presumption that, under the circumstances, the challenged action 'might be considered sound trial strategy.'" Id. at 689, 104 S.Ct. at 2065, 80 L.Ed. 2d at 694-95 (quoting Michel v. Louisiana, 350 U.S. 91, 101, 76 S.Ct. 158, 164, 100 L.Ed. 83, 92 (1955)). After carefully reviewing the record, we are satisfied that the performance of defendant's trial counsel was by no means substandard. Instead, the record reveals that trial counsel forcefully sought -- albeit unsuccessfully -- to demonstrate through his lengthy and thorough cross-examination of the Division's two representatives, and otherwise, that any failure to remit taxes did not exceed $75,000.
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