On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Indictment No. 05-08-1731.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Parrillo and Baxter.
Defendant Frank Knight appeals from his April 27, 2007 conviction of second-degree theft by failure to make required disposition of property received, N.J.S.A. 2C:20-9. At sentencing, the judge imposed a five-year term of imprisonment, ordered defendant to make restitution in the amount of $560,771 to Qualified Pension Services and imposed appropriate fines and penalties. On appeal, defendant presents the following claims for our consideration:
I. THE COURT ERRED WHEN IT FAILED TO INSTRUCT THE JURY PURSUANT TO STATE v. DAMIANO.
II. THE COURT COMMITTED PLAIN ERROR WHEN IT FAILED TO INSTRUCT THE JURY PURSUANT TO THE APPARENT CONFLICT IN THE LANGUAGE OF THE DEFENDANT'S QUALIFIED PENSION PLAN AND ERISA.
III. AN ESSENTIAL ELEMENT OF N.J.S.A. 2C:20-9 PROVIDES THAT THE PROPERTY NOT REMITTED DID NOT BELONG TO DEFENDANT IN THE FIRST INSTANCE.
IV. DEFENDANT WAS SUBSTANTIALLY PREJUDICED BY THE INEFFECTIVE ASSISTANCE OF DEFENSE COUNSEL.
Defendant was the president and sole shareholder of Knight Contracting Company, a business that provides commercial roofing, masonry, waterproofing and restoration services. In 1999, defendant applied to the New Jersey School Construction Corporation (SCC) for approval to work on school construction projects. As a condition of such approval, defendant was required to establish a Qualified Pension Plan (QPP) for his employees in order to comply with the SCC requirement that non- union contractors on public projects pay their employees the prevailing union wage, which was $45.45 per hour. Consequently, whenever defendant's employees worked on a SCC-approved project, they earned $45.45 per hour, of which $31 was their standard salary and the remaining $14.45 was the required fringe benefit. The $14.45 per hour fringe benefit that the SCC required defendant to pay his employees was not paid to them directly. Instead, defendant was required by the terms of the QPP to deduct the fringe benefits portion from the employees' $45.45 per hour wage and deposit it into the QPP that he established with Transamerica.
Beginning in 2000, defendant's company was awarded roofing and restoration projects by the SCC at the Long Branch, Orange, Hoboken and Camden school districts. Defendant testified that despite the provisions of the Employee Retirement Income Security Act (ERISA)*fn1 and its regulations that required him to deposit the $14.45 per hour fringe benefit into the QPP, he stopped making such deposits in July 2002. He claimed that constant delays by the SCC in paying his company for completed work placed the company in such dire financial straits that he was no longer able to afford to make the required contributions into his employees' pension funds. Despite his failure to make the required contributions, defendant continued to deduct the pension contributions from his employees' $45.45 hourly wages. When defendant stopped making the required contributions, his employees also stopped receiving their quarterly pension statements. Although defendant had filed Form 5500 with both the Internal Revenue Service and the United States Department of Labor (DOL) from 1998 through 2001 detailing the pension contributions he had made, he did not file a Form 5500 in 2002 or at any time thereafter.
In response to employee inquiries in 2003 concerning the missing quarterly statements, defendant repeatedly assured his employees that they would soon be receiving their statements. In early 2004, one of defendant's employees, John Roselli, confronted defendant about rumors circulating within the company that defendant was not depositing into the pension fund the money that he had been withholding from their $45.45 per hour wages.
As a result of Roselli's complaints, in March 2004, Roselli and a number of other employees met with defendant to discuss his failure to make the required deposits. During the meeting, defendant admitted that he was not depositing the withheld $14.45 per hour fringe benefit, but was instead using the money to "keep the company afloat." He assured his employees that he would make payment into the pension fund within thirty to ninety days.
Another company employee, Robert Roselli, contacted Transamerica directly after defendant ignored Roselli's requests for early withdrawal of his money from the pension fund. A third employee, William Hernandez, contacted DOL in March 2004 after he too was unable to withdraw money from his pension plan. As a result of Hernandez's complaint, DOL instituted an investigation in October 2004 into the Knight Contracting Company pension plan.
When the ninety days elapsed without defendant having made the required contributions, John Roselli, Robert Roselli, Jessie Henry and Nelson Soto, all Knight Contracting Company employees, contacted the Monmouth County Prosecutor's Office where they were interviewed by Lieutenant Jason Clark.
As a result of the employees' complaints, defendant was interviewed by both Clark and Carol Herzog, an investigator from DOL. During both interviews, defendant admitted that beginning in July 2002, he began retaining money from employee paychecks that was earmarked for the pension fund, while continuing to show such pension deductions on his employees' paystubs. He acknowledged that he retained the money he deducted from his employees' paychecks, rather than deposit it into the pension fund, in order to pay his company's operating expenses. During those interviews, defendant blamed his conduct on severe delays in receiving payment from the SCC. Herzog testified that the total amount that defendant had failed to deposit into the pension fund was $499,420.
When Herzog was asked during her testimony whether any federal statute or regulation specifies a time frame within which an employer is required to deposit funds that are withheld from employee paychecks into the pension fund, Herzog answered in the affirmative. She explained that the applicable ERISA regulation*fn2 provides that an employer must make the deposit no later than the fifteenth business day in the month after the money is withheld from the paycheck. She testified that federal regulations do not permit an employer to defer making the required contributions even if the employer is having difficulty in receiving payment on work he has performed. She explained, "there's no exception . . . ."
Herzog also testified that when she returned to her office after a second meeting with defendant, she went online to review the payments he had received from the SCC. She stated that the SCC website showed that defendant had been paid for all of the work he had performed as well as for the additional work for which he claimed the SCC still owed him money. The last question the prosecutor asked her on direct was whether, as of the date of trial, defendant had ever made the required payments into his employees' pension plans. She answered no.
At trial, Knight described the delays in receiving payment from the SCC. On the Long Branch job, thirteen months had elapsed between the time he billed the SCC in September 2000 and the time he received a $378,000 payment in October 2001; however, the October 2001 invoice was paid in full in December 2001. Although he testified that he did not receive the final payment until February 2004, the record does not establish when he submitted intervening invoices. Nonetheless, it was clear from defendant's testimony that the SCC had paid him in full for the Long Branch project.
As to the work defendant performed in Camden, his testimony established that he was paid a total of $1,861,000, of which more than $1,000,000 had been paid before he stopped making the required pension contributions in July 2002. Defendant testified that he had not experienced payment delays on the Camden job until February 2003. On the Orange project, which started in July 2001, defendant invoiced the SCC in September 2001 and received his first payment on January 15, 2002. Defendant did not describe any other payment delays on the Orange project. On the Hoboken job, the SCC required Knight Contracting to perform the work at night even though the contract had not originally so specified. Although defendant submitted invoices for the extra expense resulting from nighttime work, ultimately he was paid only $150,000 of the $325,968 that he invoiced. He received that payment in February 2004.
Defendant testified that as a result of the payment delays from the SCC, he had been forced to take out a second mortgage on his home, refinance two other properties he owned and cash out his and his wife's pensions and life insurance policies in order to keep Knight Contracting Company from declaring bankruptcy. He maintained that he would have made the required payments had he received timely payment from the SCC.
Defendant also insisted that the pension plan itself permitted him to defer depositing the pension contributions. He pointed to language in a portion of the pension plan that provided "should the employer for any reason fail to make a prevailing wage contribution for any year, then such deficiency shall be [satisfied] in subsequent years. Such contributions shall . . . equal the amount of the ...