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State v. Bernardi

Superior Court of New Jersey, Appellate Division

August 28, 2018

STATE OF NEW JERSEY, Plaintiff-Appellant,
v.
RICHARD W. BERNARDI, SR. and STRATEGIC ENVIRONMENTAL PARTNERS, LLC, Defendants-Respondents.

          Argued April 16, 2018

          On appeal from Superior Court of New Jersey, Law Division, Morris County, Indictment No. 16-02-0014.

          Thomas R. Clark, Deputy Attorney General, argued the cause for appellant (Gurbir S. Grewal, Attorney General, attorney; Thomas R. Clark, of counsel and on the briefs).

          John A. Azzarello argued the cause for respondents (Whipple Azzarello, LLC, attorneys; John A. Azzarello, of counsel on the briefs; William J. Munoz, on the briefs).

          Before Judges Messano, O'Connor and Vernoia.

          OPINION

          VERNOIA, J.A.D.

         By leave granted, the State appeals from an order dismissing the first four counts of a six-count indictment against defendants Strategic Environmental Partners, LLC (SEP) and its director and managing member, Richard W. Bernardi, Sr. Having considered the record and the parties' arguments in light of the applicable law, we reverse the court's dismissal of counts one, two and three, and affirm the dismissal of count four.

         I.

         The record[1] before the motion court showed that in 2011 SEP purchased property in Roxbury from Sussex & Warren Holding Corp. (Sussex) that included a sanitary landfill, known as the Fenimore Landfill, which ceased operations thirty years earlier. The landfill has numerous environmental issues, has never been formally closed or declared environmentally safe by the New Jersey Department of Environmental Protection (NJDEP), and is in need of environmental remediation.

         In as early as 2006, defendants had discussions with the NJDEP about a proposal to purchase and develop the property. During 2010 and 2011, defendants proposed to the NJDEP a plan to remediate the site and place solar power generation equipment on it. During negotiations over the proposal, the NJDEP had concerns about defendants' financial ability to complete the required remediation.

         The NJDEP twice requested that defendants provide a performance bond securing their performance of the proposed remediation, but defendants were unable to do so. In lieu of a performance bond, defendants agreed to deposit portions of "tipping fees" earned from its acceptance of materials at the landfill, and revenues from solar power generated at the site, into an escrow account from which the NJDEP would approve payments to third parties for the required remediation.

         Defendants represented they would deposit $2, 300, 000 in the escrow account during 2011 through 2013 from a solar power developer. Defendants further represented they would provide the NJDEP with a signed contract from the developer within sixty days of the parties' entry into an Administrative Consent Order (ACO).

         On October 6, 2011, defendants and the NJDEP entered into an ACO "to effectuate the necessary closure of the landfill." The ACO states the NJDEP agreed to its terms based on its analysis of the facts relevant to the landfill and "its review of financial information presented by SEP." The ACO expressly provides the NJDEP and defendants "AGREED" to its terms, including defendants' obligations to deposit funds in the escrow account. The ACO also states that it "represents the complete and integrated agreement" of the NJDEP and defendants. Defendants and the NJDEP "warrant[ed] that they are authorized to sign [the] ACO and bind themselves . . . to comply with [the] terms and provisions of [the] ACO." The ACO was executed by Bernardi and on behalf of SEP and the NJDEP.

         The State alleges that following the execution of the ACO, Bernardi disclosed for the first time that SEP had outstanding debt in excess of $2, 500, 000 when the ACO was executed. Defendants' debts included an undisclosed $950, 000 mortgage loan to Sussex that was executed eight months before the ACO.

         Following execution of the ACO, Bernardi claimed SEP could not honor the ACO's escrow requirements because of defendants' obligations to their creditors. By July 2013, defendants earned $5, 500, 000 in revenue from their operation of the landfill, but deposited no more than $250 into the escrow account. The evidence presented to the grand jury showed $1, 500, 000 of the revenue was paid to Bernardi family members and one of their attorneys between 2 013 and 2 014.

         The evidence before the grand jury also showed that following execution of the ACO, defendants' engineering firm requested that defendants be released from their obligation to provide a signed contract from a solar power developer. The letter revealed that defendants never had an agreement with a solar power developer, and the State alleged that defendants' representations prior to the ACO that they had an agreement with a solar power developer and would deposit $2, 30 0, 000 from the developer in the escrow account were false.

         The evidence presented to the grand jury also showed that when defendants purchased the property in 2011, they represented they would construct a solar power generation facility on the property, thereby providing a source of revenue for payment of the $950, 000 loan from Sussex that was secured by a mortgage. The evidence further showed defendants' presentation supporting the issuance of the loan and mortgage was false because defendants did not have a contract with a solar power provider, and did not yet have permission from Roxbury or the NJDEP to install solar power panels on the property. The State alleged defendants misrepresented that solar power generation revenues would provide the monies necessary to repay the loan amount secured by the mortgage.

         Defendants were charged in an indictment with: second-degree false representations for a government contract, N.J.S.A. 2C:21-34(b) (count one); second-degree theft by deception from the NJDEP, N.J.S.A. 2C:20-4(a) (count two); first-degree financial facilitation of criminal activity, N.J.S.A. 2C:21-25(b)(2)(a) (count three); second-degree theft by deception from Sussex, [2] N.J.S.A. 2C:20-4(a) (count four); and second-degree theft of services, N.J.S.A. 2C:20-8(a) and N.J.S.A. 2C:20-2(b)(1)(a) (count five).[3] Bernardi was also charged with second-degree misconduct by a corporate official, N.J.S.A. 2C:21-9(c) and N.J.S.A. 2C:2-6 (count six).

         Defendants moved to dismiss the indictment. Following argument, the court dismissed counts one through four.[4] In its oral decision, the court determined that count one, which alleged defendants made false representations to the NJDEP in connection with the negotiation and entry into the ACO, could not be sustained as a matter of law because the ACO did not constitute a "government contract" within the meaning of N.J.S.A. 2C:21-34(b). Although the court found that "certainly the ACO is an agreement between the parties," and "has many features of events that lined up . . . in contracts," it reasoned that because N.J.S.A. 2C:21-34(b) provided for grading of the offense based on the contract amount, a "government contract" under the statute is limited to "a contract for a private person or corporation to provide goods or services to a government entity and to be paid for the same." The court found the ACO was not a contract requiring the NJDEP to pay defendants "in return for goods and services," and therefore defendants' alleged false misrepresentations in negotiating and entering into the ACO could not constitute a violation of N.J.S.A. 2C:21-34(b).

         The court also dismissed count two, which alleged defendants committed a theft in violation of N.J.S.A. 2C:20-4(a) by using deception to obtain the ACO. The court determined the ACO did not have a value for purposes of grading the offense, and therefore it did "not fit" that the theft of the ACO could support the charged theft by deception offense.

         The court dismissed count four, which alleged defendants committed theft by deception in their procurement of the $950, 000 mortgage from Sussex. The court reasoned that count four charged theft of a mortgage, an instrument creating a lien, and theft of a lien on property defendants owned did not constitute theft of the property of another.

         Last, the court dismissed count three, alleging financial facilitation of the criminal activity alleged in counts one and two. The court determined that because it dismissed counts one and two, there was no criminal activity supporting the financial facilitation alleged in count three.

         We granted the State's motion for leave to appeal the court's dismissal of counts one through four. The State presents the following arguments for our consideration:

POINT I
THE ADMINISTRATIVE CONSENT ORDER WAS A GOVERNMENT CONTRACT THAT PROPERLY SERVED AS THE BASIS FOR PROSECUTION UNDER ...

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