98 N.Y.2d 105 (2002)

To convict a defendant of first-degree commercial bribing under New York Penal Law § 180.03, the prosecution must prove that the bribe caused concrete economic loss to the employer, exceeding $250, which would not have occurred absent the bribery.

Summary

Defendant, an attorney, was convicted of first-degree commercial bribing for paying kickbacks to insurance adjusters to expedite settlements. The New York Court of Appeals held that the prosecution failed to adequately prove that the kickbacks caused economic harm to the insurance companies, as required for a first-degree felony conviction, except for one instance. The Court reasoned that merely showing the payment of a kickback isn’t enough; there must be proof the employer would have paid less absent the bribe. The Court affirmed one count of first degree commercial bribing and reduced another to second degree. It also upheld the conviction for first-degree scheme to defraud related to the affirmed bribery count.

Facts

Defendant, an attorney, paid kickbacks to insurance company adjusters through intermediaries from his contingent fees. The purpose was to expedite the settlement of his clients’ personal injury claims. The indictment included felony commercial bribing counts related to payments made concerning claims with Aetna Life and Casualty Company, and Commercial Union Insurance Company.

Procedural History

The trial court convicted the defendant of first-degree commercial bribing. The Appellate Division affirmed. The Court of Appeals granted leave to appeal to consider the legal sufficiency of the evidence regarding economic harm, as required by Penal Law § 180.03 for first-degree commercial bribing.

Issue(s)

1. Whether the payment of a kickback to an insurance adjuster, alone, is sufficient to establish the “economic harm” element required for a conviction of commercial bribing in the first degree under Penal Law § 180.03.

2. Whether the trial court properly admitted out-of-court statements under the coconspirator exception to the hearsay rule.

3. Whether the People’s violation of People v. Rosario warrants reversal.

Holding

1. No, because the statute requires proof of a concrete economic loss suffered by the bribe receiver’s employer that would not have been incurred absent the corrupt arrangement. The payment of a kickback may show a willingness to settle for less, but it doesn’t prove the settlement would have been less costly without the bribe.

2. Yes, because the prosecution established a prima facie case of conspiracy independent of the co-conspirator’s statements.

3. No, because the Rosario objection was raised for the first time in a motion to set aside the verdict brought purportedly under CPL 330.30 (1) and the defendant failed to demonstrate prejudice.

Court’s Reasoning

The Court reasoned that the legislative history of the felony commercial bribery statute indicates a purpose to require proof of actual economic injury exceeding $250. The injury must be suffered by the employer and would not have occurred but for the bribery. The Court found analogous federal mail fraud cases instructive, noting that these cases require proof that the employer would have achieved a better deal without the corrupt arrangement.

The Court distinguished between the Aetna and Commercial Union counts. Regarding Commercial Union, the People’s witness testified that any attempt by the defendant to speed up the settlement process would have been rejected. Thus, the kickback did not cause economic harm because the case would not have settled faster even without the bribe. Regarding Aetna, the evidence established that honest adjusters reviewed and approved the settlement without knowledge of the kickback. The Court inferred that the kickback arrangement deprived Aetna of the opportunity to achieve a disposition in the amount of the actual settlement, reduced by the equivalent amount of the kickback. This inference was reasonable because, at the time of the Aetna settlement, the honest adjusters did not reject the settlement as premature.

The Court quoted McNally v. United States, 483 U.S. 350, 360: the employer of the kickback payee “would have paid a lower [price] or secured better [terms]” absent the corruption arrangement.

Regarding the co-conspirator statements, the Court noted the exception to the hearsay rule allows such statements “during the course and in furtherance of the conspiracy is admissible against another coconspirator” (People v Bac Tran, 80 NY2d 170, 179 [1992]). The statements are only admissible upon a showing that a prima facie case of conspiracy has been established and that the evidence must be admitted “without recourse to the declarations sought to be introduced” (id.).

Regarding the alleged Rosario violation, the Court found that the defendant did not perserve the record for this argument and had the burden of demonstrating prejudice but failed to do so.