NY Penal Law § 185.05: Fraud involving a security interest

If someone else has a security interest in property that you own, then you cannot sell it without accounting to the secured party the proceeds of the sale. If you do so, you would have committed fraud. Under New York Penal Law § 185.05, you could face prosecution for fraud involving a security interest if you create a security interest in personal property to secure a monetary obligation and

1. Under the security agreement you have the right to sell the property and the duty to account to the security party for the proceeds of the sale, you sell or other dispose of the property without accounting to the secured party of the proceeds of the disposition, or

2. Under the security agreement you do not have the right to sell the property, you sell or otherwise dispose of the property in violation of the security agreement.

Wally borrowed $10,000 from Roger. As security for the loan, Roger required Wally to pledge his 1996 Mustang as collateral for the loan. However, Wally retained possession of the car. As per the agreement, Wally gave Roger $500 per month as payments on the loan. Jimbo saw Wally driving around in the car. He loved it so much that he offered Wally $50,000 for the car. Although Wally loved the car, he decided to sell it. Wally did not tell Roger, and he also did not tell Jimbo about the agreement he had with Roger. Wally continued to make regular payments to Roger. Wally could be prosecuted for fraud involving a security interest as he failed to disclose to Roger that he sold the car.

1. Fraud in Insolvency: New York Penal Law § 185.00
2. Fraudulent disposition of mortgaged property: New York Penal Law § 185.10
3. Fraudulent disposition of property subject to a conditional sale: New York Penal Law § 185.15

Fraud involving a security interest is a class A misdemeanor. If you are convicted of this offense you could be sent to jail for up to a year. You could also receive a probation sentence of up to 3 years and be required to pay a fine.

A person is guilty of fraud involving a security interest when, having executed a security agreement creating a security interest in personal property securing a monetary obligation owed to a secured party, and:

1. Having under the security agreement both the right of sale or other disposition of the property and the duty to account to the secured party for the proceeds of disposition, he sells or otherwise disposes of the property and wrongfully fails to account to the secured party for the proceeds of disposition; or

2. Having under the security agreement no right of sale or other disposition of the property, he knowingly secretes, withholds or disposes of such property in violation of the security agreement.

Even though fraud involving a security interest is a misdemeanor and not a felony, you should still take it seriously as a conviction has consequences to be avoided. While you could receive a probation sentence, there is also the possibility that you will be sent to jail. The staff at the Law Offices of Stephen Bilkis & Associates has years of experience successfully defending clients in New York criminal courts who have been charged with fraud, grand larceny, white collar crimes, and other serious crimes. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your case. We serve those accused of larceny in the following locations: the Bronx, Brooklyn, Long Island, Manhattan, Nassau County, Queens, Staten Island, Suffolk County and Westchester County.