New York Penal Law § 190.35: Misconduct by Corporate Official

New York Penal Law § 190.35 defines the crime of misconduct by a corporate official, which is a white-collar crime that involves corporate executives and officers who use their positions for personal gain or to harm the corporation and its shareholders. Under this section of the law, a corporate official can be charged with misconduct if they:

• Knowingly commit or cause the corporation to commit a criminal offense with the intent to benefit themselves or someone else.
• Knowingly use their position as a corporate official to engage in fraud, embezzlement, theft, or other illegal activity that results in financial loss to the corporation or its shareholders. The statute applies to all types of corporations, including for-profit and non-profit entities. It also applies to all types of corporate officials, including officers, directors, and other executives.

To prove the crime of misconduct by a corporate official, the prosecutor must show that the accused acted knowingly and intentionally to commit a crime or engage in illegal activity that caused harm to the corporation or its shareholders.

It is important to note that misconduct by a corporate official is distinct from other corporate crimes, such as securities fraud or insider trading. While these crimes may also involve corporate officials using their positions for personal gain or to harm the corporation, they are typically prosecuted under different statutes and carry different penalties.

Overall, misconduct by a corporate official is a serious offense that can have significant legal and financial consequences. Anyone facing charges under this section of the law should seek the advice of an experienced New York criminal lawyer to protect their rights and mount a strong defense.

People v. Schwartz, 162 A.D.3d 601 (1st Dept. 2018). In People v. Schwartz, the defendant, Joel Schwartz, was an executive at a company that provided workers' compensation insurance to businesses. The prosecution alleged that Schwartz had approved payments to a consultant, Evan Greebel, who had no experience in the field, in exchange for a portion of Greebel's fees. The payments were made for Greebel's role in helping the company complete a merger with another company. The prosecution argued that the payments were made without the approval of the company's board of directors and that Schwartz had acted with the intent to benefit himself and Greebel. Schwartz argued that he had not acted with the intent to defraud or deceive the company and that he had believed that Greebel had provided valuable services. Schwartz also argued that he had relied on the advice of the company's attorneys in approving the payments.

At trial, the prosecution presented evidence that Schwartz had knowingly and intentionally approved the payments to Greebel, despite knowing that Greebel had no relevant experience. The prosecution also presented evidence that Schwartz had received a portion of Greebel's fees in exchange for the payments. The defense argued that Schwartz had not received a significant amount of money from Greebel and that he had not acted with criminal intent.

The court held that the prosecution had presented sufficient evidence to establish that Schwartz had knowingly approved the payments to Greebel and had done so with the intent to benefit himself and Greebel. The court rejected Schwartz's argument that he had relied on the advice of the company's attorneys and upheld his conviction for misconduct under New York Penal Law § 190.35. Schwartz was sentenced to 1 to 3 years in prison.

1. Criminal usury in the second degree: New York Penal Law section 190.40
2. Criminal usury in the first degree: New York Penal Law section 190.42

As a class B misdemeanor, the maximum sentence for misconduct by a corporate official is up to three months in jail and/or a fine of up to $500. However, the sentence may vary depending on the specific circumstances of the case and the discretion of the judge.

It is important to note that in addition to any criminal penalties, a corporate official found guilty of misconduct may also face civil penalties and may be subject to civil lawsuits brought by shareholders or other parties who have been harmed by the misconduct.

A person is guilty of misconduct by corporate official when:

1. Being a director of a stock corporation, he knowingly concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended:
   1. To make a dividend except in the manner provided by law; or
   2. To divide, withdraw or in any manner pay to any stockholder any part of the capital stock of the corporation except in the manner provided by law; or
   3. To discount or receive any note or other evidence of debt in payment of an installment of capital stock actually called in and required to be paid, or with intent to provide the means of making such payment; or
   4. To receive or discount any note or other evidence of debt with intent to enable any stockholder to withdraw any part of the money paid in by him on his stock; or
   5. To apply any portion of the funds of such corporation, directly or indirectly, to the purchase of shares of its own stock, except in the manner provided by law; or
2. Being a director or officer of a stock corporation:
   1. He issues, participates in issuing, or concurs in a vote to issue any increase of its capital stock beyond the amount of the capital stock thereof, duly authorized by or in pursuance of law; or
   2. He sells, or agrees to sell, or is directly or indirectly interested in the sale of any share of stock of such corporation, or in any agreement to sell the same, unless at the time of such sale or agreement he is an actual owner of such share, provided that the foregoing shall not apply to a sale by or on behalf of an underwriter or dealer in connection with a bona fide public offering of shares of stock of such corporation.

Misconduct by corporate official is a class B misdemeanor.

If you are charged with misconduct by corporate official, the first thing you should do is to seek the assistance of an experienced New York criminal lawyer who can provide you with guidance on how to proceed, including explaining the charges against you and the potential consequences if you are found guilty. The can also help you evaluate the evidence and develop a strong defense strategy to minimize the charges or potentially get them dismissed altogether. Contact Stephen Bilkis & Associates at 800.696.9529 to schedule a free, no obligation consultation regarding your case. We represent clients in the following locations: Nassau County, Queens, Bronx, Brooklyn, Long Island, Manhattan, Staten Island, Suffolk County, and Westchester County.