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The PEOPLE of the State of New York, Plaintiff, v. Hector VILLANUEVA, Defendant.
Defendant Hector Villanueva, along with two others, was arrested on May 9, 2018, and charged with two counts of the class A-I felony of Criminal Possession of a Controlled Substance in the First Degree, two counts of the class A-II felony of Criminal Possession of a Controlled Substance in the Second Degree, the class D felony of Criminal Possession of a Weapon in the Third Degree, and a total of thirteen other, related charges. The charges stemmed from allegations that, inside of a Bronx auto body shop, the men possessed over 8 ounces of heroin, over 8 ounces of cocaine, over 2 ounces of marijuana, a semi-automatic 9 mm handgun with the serial number scratched off, and a quantity of ammunition.
The judge presiding over the Criminal Court arraignment set bail in the amount of $100,000 insurance company bond over $50,000 cash, with a 48 hour surety. In other words, the court required that the person posting bail present to the District Attorney's office proof that the money used for the bail came from a lawful source.
Family members went to a bail bond company, which wrote a bond and presented it to another judge for approval on May 17, 2018. That judge approved the bond, pending the surety, which had not been lifted. After reviewing the financial documents presented, the People were not satisfied as to the source of the funds and would not consent to lifting the surety, and so the case was sent to this court on May 25, 2018, for a surety hearing.
The bail bond package consisted of $12,260 in cash which was deposited with the bond company. Of that, $6,260 was the premium- the bond company's fee, which would not be returned, and $6,000 was collateral. The $12,260 in cash came from two family members. Defendant's wife, Marilyn Santiago, provided $5,000, and his son-in-law, Caesar Salazar Tomayo, provided $7,260. The total collateral provided was the aforementioned $6,000 in cash, and two confessions of judgment for $100,000 each, one executed by Ms. Santiago and the other by Mr. Salazar.
At the close of the hearing, this court found that the funds provided by Ms. Santiago, which were from a disbursement from her 401(k) account, were from a lawful source. The court is also satisfied that because of Ms. Santiago's stable employment history, and the nature of her relationship to the defendant (ie that they are spouses who share a home and a life together), that it is credible and likely the confession of judgment would be satisfied by her own funds, obtained from legal employment, in the event such indemnification would ever be necessary.
The court is not satisfied, however, that the ultimate source of the funds provided by Mr. Salazar will be from a lawful source. The term “ultimate” is employed because the $7,260 tendered to the bond company by Mr. Salazar was predominantly obtained from credit cards. Credit cards are obviously a lawful source of funds. However, the credit card tender is actually a debt that will need to be repaid. Where the money to indemnify the credit card will come from is the question to be asked here. And this court is not satisfied that it is likely to come from a lawful source.
Caesar Salazar testified that the defendant Hector Villanueva is his father-in-law; Mr. Salazar is married to the defendant's daughter. They have been married for 5 years (although Mr. Salazar testified that they had been married for 7 years, he eventually acknowledged that it was 5 years - that they had married in 2013). While they do not have any children together, Mr. Salazar considers himself the father of his wife's nine-year-old daughter from a previous relationship. Mr. Salazar sees his father-in-law a few times a year, at family functions.
Mr. Salazar testified that he works as a business manager in an auto dealership, Honda of New Rochelle, describing his position as, “I do the business end of the transactions when folks come to buy cars and they need financing.” He stated that he had been in this position at New Rochelle Honda for 3 weeks, but provided no financial documentation or records to corroborate this current employment. He had been in his previous job- at Potamkin Hyundai in Manhattan- for a number of years, and did provide two W-2's for that job. He and his wife also run a small business, which is an enterprise wherein they own two livery cars and rent them out to taxi drivers. Mr. Salazar testified that the taxi business “produces” about $20,000 a year for each vehicle. That business is an LLC, and has its own bank account. The tax returns introduced into evidence by the defense, however, show a loss of $2,700 for the business in 2016, and a loss of over $33,000 in 2017. The couple's adjusted gross income, according to the tax returns, was $120,157 in 2016 and $52,965 in 2017.
Out of that income, the couple pays rent of over $3,000 a month (utilities and fees are payable with the rent, and those amounts vary from month to month). They have a car payment of $589 plus auto insurance of $180. They pay $600 in Catholic school tuition for the child. There is also an aftercare fee of $15 per day which is on an as-needed basis.
The defense introduced 3 bank statements for a checking account belonging to Mr. Salazar, for the period from January 27, 2018 through March 25, 2018, and also a printout of the account activity from May 7, 2018 through May 16, 2018. The ending balance for the statements range from $4.69 to $620.45. Mr. Salazar testified that he has several credit cards, and the bank statements do reflect payments made to several credit accounts. For example, the statement for the period of March 27, 2018 through April 25, 2018 shows a payment of $100 to Macy's credit, $100 to a Best Buy Account, $100 to a separate Best Buy account, $170 to Capital One, $101 to another Capital One account, $65 to Synchrony Bank credit card, $614.21to Discover Card, another $125 to Discover Card, and $50 to a Barclay's credit card. It also shows 3 car payments-$473.95, to Hyundai motor finance, $391.60 to Toyota Financial, and $628.90 to Toyota Financial Lease. (While the witness testified that he and his wife own one car and have a car payment of approximately $589, there was no indication of what the other 2 car payments were for and why, if they were for the business, they were being paid out of the personal account when there was testimony that a business account existed).
Mr. Salazar advanced $7,260 to the bail bond company, and signed a confession of judgment for $100,000. Of that amount, $1,060 was paid with a debit card, which is linked to an account that is held by the couple's business, even though Mr. Salazar acknowledged that this was not a business expense. The remainder of the $7,260 came from credit cards. He charged a Discover card $700 or $800, another $2,500 to a Visa card, and $200 to another credit card. Each of these brought the card virtually up to its limit. Although these amounts add up to only $4,460 or $4,560, Mr. Salazar did not give any further information as to where the full $7,200 came from, even upon clarification questioning from the court.
In cases where bail is set, and a District Attorney has reasonable cause to believe that the person posting bail is not in rightful possession of the money, or that such money constitutes the fruits of criminal or unlawful conduct, the court may require an inquiry as to the source of the funds, and whether any feature of the undertaking contravenes public policy. C.P.L. § 520.30(1). At such a hearing the defendant has the burden of proving, by a preponderance of the evidence, that the cash or collateral posted to secure the bond originates from a legitimate source, and is not the fruit of criminal or unlawful conduct. People ex rel. Aidala v. Warden, Rikers Island Corr. Facility, 100 A.D.3d 667, 952 N.Y.S.2d 904 (2nd Dept. 2012); People v. Esquivel, 158 Misc. 2d 720, 727, 601 N.Y.S.2d 541 (Sup. Ct., N.Y. County, 1993).
In conducting this inquiry, the court may consider:
(a) The background, character and reputation of any obligor․
(b) The source of any money or property deposited by any obligor as security, and whether any such money or property constitutes the fruits of criminal or unlawful conduct․
(c) The source of any money or property delivered or agreed to be delivered to any obligor as indemnification on the bond, and whether any such money or property constitutes the fruits of criminal or unlawful conduct․
(d) The background, character and reputation of any person who has indemnified or agreed to indemnify an obligor upon the bond․ [and]
(e) The source of any money posted as cash bail, and whether any such money constitutes the fruits of criminal or unlawful conduct․
Criminal Procedure Law § 520.30(1).
When the bail is set in the form of insurance company bond, the inquiry will turn on the source of the money provided to the company for their fee, as well as for any collateral. Esquivel, 158 Misc. 2d 720, 601 N.Y.S.2d 541. The relationship between the defendant and the indemnitor is relevant as well. This is because criminal actors may utilize a “straw person” to post bail. Indeed, when a person posts bail for someone he barely knows, it could be a sign that he is not risking his own money, and he is only a “front” for the true source of money. See Presier, Practice Commentary, McKinney's Cons Laws of NY, Book 11A, C.P.L. § 520.30 at 68; Johnson v. Crane, 171 A.D.2d 537, 568 N.Y.S.2d 22 (1st Dept. 1991); People v. McIntyre, 168 Misc. 2d 556, 640 N.Y.S.2d 386 (Sup. Ct., Kings County 1996). Hence, where the bail amount is $2 million, it is sufficient to provide a home worth $400,000 as collateral, when the indemnitors own a home worth over $2 million, have ready cash assets of over $300,000, are willing and able to pay the $125,000 premium, and have had a long-term, close relationship with the defendant. People v. Agnello, 183 Misc. 2d 694, 705 N.Y.S.2d 525 (Sup. Ct. Queens County 2000). Conversely, $40,000 collateral to secure a $150,000 bond was not established to be from a lawful source, when the indemnitor was the defendant's uncle with whom he was not close, who had no assets and lived on a fixed income, and borrowed the money from two friends who did not even know the defendant. McIntyre, 168 Misc. 2d 556, 640 N.Y.S.2d 386.
But what about when the funds advanced come from a credit card? When the indemnitor is the lawful account holder, and the charged amount is within his credit limit, can a court look beyond that, to the likely source of the payments to the credit card company sometime—possibly a long time--in the future?
In order to comport with the purpose of the inquiry authorized by the statute, and with sound public policy, the answer to this must be that the court should look to the likely source of the repayment to the credit card.
It is now firmly established that a court in a surety hearing must look beyond the financial soundness of the insurance company which is writing the bond, to the financial means, as well as the motives, of the indemnitor. People ex rel. Aidala v. Warden, 100 A.D.3d 667, 952 N.Y.S.2d 904; Esquivel, 158 Misc. 2d 720, 727, 601 N.Y.S.2d 541. See also People ex. Rel Savage v. Horn, 56 A.D.3d 806, 870 N.Y.S.2d 45 (2nd Dept. 2008). Thus, when a bond is posted, the court must look at the source of funds used to secure the bond. This is so that drug dealing proceeds, or other ill-gotten gains, are not simply converted through “facile manipulation” into a bond. Crane, 171 A.D.2d 537, 568 N.Y.S.2d 22. It is just as facile to pay a bond company with the credit card of an easily-persuaded (or pressured) minion, and then pay the credit card with the drug money, as it is to pay a bond company with the illegal funds.
The Criminal Procedure Law provides that any inquiry such as this may be conducted into the “source” of funds. C.P.L. § 520.30(1). The credit card is not the source—it is merely the vehicle. When a person makes a payment by credit card, she is simultaneously borrowing the money, and also advancing the money to another. See, NY Gen. Bus. Law § 511(1) (a credit card is “any credit card ․ or other identification card or device issued by a person to another person which may be used to obtain a cash advance or a loan or credit or to purchase or lease property or services on the credit of the issuer or of the holder”).
A credit card company is not the “source” of the funds for C.P.L. § 520.30 purposes any more than the insurance company which writes the bond. Hence, a court must look not just to the solvency of the bond company (or credit card company), but to the “background and purpose of any indemnitor.” Esquivel, quoting Bellacosa, Practice Commentary, McKinney's Cons Laws of NY, Book 11A, C.P.L. § 520.30 at 57. This is important where a credit card is being used as collateral for a bond, as credit cards are especially suited to money laundering purposes. See, generally, Suresh Dakshina, You Are The Company You Keep: Transaction Laundering And How Online Retailers Avoid Becoming Targets, Forbes (Jun. 9, 2017, 09:00 AM), https://www.forbes.com/sites/forbesfinancecouncil /2017/06/09/you-are-the-company-you-keep-transaction-laundering-and-how-online-retailers-avoid- becoming-targets/No.333d6c706b3d; Transaction Laundering is the New, Advanced form of Money Laundering, EverCompliant (Jan. 23, 2017), http://evercompliant.com/transaction-laundering-new-advanced-form- money-laundering; Keith Furst, Cartels Put Their Money Laundering on Corporate Credit Cards, Insight Crime (Sep. 13, 2016), https://www.insightcrime.org/news/analysis/ cartels-put- their- money-laundering-on-corporate-credit-cards.
While a court may easily scrutinize bank accounts, pay stubs and tax returns to determine the source of posted funds, it is a trickier matter to determine the source of funds that have not actually yet been paid. The credit card has advanced a payment on behalf of that cardholder, whom they think has the ability to repay them, with interest, over time. But from where the cardholder will get the money to pay the credit card is something that needs to be established at a surety hearing, and the burden of proving the source of those future funds is on the defendant.
In this case, Mr. Salazar had access to several lines of credit through various credit cards, all of which he presumably obtained before terminating his long-term employment at Potamkin Hyundai. The defense did not sufficiently establish that Mr. Salazar is even employed now. He testified about a new job, but offered no supporting evidence of this employment. He also provided no details for the reason that his previous employment ended. The testimony and bank records show that Mr. Salazar is living almost hand to mouth. His income dropped almost in half the prior year. He pays a high rent- over $3,000 a month on a $52,000 income- as well as a $600 tuition for his stepdaughter, and 3 car payments. He and his wife do own a small business, but the business suffered a big loss recently. He does not own a home, or report any savings. Yet, he has agreed to pay the credit cards thousands of dollars, plus interest, to secure the bail bond. These charges were made, not in one transaction, but in smaller, patchwork charges— as small as $200 in one instance. All of the charges brought each card up to its credit limit. Furthermore, Mr. Salazar spent $1,060 of his business's money on something that cannot even arguably be considered a business expense, without any evidence as to where the money that was in the business account came from. Mr. Salazar claimed that he rented out vehicles for use as taxis, but no proof of rental payments were provided, no contract with the drivers who were renting the cars, and no bank statements. He also signed an agreement to be responsible for $100,000 should the defendant fail to appear. All of this for someone he does not describe any kind of close relationship with, and sees only at family functions.
With consideration of all of these facts, this court is not satisfied that it has been proven by a preponderance of the evidence that the money that will be used to pay the credit card for the charge incurred for the bond company will come from lawful means. Although Mr. Salazar is the lawful holder of these cards, his expenses are so high in proportion to his income, his employment is only recent, if it exists at all, and he has no savings. By these transactions he charged up to the maximum the very cards he seems to rely on to get by. It defies belief that he will use his own income or assets to pay this off. At the very least, this court is not convinced, by a preponderance of the evidence, that the proceeds of criminal activity have not been promised to Mr. Salazar to pay this credit card debt, and is thus not approving the bail bond.
This constitutes the Decision and Order of the Court.
Linda Poust Lopez, J.
Docket No: 2018BX016671
Decided: September 04, 2018
Court: Criminal Court, City of New York.
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