According to Wikipedia, at least 8 states including New York penalize the falsifying of business records. In addition, Maine has a related statute called falsifying private records. Notable cases were prosecuted in 2005 and 2017: in New York State this is a standard tool prosecutors use in white collar crime cases.
When did falsifying business records first become illegal in New York State? Was it controversial when it passed?
The New York Times search tool provides some leads into this crime’s sordid history.
New York Times: Feb 21, 1930. Bronx Plasterer Indicted
Joseph Castro, 34 years old, a plastering contractor and member of Plasterer’s Information Bureau of 717 East 221st Street, was indicted yesterday on a charge of falsifying his business records, a felony, by a Bronx grand jury investigating racketeering in the building industry.
The next mention is in Feb 5, 1970:
RIVERHEAD, L. I., Feb. 4— Fred Fellman, chairman of the Republican party in the Town of Babylon, was arraigned today on charges of having stolen funds from the town Republican organization and from two real estate companies by falsifying business records.
Mr. Fellman, who has been the Republican town leader since 1967, was arraigned with five other men—including two town officials and one county official — in State Supreme Court here on indictments voted by a Suffolk grand jury that has been investigating land deals and the finances of the Republican party in Babylon.
June 10, 1970:
Thirty‐five of the 120 parking lot employes at Kennedy International Airport were indicted yesterday in connection with what Queens District Attorney Thomas J. Mackell called a $250,000 parking ticket racket. …
They were scheduled to be arraigned this morning in State Supreme Court in Queens on charges of petty larceny, possession of stolen property, and falsifying business records in the first degree. The latter charge is punishable by four years imprisonment.
I assume it was an evolutionary thing - tax collection requires good record keeping on behalf of the collectee… Then public companies (which go way way back centuries) would have financial obligation to report honestly to their shareholders. I presume tax evasion and fraud were sufficient to cover these in the early days. I suppose too there was eventually a need to require honest reporting of funds spent so that the shareholders would know the business was only doing legitimate business-related transactions, not siphoning money to the executive or their cronies.
Fraud was always illegal, at common law.
To be clear, are you looking for the first statute dealing with falsifying business records generally? Or if you are looking for criminal penalties specifically, would the first tax fraud statute suffice? What exactly do you consider business records? One of the first acts of the New York legislature after declaring independence from Great Britain was to impose price controls and rationing. Laws of New York, Vol I, ch. 34 (1777). Hoarding or war profiteering was made an offence against the state, to be prosecuted (as was then customary) by the reporting citizen. Falsifying business records would have been considered “against the tenor or true intent and meaning of this law”.
~Max
In my state, the nearest thing would be “uttering a false document”. The interesting thing about the NY law is not that they’ve made it more explicit by mentioning “business records”, nor that they’ve made it more explicit by including acts of omission: I think that the interesting thing is that they’ve removed the potential ambiguity by splitting it into a misdemeanor (where they don’t have to show where the money was going to go), and a felony (where they prove you were actually stealing).
In my state “uttering a false document” requires “intent to prejudice”. That’s a lot easier to prove when there is money missing, and a lot harder to prove when there is no money missing.
I don’t have the history of the NY statute, but seeing that split, I’d say they had cases where they knew something criminal was happening, but since they couldn’t follow the money they were having trouble convicting.
Changes to the law to catch people who are getting away are normally slightly controversial: I’d look at this and expect that soon they’d be prosecuting people for honest mistakes just because they were criminals, or because it was their job to catch and prosecute people. Again, looking at the law, they were obviously aware of that possibility, and included language to reassure voters. But despite the minor controversy, laws like this always get passed. I don’t imagine there was any serious push back.
I am looking for the first law specifically and explicitly aimed at falsifying business records in New York but also other US states. Put another way, I would like to know more about the history of Article 175 of the New York Penal Code. I consider business records to be whatever the law against falsifying business records defines it to be. Most states do not have these laws, though I assume all states have eg obstruction of justice laws.
I think this timeline is off. I understand that company financial reports were unreliable prior to the establishment of the Securities Exchange Commission in 1934. In New York State, this law precedes that. The mention of falsifying business records in the 1930 New York Times paragraph seemed to be linked with racketeering. I’m not sure about tax collection. Corporate taxes were on established at the Federal level in 1894: it was declared unconstitutional, but a corporate excise tax passed in 1909 and the 16th Amendment to the Constitution overruled the Supreme’s tax decisions. I don’t know how all this played out at the state level, but I very tentatively doubt whether state corporate taxes date from the 1850s or earlier (I could be wrong).
1930 NYT referenced above:
As I wrote above, it has always been illegal to commit fraud even before the penal code. Originally the public prosecutors were few and only handled major crimes. Private citizens would prosecute other offenses. As the state population grew so did the capacity for bureaucracy and by the late nineteenth century, New York had established its first penal code. Included under § 95 is the predecessor to the falsifying business documents statute. This codified part of the existing common law doctrines in a situation where the state/public is the victim. The original language makes it easy to see the relation to fraud and forgery:
"FORGING, STEALING, MUTILATING AND FALSIFYING JUDICIAL AND PUBLIC RECORDS AND DOCUMENTS.
"§ 94. […]
“§ 95. A person who knowingly procures or offers any false or forged instrument to be filed, registered or recorded in any public office within this state, which instrument, if genuine, might be filed or registered or recorded under any law of this state or of the United States, is guilty of felony.”
An Act to establish a Penal Code, ch. 676, § 95, 1 N.Y. Laws 913, 3 N.Y. Laws 23 (1881).
The first case I could find relying on the statute involved traditional forgery of a signature on the deed for a house. People v. Valentine, 26 N.Y.Crim.R. 433 (1911).
In 1909 the penal code was reorganized with no substantial change to the provision, except that it was renumbered to § 2051:
“§ 2051. Offering false or forged instruments to be filed or recorded. A person who knowingly procures or offers any false or forged instrument to be filed, registered or recorded in any public office within this state, which instrument, if genuine, might be filed or registered or recorded under any law of this state or of the United States, is guilty of felony.”
An Act providing for the punishment of crime, ch. 88, art. 184, § 2051, 4 N.Y. Laws 2681, 2963 (1909).
The first case I could find interpreting the 1909 statute is dated 1929,
“Section 2051 of the Penal Law cannot be so construed as to make an issue of every instrument filed, otherwise genuine, but containing statements that may be false, as here, the several values and contract prices mentioned in a notice filed under the Mechanic’s Lien Law. The indictment says he had a right to file the notice, but not for the amounts stated therein. The legislative intention was to cover the instrument itself, and not the several statements therein contained.”
People v. Cantor, 234 N.Y.S. 591, 591 (Co. Ct. 1929).
In 1965 the whole penal code was revised (again), this time with changes to the substance of the provision. Forgery was separated from tampering and falsification of records. To your main question, this is when falsification of business records was added, as distinguished from tampering with the public record. The relevant provisions are §§ 175.00-175.15:
"§ 175.00 Falsifying business records; definitions of terms.
"The following definitions are applicable to sections 175.05 and 175.10:
"1. ‘Enterprise’ means any entity of one or more persons, corporate or
otherwise, public or private, engaged in business, commercial,
professional, industrial, eleemosynary, social, political or
governmental activity.
"2. ‘Business record’ means any writing or article kept or maintained by an enterprise for the
purpose of evidencing or reflecting its condition or activity.
"§ 175.05 Falsifying business records in the second degree.
"A person is guilty of falsifying business records in the second degree when, with intent to defraud, he:
"1. Makes or causes a false entry in the business records of an enterprise; or
"2. Alters, erases, obliterates, deletes, removes or destroys a true entry in the business records of an enterprise; or
"3. Omits to make a true entry in the business records of an enterprise in violation of a duty to do so which he knows to be imposed upon him by law or by the nature of his position; or
"4. Prevents the making of a true entry or causes the omission thereof in the business records of an enterprise.
"Falsifying business records in the second degree is a class A misdemeanor.
"§ 175.10 Falsifying business records in the first degree.
"A person is guilty of falsifying business records in the first degree when he commits the crime of falsifying business records in the second degree, and when his intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.
"Falsifying business records in the first degree is a class E felony.
"§ 175.15 Falsifying business records; defense.
“In any prosecution for falsifying business records, it is an affirmative defense that the defendant was a clerk, bookkeeper or other employee who, without personal benefit, merely executed the orders of his employer or of a superior officer or employee generally authorized to direct his activities.”
An Act providing for the punishment of offenses, ch. 1030, art. 175, 2 N.Y. Laws 2343, 2417-20 (1965).
The only amendment since 1965 has been adding electronic media to the definitions section.
~Max
I should add that the only situation I can think of where the falsifying business records statute applies, and common law fraud does not, is where it is prosecuted before any harm is done. New York classifies false written statements under Title K, Offenses involving fraud. The statutes, however, make the fraud against the state with criminal penalties. Otherwise it would only be fraud against the affected investor, business partner, employer, etc.
~Max
Please disregard post #7 which was inaccurate. This is a revised effort.
It has always been illegal to commit fraud even before the penal code. Originally the public prosecutors were few and only handled major crimes. As the state population grew so did the capacity for bureaucracy and by the late nineteenth century, New York had established its first penal code. Included under sections 95, 470, 511, and 514 are the predecessors to the falsifying business documents statutes. These codified the existing common law doctrines and handled situations where the state/public is the victim.
All the basic elements of today’s law were present when New York first created its penal code, in 1881. The original language makes it easy to see the relation to fraud and forgery:
"FORGING, STEALING, MUTILATING AND FALSIFYING JUDICIAL AND PUBLIC RECORDS AND DOCUMENTS.
"§ 94. […]
“§ 95. A person who knowingly procures or offers any false or forged instrument to be filed, registered or recorded in any public office within this state, which instrument, if genuine, might be filed or registered or recorded under any law of this state or of the United States, is guilty of felony.”
An Act to establish a Penal Code, ch. 676, § 95, 1 N.Y. Laws 913, 3 N.Y. Laws 23 (1881).
"§ 470. A public officer, or a deputy, or clerk of any such officer, and any other person receiving money on behalf of, or for account of the people of this state, or of any department of the government of this state, or of any bureau or fund created by law, and in which the people of this state are directly or indirectly interested, or for or on account of any city, county, village or town, who
"1. Appropriates to his own use, or to the use of any person not entiteld thereto, without authority of law, any money so received by him as such officer, clerk or deputy, or otherwise; or,
"2. Knowingly keeps any fals account, or makes any false entry or erasure in any account of, or relating to, any money so received by him, or
"3. Fraudulently alters, falsifies, conceals, destroys or obliterates any such account; or
"4. Willfully omits or refuses to pay over to the people of this state or their officer or agent authorized by law to receive the same, or to such city, village, county or town, or the proper officer or authority empowered to demand and receive the same, any money received by him as such officers when it is his duty imposed by law to pay over, or account for, the same;
"Is guilty of felony.
An Act to establish a Penal Code, ch. 676, § 470, 3 N.Y. Laws 116-17 (1881).
"§ 511. A person is guilty of forgery in the second degree who, with intent to defraud,
"1. […]
"2. Forges […]
"An entry made in any book or record or accounts, kept by or in the office of any officer of this state, or of any village, city, town, or county of the state, by which any demand, claim, obligation, or interest, in favor of or against the people of the state, or any city, village, town, or county, or any officer thereof, is or purports to be created, increased, diminished, discharged, or in any manner affected; or an entry made in any book of records or accounts kept by a corporation doing business with the state, or in any account kept by such a corporation, whereby any pecuniary obligation, claim, or credit is or purports to be created, increased, diminished, discharged, or in any manner affected; or […]
“An instrument or writing, being or purporting to be the act of another, by which a pecuniary demand or obligation is or purports to be or to have been created, increased, discharged, or diminished, or in any manner affected, or by which any rights or property whatever are or purport to be or to have been created, transferred, conveyed, discharged, increased, or diminished, or in any manner affected, the punishment for forging, altering, or counterfeiting which is not hereinbefore prescribed, by which false making, forging, altering, or counterfeiting, any person may be bound, affected or in any way injured in his person or property; or”
"3. [respecting forged currency and bills]
Id. at § 511, 3 N.Y. Laws 127-29 (1881).
“§ 514. A person who, being an officer, or in the employment of a corporation, association, partnership, or individual, falsifies, or unlawfully and corruptly alters, erases, obliterates, or destroys any account, book of accounts, record, or other writing, belonging to, or appertaining to the business of, the corporation, association, partnership, or individual, is guilty of forgery in the third degree.”
Id. at § 514, 3 N.Y. Laws 130 (1881).
There was a loophole where an intentional omission wouldn’t be considered forgery. An amendment to the penal code in 1892 tried to deal with this issue.
"§ 611. Misconduct of officers and employees of corporations. - A director, officer, agent or employee of any corporation or joint stock association who:
"1. Knowingly receives or possesses himself of any of its property otherwise than in payment for a just demand, and with intent to defraud, omits to make or to cause or direct to be made a full and true entry thereof in its books and accounts; or,
"2. Concurs in omitting to make any material entry thereof; or,
"3. Knowingly concurs in making or publishing any written report, exhibit or statement of its affairs or pecuniary condition, containing any material statement which is false; or,
"4. Having the custody or control of its books, willfully refuses or neglects to allow the same to be inspected and extracts to be taken therefrom by any person, entitled by law to inspect the same or to take extracts therefrom; or,
"5. If a notice of an application for an injunction affecting the property or business of such joint-stock association or corporation is served upon him, omits to disclose the fact of such service and the time and place of such application to the other directors, officers and managers thereof; or,
"6. Refuses or neglects to make any report or statement lawfully required by a public officer; is guilty of a misdemeanor.
An Act to amend the Penal Code, ch. 692, 1892 N.Y. Laws 1417, 1427-28 (1892).
And evidently that needed to be slightly modified in 1906.
"§ 611. Misconduct of officers and employees of corporations. - A director, officer, agent or employee of any corporation or joint stock association who:
"1. Knowingly receives or possesses himself of any of its property otherwise than in payment for a just demand, and with intent to defraud, omits to make or to cause or direct to be made a full and true entry thereof in its books and accounts; or,
"2. Makes or concurs in making any false entry, orCconcurs in omitting to make any material entrythereofin its books or accounts; or,
"3. Knowingly (1), concurs in making or publishing any written report, exhibit or statement of its affairs or pecuniary condition,containing any material statement which is false, or (2), omits or concurs in omitting any statement required by law to be contained therein; or,
"4. Having the custody or control of its books, willfully refuses or neglects to allow the same to be inspected and extracts to be taken therefrom by any person, entitled by law to inspect the same or to take extracts therefrom; or,
"5. If a notice of an application for an injunction affecting the property or business of such joint-stock association or corporation is served upon him, omits to disclose the fact of such service and the time and place of such application to the other directors, officers and managers thereof; or,
"6. Refuses or neglects to make any report or statement lawfully required by a public officer; is guilty of a misdemeanor.
An Act to amend the penal code in relation to the misconduct of officers and employees of corporations, ch. 286, 1906 N.Y. Laws 595 (1906).
In 1909 the penal code was reorganized with no substantial change to the provisions.
An Act providing for the punishment of crime, ch. 88 4 N.Y. Laws 2681 (1909).
In 1965 the penal code was again revised, this time with changes to the substance of the provisions. Forgery was separated from tampering and falsification of records. To your main question, this is when falsification of business records was made into its own statute, as distinguished from tampering with the public record. The previous provisions were repealed and the current statutes were created at §§ 175.00-175.15:
"§ 175.00 Falsifying business records; definitions of terms.
"The following definitions are applicable to sections 175.05 and 175.10:
"1. ‘Enterprise’ means any entity of one or more persons, corporate or otherwise, public or private, engaged in business, commercial, professional, industrial, eleemosynary, social, political or governmental activity.
"2. ‘Business record’ means any writing or article kept or maintained by an enterprise for the
purpose of evidencing or reflecting its condition or activity.
"§ 175.05 Falsifying business records in the second degree.
"A person is guilty of falsifying business records in the second degree when, with intent to defraud, he:
"1. Makes or causes a false entry in the business records of an enterprise; or
"2. Alters, erases, obliterates, deletes, removes or destroys a true entry in the business records of an enterprise; or
"3. Omits to make a true entry in the business records of an enterprise in violation of a duty to do so which he knows to be imposed upon him by law or by the nature of his position; or
"4. Prevents the making of a true entry or causes the omission thereof in the business records of an enterprise.
"Falsifying business records in the second degree is a class A misdemeanor.
"§ 175.10 Falsifying business records in the first degree.
"A person is guilty of falsifying business records in the first degree when he commits the crime of falsifying business records in the second degree, and when his intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.
"Falsifying business records in the first degree is a class E felony.
"§ 175.15 Falsifying business records; defense.
“In any prosecution for falsifying business records, it is an affirmative defense that the defendant was a clerk, bookkeeper or other employee who, without personal benefit, merely executed the orders of his employer or of a superior officer or employee generally authorized to direct his activities.”
An Act providing for the punishment of offenses, ch. 1030, art. 175, 2 N.Y. Laws 2343, 2417-20 (1965).
The only amendment since 1965 has been expanding the definition of business records so as to include electronic media.
~Max
Nice work Max, thanks. It explains why I got more hits at the NYT after 1965 (1970 actually), but it also covers the 1930 incident. Summarizing, it’s been part of New York State criminal law since at least 1881, but was separated into its own statute during a 1965 reorganization.
The 1881 law only applied to papers, “filed, registered or recorded in any public office within this state”. (Nope, see below) There appears to have been a substantive expansion covering private business records in 1965. I couldn’t find any discussion of that change of law over at the NYT: I suspect it wasn’t especially controversial.
A New York lawyer specializing in white collar crime promotes his services by explaining business record falsification here. A list of prosecutions under this statute over the past 20 years is provided by Just Security.
ETA: I should have clicked Max’s links earlier: From 514:
The falsification of private business records has been illegal in New York state since at least 1881.