Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller

Exercise 12

In the language of the court
Manella, J. [Judge]
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Jerome Gilding owned Temple City Power Sports, a business located in San Gabriel [California] that sold and serviced motorcycles, motorized dirt bikes [all terrain vehicles (ATVs)], and jet skis.
Customers of the dealership negotiated purchases with salespersons. The dealership made sales to customers who entered into financing agreements or paid with credit cards. In such cases, after the salesperson reached an agreement with the customer regarding an item and the manner of payment, the transaction was referred to the sales manager for approval. If approved, the transaction was sent to the dealership finance department, which collected the information necessary to process the financing agreement or credit card sale. When the dealership sold an item to a customer who failed to make the loan payments or used a bad credit card, the dealership incurred a "charge back," that is, took responsibility for the loss on the transaction. * * * To prevent charge backs, the dealership's policy was to require customers to make purchases in person and to present two forms of identification.
Ordinarily, when credit card purchases were made, the card was swiped through a credit card machine, which instantaneously sent information regarding the purchase to the pertinent bank. An approval or denial was received from the bank within a few seconds. In contrast, if the machine was set for an "offline" * * * sale, the machine recorded the transaction but sent no information to the bank. As a result, no immediate credit approval or denial was generated; instead, information regarding the transaction was transmitted to the bank at the end of the business day. Gilding did not permit offline sales.
Associated with each vehicle sold by the dealership is a document known as the "manufacturer certificate of origin" (MSO). The vehicle's original MSO can be used to establish title to the vehicle in other states and countries. The dealership retained the original MSO after a sale unless the vehicle was sold to an out-of-state purchaser or transferred to another dealer. The dealership had contractual obligations to several manufacturers not to sell vehicles for exportation outside the United States. In 2009 [Jeffrey Whitmer] was the dealership's sales manager, and Alex Barrera was employed as a salesperson. Eric Van Hek worked in the financial department until August or September 2009, when he was replaced by Richard Carlos. In late August or early September 2009, Gilding told [Whitmer] not to deal with Mordichi Mor, who had engaged in a fraudulent transaction at the dealership in 2008. * * * * * * * In the fall of 2009, * * * after meeting with Mordichi [Whitmer] directed Carlos to process sales transactions involving customers Carlos had never met * * *. Whenever the transaction involved a credit card [Whitmer] told Carlos to process it as an offline sale. Carlos prepared the paperwork for each transaction and gave it to [Whitmer] who returned the documents to him with the customer's signature. [Whitmer] directed other employees to deliver the purchased vehicles to Mordichi's home. *
* * * [At Whitmer's request] Angela Wilcox, a dealership employee, * * * gave [Whitmer] original MSOs from the dealership's files related to deals [Whitmer] arranged with Mor.
* * * In mid-December 2009, a credit card company told [Gilding] that credit card usage had increased at the dealership, and that he should expect charge backs. He initiated an inquiry that uncovered 20 potentially fraudulent sales of motorcycles, motorized dirt bikes, ATVs, and recreational vehicles at the dealership from August 4 to December 8, 2009. Barrera was the salesperson in all the sales, each of which involved one of seven purported buyers. * * * The dealership incurred a charge back on each sale ranging from $9,100 to $21,479.80, resulting in losses exceeding $250,000. In addition, the original MSOs for the vehicles in the dealership's files had been replaced by copies, even though the transactions were not of the type that required the dealership to transfer the original MSO to the purchaser. Shortly after Gilding discovered the potential fraud, Barrera stopped appearing for work.
Later, [local] Police Department Detective Armando Valenzuela determined that the identification information provided for the buyers on the sales documents was false, and that the existence of the buyers could not be established. He also discovered that several of the vehicles had been shipped to Israel.
On February 16, 2010, Detective Valenzuela * * * arrested [Whitmer, who was charged with twenty counts of grand theft. A jury in a California state court convicted him on all counts. He appealed to a state intermediate appellate court, contending that he was unlawfully convicted.] * * * We will affirm the convictions if there is substantial evidence to support a finding that each act of grand theft qualified as an independent offense.
We conclude that the record discloses evidence sufficient to establish that appellant was properly convicted of 20 counts of grand theft. Each transaction involved a different vehicle. The 20 transactions occurred on 13 different dates. With the exception of two dates, whenever more than one transaction occurred on a single date, the transactions involved distinct fictitious buyers. On the two dates a fictitious buyer purportedly bought more than one vehicle, the transactions involved separate paperwork and documentation. This constituted substantial evidence that the 20 transactions constitute distinct offenses. * * * In sum, appellant was properly convicted under the 20 counts of grand theft.
* * * * * * * Appellant argues there was no direct evidence that he intentionally participated in the fraud activities related to the taking of each vehicle. Appellant's argument misapprehends our role in reviewing the record for substantial evidence. We do not engage in independent factfinding, but instead affirm the jury's determinations if they are supported by any logical inferences grounded in the evidence. [Emphasis added.] There was ample evidence that appellant directly perpetrated the thefts. * * * Appellant authorized the offline credit card sales and other violations of dealership policies, obtained the false signatures from the fictitious buyers on the sales documents, and arranged for the delivery of the vehicles. Furthermore, * * * appellant admitted that Mor had "gotten the ball rolling" on the thefts, that Van Hek had instructed appellant how to do offline transactions, and that appellant had participated for "personal gain." This evidence was sufficient to establish that appellant supervised and directed the thefts within the dealership.
* * * * * * The judgment is affirmed.
Legal Reasoning Questions
1. What is the definition of the crime of obtaining goods by false pretenses? Do the facts in this case satisfy that definition? Explain.
2. Besides the defendant, who may have committed a crime in this case?
3. How might the dealership have prevented the crimes in this case?
4. Why do some states combine larceny, embezzlement, and obtaining goods by false pretenses into a single crime called theft? Discuss.