Last modified: Thursday, May 31, 2007 1:03 AM EDT City Councilor James Hanley appeared in Attleboro District Court Wednesday for arraignment on larceny charges. (Staff photo by MIKE GEORGE) Hanley denies guilt BY DAVID LINTON SUN CHRONICLE STAFF ATTLEBORO - City Councilor James Hanley said he was "absolutely not guilty" after he was arraigned Wednesday on a larceny charge related to a dispute over the payment of medical expenses for a former business partner. Hanley, 64, a Ward 1 city councilor, is accused of larceny of more than $250 for allegedly failing to pay $13,500 in medical expenses incurred by Michael Poulin and his wife, Clara. Poulin, 45, of Pawtucket, is a former business partner in Hanley's weekly newspaper, My Backyard. Hanley's lawyer, Roger Ferris of Attleboro, said the case against his client is the result of a business dispute which belongs in a civil court rather than before a criminal proceeding. Hanley, of 34 Rosewood Ave. in South Attleboro, and the Poulins tried to resolve the dispute out-of-court, but the Poulins made a complaint to police when Hanley did not pay the money he owed by the date they had agreed upon, according to court records. The couple had medical procedures in 2005 and later found that they were not covered by medical insurance because Hanley allegedly neglected to pay the company's health insurance bills and the company canceled the company's policy, according to court records. Hanley did pay some of the prescription bills the couple incurred and was later unsuccessful in trying to resolve a disagreement about the policy with his company's health insurance company, according to court records. "The failure of Mr. Poulin to resolve this business dispute has resulted in him seeking criminal sanctions. This is a civil matter, not a criminal matter and should be resolved in the appropriate forum," Ferris said. In a criminal trial, Ferris said, the prosecution must prove beyond a reasonable doubt that Hanley intended to deprive the Poulins of their money, which he said was never the case. The complaint filed by Detective Russell Castro, who investigated the case with Detective Timothy Cook Sr., alleges Hanley used funds collected for the Poulins' health coverage to pay other business debts from October 2004 to July 2005. Hanley and Poulin started My Backyard Publishing in March 2000. But the partnership dissolved after the men had a falling out in 2004, according to the police complaint filed in court. As part of the agreement to dissolve the partnership, court records say, Poulin was supposed to retain health insurance coverage for 18 months through My Backyard's group health insurance policy and pay monthly insurance premiums. But Hanley never paid the money to the insurer, United HealthCare Insurance, and used the money instead to pay other bills, according to the complaint. Hanley is due back in court for a pretrial conference Aug. 6.