What Is Embezzlement?

What Must Be Shown to Prove Embezzlement? How Is It Different from Other Theft Crimes?

We’ve all heard the term “Ponzi scheme,” and most of us have read or heard about the billions of dollars that former stockbroker Bernie Madoff bilked from investors. Those are common examples of what is legally known as “embezzlement.” What qualifies as embezzlement? How does it differ from other types of theft crimes? Where is the crime prosecuted? What are the potential penalties?

What Is Embezzlement?

Embezzlement is a type of white-collar crime that typically takes the form of misappropriation of money or property entrusted to the offender. In most instances, the property taken is in the form of money or legal tender. The embezzled money can be stolen cash, or it may involve fraudulently transferring funds into a bank account or other financial account that benefits the perpetrator. Embezzlement can also involve the theft of tangible property, such as electronics, merchandise, or even office supplies.

The common characteristics of embezzlement that distinguish it from other forms of theft are:

• The absence of force, violence, or any similar act to effect the theft, and
• A perpetrator who is in a position of trust or who has a fiduciary relationship with the owner of the embezzled property.

Some of the most common forms of embezzlement include:

• Taking money from a till—This also includes pocketing money that should have gone into a till, particularly in a primarily or exclusively cash-based business.
• The fraudulent use of company checks, credit cards, or financial systems to redirect funds—In many instances, this is accomplished by a person entrusted to create, monitor, or maintain the company’s finances without any system of checks and balances. In its most complex forms, it can involve the creation of fake vendors or invoices and fabricated expenses.
• Misuse of company reimbursements—A person may falsify or pad expenditures, often providing bogus documentation to support the business expense.
• Misappropriation of funds by the executor of an estate, a guardian or conservator, or a trustee
• Electronic redirection of funds

Is Embezzlement a State or Federal Crime?

While embezzlement may be charged as a state or a federal offense, prosecution in the federal court occurs only in limited circumstances, such as:

• Where the property unlawfully taken was public money or property
• Where the embezzler was a federal employee at the time of the theft
• Where the money embezzled was taken from a bank or other financial institution

Is Embezzlement a Misdemeanor or a Felony?

Though embezzlement may be charged as a misdemeanor, it’s almost always prosecuted as a felony because of the dollar amounts involved. Most states differentiate between petty theft and grand theft crimes based on the amount in question (the amount varies from state to state). Furthermore, many embezzlement schemes are only discovered after a significant period of time has passed, during which the perpetrator has been able to embezzle a relatively large amount. Accordingly, the amount taken almost always renders the crime a felony.

What Must a Prosecutor Show to Prove a Charge of Embezzlement?

The following elements must be proven in order to obtain a conviction on a charge of embezzlement:

• An intentional act—A person cannot negligently or carelessly commit embezzlement, and it cannot be the result of an accounting or other financial mistake.
• The defendant must have had a fiduciary relationship with the person or institution from whom the property was wrongfully taken—The victim must have relied on the perpetrator to take care of the money.
• The embezzled property must have been obtained because of the relationship between the parties—It’s not enough that the parties knew each other. The defendant must have had access to the property because of their relationship with the victim.
• The embezzler must have exhibited ownership of the property, concealed it from the true owner, or transferred it to a third party.

What Are the Potential Penalties for Embezzlement?

Penalties differ from state to state and also depending on whether the crime is charged as a misdemeanor or a felony. However, incarceration is a fairly common sanction and courts often order restitution, i.e., that the stolen money be returned.