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Embezzlement

Embezzlement is a form of theft and it is usually charged as theft. What makes embezzlement different from other types of theft or larceny is that it involves a betrayal of trust or duty. These thieves do not need to break into homes or threaten people at gunpoint or even pick a single pocket. Embezzlers use their relationships and positions of trust to commit their crimes.

According to the Association of Certified Fraud Examiners (ACFE), embezzlement costs companies and taxpayers millions of dollars. Most victims are actually for-profit companies, but individuals and smaller organizations can be targeted also. More than half of the victims never recover any of the money that was lost.

This article defines embezzlement and looks at what prosecutors need to prove to convict someone of this crime. It also provides examples of high-profile embezzlement crimes.

Definition of Embezzlement

A short definition of the white-collar crime of embezzlement is this:

Theft or misappropriation of assets (money or property) by a person in a position of trust or responsibility for those assets.

Every state has a slightly different definition. Consider Rhode Island's embezzlement (larceny) statute.

First, it defines the types of people who have a position of trust. This is not an exclusive list, but it provides guidance for interpreting what is meant by this phrase:

  • An official at a financial institution
  • An officer, agent, clerk, or servant to whom money or property is entrusted
  • A person acting as an executor, administrator, conservator, guardian, custodian, or trustee

It explains how that trust is bestowed:

  • By virtue of their employment
  • For a specific purpose
  • By assignment of the court or a legal will or another legal document
  • Because they are responsible for collecting or receiving money or property on behalf of someone else

Then it defines what could be taken:

  • Money
  • Personal property like a company laptop computer or fleet vehicle
  • Real property (like a building or tract of land)

And finally, how the money or property is taken:

  • Intentionally
  • By fraudulently converting it to one's own use, or selling it, or giving it away
  • By secreting it away (hiding it) permanently

The methods used to embezzle can be surprisingly creative. They can include payroll checks to fabricated employees and invoices to fake vendors.

Proving the Crime of Embezzlement in Court

The elements needed to prove the crime of embezzlement differ under various state laws. Generally, these four factors must be present:

  1. There must be a fiduciary relationship between the two parties. That is, there must be a reliance by one party on the other.
  2. The defendant must have acquired the property through that relationship, rather than in some other manner. For example, if an investment broker steals a client's bicycle, that's not embezzlement.
  3. The defendant's actions must have been intentional, and not the result of an error in accounting.
  4. The defendant must have taken ownership of the property (at least temporarily), transferred the property to someone else, or destroyed or hidden the property.

Embezzlement can also include the use of funds or property beyond the scope of authorized use. For example, a trust administrator might illegally "borrow" funds from the trust to pay a personal debt. Even if they later repay the trust in full, they could still be charged with embezzlement. Discarding or destroying property can also be charged as embezzlement, such as the case of the police officer who was convicted for embezzlement after ditching a lawfully confiscated bike.

Who Commits Embezzlement?

In 2020, the ACFE issued the Report to the Nations: 2020 Global Study on Occupational Fraud and Abuse. It examined more than 2,500 cases of fraud in the workplace to understand perpetrators and behavioral red flags. Here's what they found:

  • More than 70% of embezzlers are men.
  • More than half are between the ages of 31- to 45-years old.
  • Most have never previously been charged with a criminal offense.
  • They are more likely to be employed in operations, accounting, sales, or upper management.
  • The amount of money lost is related to the position the perpetrator holds in the company. The median loss caused by embezzling executives was $600,000. The median loss from criminal managers was $150,000, and the median loss from lower-level employees was only $60,000.

There are other common traits among white-collar embezzlers that reveal likely motives for the crime. The most notable red flag of embezzlement, according to ACFE, is that the perpetrators are living beyond their means (42%). Other warning signs include suffering from financial difficulties (26%) or going through a divorce or other family problems (over 10%).

 

Embezzlement As a Federal Crime

 

Embezzlement can also take place at all levels of government, from local school boards to massive government agencies. Several federal statutes prohibit embezzling public funds and misappropriating federal government property.

The rollout of COVID-19 relief funds in 2020 provided many opportunities for embezzlement. The first indictment for embezzling government COVID funds occurred in February 2021 against the owner of a home health services company. The Department of Justice accused the owner of charging the government more than $37,000 for providing COVID-related health services when the company did not even employ any healthcare providers. According to the grand jury indictment, she simply gave checks to family members for personal use.

Because they are federally regulated, banks and financial institutions fall under federal embezzlement laws. Under this authority, a former bank president, Thomas Hinkebein, who pled guilty to one count of embezzlement by a bank officer.

His case was investigated by the FDIC and the Federal Reserve. He admitted that over a two-year period he had embezzled property, including golf carts, owned by a local country club, which was an asset of the bank. He also sought bank reimbursement for personal expenses. He falsified reports of the expenses to hide the fact that they were personal, and not bank business expenses.

He was sentenced to 12 months in federal prison, a fine of $5,500, and restitution payments in the amount of $50,739.

Penalties for Embezzlement

Penalties can vary widely from state to state, and from case to case. Let's look again at the Rhode Island embezzlement statute. The penalties it lists for those convicted of embezzlement include:

  • Fines of not more than $50,000, or three times the value of the money or property that was embezzled, whichever is greater
  • Imprisonment of not more than 20 years
  • Or both

If the value of the property embezzled is less than $100, the fine shall be not more than $1,000, or imprisonment for not more than one year, or both.

Punishment frequently includes forfeiture of assets purchased with illegally obtained money, as well as payment of restitution to the victims.

 

Examples of Embezzlement

 

Delta Sigma Theta

In 2021, the former executive director of a prestigious Black sorority, Delta Sigma Theta, pled guilty to embezzlement. Jeanine Henderson Arnett, and her husband Diallo Arnett, used credit cards for personal purchases. They also committed wire fraud by wiring the charity's money directly into their bank account.

Over a two-year period, the couple misappropriated $228,000. They have been ordered to forfeit $228,000 and to pay another $228,000 in restitution. Jeanine Arnett was sentenced to sixteen months in prison, and her husband was sentenced to just over twelve months.

Girl Scouts

Certainly, there are the big splashy embezzlement cases, but there is no shortage of small-time players who get caught with their hands in the proverbial (or literal) cookie jar. The Girl Scouts regularly report cases of embezzlement of Girl Scout Cookie funds to local law enforcement. Not surprisingly, these prosecutions are aimed at greedy parents, who use the trust of their little Brownies to get their hands on some dough.

Lawyer Embezzles Funds From Trust

In Michigan, attorney Anthony Semaan pled guilty to embezzling funds from a deceased client's trust. He had drafted the trust for his client in 2011. When the client died, half of the funds were pledged to the Michigan Humane Society. Instead, he placed $262, 732 into his office escrow account and never told the Humane Society about the money they had been gifted.

In regard to the case, Michigan's Attorney General, Dana Nessel, said: "Older individuals who use professionals for estate planning should be able to rely on those professionals to follow the law and make sure the money is distributed in accordance with their wishes."

This case illustrates how a person in a position of trust can use that trust to purloin funds from those he is pledged to serve. With homeless pets as the real victims of this lawyer's dishonesty, his actions could be described not just as criminal, but inhumane.

Charged With Embezzlement? You Need a Strong Defense - Call an Attorney

If you have been accused of embezzlement, you could be facing serious penalties. You need a strong and trusted advocate by your side. Talk with an experienced local criminal defense lawyer.

You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help

Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

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