There are many different forms of theft, and they don’t always involve slipping a note to a teller while wearing a mask or picking up someone’s wallet when they are distracted. Embezzlement is a specific type of white-collar crime, that can be more painful to its victims than a hold-up.
What is Embezzlement?
Embezzlement is defined as the theft of funds by an “insider,” often an employee with direct access to a business’s bank accounts or payroll. It is usually a white-collar crime committed over a long period of time by diverting money or creating fake payment accounts. Embezzlement can be a form of fraud if a person promises to take care of a sum for a business or another individual but instead misuses the money.
A person who embezzles is often a financial officer of an organization or business. This white-collar crime can be committed in many ways, illustrating the different meanings of embezzlement in practice:
- Embezzlement Meaning: Misappropriation through hidden accounts
Creating a secret new deposit account for certain checks and diverting money to this account for personal use.
- Embezzlement Meaning: Fraudulent manipulation of accounts
Creating fake customer accounts and issuing refunds to them, which are then accessed by the employee.
- Embezzlement Meaning: Concealing theft through deceptive accounting
Making incomplete or split deposits so that their supervisor sees funds going into the right accounts, but the embezzler has access to a second account in which the skimmed funds are deposited.
- Embezzlement Meaning: Misuse of entrusted resources
Purchasing items for themselves or family members using company credit cards or accounts and faking or hiding the charges.
- Embezzlement Meaning: Fraudulent invoices and payments
Paying fake suppliers for nonexistent products and keeping the money.
- Embezzlement Meaning: Direct theft of entrusted funds
In an organization that deals in cash or many checks for small amounts, an embezzler may simply apply those funds directly to their own account.
- Embezzlement Meaning: Exploitation of a trusted position
Professionals, including attorneys, who are named as guardians for elderly or incompetent individuals, may embezzle from the individual by writing checks to themselves for fake expenses or cash in stocks and bonds for their own purposes, hoping nobody notices.
Embezzlement Definition in Law
The meaning of embezzlement in law is the misappropriation of funds or property entrusted to someone's care. Embezzlement may be a felony or misdemeanor, depending upon the amount of money stolen. It may also be prosecuted in criminal or civil court but is most often a criminal offense.
To establish embezzlement charges, there needs to be evidence that the person intentionally redirected these funds without permission for personal gain. In such a case, the prosecutor seeks to prove intent, which indicates a willful pattern of behavior that resulted in loss of income or assets, the standard for criminal prosecution of embezzlement. So what is embezzlement in legal terms? In simpler terms, embezzlement is the theft of entrusted funds through a willful act.
Embezzlement Definition in Accounting
Accountants, guardians, and officers have a fiduciary duty to legally manage the funds of another person or a business entity. Embezzlement is a breach of trust by theft, often resulting in embezzlement charges. This is frequently often accomplished by creating fake invoices and paying them into their own account, inflating business costs and pocketing the difference, or selling assets for personal gain.
So what is embezzlement in accounting? In short, it is a betrayal of trust by an accountant who steals or misuses the funds entrusted to them for personal benefit, often through fraudulent means.
Embezzlement Examples
- Embezzlement Example of a Ponzi scheme
A Florida man representing himself as an investment advisor defrauded 10,000 people out of a total of $55 million. This case is considered embezzlement because the people believed the man’s claims that he would invest their money in a “coin” fund and guaranteed high returns. Instead the investment scheme, combined with other fraudulent claims about the man’s business connections, was shut down by federal officials. The man faces a possible 20 year prison sentence.
- Embezzlement Example of manipulating company accounts and records
A Massachusetts woman was sentenced to 70 months in prison on felony embezzlement and fraud charges for a long-term scheme that involved stealing over $1 million from her employer. She also collected unemployment benefits when she was working full time, using two different social security numbers. The federal charges were enhanced when she did not report the stolen income on her tax return.
- Embezzlement Example of misusing company credit cards
A Georgia office manager was charged with embezzling over $3.5 million from their employer in a five-year scheme to fund a lavish lifestyle. The scheme involved using company credit cards for personal items and then changing the records to make the charges appear to be legitimate business expenses.
- Embezzlement Example involving elder abuse
A Michigan woman was charged with a misdemeanor for embezzling less than $20,000 from her elderly father’s social security benefits while acting as his guardian. By setting up a joint bank account to receive the federal benefits and then using the money for her own expenses, the woman was found guilty of embezzling. Charges were made more serious because the victim was an elderly person, which enhances the crime in most states.
Embezzlement Charges
Low-level embezzlement can be treated as a misdemeanor and punishment may be repayment of the funds stolen. In more serious cases in which prosecutors establish clear intent to defraud and misappropriate funds, charges are often felony-level and compounded by related activities, including not reporting the ill-gotten gains on one’s tax returns.
Conclusion
When a person abuses the trust of others to commit fraud and conceal the ongoing theft of funds, it is a white-collar crime called embezzlement. These crimes often involve fake bank accounts and wire transfers, which are federal offenses. The legal standard for embezzlement involves the clear intent to steal and use the money for personal expenses. More elaborately, long-term schemes are charged as felony crimes, but smaller cases that can be repaid in full may be misdemeanors.
FAQs
How to Get Out of Embezzlement Charges?
The best way to get out of embezzlement charges is to make an agreement that the charges will be dropped if the full amount is refunded. There are always opportunities to negotiate with prosecutors, who seek to avoid lengthy court cases when possible. Another way to avoid the worst of embezzlement charges is to strike a deal that will reduce charges to a misdemeanor rather than a felony charge, perhaps for one’s first offense.
What is The Punishment for Embezzlement?
Courts take fiduciary duties very seriously, so a breach by a professional accountant, an attorney, or a person preying on an elderly victim can result in significant jail time. Most states set the benchmark for felony charges at $250 or above, so it doesn’t take much to get into serious trouble. Those with felony convictions on their records suffer additional penalties that last many years, including losing the ability to vote, having trouble qualifying for a mortgage, and being overlooked for future jobs that require financial responsibility. Felonies are crimes that carry a punishment of one or more years in prison.
How Does Embezzlement Differ From Other Forms of Theft?
Theft is usually a crime of opportunity, one that involves impulse and may be driven by need. Embezzlement is at a different level because it involves a trusted associate who understands fiduciary duty.
