Embezzlement occurs when someone trusted steals money or assets. It can happen in business partner relationships, employer-employee relationships, or between clients and their financial advisors. In order to be charged with embezzlement, the embezzler must have been trusted to handle the asset or money because of their job position or the nature of the relationship. That trusted position is leveraged in order to commit embezzlement.
Here are some examples of embezzlement:
- Lawyers using the compensation they win for clients (outside of their fee) to pay for something
- Ponzi schemes
- Borrowing money from business accounts at work or another organization
- “Fudging” the books to hide any funds that have been stolen
- Credit card kiting schemes
- Selling property as an executor and lying about the sale price to pocket some of the proceeds
Common Types of Embezzlement
Embezzlement can take many forms, and it seems that it is constantly in the news. These are the three most common types of embezzlement:
- Forging checks – This type of embezzlement is where the employee writes a check from the company to themselves and then fudges the books to make it look legit. Often companies will have signature stamps to make the process of paying suppliers easier. This also makes embezzlement easier because you are effectively giving your employees blank checks that they can write any amounts and payees on. The best way to prevent this type of embezzlement is either to have a senior executive sign all checks or to divide the job up between two employees. One is responsible for reconciling all payments; one writes the checks.
- Cashing customer checks – This type of embezzlement is where the employee either cashes the customer checks and keeps some or all of the money or sets up an account to receive clients’ electronic payments. Again, one of the best ways to prevent this type of embezzlement is to separate reconciliation and payment processing between two employees. This creates a system of checks and balances to prevent embezzlement.
- Overcharging customers – This type of embezzlement is where an employee overcharges your customers for a product or service and pockets the difference. They then fudge the books to hide their wrongdoing. Customers will either be charged twice for the service or the amount charged is slightly higher than it should have been. To prevent this type of embezzlement, you should conduct regular random audits of customer transactions to ensure everything is legit. Look for errors and ask for explanations of errors. If you notice a pattern of similar errors made by one employee, you should investigate it.
The Legal Consequences of Embezzlement
The victim of embezzlement can press criminal charges and file a civil lawsuit in order to recover compensation. The civil lawsuit may require the defendant to pay a lump sum or garnish their wages in order to recover compensation. Your lawyer will be able to advise you on all available legal remedies in your state. In this article, we will concentrate on the criminal proceedings for embezzlement as civil lawsuits can vary significantly depending on the jurisdiction and the circumstances of the case.
Embezzlement is a wobbler, meaning it can be charged as either a misdemeanor or a felony, depending on the circumstances of the case. When deciding on the severity of the embezzlement charge, the court will consider the defendant’s criminal history, the facts of the case, the value of the embezzled property or money, or the type of property.
For example, in California, embezzlement will always be charged as a felony if the property stolen is a firearm, an automobile, or the value of the property is over $950.
If the property embezzled is less than $950 or the prosecutor used their discretion to reduce the charges to a misdemeanor, then it can be charged as a misdemeanor.
Felony Embezzlement
The penalty for felony embezzlement in California is up to 3 years in state prison and up to $10,000 in fines.
In California, embezzlement will always be charged as a felony if the property stolen is a firearm, an automobile, or the value of the property is over $950.
Misdemeanor Embezzlement
The penalty for misdemeanor embezzlement is up to a year in county jail and a fine of up to $1,000. If the prosecutor decides to, they can charge embezzlement as petty theft, and it will attract up to 6 months in county jail.
Legal Defenses to Embezzlement in California
Your criminal defense lawyer can help you pick the best legal defense to embezzlement charges based on the circumstances of your case. They can use the most appropriate legal defense to either reduce the charges or get them dismissed altogether.
Some common legal defenses to embezzlement charges are:
- The defendant did not act fraudulently
- The defendant believed in good faith that they had legal rights to the property they allegedly embezzled.
- The defendant was falsely accused of embezzlement
- The defendant did not intentionally take or deprive the victim of their property
Criminal Penalties of Embezzlement
The criminal penalties for embezzlement is detailed in the California Penal Code. The law allows for the court to practice discretion based on the facts of the case and the value and type of property that was embezzled. Embezzlement may be charged as either a felony or a misdemeanor. The value of the property will be calculated based on the current market value, not the value at the time of purchase. If there were multiple instances of embezzlement over a period of time and the total value of the property was over $950, then it will still be charged as a felony.