What Happens When Someone Steals Money from a Company?

When a person steals from a company, the person may be charged with theft, embezzlement, misappropriation, or breach of fiduciary duty. A criminal charge may be initiated against an employee or a civil lawsuit started by the business owner or partner.

What Happens When Someone Steals Money from a Company?

Henry and Charlotte have inherited a large corporation from their father that includes bookstores across the country and an e-commerce website. Now in their 30s, the brother and sister are partners in a company called Bookathon, and they work together in the main office in San Francisco, California.

Charlotte has always been an intelligent worker and supervisor, and as her role at the company increased, she took it in stride. However, her brother Henry struggles with his responsibilities and is often called a “wild card” due to his lavish spending and love of gambling. Henry’s behavior is unpredictable, but on the other hand, he is skilled at making deals and negotiating.

Charlotte receives a company financial report from accounting each Friday, and she noticed that many of the numbers are off this week. Bookathon’s online sales, for example, are still high, but the company’s profits do not reflect those sales. Also, the company’s debt has increased.

It does not take Charlotte long to track the new company debt to Henry’s business credit card. The following week, Charlotte also finds out that Henry has been gambling again, and she finds several large withdrawals he authorized from the company’s business account.

When Charlotte confronts her brother, he tells her that she is overreacting. Henry claims that the company’s accounts belong to him and that he is not stealing because their family owns Bookathon.

Over the next week weeks, however, Charlotte learns that Henry’s offenses go even further. He’s gambled away cash, run up vast sums on company credit cards, and even given gift certificates to all of his friends for free. Henry has brought in a lot of clients over the years with his intoxicating personality and negotiation skills. However, at the same time, Henry has been stealing money from the company.

Ultimately, Charlotte realizes that not only must she tell the rest of her family about Henry’s crimes, but she must also take action as the other business partner. However, what should Charlotte do? Should she remove Henry from the business, something he will not agree to? Should she press criminal charges? Or should Charlotte give her brother another chance and risk ruining the company to which her entire family has dedicated their lives?

What Should Business Partners Do When Stealing Occurs?

Individuals who steal money from their businesses take an enormous risk. They risk losing their jobs, facing fines, and spending time in jail. Their actions damage the business and hurt their relationships with fellow partners and coworkers, regardless of the outcome. When individuals steal, their fellow employees often do not know what to do first. Even the company partners are sometimes unsure of what actions they should take.

This article will answer the question: what happens when someone steals from a business? We will examine the consequences of two of the most common forms of stealing, embezzlement and fraud, and the penalties accompanying these offenses. This article will also go over precautions companies can take to prevent theft.

What is the Difference Between Embezzlement and Fraud?

Although it is easy to confuse embezzlement with fraud, business owners and entrepreneurs should be aware of the differences between these categories of company theft.

Embezzlement

When a trusted business member takes company assets without authorization, they embezzle from the company. Embezzlement often occurs when an individual has access to company accounts, so it is usually committed by:

Company partners
Individuals in offices of trust
Individuals who are responsible for the business’ assets
Trusted employees, managers, COOs, or CEOs

What is embezzlement?

Embezzlement is one of the most common types of business theft, but that does not make it any less serious of an offense. Embezzlement is synonymous with larceny and is a criminal offense that is punishable with fines or jail time, and embezzlement cases are often handled in court.

What is Fraud?

When a business partner takes money from a company but lies about what they are using it for, they commit fraud. For example, a business partner might say they need $500 for a company expense, such as a client lunch. However, if the partner spends this amount on themselves, this is fraud.

Sometimes, individuals take money from one business legally but then direct the money to another business venture. This scheme is also a form of fraud.

Proving fraud can be challenging because to illustrate to other partners or a court of law that fraud has occurred, the individual must show that:

The individual who committed fraud lied.
The other individual trusted in and relied on the lie.
The lie itself and the act of theft caused harm to the business, to the other individual, or to both entities.

If the partner suspected of fraud already had a reputation for being deceitful, that fact could hurt the case against them for fraud.

Similar to embezzlement, fraud is a criminal and civil offense, and those who commit fraud risk being incarcerated or having to pay damages.

For example, Gerry and Philip run a small investment firm in Malibu, California. Business is going well, and Philip trusts Gerry. However, Gerry is passionate about stocks, and he convinces Philip that he should invest a small number of their company’s profits in the market each month.

A year later, Philip asks Gerry for their investment records to see what profit the company has made. Gerry says he cannot find them, and the two partners begin arguing. A week later, Philip does some digging and finds out that Gerry has been taking 10% of the company’s monthly profits and using it as seed money for his new business, which he has hidden from Philip.

Gerry has committed fraud against the company and Philip, and it is now up to Philip to prove this crime has occurred.

Both fraud and embezzlement result in a range of penalties, depending on the nature and severity of the offense.

What Are the Penalties for Stealing from a Company?

Individuals who embezzle from their companies, or other businesses, must know they can be charged with theft by the court. However, individuals who decide to commit these offenses can also face additional fines and penalties, such as:

A misdemeanor
A felony

These specific charges depend on the amount stolen and other conditions. For example, if the individual steals $2000, they will probably be charged with a misdemeanor. However, if the person steals property or funds worth more than $2000, the court may decide to charge them with a felony. The penalties for these contrasting offenses are also much different:

A misdemeanor in the first degree costs up to five years in jail
A felony in the third degree costs up to seven years in jail

When a business partner or employee notices that stealing has occurred, there are specific actions they should take, including notifying others at the office and possibly telling the authorities. However, since accusing someone of stealing is a serious offense, one must be certain that theft has occurred.

One of the ways to prove that someone is stealing from the company is to obtain documented proof of their actions. At this point, we also recommend contacting an attorney to protect the company and yourself.

When Someone Steals from the Company, What Should Individuals Do First?

Bill and Joe run a small but popular sandwich shop in Huntington Beach, California, called Bread & Boards. Although the two partners grew up together and have always been close friends, they have grown apart as of late. Plus, the shop is suddenly losing money, and Bill isn’t sure why or how.

When Bill examines the shop’s security camera, he sees his friend and longtime business partner stealing from the register. Bill experiences different emotions. He is angry at Joe, but he is also sad about losing their friendship. Bill feels overwhelmed regarding what to do, but he also worries about Joe: why would he need to steal?

Bill struggles to figure out what to do and how to confront Joe about his actions, but he knows he must do something. Unfortunately, when a business partner or anyone steals from the company, it is difficult to know what to do first. So here are five actions to consider when individuals discover someone stealing from the company.

Contact an Experienced Lawyer

An experienced business lawyer will be able to help concerned individuals figure out what to do next when someone steals from the company. Skilled attorneys can help with various matters, from identifying the type of theft to deciding whether or not to press charges.

In addition, business attorneys can negotiate on the individual’s behalf, depending on their involvement, and devise a strategy for dealing with the person who is stealing.

While all cases of theft should be dealt with promptly, business partners must continue running the business, despite the psychological toll of the theft. When an attorney is present to help take charge of the situation, the partner does not risk neglecting the company’s interests. Together with their lawyer, the individual can devise a plan for dealing with the problem and moving forward.

Individuals must discuss their partner’s offenses with their attorneys and provide evidence and details. The more information lawyers have, the easier it is for them to recommend the next steps. There are many different strategies for individuals and companies to take, depending on the nature of the crime, including:

Negotiation
Arbitration
Mediation
Criminal prosecution
Litigation

Identify the Category of Theft

Dealing with company theft begins with figuring out the type of offense. Different offenses require different responses. For example, if a partner commits fraud, the other partner or partners must contact the authorities at some point because fraud is a criminal offense.

An attorney can help individuals decide if they should begin the court process and if they need to file criminal charges. Additionally, partners may be able to collect damages in multiple ways, including:

Recovery of stolen funds or goods
Civil damages

It is essential for the company to understand the nature of the person’s offenses, so they can figure out how to penalize the thief and whether or not to press charges. In addition, most business partners will want to know whether the person violated their fiduciary duty and how much money or property they stole from the company.

Gather Evidence

The proof is required to prove that a business partner is stealing. Without certified proof, the deceitful partner or their attorney can make excuses based on company mistakes or errors in accounting. However, even when individuals notice someone stealing from the company, they are unsure how to gather evidence.

One thing Individuals can do is place controls on their accounts. They can also be strict about using receipts for all spending. Individuals should keep track of all company spending, from ATM withdrawals to credit card use, and be vigilant. Installing a camera at the cash register is also an intelligent move.

A case will not hold up without evidence, and it is never too early to begin collecting and documenting evidence.

For example, Sara and Denise are business partners, and Denise has noticed Sara running up higher and higher bills on the company credit cards. For Sara, gathering evidence is as easy as printing up the credit card statement and making sure she can show which charges belong to Sara.

When trying to track down evidence, individuals should pay attention to the evidence that signals that assets have been stolen. These may include:

Receipts
Camera footage
Financial statements
Bills of sales

An experienced attorney can also help individuals gather relevant proof and advice on taking the next steps forward in the case. Excellent lawyers realize that people are busy, and even if they suspect stealing is occurring, they do not want to spend all their time attempting to track down proof to prove the case. Once you contact an attorney, they will help manage evidence and present a convincing argument that details the company theft.

Recover Losses

The process of recovering losses should begin immediately because these actions are extremely time sensitive. While individuals should employ an attorney to help with this process, individuals can also help by identifying their specific losses.

Company partners should also speak with fellow partners, managers, and employees to decide how the business can continue to move forward. If there are only two partners and one has committed an offense, then a skilled lawyer is an even more important key to making it through these difficult times.

The key to recovering losses is to have a coherent strategy to fall back on. Even if it is a fact that a partner is stealing, recovering losses accurately can be a challenge.

Dissolve the Partnership

Dissolving the company is not the right step for everyone. However, when individuals realize that someone is stealing from the company, they must consider that dissolution might be on the horizon. Company theft damages relationships, but it can also damage the company. Sometimes, after the acts are made public, or the person is prosecuted, the company may recover its losses yet still be unable to recover.

Sometimes, the partners cannot continue with the partnership after the offense is committed or do not want to. Sometimes it makes good financial sense to dissolve the partnership and move on with another venture, especially for smaller companies with fewer partners.

When partners seek legal representation for help with dissolving the partnership, they usually do so based on the following:

Breaches of contract
Breaches of fiduciary duty
Conflicts of interest

Why is Proof of Intent to Harm Important When Someone Steals from the Company?

The concept of proving “intent to harm” becomes important when individuals and their lawyers attempt to prosecute cases of company theft.

There are several important details that the prosecutor needs to be able to show in court. These include proving that:

The person who stole from the company intended to permanently deprive the client of something
The person who stole violated agreements made with the client
The person who stole used the property in a specific manner beneficial to them

When someone steals money from a company, they deprive the company of something. When someone sets out to deprive an entity or individual of something, they intend to harm them, and the attorney must prove this idea to the court.

In terms of acts and services that were “agreed upon,” the prosecutor needs to show that:

The guilty party did not deliver as promised
The guilty party kept the money after agreeing to use it for company purposes or accepted purposes

For example, Ted’s company authorizes him to use company funds to pay his employees. However, Ted uses these funds to go on vacation and does not pay his employees.

Ted is not only stealing, but he is also in violation of his fiduciary duty to the business. When individuals violate their fiduciary duty, they act on behalf of their self-interests instead of the company’s.

When accusing someone of theft, be prepared for them to defend themselves. Typically, individuals accused of theft claim as defense:

Unintentional conduct
Mistaken conduct

However, the individual’s defense strategy depends on the stolen property type and the case’s timeline.

Can Someone Who Steals from a Company Be Prosecuted?

The court can prosecute someone who steals from a business if relevant evidence exists. The person’s prosecution depends on the offense’s severity and nature.

When someone unrelated to the company steals money or property, the case is fairly cut and dry and is usually treated as a criminal offense, depending on the circumstances. However, the offense can become more complicated when someone steals from inside the company, such as a business partner. For example, if the individual takes the company’s assets and uses them for personal, unauthorized aims, this is a serious offense against the company and its other partners.

For example, Rick and Steve are equal owners of a surf shop in Laguna Beach, California. In addition, Rick and Steve signed a partnership agreement that certifies that they are equal partners and addresses fiduciary duty violations and other offenses.

When Steve finds out Rick is using the company credit accounts to fund his vacations, it does not take Steve long to figure out what to do. With the help of an attorney, Steve pinpoints exactly where Rick violates the company’s partnership agreement, and this proof helps him press charges against his former partner and collect the appropriate damages.

What Court Proceedings Occur After a Partner Steals?

After a theft occurs, the individual should report the act quickly, so it goes on the record. When a person makes a report, they should include the following:

-How they discovered that stealing had occurred

-All evidence they have that shows that theft has occurred

The next step is usually for law enforcement officials to investigate the issue and substantiate the claim. After that, the officials decide how to follow up and the next steps, and then they let the involved parties know what comes next.

Depending on the offense’s severity, the individual suspected of stealing may be taken into custody and taken to court. The next steps typically include the following:

The allegation of theft being read to the defendant
The defendant entering their plea
A date for the hearing is set
The defendant is allowed to go on bail, or they are detained. This decision depends on the nature of the accusation and the investigation’s progress

After these events, the case proceeds to trial. The accusing party and their attorney must provide certain evidence of wrongdoing at this point since all defendants are innocent until proven guilty. If the defendant is found guilty of stealing from the business, they will be sentenced in court.

What Precautions Should Business Owners Take to Prevent Theft?

Experienced entrepreneurs, attorneys, and the authorities agree: thieves usually act predictably. Individuals who commit fraud or embezzle funds usually act out similar routines.

Therefore, when individuals discover company theft, they usually do so by noticing a pattern. Based on this, when employees, managers, partners, and CEOs know their surroundings, they have a better chance of discovering that one partner is guilty of fraud, embezzlement, or worse.

It is easy for business owners, partners, and employees to let our daily business take over our lives. However, take a little time each day to check on different aspects of the business.

For example: does the company credit card reflect some new, questionable spending? Do sales and profits suddenly appear dramatically from normal? Is a certain employee acting peculiarly, spending more money, or not working as diligently as usual?

There are also specific things that individuals can do to make stealing more difficult, such as monitoring spending and placing controls on accounts. In addition, businesses should feel comfortable using cameras, and partners should track all transactions.

For example, Chip runs a bar named Brews & Wings in Solana Beach, California. Lately, Chip notices that on Sundays, profits go down, but sales of alcohol and food stay the same. Chip finds out who works on Sundays, and it is the same team Kristina, the bartender, and Autumn, the waitress.

Chip decides to install a camera at the cash register. A week later, the footage reveals some surprising information. First, Autumn and Kristina drink on the clock, which costs the business money and is illegal. Kristina gives all the regulars, and her friend’s free burgers and beers.

Chip’s simple act clued him in on his employees’ illicit behavior, and Chip has no tolerance for workers who spend the money he works so hard for. After all, Chip has two kids in college and one on the way. So he fired both Autumn and Kristina, hired two new employees, and held a company-wide meeting to discuss the importance of honesty and trust in the workplace. Also, Chip overhauled his new-hire training program to include scenarios of theft that all employees could learn from.

How Can Individuals Cope When Someone Steals from the Business?

Whether a stranger or a fellow employee, the news that someone is stealing from a company can be disturbing and create significant emotional reactions. When someone at the business is caught stealing, it also can create a high-stress level.

When partners create a business, they are full of hope for their new venture and respect each other. Often, the partnership agreements they sign reflect this goodwill. Accordingly, business partners place trust in one another to succeed.

However, greed and narcissism can easily ruin this positive sentiment. After stealing occurs, many entrepreneurs become angry, resentful, and jaded regarding future business partnerships.

It takes time to register and get over the shock of a fraudulent business partner, colleague, or employee’s actions, but it will happen. Individuals should allow themselves time to heal, and they might want to speak with a friend, family member, or therapist.

Individuals should also consider that early in the process may not be fully aware of much stealing. Perhaps the person took more than is suspected, or they did not act alone. While every partner hopes the situation will resolve quickly and easily, they should prepare for a legal battle.

Individuals should dedicate themselves to getting their money, property, or ideas back immediately; that is where an excellent attorney comes in. Whether the person’s goal is to litigate or negotiate, a trusted attorney is necessary when dealing with company theft. The key for individuals forced to deal with company theft is to protect themselves and keep the company on track.

Unfortunately, criminals exist within our society. Therefore, it is up to all of us to stay vigilant, gather evidence, and report our findings to the authorities.

Nakase Wade: Call Our Business Dispute Attorney When Someone Steals from Your Company

The attorneys at Nakase Wade in California have dealt with numerous cases involving business partners who commit fraud, embezzlement, and worse. We understand that when you discover that someone is taking money from your company, emotions run high, and even the most successful entrepreneurs are unsure what to do first.

The first step is to contact our office, and we will take it from there. Our experienced, licensed attorneys will get to work immediately. First, we will help you identify the specific type of theft that occurred. Then, we will collect evidence of the crime and pursue appropriate legal action against the business partner.

If your partner steals from the business, you may be entitled to collect civil and legal damages. Our talented lawyers will quickly build a strong case and work towards the outcome you desire so that you can return your focus to the company. Our goal is for our clients to be able to return to normal business, and normal life, as soon as possible.

At Nakase Wade, California, business lawyers and corporate attorneys understand how to prove that an individual is stealing. Our team will help with all aspects of the case, from strategy and decision-making. Having a skilled lawyer on one’s side prevents the situation from becoming overwhelming, especially in a high-pressure case.

If your business partner is stealing from the business, there is no time to waste: contact Nakase Wade today for a free consultation.

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