What Is Embezzlement?
Embezzlement is a legal term for the crime committed when an individual fraudulently takes or misdirects money that belongs to another individual. It does not matter whether the offender actually keeps the money or property for themselves or transfers them to a third party. The act of stealing another person's funds is enough to be considered embezzlement on its own.
Embezzlement is considered to be a "white-collar crime," which is a type of fraud typically committed by business people and other professionals. Besides embezzlement, white collar crime can include any of the following:
- Corporate fraud
- Health care fraud
- Mortgage fraud
- Securities and commodities fraud
- Insurance fraud
- Mass-marketing fraud
- Asset forfeiture/money laundering
- Bankruptcy fraud
- Hedge fund fraud
There are several differences between charges related to the crime of embezzlement versus those of theft or larceny. One of the most distinct differences is that, with regard to embezzlement, the individual committing the act has been legally entrusted with the (eventually) misappropriated money or property in the first place.
For example, a financial advisor who alters his ledger to remove some of the funds from the client account he is responsible for would be guilty of embezzlement; a hacker who broke into the server holding the accounts and removed the funds within would a thief.
The most prominent example of embezzlement in modern American history is the Bernie Madoff scandal. Over a period spanning decades, Madoff — seemingly a powerful, well-heeled financial magnate — operated a complex Ponzi scheme in which he fabricated ledgers and falsified profits and earnings statements, yet paid out the smaller withdrawals requested by some creditors in order to maintain an image of propriety. The former NASDAQ chairman was found guilty of 11 federal crimes, mostly concerning investment and securities fraud, and sentenced to 150 years in prison.
The most common examples of the crime of embezzlement are white-collar crimes, conducted by professionals who are willing, and capable, of hiding their fraudulent activities via "cooked" books, false financial reports and other secretive methods.
The cash register, commonly found in retail locations throughout the world, was invented by Ohioan James Ritty in 1879 to prevent embezzlement, ensuring that the sales made throughout the day were logged, recorded and matched the amount in the till — minus float — at the close. However, there are other ways a business owner can try to prevent embezzlement.
Regular audits by third-party professionals, stringent hiring practices including full background checks and day-to-day personal engagement with the business by owners and managers can all help to reduce the risk of embezzlement.
Separation of duties is also a very common preventative against embezzlement, as the scope of responsibilities (and therefore, access) to each aspect of a business is strictly limited. This type of strict delineation of job descriptions also means that more than one (and sometimes several) employees would have to act in collusion to enact a more serious plan of embezzlement, reducing the risk of an occurrence.
Penalties for embezzlement vary depending on the crime and the state you live in, but most of the time a conviction will lead to fines or imprisonment. Whether aggravating factors are involved is also considered in embezzlement penalties. For example, stealing from an elderly or disabled person or if the defendant is someone who is a public servant who works for a bank or insurance company are considered aggravating factors.
The penalty for embezzlement might also be based on the type of property and its value.
Given that embezzlement is often a complex crime, if you're facing financial fraud charges of this nature you should consult an experienced criminal defense attorney.
Disclosure of the details of your crime may be protected under lawyer-client privilege, so be sure to ask your legal counsel whether this is the case before proceeding.