June 5, 2023
Embezzlement charges can occur in a variety of industries in scenarios. A common situation is that of an employee-employer relationship, such as where an executive misappropriates company funds for his or her own use, but even lower-level employees such as cashiers and customer service representatives can be charged with embezzlement. Additionally, embezzlement charges can happen in the public sectors, non-profit organizations and clubs, investment schemes, and even between family members and friends, as the key aspect of embezzlement is simply that one person misappropriates property entrusted to him by another.
California Embezzlement Violations and Penalties
California Penal Code §503 provides a simple and straightforward definition of embezzlement as follows: “Embezzlement is the fraudulent appropriation of property by a person to whom it has been entrusted.”
Embezzlement is a form of larceny, which is more comprehensively defined by California Penal Code §484, stating in part: “Every person who shall feloniously steal, take, carry, lead or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by a false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property…is guilty of theft.”
The California Criminal Jury Instructions relating to the state crime of embezzlement provide further detail on what a person under investigation and/or prosecution for embezzlement must defend against to avoid criminal penalties. To prove a defendant is guilty of embezzlement, state prosecutors must prove beyond a reasonable doubt each of the following elements:
- An owner [or the owner’s agent] entrusted (his/her) property to the defendant;
- The owner [or owner’s agent] did so because (he/she) trusted the defendant;
- The defendant fraudulently (converted/used) that property for (his/her) own benefit; AND
- When the defendant (converted/used) the property, (he/she) intended to deprive the owner of its use.
The jury instructions go on to explain that, “A person acts fraudulently when he or she takes undue advantage of another person or causes a loss to that person by breaching a duty, trust or confidence.”
The criminal penalties for felony embezzlement of property valued over $950 pursuant to California state law is up to three years in prison. Embezzlement of property valued at $950 or less can result in misdemeanor charges with the potential of up to six months in jail.
Federal Embezzlement Violations and Penalties
While most criminal charges related to embezzlement are typically pursued under state law, there are a number of federal laws relating to embezzlement as well. Federal laws related to embezzlement include the following:
- Embezzlement of public property, funds, or records: Pursuant to 18 US Code § 641, it is a crime to convert any federal property for your own use, or to receive property from another that belongs to the federal government. A person found to violate this section can face up to ten years in prison, unless the property is under $1000 in value, in which case the maximum sentence is one year in prison.
- Embezzlement of tools for counterfeiting purposes: Pursuant to 18 US Code § 642, a person who takes any tool used to print currency, bonds, stamps, or similar items can face up to ten years in prison.
- Embezzlement of public money: Pursuant to 18 US Code § 643, an officer, employee, or agent of the federal government who receives and retains public funds not intended for his or her personal use faces up to one year in prison. Similarly, pursuant to 18 US Code § 644, any banker that unlawfully receives public money also faces up to one year in prison.
- Improper use of public funds: Pursuant to 18 US Code § 653, a disbursing officer of the federal government who misuses public funds for his personal use faces up to one year in prison.
- Embezzlement by a bank officer or employee: Pursuant to 18 US Code § 642, an officer, director, agent, or employee of, or connected in any capacity with any Federal Reserve bank, member bank, depository institution holding company, a national bank, insured bank, branch or agency of a foreign bank, or organization operating under section 25 or section 25(a) [1] of the Federal Reserve Act, or a receiver of a national bank, insured bank, branch, agency, or organization or any agent or employee of the receiver, or a Federal Reserve Agent, or an agent or employee of a Federal Reserve Agent or of the Board of Governors of the Federal Reserve System who misuses public funds (including embezzlement) faces up to 30 years in prison.
Defenses to Embezzlement Charges
Embezzlement investigations and prosecutions are generally quite fact-specific, and the state or federal government charging body typically needs to show a specific level of intent in securing a conviction, e.g., that a defendant “knowingly” and/or “willfully” converted the property at issue to his or her own use in an improper manner without the consent or knowledge of the true owner of the property.
Thus, there may be any number of fact-specific defenses to an embezzlement charge. First, the charging body would have to prove that the property was indeed converted by the defendant. Beyond that, there may be significant questions of whether the property was taken for legitimate business purposes, or whether there was consent to take the property.
With embezzlement charges, there may be questions of whether the defendant indeed had the intent necessary to commit embezzlement, as opposed to, for example, mistakenly converting the property while believing it is legitimate to do so or simply holding the property temporarily without the intent to deprive the true owner of their ownership rights. The California jury instructions on embezzlement specifically indicate that a good faith belief that one is acting with authorization to use the property is a defense and that this may be the case even where the belief was “unreasonable” (although the jury instructions go on to state that a “completely unreasonable” belief may not, in fact, be a “good faith” belief).
Additionally, the applicable statute of limitations to an embezzlement charge may make prosecution of the embezzlement improper. There is a general 4-year statute of limitations for theft crimes, although it is important to note that there is no statute of limitations for prosecuting embezzlement of public funds in California.
As with any criminal offense, any evidence used in the prosecution of an embezzlement charge must have been lawfully obtained. Thus, a defendant should work with counsel to determine whether, for example, evidence may be excluded due to having been the product of an improper search and seizure or an improper police interrogation.
Conclusion
The time to seek experienced counsel from a skilled white-collar defense attorney is at the first signs of a potential government investigation, enforcement action, or prosecution. Often, the first steps in responding to a potential government proceeding are the most critical in setting the course for an ultimate outcome that defends one’s interests, reputation, and, in some cases, freedom. Contact our office to speak with an experienced white-collar defense attorney regarding your situation today.
