Embezzlement — What Employees and Fiduciaries Need to Know

Have you been accused of embezzlement? Embezzlement can take many forms, some of which are harder to prove than others. If you find yourself dealing with allegations of embezzlement, it's important to understand what it involves in legal terms and how you can successfully defend yourself against the charge. To help you do this, here are a few of the most important things to know.

What Is Embezzlement?

Embezzlement is a type of theft. It's generally the theft of something of value from an employer, but it may extend to others who have been put in a position with a fiduciary duty (such as board members or volunteers). A fiduciary duty is a position of trust where a person holds or manages the assets of another person or organization. They have a duty to act in the asset owner's best interests, not their own.

Although it's a form of theft, embezzlement is differentiated in one key way. Theft generally happens when a person takes something to which they have no right. However, embezzling involves assets that the person has a right to be in control of during their job. If an employee steals cash from the tip jar, it's theft. If they're assigned to take the tip jar to the bank, they embezzle if they deposit it into their own account.

How Does Embezzlement Occur?

The most common form of embezzlement is the skimming of small amounts of cash or small goods during the course of a person's job. Small losses are easier to hide, and companies need a longer period to determine the existence and causes of these. However, losses of cash or inventory can also disappear for many unrelated reasons, including bad inventory controls, disorganization, and damage.

With the advent of more and more computerized financial transactions, embezzlement through paperwork has become more common. A bookkeeper, for instance, might change their own salary before payroll, issue company checks to a personal business, or create falsified invoices. Managers might manipulate account balances and financial statements. And owners might even hide money between subsidiaries.

Although most embezzlement involves cash, credit cards, and checks, it can include taking any number of other assets. This could range from taking company-owned mobile devices to just not charging yourself and your family for services you provide as an employee. The commonality is that embezzlement is nonviolent and enriches the embezzler in some way.

What Makes Up an Embezzlement Case?

In general, to prove embezzlement, a prosecutor must demonstrate four key elements.

The first is that a fiduciary relationship exists. As mentioned above, if the employee has no fiduciary duty to their employer, taking an asset is unlikely to be embezzlement and would need to be pursued as theft, larceny, or another charge. In addition, if the person had no access to the assets as a fiduciary, it's unlikely they could have taken them.

The second requirement is to show that the person obtained the stolen items in the course of their fiduciary duty. Although it may sound like a small detail, how a person acquired an item is important in determining if they're guilty of this particular crime. An office employee who takes a piece of inventory may have committed theft, but they may not have committed embezzlement since inventory wasn't their job.

Third, the act must have been intentional. Unintentional actions might include an employee who genuinely believed that the asset or money was theirs to take. It might involve accounting or inventory control errors that appear like embezzlement. Or a person may have accidentally taken something that wasn't theirs.

Finally, the embezzlement must be proven to have occurred. How difficult this is may vary. If physical assets or cash is taken, cameras or witnesses may provide verification. And some transactions can be easily linked to a particular employee. But if the paper trail is complicated or many people have the same access, proving this element may be challenging.

What Should You Do If You're Accused?

If you're accused of embezzling in any way, the first step should be to work with an experienced attorney. In Wisconsin, as in many states, embezzlement of large assets can be a felony offense that results in fines and jail sentences. And because it involves matters of trust, it can also damage your ability to get future jobs in your field, even if considered a lesser offense.

Embezzlement is also often a complicated case to navigate. You may need to defend yourself against complex transaction histories and accounting research by financial professionals. Most employees are not expert forensic accountants, so they need outside assistance.

Where Can You Start?

Wisconsin residents who may be accused of embezzling can call on the team at Cohen Law Offices. For more than three decades, we've helped defend clients against a variety of white-collar crimes, including both misdemeanor and felony embezzlement. Call today to learn more or to make an appointment.