When an employee steals or misappropriates money, or when an employee steals property from their employer, both acts are referred to as embezzlement. According to the Federal Bureau of Investigation, embezzlement is considered a white-collar crime.
When an employee is entrusted with property or budget, but they use the property or funds in an unauthorized or intended manner, the act is referred to as employer embezzlement. When an employer commits employer embezzlement, the embezzler benefits.
Examples Of Employer Embezzlement
There are many ways an employee can embezzle their employer’s money. Some common methods include:
- Padding expense accounts
- Elevating the charge for a product and keeping the difference for themselves
- Lifting office supplies or inventory
- Accepting kickbacks or bribes
- Transferring funds into their personal accounts from a customer’s account
- Taking checks from vendors and depositing them into their own accounts
- Falsifying time records
- Taking cash from the cash register
- “Cooking the books” to cloak stolen money or losses
- Tampering with payroll by adding a non-existent employee
Employer Embezzlement by Mishandling Entrusted Property
Another way a person can embezzle funds is by mishandling property that was entrusted to them. For example, the embezzler can:
- Alter account books to conceal funds misappropriation
- Spend someone’s Social Security check
- Borrow money from a civic organization’s bank account
- Implement a Ponzi scheme
- Pay operating expenses out of a client’s lawsuit
- Establish a kiting scheme
To establish that embezzlement has occurred, the prosecutor needs to prove that the suspected embezzler either:
- Managed the property or money as a function of their employment; or
- Was in a position of authority to substantially control the property or money
In the latter case, an employer reviews the suspected embezzler’s job description and title. The courts will also review how the employer conducted certain aspects of their business to account for ways in which the embezzlement might have transpired.
A person who attempts embezzlement may also face criminal charges, regardless if they succeeded in their attempt.
Potential For Tax Evasion Charges
When an individual embezzles employer property or funds, they must report the amount they embezzled to the Internal Revenue Service (IRS) via their annual income taxes. The employee can choose to pay restitution or return the embezzled amounts, and, in so doing, receive a tax deduction.
If the employer catches the embezzlement and the IRS discovers they did not pay taxes on the embezzled funds as gross income, the employee may face tax evasion charges.
To prove tax evasion, the prosecutor will need to show each of the following beyond a reasonable doubt:
- The individual did not pay a specific tax liability.
- The defendant tried to evade a tax.
- The defendant knew they owed a tax and specifically tried to evade it (intent).
Tax evasion charges can lead to monetary penalties, as well as imprisonment.
Embezzlement in Pennsylvania Law
The state of Pennsylvania does not specifically address embezzlement. The state’s basic theft statutes cover embezzlement as a criminal act under various aspects. The state’s laws address theft via deception and extortion.
Theft by Deception
- Creating or reinforcing a false impression (including misleading value, law, or intention)
- Blocking another party from obtaining information that would influence their decisions or judgment about a transaction
- A false impression that the defendant created that is affecting a person connected to a fiduciary or confidential relationship
A person cannot be deceptive if:
- Their falsification of information does not lead to “pecuniary significance.”
- Their attempts to mislead are not likely to trick “ordinary persons.”
Penalties For Theft by Deception
The value of the embezzled property determines the seriousness of the crime, as well as the penalty.
Failure to Make Required Disposition
Employer embezzlement falls under “failure to make required disposition” (PA Title 18, §3927) of funds or property statute. This statute covers a wide area of embezzlement offenses. This statute focuses on embezzlement that occurs when a person has access to a property via an agreement or fiduciary responsibility to the owner, but intentionally handles the property as if it belongs to them.
After receiving said property, the individual fails to manage it per the guidelines of their agreement with the owner or their fiduciary role. When an employee uses funds to the point where the owner’s property is indistinguishable from the employee’s property, this is also a crime. Pennsylvania’s embezzlement statute addresses this offense.
Employee Embezzlement Within the Federal Government
Although embezzlement typically falls under the realm of state law, an employee who takes money from the federal government will receive prosecution by the federal government. A conviction could serve up such penalties and punishments as fines, victim restitution, and time behind bars.
Defenses To A Charge Of Embezzlement
Embezzlement has one basic defense: The embezzlement was a mistake, or it took place due to the result of some unintentional behavior. If you receive an embezzlement charge, a criminal defense lawyer can try to construct this defense for your case.
Call McKenzie Law Firm, P.C. to schedule a legal consultation at (610) 680-7842.