Embezzlement is a form of larceny that involves the taking of the property of another by someone who was entrusted with care of the property. Embezzlement can occur in a variety of circumstances but is most commonly committed by financial advisers or other individuals placed in charge of the money of another. According to the 2012 Marquet Report on Embezzlement, the crime of embezzlement is on the rise in the United States and increased more than 11 percent between 2011 and 2012, with an average loss of $1.4 million for major embezzlement schemes.
For an embezzlement to occur, four factors must be present. First, there must be a financial relationship between the victim and the perpetrator, often known as a fiduciary relationship. This means that one party relied on the other and trusted him or her to handle money, property, or something else of financial value. Common fiduciary relationships that lead to embezzlement include bankers and clients, financial advisers or stock brokers and clients, and employees providing financial services to companies. The mere handling of money is usually not enough to give rise to a fiduciary relationship. Thus, for instance, a cashier at a store does not have a fiduciary relationship with the customers whose money he or she collects. However, a retirement advisor who is charged with managing the retirement funds for an elderly couple likely does have a fiduciary relationship with his or her clients.
Second, the perpetrator must actually have acquired the property of another through this financial relationship and then transferred possession to the self or a third party. This is an inherent aspect of embezzlement or larceny in general. It is not enough that the perpetrator has access to the property, although often that may be an element of the perpetrator’s job. Instead, the perpetrator must have used that access to convert the property for his or her own personal benefit or the benefit of another. One simple example is where a stock broker transfers a client’s stock to himself, or sells it and keeps the profits. Or embezzlement may occur when an employee is charged with paying the company bills but instead uses the money for his own personal expenses.
Finally, the perpetrator’s actions must have been intentional. This is the requirement of fraudulent intent. Thus, if a financial adviser mistakenly transfers the property of a client, or believes that the client has given him authorization to undertake an action that has not actually been authorized, this usually will not constitute embezzlement. Likewise, if a person entrusted with property reasonably believes that the property has been given to him, this is often a defense to embezzlement.
Punishment for Embezzlement
Although the punishment for embezzlement varies by state, most states adjust the severity of the punishment according to the value and type of the property stolen. Thus, if millions of dollars are taken, a defendant is likely to face more significant punishment than if several hundred dollars are stolen. Likewise, some states heighten the punishment for embezzlement when the property is of particular value to the owner or when the money embezzled is public funds.
Since trust is a crucial aspect of any fiduciary relationship, many states have also determined that certain aggravating factors may apply to an embezzlement charge when the perpetrator occupied a position of public trust, such as a public servant or an employee at a local bank, or when the perpetrator targeted particularly vulnerable populations like the elderly.
Defendants convicted of embezzlement will likely face jail time and fines, and they are usually required to pay restitution as well. Restitution is a payment made to the victim to compensate him or her for the loss that he or she experienced. It may be the value of the money or property stolen, or, when the property is not subject to ready valuation, an amount determined by the court.