What is Embezzlement?
Embezzlement is a type of financial fraud where someone who has been entrusted to manage or monitor someone else’s money or property steals all or part of that money or property for personal gain. It’s a breach of trust, where the embezzler takes advantage of their position to secretly take something that doesn’t belong to them.
How Does Embezzlement Happen?
Embezzlement usually takes place over an extended period of time. Unlike other thefts or frauds that occur all at once, embezzlers make unauthorized withdrawals or transfers in smaller amounts over weeks, months or years so it’s less obvious. For example, an accountant might slowly siphon off money by falsifying expense reports, or a cashier might pocket some of each day’s receipts.
Some common embezzlement schemes include:
- Padding expense reports with personal purchases
- Forging company checks or stealing blank checks
- Creating fake vendors and billing the company for non-existent services
- Diverting payments from customers to the embezzler’s personal account
- Falsifying time sheets for unworked hours
The key elements are that the embezzler has legitimate access to the funds or property and abuses their position of trust to take it secretly.
What Makes Something Embezzlement vs Theft?
Whether a crime is considered embezzlement vs regular theft or larceny depends on the relationship between the perpetrator and the victim. Embezzlement only applies when the person is entrusted with lawful access to the money or property and abuses that access.
For example, an employee who steals from the company register is committing theft. But an accountant who makes unauthorized withdrawals from the company account is embezzling because they were legally entrusted with that money. Both involve illegally taking something that doesn’t belong to you, but embezzlement specifically refers to an abuse of one’s position.
What Are the Penalties for Embezzlement?
Like most financial crimes, the penalties for embezzlement depend on the amount stolen and other factors determined by state laws. In general:
- Embezzlement of small amounts may be prosecuted as a misdemeanor with fines and up to 1 year in jail.
- Larger amounts over $500-1000 are likely to be charged as felonies, punishable by fines and over 1 year in prison.
- Amounts over $10,000, $50,000, or $100,000 may face additional charges and longer sentences depending on the state.
- Restitution is almost always required.
An experienced defense attorney can sometimes get charges reduced through plea bargaining, or get sentences lowered based on mitigating circumstances. But embezzlement is considered a breach of trust that usually results in conviction.
What are Some Famous Embezzlement Cases?
Some of the largest and most famous embezzlement cases include:
- Rita Crundwell – The comptroller of Dixon, Illinois embezzled over $50 million in city funds over 20 years to finance her quarter horse breeding operation. She was sentenced to 19 years in prison.
- Allen Stanford – The CEO of Stanford Financial Group stole $7 billion from investors in a Ponzi scheme. He was sentenced to 110 years in prison.
- John Rigas – The founder of Adelphia Communications took over $100 million to fund a lavish lifestyle. He received a 12-year prison sentence.
- Dennis Kozlowski – The CEO of Tyco International stole over $100 million from the company. He served over 6 years in prison.
- Brian and Sandy Hatfield – A married couple embezzled over $3.5 million from an Oregon timber company over 4 years. They both received over 3 year sentences.
Many smaller embezzlement cases occur at companies everyday but don’t make the news. The Association of Certified Fraud Examiners estimates that organizations lose 5% of their revenue to employee fraud each year. Proper oversight and financial controls are the best way for companies to prevent embezzlement.