Persons Liable for Embezzlement
Statutes often specify the persons who are capable of committing the offense of embezzlement. However, even if a statute does not expressly mention a type of fiduciary, that does not necessarily prevent the statute’s application to a person acting in that capacity. Thus, embezzlement statutes have been applied to various categories of persons including executors, administrators, guardians, trustees, retailers and brokers.
A person may be held guilty of aiding and abetting embezzlement by instructing someone to steal money from the bank in his/her official capacity. A person who engages is a conspiracy to embezzle is equally liable. Employees and subordinates who act with public officers to embezzle public funds may be prosecuted as principals, even if the embezzlement statute explicitly refers to only the official custodians of the funds.
Embezzlement statutes commonly apply to conversions or misappropriations by agents. The agency relationship, rather than the extent of the authority conferred, is the essential element of the crime of embezzlement and an uncompensated agency relationship based on only trust and confidence also falls under the prohibited class.
The term “agent” includes persons who act as directors, managers, or representatives of covered organizations, even if those persons are not actually employed by the organizations from which they embezzle. An attorney may be guilty if such attorney converts the money of a client put into escrow[i].
An independent contractor will generally not be presumed to be an agent under this analysis. However, some state statutes make building contractors criminally responsible for failing to pay labourers and suppliers or for knowingly failing to distribute funds held by them in trust for the payment of lien claimants[ii]. Apart from intent and knowledge, the contractor should have a legal obligation to pay out of the proceeds received from the owner. However, no criminal liability can be imposed under such statutes for a contractor’s failure to pay an amount that the contractor disputes in good faith.
An officer of a corporation may be held criminally responsible for the embezzlement if the act is done by the individual officer, at the officer’s direction, or with the officer’s permission. If the consent of the officers and stockholders was obtained by fraud, such officer cannot escape liability.
It has been held that a stockholder can commit embezzlement with respect to corporate property, even if the stockholder owns the entire beneficial interest in the corporation, and even if the embezzlement does not injure corporate creditors or cause the corporation’s insolvency[iii]. Generally, a debtor’s failure to pay creditors will not constitute embezzlement.
An employee of a corporation may be held criminally responsible for the embezzlement or larceny of the property of a third person through a corporate act if the act is done by the individual employee, at the employee’s direction, or with the employee’s permission. Such an employee cannot escape liability for embezzlement by asserting that the employer did not have legal title to the property.
The Uniform Partnership Act § 21 makes a partner accountable to the partnership as a fiduciary and a partner can be convicted of embezzlement from a partnership. Embezzlement by a public officer usually requires that the alleged appropriation was for the officer’s personal use and the money came to his/her possession by virtue of the office or employment. However, this does not mean that the funds rightfully came in the course of the person’s official duties[iv]. In addition, it must be proven that the officer embezzled or fraudulently converted the property to his/ her own use. However, mere neglect to turn over funds will not constitute embezzlement unless it has been either in contemplation of, or a consequence of, a misappropriation[v].
Federal law prohibits embezzlement by an officer, employee, or agent of the United States, a federal court officer, a person charged with the safekeeping of federal public moneys, a federal disbursing officer, a public bank examiner or assistant examiner, of money or property of value in the possession on an bank or banking institution that is a member of the Federal Reserve System and an officer, agent, or employee of a federal lending, credit, or insurance institution[vi]. Subordinates and employees of public officers also fall under the purview of embezzlement statutes.
[i] Commonwealth v. Schmukler, 22 Mass. App. Ct. 432 (Mass. App. Ct. 1986)
[ii] Kirschner v. State, 997 S.W.2d 335 (Tex. App. Austin 1999)
[iii] State v. Harris, 147 Conn. 589 (Conn. 1960)
[iv] People v. Jones, 182 Mich. App. 668 (Mich. Ct. App. 1990)
[v] State v. Hanna, 224 Ore. 588 (Or. 1960)
[vi] 18 U.S.C.A. §§ 643 to 657