embezzlement

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Embezzlement is the fraudulent taking of personal property by someone to whom it was entrusted. It is most often associated with the misappropriation of money. Embezzlement can occur regardless of whether the defendant keeps the personal property or transfers it to a third party.

Historically, embezzlement became a crime because thefts were occurring in which the elements of larceny could not be met because the thief had the right to possess the funds; thus, the prosecution could not prove the element of a “trespassory taking.” Meanwhile, proving embezzlement only requires showing either that the employee had possession of the goods or funds because of the employee’s position or that the employee had the authority to exercise substantial control over the goods or funds. Courts determine the question of substantial control by considering the employee’s job title, job description, and the practices of that company. Some states also have fraudulent conversion statutes, which provide for the criminalization of actions that border between larceny and embezzlement. The government can also charge individuals with attempted embezzlement.

Methods of embezzlement differ. Some embezzlers “skim off the top” so that they continually acquire a small amount over a particular time interval. This method reduces the likelihood of being caught. On the other hand, some embezzlers steal a very large amount of the goods or funds in a single instance and then disappear. Sometimes company managers under-report income to their supervisors and keep the difference.

The Internal Revenue Service requires that embezzlers include embezzled funds in their yearly income taxes. Upon returning the funds or paying restitution, the embezzler becomes eligible for a tax deduction. Failure to report embezzled funds as gross income can result in the bringing of tax evasion charges.

Companies have created safeguards to protect against embezzlement. For example, they invented cash registers to ensure that gross sales equal the deposit at the end of a given day. Companies also divide duties between levels of employees as a form of oversight. Embezzlement in the face of split duties adds the difficult requirement of forming a collusive arrangement and likely requires split proceeds, lowering the payoff for each member of the arrangement.

See also: White-collar crime.

[Last updated in October of 2022 by the Wex Definitions Team

Federal Materials

U.S. Constitution and Federal Statutes
  • U.S. Constitution
  • U.S. Code: 18 U.S.C. - Crimes and Criminal Procedure
    • 18 U.S. Code Chapter 31 - Embezzlement and Theft
  • CRS Annotated Constitution
  • Federal Rules of Criminal Procedure
  • Federal Rules of Evidence

Key Internet Sources

  • Litigator's Internet Resource Guide: rules of court
  • Federal Judicial Center Publications
  • Senate Judiciary Committee
  • House Judiciary Committee
  • Vera Institute of Justice