Embezzlement or Misappropriation of Funds Can Be a Serious Crime in Texas Federal Courts. Embezzlement is considered a white collar crime in the state of Texas and is almost always charged as a felony. Punishment can be severe depending on what was done and how the funds were misappropriated. The criminal could face fines in the million of dollars and many months in prison. If you’re being charged with Embezzlement, you will need an experienced criminal defense lawyer on your side. Contact Houston Embezzlement Lawyer Charles Johnson to speak with an experienced legal professional about what you can do to protect your name and reputation. Attorney Johnson will travel to any state court in the State of Texas and to any Federal Court in the United States of America to fight for your freedom. Contact him directly around the clock, 7 days/week at (713) 222-7577.
The Federal Bureau of Investigation (FBI) defines embezzlement as the “misappropriation or misapplication of money or property entrusted to one’s care, custody, or control.” What distinguishes embezzlement from other types of theft is the violation of financial trust between the owner of the money or property and the offender.
Theft by employees is one of the most prevalent and costly problems faced by today’s business, either private or public. It includes, but is not limited to, “the removal of products, supplies, materials, funds, data, information, or intellectual property.” The estimated annual costs of all forms of embezzlement are up to $400 billion.
The ways that an employee can steal from an organization depend on a number of factors, including that type of money or properties that have been entrusted to the individual, and the access to company funds that the individual might be allowed because of their position. For example, a department store cashier might steal from a cash register, fail to ring up purchases, or take merchandise from storage rooms or receiving areas. Other employees with more access within the company might cheat on expense accounts, or misappropriate funds through billing, inventory, or payroll schemes.
While some research has found that theft by employees is typically a solitary event, the influence of co-workers on theft behavior has been shown to have an enormous impact on such deviant behavior. A strong argument is also made for the effects of informal sanctions; those that did not comply with the theft culture were often ostracized and pressured to leave the job.
The “typical” embezzlement scheme occurs at companies with fewer than 100 employees. The average amount stolen is $120,000 versus just $10,000 for Fortune 500 companies. Small businesses, defined as employers with less than three bookkeepers, are 100 times more likely to experience employee fraud than larger companies. The crime is often carried out over a number of years and has forced many small companies into bankruptcy.
Common Embezzlement Schemes
Bogus loan schemes include cases in which fraudulent loans are created or authorized by the perpetrator from which funds are taken for their own benefit.
Credit card/account fraud cases involve the fraudulent or unauthorized creation and/or use of company credit card or credit accounts.
Forged/unauthorized checks cases are those in which company checks are forged or issued without authorization for the benefit of the perpetrator.
Fraudulent reimbursement schemes include expense report fraud and other cases in which a bogus submission for reimbursement is made by the perpetrator.
Inventory/equipment theft schemes include employee theft of inventory and supplies, and the unauthorized use of equipment.
Payroll shenanigans cases include all forms of manipulation of the payroll systems in order for the perpetrator to draw additional income.
Theft from tax or benefit accounts include cases in which the perpetrator manipulates company accounts meant to pay corporate taxes or employee benefits to siphon these funds off for themselves.
Theft/conversion of cash receipts cases involve the simple taking of cash or checks meant for company receipts and pocketing or converting them for one’s own benefit.
Unauthorized electronic funds transfers cases apply to anyone who uses or attempts or conspires to use any counterfeit, fictitious, altered, forged, lost, stolen or fraudulently obtained debt instrument to obtain anything of value.
Vendor fraud schemes include those where either a bogus vendor is created by the perpetrator to misappropriate monies or a real vendor colludes with the perpetrator to siphon funds from the company.
Clearly the most common form of embezzlement, by nearly a two-to-one margin, is the forgery or unauthorized use of company checks for one’s own benefit. Almost 40 percent of all major embezzlement cases are principally the result of this type of scheme. The next three most common forms of embezzlement are theft/conversion of cash receipts (20.5%), unauthorized electronic transfers of funds (13.4%) and payroll shenanigans (8.7%).
Examples of Embezzlement Schemes
- The bookkeeper pays him/herself – The bookkeeper simply takes a business check, makes it payable to him/herself and signs it.
- Duplicate payments to phony accounts – The bookkeeper pays an invoice with multiple checks over time and creates a phony bank account to deposit the second check. By the way, it is very easy to open a phony account.
- Check alteration – The bookkeeper either alters checks paid to you by customers, or creates a phony bank account to deposit checks.
- Double billing – The bookkeeper re-bills customer twice for the same work and deposits check in a phony account. It is surprising how often businesses will pay twice for the same invoice.
- Duplicate checks – The bookkeeper orders a duplicate set of checks mimicking your account and then proceeds to write duplicate checks to vendors – only the duplicate checks are deposited into the phony account. The business owner may be too busy to notice this deception.
- Credit card transactions – An employee makes a credit card sale, then issues a credit for that item back on to their own credit card.
- Petty cash expenditures – A business does not closely review the petty cash expenditures, unknowingly creating an opportunity for theft.
FBI – Financial Crimes
The Federal Bureau of Investigation (FBI) investigates matters relating to fraud, theft, or embezzlement occurring within or against the national and international financial community. These crimes are characterized by deceit, concealment, or violation of trust, and are not dependent upon the application or threat of physical force or violence. Such acts are committed by individuals and organizations to obtain personal or business advantage.
Theft, Embezzlement or Misapplication by Bank Officers or Employees
Title 18, Chapter 31 of the U.S. Code contains sections that deal with the various forms of embezzlement and their penalties. For example, Section 656 covers theft, embezzlement, or misapplication by a bank officer or employee.
Motivating Factors for Embezzlement
While a large number of crimes can be attributed to opportunity or the economic need of the offender, loss incurred through the actions of employees can also be a response to poor working conditions, dissatisfaction with management or compensation, or pressure from co-workers. The following are some of the primary motivating factors for Embezzlement:
- Entitlement belief
- Financial need
- Lavish lifestyle
- Gambling issue
- Shopping addiction
- Substance abuse
- Support a personal business
- Support significant other
In the overwhelming number of cases, excessive greed or the desire to live a relatively more lavish lifestyle appears to be the key motivating factor for major embezzlers – not to alleviate personal financial problems, as some might expect. Gambling continues to be a factor for many embezzlers. In some cases, the gambling problem was also part of an overall extravagant lifestyle.
The underlying question remains, however, why do these embezzlers steal so much over such a long period of time from employers who trusted them so implicitly? The classic fraud triangle theory holds that there generally must be three basic elements to exist for fraud to occur: opportunity, incentive/pressure and attitude/rationalization. For embezzlement, the opportunity factor is present in organizations in which business controls are weak and specific individuals, principally those with fiduciary duties, can exploit those weaknesses. For fraud in general, the incentive/pressure factor is often suggested to be financial woes. However, for embezzlers, other factors exist, such as a substance abuse problem, a gambling problem, a perceived need to support a loved one and, a desire to live an extravagant lifestyle or a desire to support a personal or family-owned business.
Rationalization is the most elusive segment of the fraud triangle. Researchers have suggested that one or more of the following attitudes or beliefs exist for embezzlers to engage in illicit activities:
- They believe they are entitled to the money;
- They believe they must save a family member or loved one who is perceived to be in dire circumstances;
- They believe they are in a desperate financial situation and all could be lost;
- They believe that no external or other help exists;
- They believe they are only “borrowing” the money;
- They do not understand the consequences of their actions; and,
- They do not believe or understand that what they are doing is wrong.
Costs and Statistics
While many think of the workplace as insulated from the questionable behavior found elsewhere in society, the statistics can be quite alarming. It is estimated that losses due to employee theft can range from $20 to $90 billion annually to upwards of $240 billion a year when accounting for losses due to intellectual property theft. This makes theft by employees two to three times more costly than all of the nation’s Type I index crimes combined, and accounts for approximately 30 to 50 percent of all business failures. In addition, it is estimated that as many as three-quarters of all employees steal from their employers at least once and some employees may engage in theft behavior as a regular part of their lives on the job.
Employee theft does not occur in a vacuum, but is often found in conjunction with high rates of other workplace deviant behavior. The financial impacts of such behavior, when coupled with the indirect costs of higher levels of stress, increased absenteeism, higher turnover, raised insurance premiums, an increased number of lawsuits, and lower morale, make workplace deviance a problem for businesses of all sizes that can reach an annual price tag hovering in the billions of dollars.
How has the widespread infusion of technology into the workplace impacted issues of embezzlement and employee theft? One result has been the dramatic increase in costs associated with a given offense. Not only can technology facilitate larger transactions that are illegal in nature, but when coupled with poor controls it can be manipulated to make detection much more difficult. Furthermore, the types of theft in the workplace appear to be changing. In addition to cash, materials, and merchandise, employees are increasingly finding value in company-owned software and intellectual property. In 2004, it is estimated that Fortune 1,000 companies sustained losses of more than $59 billion from theft of proprietary information, with insiders to the organization being seen as a higher than average threat.18 Borrowing software from work for personal use accounts for some of the $33 billion lost to software piracy worldwide.
The Response/Current Efforts
Traditionally, organizations did not want the public stigma of being known as an “easy target” or a company that harbored embezzlers and other types of dishonest employees. Most matters were handled internally, if they were handled at all. Some organizations viewed theft as a cost of doing business. In recent years, companies have stepped forward and begun to address the reality that they have dishonest employees who are causing significant economic losses. Studies have shown that there has been an increase in the use of deterrence and apprehension strategies and an increase in the severity of sanctions brought against someone accused of theft. In 1997, retail companies alone spent over $5 billion to combat inventory losses, with theft by employees seen as accounting for the largest share of those losses. These expenditures in formal social control can be seen in both investments in security technology and loss prevention personnel. Additionally, over 40 percent of employees caught stealing is referred for prosecution and 20 percent is required to make some form of restitution.28 So while the problem of employee theft still exists within organizations, some employers have taken important steps towards acknowledging and combating the problem.
Penalties for Embezzlement
Under Texas law, Embezzlement falls under the law criminalizing theft. Embezzlement is essentially financial theft by an employee. It can be considered white collar crime in some instances but it does not have to be only a white collar offense. It occurs when the defendant is entrusted with his or her employer’s money or goods and then steals those money or goods.
In a criminal case involving employee embezzlement, the state must show beyond reasonable doubt that the employee had possession of the assets by “virtue of his/her employment”. If their position did not provide them with control of the missing assets, they would not be able to be charged with this type of crime. There are many situations where it can be a difficult task to determine if the offense can be classified as embezzlement or larceny.
Texas offers a wide variety of penalties for the crime of Embezzlement. The factor that determines the severity of the punishment if convicted on a charge of Embezzlement is the amount or value of the goods, services or cash stolen. For the smallest amounts ($50 and under), the charge will be a “Class C” misdemeanor carrying a penalty of a simple fine of up $500. The most serious charge will be for stealing $200,000 or more in goods, services or cash. This is considered a first degree felony and can be punishable by five to ninety-nine years in prison and/or a fine of up to $10,000.
White collar crimes may be charged as misdemeanors or as felonies. The charges depend on the type of crime, the severity of the crime, and the amount of money that is involved in the crime, among other things In general, the more severe a crime the more harsh the potential punishment if convicted. While white collar crimes don’t involve physical violence, they can still be serious. Houston White Collar Crimes Attorney Charles Johnson will help guide you through the legal process and will advocate for your rights every step of the way. If you are in jail, Attorney Johnson will assist in getting your bail reduced if possible so you can be released on bond until your trial date.
Defenses to Embezzlement Charges
When you are responsible for handling corporate finances and assets, errors may occur. A bookkeeping mistake or oversight could lead to an investigation. The minute you are notified of any potential allegations of embezzlement is the time to retain experienced legal counsel.
Embezzlement is a crime, so all the defenses available for other crimes can be used. Common defenses include:
Insufficient evidence – A criminal charge or case can be dismissed if there is insufficient evidence to prosecute. This defense will not work as long as a jury can find you guilty without a reasonable doubt. However, 40% of federal embezzlement cases are dropped because of insufficient evidence, so it can be worth pursuing.
Duress – Duress occurs when a person is situated where he/she truly believes they will be in some danger or harm if they do not participate in the crime. Common duress defenses in embezzlement cases that generally do not work include embezzling money to satisfy an addiction (drugs, alcohol, gambling) or to prevent family hardship. A duress defense will more likely work in cases where you would lose your job unless you participated in an embezzlement scheme.
Entrapment – Entrapment occurs when the government compels an innocent person to commit a crime they would have otherwise not committed. Stings are generally exempt. However, setting up “bait” to get you to commit embezzlement can be entrapment. When bringing an entrapment defense, the prosecution will usually contend you were inclined to commit the offense anyway.
Absence of intent to commit a crime – Most crimes require an intention to commit the crime. Embezzlement requires that you intended to take money or property from others. Without the required intent, the embezzlement charge may be dismissed. For example, maybe you thought you were the true owner of the money or property that you are accused of embezzling.
Insanity – Insanity is always a possible defense, but it is a “tough sell”in any court for any crime. This defense allows you to claim you were either insane at the time of the offense or during trial. The success rate of an insanity defense is low and it would most likely be ineffective in embezzlement cases.
Incapacity – This is different from insanity. In embezzlement cases, this defense may work only if you can show you were somehow mentally incapacitated at the time of committing the embezzlement. An example would be if you were under heavy medication and didn’t realize you deposited company money into your own account.
Intoxication – Voluntary intoxication is almost never a defense to a crime. If you drink voluntarily, you should realize the risks of doing so. This defense rarely comes up in embezzlement case.
Embezzlement charges can be quite complex. In many cases there may be many items that must be reviewed in order to determine the best defense. Some crimes may be a result of miscommunication or deception. It is important to get your story out. There are many ways that a defense attorney will be able to help you protect your rights. The goal of your attorney is to not only help you defend against the charges but to also help you guard your professional reputation. A conviction on these types of charges can be detrimental to your career so it is important to defend the charges as vigorously as possible. Houston Criminal Lawyer Charles Johnson will review all aspects of your case in depth to provide a complete defense of the charges.
If you have been charged with Embezzlement, you are probably facing stress at your home and workplace. Houston Lawyer Charles Johnson can help relieve that stress by ensuring that you are protected by the best Texas embezzlement lawyer available. If you want the best in knowledgeable legal representation & a criminal law firm that will treat your case with consideration and concern, please contact us 24/7 at (713) 222-7577 for a FREE confidential consultation. Your initial consultation can be done over the phone, and will be free and completely confidential. During this consultation you will be informed about the law, your rights and your legal options, with a reliable idea of how much an effective embezzlement defense may cost. Rest assured that The Charles Johnson Law Firm will zealously defend you against any type of White Collar Crime accusation.
News Stories Related to Embezzlement in Houston:
A Houston man has appeared for arraignment in a 12-count indictment alleging bank embezzlement, United States Attorney Kenneth Magidson announced today. A federal grand jury returned the sealed indictment against Shawn Nelson, 39, on Feb. 20. He was ...Your Houston News - Mar 29 2013
HOUSTON (AP) – A former banker in Houston has been sentenced to two years in federal prison for stealing $124,000 mainly from elderly customers or out-of-state patrons. Prosecutors in Houston on Monday announced the penalty for 24-year-old Hannah Gonzales.news92fm.com - Sep 10 2013
Linda Balducci of Shelby pleaded guilty last year to one count of conspiracy to embezzle money. Court documents show she was sentenced in Feb. 28 in U.S. District Court in Oxford. The Bolivar Commercial reports that federal prosecutors dismissed ...The Commercial Appeal - Mar 06 2014
HOUSTON (AP) -- A now-fired Houston banker has been charged with embezzlement for allegedly stealing from the accounts of elderly customers or accepting deposits and pocketing the cash. Law officers Tuesday arrested 24-year-old Hannah Gonzales of Houston ...KHOU - Jan 15 2013
HOUSTON (AP) — A former Houston banker has been sentenced to three years in prison for stealing $340,000 from accounts he opened using the names of family and friends. A federal judge in Houston on Wednesday sentenced 39-year-old Shawn Nelson. The former ...houston.cbslocal.com - Dec 05 2013
McCann Investigations, a firm in Texas that provides digital security and surveillance services, announced that it added controller/CFO embezzlement investigations to its set of fraud investigation services in Houston. Embezzlement is a crime that deals ...StreetInsider - Jan 23 2014
HOUSTON (AP) -- A former executive with a Houston credit union faces up to 30 years in prison for embezzling about $340,000 through bogus loans in other people’s names. Prosecutors say 39-year-old Shawn Nelson opened signature loan accounts in the names ...KHOU - Jun 28 2013