embezzlement paper

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White-Collar Crime: Embezzlement White-collar crime is not something many people consider when thinking about crime. These non-violent offenses, typically committed by individuals in professional or managerial positions. One of the most well-known white-collar crimes is embezzlement. Embezzlement is "the fraudulent appropriation of property by a person to whom such property has been entrusted, or into hands it has lawfully come (Department of Justice, 2020). Even though embezzlement is

2 hard to detect in some forms, there are ways to prevent it and punishments for those who commit this crime. In this paper, we look at the history of embezzlement, examining its various forms and methods, its punishment, and preventive measures. White-collar crime involves a range of non-violent illegal activities that are financially motivated and mainly carried out by those in business or professional settings. This type of crime differs from traditional crimes due to the methods of deceit, concealment, or violation of trust instead of physical force. These offenses can include fraud, bribery, money laundering, and embezzlement. This clearly defines white-collar crime, emphasizing its distinction from other forms of criminal behavior and the common characteristics exhibited by offenders. Embezzlement has not always been around; it was initially referred to as larceny. The term Larceny involves the property being carried away; the perpetrator was never the owner or had possession of it. According to the Cornell Law School, "embezzlement became a crime because theft was occurring in which the elements of larceny could not be met because the thief had the right to possess the funds," which the prosecution couldn't prove "trespassory taking" (Wex Definitions Team, 2022). When the crime embezzlement was created, all that needed to be proven was that the defendant gained some sort of property or money through the position or power they handled in an organization or company. The courts believed that judging a person's actions based on their status, title, or occupation would work and be enough to bring embezzlement charges against someone. There is also a fraudulent conversion statute that some states have adopted, which provides actions that go between larceny and embezzlement. A dependent can be charged with attempted embezzlement if intent is found and attempt to embezzle.

3 There are different methods and forms of embezzlement. Some ways can go unnoticed for years, while some can be detectable immediately. Some embezzlers pocket small amounts of money so they can acquire small amounts over a period of time. This method is less likely to be caught because it can go unnoticed. However, the other method requires the perpetrator to take a large amount of funds at one time and then disappear. This method would be very noticeable on records and trace back to who did it. Embezzlers can perform these methods in many different ways. An individual withdrawing money from a cash register before balancing it at the end of the night is considered a small embezzlement. However, there can be more personal forms of embezzlement, like if someone took their own family member's or relative's social security check for their own personal gain, or if an individual "borrows" money from a sports league or organization, they would be charged with embezzlement because they are taking money they were trusted with and using it for their own personal gain. One of the most well-known embezzlement cases is the case involving Bernard Madoff. Madoff was an investment advisor on Wall Street who lost his investors an estimated $50 billion or more over 20 years. Madoff conducted a Ponzi scheme where he told investors that he would be able to give them a significant return on the investments that they had made. When the investors gave him the money, Madoff deposited the money into his personal bank account. He paid 'returns' to earlier investors using the money from later investors (CFI,2023). He was able to provide his clients with trading statements showing their supposed profits, which was a complete lie. Madoff's schemes began its destruction in 2008 when many of his investors decided to cash out their investments, totaling $7 billion. As one could imagine, Madoff did not have the money to cover what was requested; he could only give a couple hundred million. Shortly after, he was arrested and sentenced to a 150-year prison term in 2009, and the U.S. government ended up

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4 offering to pay out more than $700 million to defrauded Madoff investors (CFI Team, 2023). Madoff was about to go undetected for many years because he was consistent throughout the scheme; he kept records, sent out statements on a regular basis, and sent out withdrawal cash to those who requested it on time. When charging someone with the act of embezzlement, there are four elements that are taken into consideration when someone is being accused of the crime of embezzlement. First, the defendant must understand that he has committed a crime by being in possession and taking money or property. Another accusation could be made if the perpetrator does understand that the act was wrong. Secondly, the person accused of embezzlement should not assume that the money or property rightfully belongs to them (CFI Team, 2023). The crime of embezzlement involves the unlawful taking of someone else's property. For example, if someone takes money from a cash register, believing it was there for the company's meal, it would not be a form of embezzlement. This is only because the individual who took the money believes it was there to pay for the company's meal. The next element is the perpetrator has to have intent and purposely taken possession of the money or property to defraud the owner of the property or funds (CFI Team, 2023). Lastly, someone with the money or property must have trusted the perpetrator. For example, suppose the accountant of a grocery store chain takes money from the cash register for personal use. In that case, it is considered embezzlement since the accountant was trusted with the company's finances (CFI Team, 2023). There is much more to consider than just stealing money when an individual is being charged with embezzlement, or many crimes would be defined as larceny. Majority of the penalties for embezzlement are decided based on whether the crime is a felony, which is a grand theft, or a demeanor, which is petty theft. The differentiation is often

5 determined by the value of the funds or property the defendant embezzled. Grand theft is when the funds or property that is embezzled are worth 400 dollars or more. This crime is charged under the Penal Code Section 487 PC (Miranda, 2023). The Madoff cases is considered grand theft. Grand theft is known as the "wobbler" and can be either a felony or a misdemeanor. Some things that are taken into consideration when deciding this are the dependent's previous criminal record, the sophistication of the methods used to embezzle, the level of victim vulnerability, and how much was lost in the crime. When an embezzlement crime is charged as a felony grand theft, a defendant can be fined up to 10,000 and imprisoned for up to three years in State prison. When one gets a misdemeanor conviction, they can get up to a $1,000 fine and up to one year prison time in county jail. However, petty theft is when the property embezzled is $400 or less, and the punishment can be a maximum fine of $1,000, up to one year in county jail, or summary probation. Along with the fines and prison time that defendants are sentenced to, many states often require them to pay restitution to their victims. Restitution involves repaying the victim for the monetary value of the money or property that was embezzled (Steiner, 2022). Many times, all three, fines, imprisonment, and restitution, are required of the defendant. These charges are often subject to the statute of limitations. The statute of limitations sets a time limit on how long a victim has to report the crime and start legal proceedings. Still, the statute of limitations varies regionally depending on the applicable laws, the amount of embezzled, and the use of the discovery rule (Ellis, 2023). One of the main reasons there is even a statute of limitation for embezzlement is because the court wants to preserve the idea that justice needs to be fitting to the current situation. The same embezzlement crime that was committed 20 years ago might have no effect on state affairs today. So, with that being said, it might be construed as a miscarriage of justice to pursue a case so long in the past (Ellis, 2023).

6 The statute of limitations also prevents the persecutor, who has known about the situation for a while, from ignoring it just to use it as revenge or retaliation years down the road. Lastly, it can serve as encouragement for individuals to keep all their records in order to be able to identify unlawful appropriations faster and more efficiently. For most regions worldwide, the time limit set by the statute of limitations is three to five years. Companies and employers can watch for certain signs that could potentially be embezzlement. Missing financial documents is a big sign of embezzlement. If someone is committing the crime of embezzlement, they are going to want to destroy or hide any type of evidence. Therefore, having documents like invoices, receipts, or payroll go missing is a reason to investigate for embezzlement. Another sign of embezzlement would be customers saying they already paid a bill. As an employer, it is essential that one is attentive to a pattern of delayed customer payments because it is possible the embezzler might be using these payments for personal gain (Fermin, 2023). Another famous sign is the disappearance of cash. Cash is a popular embezzlement tactic because it cannot be traced easily like a credit or debit card. An employee's behavior with their job could be a warning sign, like when an employee continues to work late, even on the weekends and refuses to take a vacation. Also, their standards of living change to a level that is unexplainable based on what they are paid at their job. Frequently, there is a combination of warning signs to someone committing embezzlement; regardless, even if one warning sign is noticed, it needs to be investigated. Although embezzlement can go undetected, there are ways that can prevent it from occurring within a company or organization. According to Pullman and Comley, a company or organization must develop the right culture first (Cohen & Pedneault, 2023). The board of an organization or company has to be able to assign the workload and let their employees notice that

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7 they work as a team. If a board does not encourage this type of work environment, then its employees will only think of themselves. Another preventive measure companies can issue is to create written policies that help avoid conflicts of interest. Anyone who has a professional relationship with the association should be required to have other board members closely supervise all contracts, payments, work, and other related interactions. A company should insist on dividing the responsibilities. There should be different employees doing different jobs. There needs to be a requirement of two signatures on all checks of the association, and everyone who has access to the company back account should not be allowed to use them at any time without another individual present or notified, along with documentation in the books (Cohen & Pedneault, 2023). Another preventative measure is to make all financial records accessible and actively reviewed. Treasurers should give original bank statements and standard financial reports to the board that come straight from the accounting system that the company uses. All these documents should be viewed monthly by different board members, someone who isn't directly associated with the finances. Along with all these preventative measures, employees who are dealing with money or property for the companies must be trustworthy, responsible, and accountable individuals. This might seem like many extra steps for companies to require; however, it saves them from letting employees embezzle from them. In conclusion, embezzlement is a very hard crime to detect due to the fact that it can be done without anyone finding out for an extended period of time. However, there are many ways an individual can prevent embezzlement, and there are punishments set in place to punish those who commit embezzlement. The culture in today's world is much more knowledgeable on embezzlement than several years ago. However, as we continue to make advancements and

8 society increases, we have a way to go when it comes to uncovering and preventing embezzlement from happening within companies and organizations around the world.

9 References Wex Definitions Team. (2022, October). Embezzlement . Legal Information Institute. https://www.law.cornell.edu/wex/embezzlement CFI Team. (2023, October 6). Embezzlement . Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/esg/embezzlement/ Cohen , A. J., & Stephen Pedneault. (2023). Six tips for preventing embezzlement . Pullman & Comley. https://www.pullcom.com/newsroom-publications-Six-Tips-for-Preventing- Embezzlement Department of Justice Archives. (2020, January 21). 1005. embezzlement . The United States Department of Justice. https://www.justice.gov/archives/jm/criminal-resource-manual- 1005-embezzlement Ellis, J. (2023, October 29). What is the embezzlement statute of limitations? . My Law Questions. https://www.mylawquestions.com/what-is-the-embezzlement-statute-of- limitations.htm Embezzlement law . Justia. (2023, October 16). https://www.justia.com/criminal/offenses/theft- crimes/embezzlement/ Fermin , J. (2023, May 26). Warning signs of embezzlement: Protect your business today: Allvoices . RSS. https://www.allvoices.co/blog/warning-signs-of-embezzlement Miranda, D. (2022, December 31). What are possible penalties for embezzlement? . Miranda Rights Law Firm. https://www.mirandarightslawfirm.com/blog/what-are-possible- penalties-for-embezzlement/ Steiner, M. (2022, January 27). Embezzlement: Penalties and sentencing . www.criminaldefenselawyer.com. https://www.criminaldefenselawyer.com/crime- penalties/federal/embezzlement.htm Wex Definitions Team. (2022, October). Embezzlement . Legal Information Institute. https://www.law.cornell.edu/wex/embezzlement

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