As discussed in other articles on this website, embezzlement gives rise to civil causes of action by the wronged party against the embezzler and allows a judgment which, if properly obtained, cannot be eliminated by bankruptcy and should compensate the victim not only for the losses but the costs of obtaining judgment.
In addition to civil liability, embezzlement is also a crime in California and the district attorney of the appropriate county can bring criminal charges against the wrongdoer which can result in fines and imprisonment. Often the criminal case precedes the civil case since most criminal cases proceed far more quickly than civil ones.
This article shall discuss the penal code and its application to the crime of embezzlement and further consider the practical aspects of seeking relief if you are a victim.
The Basic Criminal Liability:
The major difference between embezzlement and mere theft if a violation of trust. Embezzlement is a property crime under the laws of California. The crime is the unlawful retention of property that was entrusted to the defendant. State law distinguishes embezzlement from larceny or theft by requiring a fiduciary relationship between the defendant and the victim. In a fiduciary relationship, the party entrusted with money or property has specified obligations and duties. Parties with fiduciary duties include trustees, agents, corporate officers, and public officers as well as employees, and professionals. Embezzlement reflects a defendant's betrayal of those duties.
To prove embezzlement, a prosecutor must prove beyond a reasonable doubt to a moral certainty that the defendant had a specific intent to defraud the victim of property entrusted to the defendant through the fiduciary relationship. The defendant must have actually intended to deprive the victim of the property. Negligence or error on the part of the defendant will not constitute embezzlement.
For example, the defendant may have spent funds for purposes other those specified by the parties' agreement or fiduciary relationship. Under California law, an intent to temporarily deprive the owner of the property will usually be sufficient for an embezzlement charge. Some states other than California do require an intent to permanently deprive the owner of the property.
Burden of Proof
Unlike a civil action in which the plaintiff must prove his or her case by a preponderance of the evidence, in a criminal matter the state must prove its case beyond a reasonable doubt, a much higher burden of proof, and the verdict must be unanimous or the “hung” jury cannot convict. Thus, the task faced by the prosecutor is much more difficult than the civil litigant.
Note these laws are subject to change and the reader should check the current provisions before relying on the information below.
California Penal Code Sections 484-502.9
California Penal Code Sections 503-515
Theft of property valued below $950 results in a charge of petty theft, which may be punished by a fine of up to $1,000, a term of imprisonment lasting up to six months, or both.
Theft of property valued above $950 results in a charge of grand theft. The crime of grand theft generally leads to prosecution as a felony. Accordingly, a conviction for the embezzlement of property valued above $950 will likely require felony sentencing. The defendant may receive a sentence for a term of imprisonment ranging from six months to three years. The state may also consider whether any aggravated factors justify an increased punishment during felony sentencing.
California Code, Penal Code - § 484
(a) Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, or who causes or procures others to report falsely of his or her wealth or mercantile character and by thus imposing upon any person, obtains credit and thereby fraudulently gets or obtains possession of money, or property or obtains the labor or service of another, is guilty of theft. In determining the value of the property obtained, for the purposes of this section, the reasonable and fair market value shall be the test, and in determining the value of services received the contract price shall be the test. If there be no contract price, the reasonable and going wage for the service rendered shall govern. For the purposes of this section, any false or fraudulent representation or pretense made shall be treated as continuing, so as to cover any money, property or service received as a result thereof, and the complaint, information or indictment may charge that the crime was committed on any date during the particular period in question. The hiring of any additional employee or employees without advising each of them of every labor claim due and unpaid and every judgment that the employer has been unable to meet shall be prima facie evidence of intent to defraud.
(b) (1) Except as provided in Section 10855 of the Vehicle Code , where a person has leased or rented the personal property of another person pursuant to a written contract, and that property has a value greater than one thousand dollars ($1,000) and is not a commonly used household item, intent to commit theft by fraud shall be rebuttably presumed if the person fails to return the personal property to its owner within 10 days after the owner has made written demand by certified or registered mail following the expiration of the lease or rental agreement for return of the property so leased or rented.
(2) Except as provided in Section 10855 of the Vehicle Code , where a person has leased or rented the personal property of another person pursuant to a written contract, and where the property has a value no greater than one thousand dollars ($1,000), or where the property is a commonly used household item, intent to commit theft by fraud shall be rebuttably presumed if the person fails to return the personal property to its owner within 20 days after the owner has made written demand by certified or registered mail following the expiration of the lease or rental agreement for return of the property so leased or rented.
(c) Notwithstanding the provisions of subdivision (b), if one presents with criminal intent identification which bears a false or fictitious name or address for the purpose of obtaining the lease or rental of the personal property of another, the presumption created herein shall apply upon the failure of the lessee to return the rental property at the expiration of the lease or rental agreement, and no written demand for the return of the leased or rented property shall be required.
(d) The presumptions created by subdivisions (b) and (c) are presumptions affecting the burden of producing evidence.
(e) Within 30 days after the lease or rental agreement has expired, the owner shall make written demand for return of the property so leased or rented. Notice addressed and mailed to the lessee or renter at the address given at the time of the making of the lease or rental agreement and to any other known address shall constitute proper demand. Where the owner fails to make such written demand, the presumption created by subdivision (b) shall not apply.
Any person who receives money for the purpose of obtaining or paying for services, labor, materials or equipment and willfully fails to apply such money for such purpose by either willfully failing to complete the improvements for which funds were provided or willfully failing to pay for services, labor, materials or equipment provided incident to such construction, and wrongfully diverts the funds to a use other than that for which the funds were received, shall be guilty of a public offense and shall be punishable by a fine not exceeding ten thousand dollars ($10,000), or by imprisonment in a county jail not exceeding one year, or by imprisonment pursuant to subdivision (h) of Section 1170 , or by both that fine and that imprisonment if the amount diverted is in excess of two thousand three hundred fifty dollars ($2,350). If the amount diverted is less than or equal to two thousand three hundred fifty dollars ($2,350), the person shall be guilty of a misdemeanor.
Embezzlement of Public Funds
California Penal Code Section 514: State law establishes a distinct punishment for the embezzlement of federal, state, or local public funds. Embezzlement of public funds results in a sentence of imprisonment in state prison as well as a bar from holding a public office in the future.
Aside from the usual fact issue of denying that any taking took place, there are other defenses that are common in the criminal embezzlement case:
- Claim of good faith: The defendant openly took the property with a good faith belief of title. (Note that this defense does not usually apply to set off, that is if the defendant kept the property of another as compensation for alleged debts owed to the defendant.)
- Claim of authority: The defendant claims that the property was properly taken during the scope of duties through a power-of-attorney or trust instrument, or through another arrangement requiring the acts of an agent to obtain the property.
- No demand: While a demand is not explicitly required by law as an element of the crime, the owner of the property should make a demand or written request for the return of the property. The defendant's refusal, if any, may reflect the defendant's criminal intent. If the owner does not make a demand, the defendant may be able to offer a defense of neglect or another non-criminal reason for the lack of return.
Practicalities of Seeking Criminal Prosecution:
It is common for victims to expect the police and district attorney to enthusiastically prosecute the offense at public expense and obtain restitution as part of the plea bargain or after conviction, hoping to have the judge somehow require restitution. Sometimes that does happen. Often it does not.
District attorneys and police are seldom enthusiastic about arresting and prosecuting embezzlement cases. Unlike the more violent crimes, white collar crimes seldom are seen by juries as critical to protect public safety and the proof of embezzlement, which often involves complex bookkeeping and proving financial transactions over many years, is disliked both by prosecutors and juries. Unless the amount of money is truly large, most prosecutors and police would like a civil action brought by the victim to obtain the relief.
This is exacerbated by the high burden of proof criminal prosecution requires compared to the civil case. This writer has often heard prosecutors state that they do not have the resources to investigate a long history of financial transactions and that civil counsel should seek relief instead. This is always a deep disappointment to victims since the civil prosecution will cost tens if not hundreds of thousands of dollars and if the defendant does not have resources, may result in a judgment that is unenforceable. It is for that reason that many employers simply fire but do not prosecute the embezzler and that is one reason embezzlers often repeat their crimes over and over with new employers.
Relief is available, as discussed in other articles on this website, and careful and strategic thinking is required. Use of the criminal process may require some careful thought about how to approach the police or district attorney.
A good approach is to assist the district attorney in developing the financial evidence since that would be required for both the civil and criminal action as well as to write off the loss for tax reasons. Often the district attorney, seeing the work load lessened, will at least begin the process and the embezzler may very well enter into a resolution without forcing the victim to spend the sizable sums to obtain a verdict.
Filing a civil suit does not necessarily mean the full cost of a trial. Equally likely is the embezzler letting a default be taken in the civil action and arranging a stipulated method of paying the debt off, hoping that the settlement will result in the district attorney not commencing criminal action.
Working closely with the district attorney and being willing to at least commence civil action is often the key to obtaining recovery. But to expect the district attorney to bring the case to jury trial is usually unrealistic. There are exceptions. Some district attorneys are quite willing to take an embezzler all the way to prison-but such district attorneys are usually transferred to violent felonies quite soon since that type of aggression and commitment is needed in those court rooms as well.
Sadly, embezzlement is a common crime and the number of employers not subject to this event are few and far between. It is vital for the victim to quickly learn how to use the system, both civil and criminal, to maximize the chance for successful restitution and punishment, keeping cost benefit in mind. To relay simply on the government to provide relief is seldom effective unless the sums stolen are truly significant.
Relief is available, but one must be sophisticated and intelligent in how one achieves it.