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Embezzlement and Bank Fraud

mail and wire fraud

Embezzlement Overview

Embezzlement is a form a theft. Embezzlement occurs when an individual is entrusted with his or her employer’s money and this individual converts this money for their own use. A common example of embezzlement is an employee stealing company funds. Embezzlement can be both a state and federal offense dependent on the parties involved. If an individual steals money from a financial institution such as a bank or any other federal entity, then the offense is a federal offense. If an individual steals money from a private company or a state-funded entity, then the individual will be charged with a state offense. Embezzlement charges are criminal offenses, not civil offenses. Whether charged with embezzlement at the state or federal level, an individual can face potential jail time.

Federal Embezzlement

If you steal or misappropriate money belonging to the government or another federally funded entity, you can be charged with embezzlement under federal law. Under 18 U.S.C Sections 641 – 670, the government must prove the following elements:

  • There is a trust or fiduciary relationship between the rightful property owner and the defendant;
  • The U.S. government owns the property or has an interest in the property;
  • The defendant took possession of the property in the course of their employment;
  • The defendant fraudulently converted or appropriated the property for their own use; and
  • The defendant intended to deprive the rightful owner of use of the property.

Depending on the type of misappropriated money and the type of entity stolen from will determine what section of the federal statute you will be charged under. For example, Section 656 applies to bank employees embezzling bank funds, whereas Section 664 applies to employees embezzling federal retirement accounts. Whether the government charges you under Section 641 – 670, the government must prove all the requisite elements of the offense beyond a reasonable doubt. All federal embezzlement charges must be brought within five years of the alleged theft or else the statute of limitations prevents charges from being filed.

Federal embezzlement offenses can be charged either as a misdemeanor of a felony. Whether the charges are a misdemeanor or felony is dependent on the alleged amount to have been stolen. If the alleged amount is less than $1,000, then the offense is a misdemeanor and the individual charged faces a potential jail sentence of up to a year and a fine. If the amount alleged to have been embezzled is more than $1,000 then the offense is charged as a felony. A charge of federal felony embezzlement carries a potential prison sentence of up to ten years and a potential fine of up to $250,000. The more serious embezzlement charges stem from allegations of large amounts of money stolen.

Most often when an individual is convicted of embezzlement, the individual is required to pay back the embezzled funds to the aggrieved party in addition to any prison time and levied fines. To ensure these funds are recovered, the aggrieved party can civilly sue the individual who embezzled. If successful in a civil suit, the aggrieved party can recover stolen funds, but cannot put give the individual any additional jail time.

Federal Cases Involving Embezzlement

A former financial advisor from North Carolina was sentenced to 65 months in prison for his role in an embezzlement scheme. According to the court documents, the former financial advisor advertised his services exclusively to high profile individuals such as professional athletes. Over the course of several years, the financial advisor would tell his clients he would not make any financial transactions without their express consent. However, the financial advisor proceeded to steal millions of dollars out of the accounts his clients entrusted him to manage. The financial advisor attempted to hide his embezzlement scheme by not reporting the money he stole on his annual tax returns.

A woman in Mississippi was sentenced to 48 months in prison for stealing money from her clients. According to the court documents, the woman was an accountant who helped her clients prepare their annual tax returns. When a client owed money to the IRS, the woman made her clients write a check to her for the tax payment amount instead of directly to the IRS. The woman in turn did not send these checks to the IRS but kept the money for her own personal use. In addition to her prison sentence, the woman was ordered to pay restitution in excess of $500,000.

An investment firm executive in New Jersey was recently indicted for his alleged role in an embezzlement scheme. According to the indictment, the executive oversaw securities transactions within the firm and was responsible for ensuring commissions earned as a result of these securities transactions were properly accounted for. Instead of crediting the investment firm with the commissions, the executive is alleged to have diverted these commissions into his own personal banking account. The executive is alleged to have embezzled over $600,000 in commissions that were to be credited to the firm’s account.

Frequently-Asked Questions (FAQs): Facing a Federal Embezzlement Investigation

Q: Is embezzlement a felony or misdemeanor under federal law?

 

Embezzlement can be charged as either a felony or a misdemeanor offense depending on the specific allegations involved. In most cases, however, it will be charged as a felony. For example, under 18 U.S.C. Sections 641 and 644, embezzlement is a felony offense unless the total amount embezzled was less than $1,000. When charged under 18 U.S.C. Section 666, embezzlement from a federal government program or federally-funded entity is automatically a felony offense.

Application of the Federal Sentencing Guidelines is optional in federal criminal cases, and it establishes terms of incarceration only (subject to the maximum terms imposed by statute). For more information on federal sentencing, you can read our Ultimate Guide to the Federal Sentencing Guidelines.

Q: What are the federal penalties for embezzlement?

 

The penalties for embezzlement depend on the specific statute under which the offense is being charged. In most cases, however, embezzlement carries a maximum sentence of 10 years in federal prison and a $250,000 fine. This fine increases to $500,000 for corporate defendants. In the limited circumstances in which embezzlement is charged as a misdemeanor, the maximum penalties include up to a year in prison and a $100,000 fine ($200,000 for corporate defendants) in most cases.

Q: What is the federal statute of limitations for embezzlement?

 

The federal statute of limitations for embezzlement is found in 18 U.S.C. Section 3282. This section of the U.S. Code establishes a five-year statute of limitations for all non-capital offenses, unless a different statute of limitations is “expressly provided by law” for a specific offense.

The statute of limitations for embezzlement runs from the date the crime is committed to the date, “the indictment is found or the information is instituted.” An indictment is found by a grand jury following the issuance of a criminal complaint by federal prosecutors. An information is instituted when a defendant waives his or her right to have the prosecution’s allegations heard by a grand jury.

Q: Can I be charged with a federal crime for embezzling from a private entity?

 

Yes. In addition to embezzling from government agencies and government programs, it is also a federal crime to embezzle from certain private entities. For example, 18 U.S.C. Section 656 establishes the offense of “Theft, embezzlement, or misapplication by a bank officer or employee,” and 18 U.S.C. Section 666 establishes the offense of “Theft or bribery concerning programs receiving federal funds,” which includes programs administered by private institutions.

Under 18 U.S.C. Section 654, federal employees can also face embezzlement charges for stealing or converting money that comes into their possession as a result of their position in the government. This would include, for example, an agency employee embezzling fees paid by private citizens or businesses.

Q: How hard is it for federal prosecutors to prove embezzlement?

 

In federal criminal cases, the government has the burden of proving the defendant’s guilt beyond a reasonable doubt. The ease with which this can be done depends on numerous factors, from the evidence that is available (and legally admissible in court) to the defendant’s choice of legal representation. Federal prosecutors must have sufficient evidence to prove each element of the offense, and they must be able to successfully overcome defense counsel’s arguments as to why a jury verdict of “guilty” is unwarranted.

Q: What are some examples of embezzlement?

 

Embezzlement is a unique crime in that it is defined in multiple federal statutes; and, within each of these statutes, the offense can take several forms. For example, 18 U.S.C. Section 641, defines the crime of embezzlement as follows:

“Whoever embezzles, steals, purloins, or knowingly converts to his use or the use of another, or without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of the United States or of any department or agency thereof, or any property made or being made under contract for the United States or any department or agency thereof; or

“Whoever receives, conceals, or retains the same with intent to convert it to his use or gain, knowing it to have been embezzled, stolen, purloined or converted [shall be guilty of embezzlement].”

Other sections of the U.S. Code contain similarly broad definitions. As a result, when facing an embezzlement charge, it is imperative to work with experienced defense counsel who can attack the specific allegations against you.

Q: What are some possible defenses to embezzlement in a federal case?

 

While there are many ways that prosecutors can pursue embezzlement charges in federal court, there are also many potential defenses to the federal crime of embezzlement. Depending on the circumstances involved, the available defenses may include:

  • Unlawful search or seizure, resulting in the inadmissibility of key evidence in court;
  • Miranda violation, resulting in the inadmissibility of key evidence in court;
  • Other constitutional violations resulting in the inadmissibility of evidence or the inability to prosecute; and,
  • Inability to prove any element of the alleged offense beyond a reasonable doubt.

Bank Fraud

Bank fraud is a federal criminal offense. Bank fraud is charged under 18 U.S.C. 1344. An individual can be prosecuted for bank fraud if he or she devises a scheme to defraud a financial institution. For example, lying on a loan application in order to secure a bank loan would be considered bank fraud. Since bank fraud is a criminal offense, the government must prove the following elements for individuals charged beyond a reasonable doubt:

  • Executed or attempted to execute a scheme, substantially as charged in the indictment, to defraud a financial institution [or to obtain a financial institution’s money by means of false or fraudulent pretenses];
  • Knowingly and willfully participated in this scheme with the intent to defraud [or to obtain money by means of false or fraudulent pretenses];
  • The financial institution was federally insured, a federal reserve bank or a member of the Federal Reserve System.

Penalties for being convicted of bank fraud can be severe. The penalty for a bank fraud conviction depend on the amount of money involved in the fraud scheme. Under the bank fraud statute, individuals face a potential prison sentence of up to thirty years a potential fine of up to a million dollars. It is important to note that the bank or financial institution does not need to suffer actual harm in order for an individual to be convicted of bank fraud. According to the statute, the bank or financial institution need only be put under a threat of suffering harm. Taking the example from above, if an individual lies on a loan application in an attempt to secure an unauthorized loan from the bank, it does not matter if this application was ever approved – it only matters that the individual attempted to secure this loan based on fraudulent pretenses.

Debit and credit card fraud, along with check fraud are the most common types of bank fraud cases prosecuted. Debit and credit card fraud cases are discovered once the bank is notified by a client that an unauthorized transaction has occurred. Check fraud is often discovered by the banks themselves. Banks and other financial institutions have sophisticated mechanisms in place to ensure checks being cashed or deposited are legitimate. Of course, banks do not have a perfect system in place and often people or entities can get a fraudulent check through the bank’s system. Other examples of bank fraud include:

  • The use of counterfeit or fake financial documents
  • Obtaining fake appraisal documents and presenting these documents to the bank as valid
  • Fording an individual’s name on a check
  • Altering a check’s amount
  • Altering a financial document without express consent

Federal Cases Involving Bank Fraud

A woman in New Jersey was sentenced to three years of probation and required to pay over $80,000 in restitution after pleading guilty to bank fraud. According to the plea documents, the woman worked as a bank teller and part of her job responsibility was filling the ATMs at the bank with cash. While filling the ATMs the woman was caught on camera taking cash for her own use. The woman used the cash to pay for personal expenses such as clothes and vacations.

A Colorado man was sentenced to spend 84 months in prison after being convicted of bank fraud. According to court documents, the man owned a vending company repair business and needed a bank loan in order to keep his business functional. The man did not qualify for a loan due to him being a convicted felon. The man used his friend’s personal information on the loan application in order to secure the loan. The man’s friend had no relationship to the man’s business. As a result of his scheme, the man was able to obtain over $1.2 million in fraudulent loans and used over half of the loan proceeds for personal expenses rather than business expenses.

A former financial advisor in Maryland pleaded guilty in federal court for his role in a bank fraud scheme. According to the plea documents, the former financial advisor created fake loan applications for his company in order to secure favorable credit lines at various banks. The former advisor would then use these credit lines to make securities trades that he otherwise would have been unable to make. The securities trades based on the fraudulently obtained credit lines netted the former advisor approximately $1.2 million in personal commissions.

Contact Knowledgeable Bank Fraud and Embezzlement Defense Attorneys

If you have been accused of embezzlement or bank fraud and need defense advice, get in touch with Oberheiden, P.C. today. Contact us online or call us at 888-680-1745.

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