The Ultimate Guide to the Federal Embezzlement Statutes

Embezzlement is a crime at the state and federal levels. While the majority of embezzlement prosecutions take place in state courts, the U.S. Department of Justice (DOJ) prosecutes company executives, accountants, lawyers, bank officers, government employees, and various other individuals suspected of embezzling funds from their companies or employers.

At the federal level, embezzlement is a very serious crime. Depending on the specific embezzlement statute implicated in a particular case, penalties can reach $1 million in fines and 30 years of imprisonment for a single count. As a result, defending against federal embezzlement charges requires a focused and strategic defense, and this requires an in-depth understanding of the specific statutory provisions that apply.

Everything You Need to Know About the Federal Embezzlement Statutes

In this Ultimate Guide to the Federal Embezzlement Statutes, our white-collar defense lawyers provide an overview of the various sections of the U.S. Code that pertain to the crimes of embezzlement and theft. We also provide an introduction to the types of defenses that are available in federal embezzlement cases.

The Federal Embezzlement Statutes: An Overview

While the term “embezzlement” is commonly used as a catch-all for illegally converting entrusted funds, the U.S. Code establishes several specific—and in many cases very different—embezzlement-related crimes. Chapter 31 of the U.S. Code (entitled “Embezzlement and Theft”) includes 30 sections, each of which establishes a separate offense, or series of separate offenses, with each offense having its own unique elements and associated penalties.

Broadly, the crime of embezzlement is defined at the federal level as, “the fraudulent appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come.” As a form of fraud, embezzlement inherently involves an element of intent; and, as the U.S. Department of Justice notes, “[t]he requirement that the defendant act with the intent to deprive the owner of his property makes embezzlement a specific intent crime.” As the DOJ goes on to state, “[i]t should be noted, however, that the intent required to violate the law is not an intent to deprive another of his/her property permanently. Therefore, even if an individual intends to return the property, his/her actions are still illegal.”

With these general principles in mind, we can now take a look at some of the specific embezzlement crimes established in Chapter 31. Some of the statutory sections most commonly used to prosecute embezzlement at the federal level are:

18 U.S.C. Section 641 (Embezzlement from the United States)

Embezzling money, property, or records from the United States (or any federal agency) is a federal criminal offense under 18 U.S.C. Section 641. Specifically, this section of Chapter 31 provides that:

“Whoever embezzles . . . 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 [shall be guilty of embezzlement].”

While Section 641 allows for the federal prosecution of government employees who embezzle public funds or other public property, it also allows for the embezzlement of contractors and other individuals who have been entrusted with the safekeeping of government assets. Violations of Section 641 carry statutory fines and up to 10 years of federal imprisonment.

18 U.S.C. Section 654 (Embezzlement of Private Funds By Federal Employees)

While 18 U.S.C. Section 641 addresses embezzlement of government property, Section 654 addresses embezzlement of private funds by government employees. Specifically, this federal embezzlement statute provides that federal employees can face prosecution for embezzling or wrongfully converting “money or property of another which comes into his possession or under his control in the execution of such office or employment, or under color or claim of authority . . . .” Similar to Section 641, Section 654 provides for the imposition of statutory fines (or a fine equal to the amount embezzled, whichever is greater), and up to 10 years of federal prison time.

18 U.S.C. Section 656 (Theft, Embezzlement, or Misapplication by Bank Officer or Employee)

18 U.S.C. Section 656 addresses embezzlement of funds held by banks and other private financial institutions. This federal embezzlement statute provides that:

“Whoever, being an officer, director, agent or employee of, or connected in any capacity with any Federal Reserve bank, member bank, depository institution holding company, national bank, insured bank, branch or agency of a foreign bank, or . . . [other covered entity] embezzles . . . or willfully misapplies any of the moneys, funds or credits of such bank, branch, agency, or organization or holding company or any moneys, funds, assets or securities intrusted (sic) to the custody or care of such bank, branch, agency, or organization, or holding company or to the custody or care of any such agent, officer, director, employee or receiver, shall be [guilty of embezzlement].”

While it may come as a surprise to some, the federal penalties for embezzling funds from a private bank are more severe than those for embezzling funds from the government. Under Section 656, bank officers and employees who are convicted of embezzlement can be sentenced to up to a $1 million fine and 30 years of incarceration in federal prison.

18 U.S.C. Section 666 (Embezzlement from Entities that Receive Federal Funds)

18 U.S.C. Section 666 addresses embezzlement from entities that receive $10,000 or more from any federal program (including any ” grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance”). Embezzlement charges under Section 666 carry statutory fines and up to 10 years of federal imprisonment. As outlined by the DOJ, to secure a conviction for embezzlement from a private entity that receives federal funds under Section 666, federal prosecutors must be able to prove that:

• “[T]here was a trust or fiduciary relationship between the defendant and the private organization or State or local government agency [that received federal funds];
• “[T]he property came into the possession or care of the defendant by virtue of his/her employment;
• “[T]he defendant’s dealings with the property constituted a fraudulent conversion or appropriation of it to his/her own use; and
• “[T]he defendant acted with the intent to deprive the owner of the use of this property.”

18 U.S.C. Section 669 (Embezzlement from a Healthcare Benefit Program)

18 U.S.C. Section 669 addresses embezzlement from federal healthcare programs such as Medicare, Medicaid, and Tricare. Under this federal embezzlement statute, embezzling, converting without authority, or misapplying any “moneys, funds, securities, premiums, credits, property, or other assets of a healthcare benefit program” is a federal offense that carries statutory fines and up to 10 years of federal imprisonment.

Again, these are not the only federal embezzlement statutes in Chapter 31, but rather an illustrative set of the statutes that DOJ prosecutors most commonly use to pursue embezzlement-related charges. When facing a federal embezzlement investigation or facing charges for embezzlement in federal district court, identifying the specific statutory allegations at issue is a key first step toward executing an effective defense.

Defense Strategies in Federal Embezzlement Cases

While there are several federal embezzlement statutes—and while each statute includes specific “elements” that DOJ prosecutors must prove to secure a conviction—there are several general elements to a federal embezzlement charge as well. Challenging the DOJ’s evidence of these general elements will prove to be an effective defense strategy in many cases.

For example, as noted above, one of the general elements of a federal embezzlement charge is intent—prosecutors must be able to prove that the defendant acted with “intent to deprive the owner” of the property at issue. If prosecutors cannot prove a defendant’s subjective intent, then the rest of the facts are irrelevant. Evidence of intent (like all other elements) is essential to the government’s case; and, if this evidence is lacking, then a conviction is unwarranted.

Along with defenses related to the elements of the specific embezzlement statute at issue, a defendant may also be able to avoid a conviction by raising constitutional issues related to the government’s investigation or prosecution. For example, if federal agents improperly seized evidence without a valid warrant, then this evidence may be inadmissible in court. Likewise, if federal prosecutors fail to disclose exculpatory evidence—whether willfully or inadvertently—this may justify a motion to exclude unfavorable evidence as well. There are also several types of procedural defenses that can lead to dismissal regardless of the substantive facts at hand.

In short, while embezzlement charges present significant risks, the federal embezzlement statutes, U.S. Constitution, and Federal Rules of Criminal Procedure also provide significant opportunities to defend against charges filed under all provisions of Chapter 31. For individuals who are under investigation or facing charges, engaging experienced counsel promptly is critical for preserving all available defenses.

Request a Complimentary Consultation with a Federal White-Collar Defense Lawyer

If you need to know more about the federal embezzlement statutes or the defenses to embezzlement charges under federal law, we encourage you to contact us promptly. To arrange a free and confidential consultation with a federal white-collar defense lawyer at Oberheiden P.C., please call 888-680-1745 or request an appointment online today.