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The Consequences of An Allegation of Embezzlement: Hire the Right Houston

White Collar Crimes Attorney

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.

Embezzlement Defined

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.

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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

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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

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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

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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

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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

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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.

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The Consequences of An Allegation of Embezzlement: Hire the Right Houston White Collar Crimes

Attorney

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Houston Lawyer Charles Johnson can be reached 24 hours a day, 7 days a week. Call us at 713-222-7577 or toll free at 877-308-0100.

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