Sources
Help build the largest human-edited directory on the web.
Submit a site - Become an editor
Wikipedia. Licensed under the GNU Free Documentation License.
Are you an expert in this subject? Join the discussion and share your knowledge at Wikipedia.org.
Embezzlement
From Wikipedia, the free encyclopedia
 |
This article does not cite any references or sources. (June 2007) Please help improve this article by adding citations to reliable sources. Unverifiable material may be challenged and removed. |
 |
| Criminal law |
|---|
| Part of the common law series |
| Criminal elements |
| Actus reus · Causation · Concurrence |
| Mens rea · Intention · Recklessness |
| Criminal negligence · Ignorantia juris… |
| Strict, Corporate & Vicarious liability |
| Crimes against people |
| Assault · Battery · Robbery |
| Sexual offences · Pimping · Rape |
| Kidnapping · Manslaughter · Murder |
| Crimes against property |
| Criminal damage · Arson |
| Theft · Burglary · Deception |
| Crimes against justice |
| Obstruction of justice · Bribery |
| Perjury · Malfeasance in office |
| Inchoate offenses |
| Attempt |
| Conspiracy · Accessory |
| Criminal defenses |
| Automatism, Intoxication & Mistake |
| Insanity · Diminished responsibility |
| Duress · Necessity |
| Provocation · Self defence |
| Other areas of the common law |
| Contract law · Tort law · Property law |
| Wills and trusts · Evidence |
| Portals: Law · Criminal justice |
Embezzlement is the fraudulent appropriation by a person to his or her own use of property or money entrusted to that person's care but owned by someone else. For instance, a clerk or cashier can embezzle money from his or her employer, a civil servant can embezzle funds from the treasury, or a pastor can embezzle funds from a church.
Embezzlement differs from larceny in two ways. First, in embezzlement, an actual conversion must occur; second, the original taking must not be trespassory. That is, the embezzler must have had the right to possess the item, and used that position of trust to convert the property. Embezzlement may range from the very minor, involving only a very small amount, to immense, involving very large sums and very sophisticated schemes.
Conversion requires that the theft seriously interfere with the property, rather than just relocate it. As in larceny, the measure is not by the gain to the thief, but the loss to the true owner. Embezzlement was statutorily created to deal with situations where theft could occur while the thief himself was innocent of larceny — typically because of the "lawful possession" element. That is, embezzlement fills in the blanks where larceny cannot.
Embezzlement sometimes involves falsification of records in order to conceal the theft. Embezzlers commonly steal relatively small amounts repeatedly over a long period, although some embezzlers steal one large sum at once. Some very successful embezzlement schemes have continued for many years before being detected due to the skill of the embezzler in concealing the nature of the transactions.
One of the most common methods of embezzlement is to under-report income, and pocket the difference. For example, in 2005, several managers of the service provider Aramark were found to be underreporting profits from a string of vending machine locations in the eastern United States. While the amount stolen from each machine was relatively small, the total amount taken from many machines over a length of time was very large.
Another method is to create a false vendor account, and to supply false bills to the company being embezzled so that the checks that are cut appear completely legitimate. Yet another method is to create phantom employees, who are then paid with payroll checks.
The latter two methods should be uncovered by routine audits, but often aren't if the audit is not sufficiently in-depth, because the paperwork appears to be in order. The first method is easier to detect if all transactions are by check or other instrument, but if many transactions are in cash, it is much more difficult to identify. Employers have developed a number of strategies to deal with this problem. In fact, cash registers were invented just for this reason.
Tax Consequences of Embezzlement
Proceeds of embezzlement must be included in gross income unless the embezzler repays the money in the same taxable year.[1] Congress has ruled that lawful as well as unlawful gains are includable in gross income[2] and that it is inconsequential that an embezzler may lack title to the sums he appropriates.”[3] When the embezzler returns the victim’s funds either directly or indirectly (i.e. restitution) then the embezzler may have a reduction in taxable income.[4]
However, if a corporate embezzler can show four things,[5] then they need not include the embezzled funds in income:
“Where a taxpayer withdraws funds from a corporation 1) which he fully intends to repay and 2) which he expects with reasonable certainty he will be able to repay, 3) where he believes that his withdrawals will be approved by the corporation, and 4) where he makes a prompt assignment of assets sufficient to secure the amount owed, he does not realize income on the withdrawals under the James test.”[6]
