What is Embezzlement?
Find out what to do when your partner is dipping into the till.
Page 1 of 2
Hello, and welcome to Legal Lad’s Quick and Dirty Tips for a More Lawful Life. I’m your host, Adam Freedman.
But first, your daily dose of legalese: This podcast does not create an attorney-client relationship with any listener. In other words, although I am a lawyer, I’m not your lawyer. In fact, we barely know each other. If you need personalized legal advice, contact an attorney in your community.
Is this Embezzlement?
This week: embezzlement. Eric writes that his business partner “doesn’t think that the money he “borrowed” is embezzlement,” but Eric obviously thinks otherwise, and asks me to shed some light on the topic.
Eric, I’ll be happy to do that. But I have to ask you a question: why are you still in partnership with this guy? Oh well, none of my business I guess. The short answer is that if your partner is taking company money for his own use without proper authorization, he may be embezzling, even if he thinks it’s only a “loan” and even if he hopes to pay the money back some day.
What Is Embezzlement?
Embezzlement is the dishonest misappropriation of money or property by a person who gained access to the money or property by virtue of his employment. In other words, it’s a fancy legal term to describe the phenomenon known as “dipping into the till.” The word embezzlement comes from the old Anglo-French word enbesiler, meaning “to carry off”.
Believe it or not, the law of embezzlement was originally aimed at light-fingered servants in English country houses. There had been a gap in the law: “larceny,” which was the traditional law of theft, required that the thief obtained the goods illegally. But theft by a servant did not fit the technical definition of larceny because the servant did not initially gain possession of the goods illegally. The butler, for example, was perfectly entitled to handle the silver for the purpose of polishing it. Unfortunately, he did not always put it back.
In the modern business world, embezzlement covers hundreds of situations, from the cashier skimming off the top, to the executive who diverts millions to an offshore account.
There are certain federal embezzlement laws, but more often the crime is covered by state laws. There are, of course, variations among state and federal laws, but generally, to prove embezzlement, a prosecutor has to show that the employee had possession of the goods or funds because of the employee’s position, or that the employee had the authority to exercise substantial control over the goods or funds.