Federal Embezzlement Charges: Defending Against Theft Allegations.

Federal embezzlement is a statutory offense with several different variations. When defending against embezzlement allegations, the first step is to determine which statute applies (if any). Federal prosecutors generally need to establish that you:

• Had lawful possession of the funds in question;
• Exercised unauthorized control over the funds; and,
• Acted with criminal intent (i.e., acting with the intent to defraud the rightful owner).

2. What Is the Difference Between Embezzlement and Ordinary Theft?

The key difference between embezzlement and ordinary theft (such as larceny) is that, with embezzlement, the initial possession of the funds was lawful. In ordinary theft, the defendant never had lawful possession. Because federal embezzlement requires unlawful use of lawfully-possessed property, embezzlement defenses focus on challenging the government’s allegations concerning:

• Property ownership, authorization, and entitlement;
• Control, appropriation, and conversion;
• Fraudulent intent; and,
• Losses suffered by the rightful owner(s).

3. How Can a Federal Embezzlement Defense Challenge Allegations of Criminal Intent?

While federal embezzlement prosecutors are generally required to prove fraudulent intent, a good-faith belief in entitlement is also enough to raise a substantial doubt about the prosecution’s case. Even if you had no actual authority to use the property, the good-faith belief that you were entitled to use it, or the good-faith belief that the rightful owner(s) consented to the use, can defeat a criminal charge.

4. How Can a Federal Embezzlement Defense Challenge Allegations of Unauthorized Appropriation or Conversion?

Similar to allegations of criminal intent, allegations that you illegally took or illegally used the funds you had in your possession may also be vulnerable to challenge. For example, you may have been granted permission by the rightful owner to use the property. Or, you may have been acting within the scope of your authority. As a result, the government’s allegations of unauthorized appropriation or conversion may not be supportable.

Which federal statutes and thresholds decide whether conduct is federal embezzlement?

1. Are There Differences Between the Various Federal Embezzlement Statutes?

Yes. While the term “embezzlement” is often used as a shorthand for various forms of criminal theft and fraud, in the federal system, it refers to a series of different crimes that each trigger different elements. Because the specific statute charged dictates the elements of the offense (and the potential punishments), an important step in developing an embezzlement defense is to determine if the specific statute identified in the indictment is applicable.

2. What Is the Federal Embezzlement Statute for Banks, Credit Institutions, and Other Financial Entities?

There are several different federal embezzlement statutes that apply in bank cases. Depending on the allegations involved, prosecutors may pursue charges under several different federal embezzlement statutes, including:

• 18 U.S.C. Section 656, which deals with embezzlement by bank officers and employees.
• 18 U.S.C. Section 657, which deals with embezzlement from banks, savings and loan associations, and similar financial institutions.
• 18 U.S.C. Section 666, which addresses theft or bribery involving programs receiving federal financial assistance.

3. When Does Theft Involve a Program Receiving Federal Financial Assistance?

Under 18 U.S.C. Section 666, the statutory circumstance exists when the organization, government, or agency receives benefits in excess of $10,000 under a federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of federal assistance in any one-year period. Note that Section 666 also applies if the program receives federal financial benefits from a federal grant, or if the organization receives federal benefits through a federal loan.

What Records and Pre-Indictment Decisions Determine Whether Suspicious Transactions Are Attributed to You?

1. What Records Should a Federal Embezzlement Defense Lawyer Assess?

If you are under investigation for embezzlement, your lawyer should review all pertinent records. This may include emails, software logs, approval histories, text messages, bank metadata, and other relevant documentation. All of these can help explain the timing, nature, or purpose of suspicious transactions, and some of them may help establish a lack of criminal intent. With this in mind, records are extremely important because the government’s case will depend on establishing your intent.

2. Can You Challenge Allegations of Embezzlement Even When There Is Evidence of a Suspicious Transaction?

Yes. While suspicious transactions can look like embezzlement, they can also be attributed to accounting mistakes, software glitches, timing gaps, and a wide range of other factors. In many cases, transactions that look like evidence of embezzlement are, in fact, non-criminal.

3. What Attribution Challenges Can a Federal Embezzlement Defense Present When Someone Else Had Access to Your Bank Account or Your Computer?

If a third party had access to your bank account or computer, this is another significant challenge to attribution. For example, if the suspected transactions involved shared credentials, including shared passwords or using a single account to perform numerous functions, this can complicate the government’s case as well. In many cases, this may make it impossible for the DOJ to definitively prove attribution.

4. How Can You Challenge Accusations Based on Reports from Internal Accusers?

When internal accusers provide evidence of embezzlement, this can lead to additional issues. It is important to consider the motivations of those reporting the transactions, as they may involve:

• Employment-related conflicts;
• Disciplinary issues;
• Succession planning; or,
• Compliance audits.

5. Can You Intervene Before an Indictment Is Filed?

Yes. Intervening before an indictment is filed in an embezzlement case, can be an important defense strategy. While this may be risky (in some cases it can reveal information you are not yet aware of), this is often a key part of trying to influence federal prosecutors’ charging decisions, negotiations about the loss amount, or efforts to avoid charges altogether.

6. What are the Risks of Interviewing with Federal Embezzlement Prosecutors or Agents?

Going into an interview with federal prosecutors or agents unprepared is extremely risky. Prosecutors are often able to take advantage of any ambiguity to assert that you made false statements (18 U.S.C. 1001). Even with the best intent, an uninformed interview can result in accusations of attempting to obstruct the investigation, which can then serve as additional grounds to bring criminal charges against you.

Spodek Law Group takes federal matters nationwide, coast to coast, and runs a fully online client portal so a case can be handled from anywhere.

When can federal embezzlement allegations be declined, dismissed, reduced, or acquitted?

1. Are All Federal Embezzlement Cases Resolved through Plea Agreements?

No. While most federal cases are resolved through plea agreements, federal prosecutors and defendants may go to trial in any federal embezzlement case. Federal cases involving theft and fraud can proceed from an indictment to arraignment, discovery, pretrial motions, plea negotiations, or trial.

2. How Can You Seek a Pre-Trial Dismissal in a Federal Embezzlement Case?

If you are facing a federal embezzlement indictment, your lawyer should promptly seek a pretrial dismissal. This is accomplished by filing motions under Federal Rule of Criminal Procedure 12 (and similar rules under the Federal Rules of Criminal Procedure). If a court dismisses the case, this prevents the government from proceeding unless it can convince a judge to reconsider, which can happen in a limited number of circumstances.

3. How Can a Defendant Seek a Judgment of Acquittal after a Federal Embezzlement Trial?

While federal judges generally defer to jury verdicts, Federal Rule of Criminal Procedure 29 authorizes a judge to enter a judgment of acquittal if the evidence at trial does not support a conviction on any charged offense. This can lead to an acquittal on all, some, or none of the counts charged in a federal embezzlement indictment.

4. What Is the Difference Between a Declination and a Dismissal?

With federal embezzlement allegations, a “declination” refers to a prosecutor’s decision not to commence federal prosecution. “Dismissal” is a decision made either by the court or, with leave of court, by the government to drop the case after the government has already charged the defendant(s).

5. When Does a Plea Deal Call for a Reduction in Charges?

If a plea deal reduces the charges against a federal defendant, the reduced offense(s) must still correspond to the evidence. For example, if the DOJ declines to pursue an embezzlement charge, the replacement charge might be one involving related offenses. This is common in embezzlement cases where prosecutors cannot prove that the amount of money involved exceeds the federal threshold for an embezzlement charge.

How do loss calculations, restitution, forfeiture, and collateral consequences change the stakes?

1. How Can Federal Investigations Overstate Financial Losses?

When conducting financial investigations, prosecutors may fail to discount duplicate entries or chargebacks. When this results in an overstatement of losses, the government’s prosecution will be flawed (and the financial implications for a defendant will be substantial). In some cases, the real financial loss may not exceed the statutory minimum to support federal charges; while in other cases, reducing the loss amount can lead to a substantial reduction in sentencing exposure.

2. How Can Financial Losses be Recalculated to Reduce a Federal Defendant’s Sentencing Exposure?

In embezzlement cases involving theft or other forms of financial fraud, disputed losses may be recalculated using records and data from the target organization. As a result, in some cases, the actual financial losses may not exceed the statutory minimum to support federal embezzlement charges. In these cases, reducing the loss amount can substantially reduce a defendant’s potential sentencing exposure.

3. What Are the Potential Consequences of a Federal Embezzlement Conviction?

In federal embezzlement cases, criminal convictions can carry a wide range of potential consequences. These include:

• Incarceration (up to 30 years under some federal embezzlement statutes);
• Fines;
• Restitution obligations; and,
• A permanent criminal record.

All of these can seriously impact the defendant’s future.

4. What Other Collateral Effects Can Arise from an Embezzlement Indictment?

Apart from the potential for a conviction at trial, embezzlement indictments and convictions can trigger other collateral effects as well. In addition to criminal penalties, these effects may include:

• Loss of professional licensure;
• Loss of employment;
• Loss of credit access and housing options; and,
• Impact on immigration status (including potential revocation of visas or deportation).

These outcomes can be devastating, and they can even lead to lifelong repercussions.

5. How Much Does it Cost to Defend Against a Federal Embezzlement Charge?

Due to the uncertainty involved, we cannot provide a reliable estimate of the cost of a federal defense based on the supplied pages. Our team’s attorney fees vary based on the circumstances, and the complexity and costs of a federal embezzlement defense are not limited.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 888 348 8028 to speak with our team.