Embezzlement or an Accounting Error?
It’s one thing to make an error that leads to the books being off by a few dollars, but the stakes are a lot higher if you’re accused of something that looks like embezzlement.
Typically classified as a white-collar crime, embezzlement is a complicated offense. It describes a situation where a person had lawful possession of something, but engaged in unlawful acts. The timing, intent, and nature of the alleged misconduct are key issues, which is you should rely on an embezzlement lawyer for help in fighting the charges.
Generally, embezzlement encompasses elements of theft crimes and fraud. The specific definition of embezzlement is misappropriation of property by someone who initially had proper, legal custody.
There are certain essential elements to secure a conviction, so a prosecutor must prove:
- There was the existence of a fiduciary relationship between the parties, which may be individuals or entities
- One party placed or entrusted property to the other, such that the possession of it was lawful
- Sometime thereafter, the person or entity in possession fraudulently converted the proper for their own use
- The offender converted the property with an intent to permanently deprive the rightful owner of using it.
Embezzlement is most common in the corporate or employment settings, where an employee is entrusted with company property. However, it can occur in the context of any principal/agent or fiduciary relationships, such as the administrator of a trust or estate.
Acts of embezzlement may include:
- Using funds, such as spending petty cash
- Selling property to a third party
- Giving property away
- Destroying or damaging property to the point that it’s unusable
- Permanently withholding property from the rightful owner.
Accounting Mistakes and Proving Intent
While each of the four elements mentioned is essential to the crime of embezzlement, one in particular addresses an accounting mistake: Intent. By definition, a mistake is an inadvertent error in judgment.
When it occurs in the context of accounting, there may be unfortunate consequences that result in the conversion of the principal’s property. However, conversion without intent is not embezzlement. Unless the prosecutor can prove that your purpose in handling the property was to convert it while it was in your lawful possession, you don’t have the required intent.
Defenses to Embezzlement
Besides the lack of intent that may occur due to an accounting mistake, there are other strategies for fighting embezzlement charges. The first is to identify and attack weaknesses in other areas of the case.
For instance, you may contest that there was a fiduciary relationship, or dispute conversion to the extent of depriving the owner. When it’s your turn to defend yourself, your lawyer may also present evidence showing you:
- Converted the property for legitimate business purposes, such as paying a bill
- Were under duress, believing that you were at risk of harm or loss unless you took action
- Converted the property under circumstances indicating entrapment, in which you were coerced into doing something that you wouldn’t through your own free will.
Retain an Embezzlement Attorney Right Away
Simple accounting mistakes present little cause for concern, but you’ll need experienced counsel if you’re facing criminal charges for embezzlement. A conviction could mean incarceration, hefty fines, and other penalties, especially if the circumstances lead officials to charge you with a federal crime.
Even if you have extensive experience in accounting principles, you put your rights at risk if you don’t get legal help to protect your interests.
Contact an embezzlement lawyer with Worgul, Sarna & Ness Criminal Defense Attorneys right away to learn more about potential defense strategies. Call (412) 281-2146 to set up a free and confidential consultation.
What is a White Collar Crime?
The term “white-collar crime” conjures up images of corporate sharks in fancy suits as they empty the bank accounts of unsuspecting victims. While it makes for great TV, there’s little truth to it. Someone accused of a white-collar crime is more likely an average person, usually seeking gain through fraud.
These charges can happen to anyone with access to someone else’s finances. This can mean accountants, bookkeepers, financial planners, or someone in charge of handing out company funds. Whatever the case, allegations are serious and convictions can ruin careers and lives.
Your situation may seem grim if you’ve been arrested on white-collar charges, but it’s important to remember that you have rights and these cases require a lot of technical evidence. The prosecution must prove guilt beyond a reasonable doubt. Plus, there may be defenses and strategies available. Because of the complicated nature of white-collar cases, it’s wise to rely on an experienced criminal fraud defense attorney.
White Collar Crimes – An Overview
White-collar crimes usually focus on financial gain, often through nonviolent, deceitful methods. They typically involve some element of misrepresentation or other misconduct as part of an overall scheme to defraud.
Though the specifics will vary based on the exact offense, the elements that a prosecutor must prove are:
- The accused made a material statement or provided information to another person, knowing it was false;
- Fraudulent statement or information was intended to persuade a victim to give over something of value, such as money, contractual rights, assets, or other items;
- Victim relied on the statement in handing over valuables; and,
- That person would never have done so, knowing the truth of the matter.
Federal White Collar Crimes
By their nature, white-collar offenses often qualify as federal crimes because the misconduct tends to cross state lines through the use of telecommunications networks. By making a phone call, sending an email, faxing documents, or accessing the internet, the accused individual may face federal sentencing for a conviction.
The fines, jail time, and other punishments are much more severe as compared to the laws of most US states. Depending on the specific crime, prior criminal history, number of victims, and other factors listed in the federal sentencing guidelines, punishment may include:
- Fines ranging from $100,000 and up, on a per count basis;
- Imprisonment of up to 30 years or more; and,
- Restitution, which means reimbursing victims for their losses, plus interest.
Types of White Collar Crimes
There are numerous scheme to defraud that would be considered white-collar, usually classified by the type of victim:
Government: Individuals may make false statements in dealing with federal, state, or local government bodies, potentially leading to charges for bankruptcy fraud, tax evasion, health care fraud, and others.
Bank and Financial Institutions: Many crimes in the financial sector include check kiting, money laundering, mortgage fraud, forgery, and counterfeiting.
Insurance Companies: It’s against the law to make false statements to home, auto, business, or other insurers in two contexts:
- Executing documents to purchase a policy; and,
- Making a claim for losses in connection with policy coverage.
Corporations: The most common white-collar crimes in the corporate world are insider trading and embezzlement, where an individual having legal custody of someone else’s property converts it to their own use. An example would be an employer entrusting an employee to deposit some petty cash, but the worker pockets the funds instead.
Private Individuals: Fraud crimes in this category may include identity theft, credit card fraud, bribery, extortion, and Ponzi or pyramid schemes.
Get Legal Help ASAP
White-collar offenses encompass a wide range of activities, and the sentences are harsh. Under the circumstances, you need skilled legal representation to explore all potential strategies for fighting the allegations. With a contact a fraud defense lawyer on your side, it may be possible to obtain a favorable outcome.
At Worgul, Sarna & Ness Criminal Defense Attorneys, we are highly experienced in the technical aspects of these cases and have a long track record of success defending white-collar charges in and around Pittsburgh, PA. Know what you’re up against and how to effectively deal with it.
Small Business Embezzlement – Common QuickBook Asset Manipulation Tricks
Thanks to its user-friendly design and robust capabilities, QuickBooks has become an indispensable tool for many small and medium-sized businesses. Unfortunately, its ease-of-use also makes it easy to manipulate. Using QuickBooks to embezzle funds is surprisingly common.
If you’ve been accused of using QuickBooks to misappropriated company funds or charged with embezzlement in Pittsburgh, contact Worgul, Sarna & Ness, Criminal Defense Attorneys, LLC today. We can help you through every part of the legal process to bring about a favorable resolution. Call our office today at (412) 281-2146 or fill out our online contact form.
What is Embezzlement?
To understand how QuickBooks is used in embezzlement crimes, it’s first helpful to recognize that embezzlement includes more than just taking cash from your employer. Embezzlement can be charged in any situation where an employee misappropriated money or other property entrusted to them by their employer.
Embezzlement can include:
- Inflating invoices or sales records to generate higher commissions
- Claiming false expenses
- Diverting funds from corporate accounts to your personal account
If they have the right privileges, QuickBooks allows users to easily manipulate invoices, ledgers, and even checks to embezzle money from their employers.
Creating Fictitious Vendors
A common embezzlement scheme involves creating fictitious vendors that allow the user to divert funds to their account. If the user has access to the purchases and accounts payable function, they can set up a fictitious vendor. They then create an invoice for goods or services and then uses corporate funds to pay the vendor. Obviously, the vendor doesn’t get paid – the funds are diverted to the embezzler.
“Print on Check” Schemes
QuickBooks allows users to print a different name on the check than the actual vendor by way of the “print on check” feature. As a result, the user could print a check made payable to themselves, while the payment in QuickBooks would appear to be to a legitimate vendor.
Altered Payee Schemes
This is similar to the print on check scheme. The user alters the name on the check in order to divert the funds from a legitimate vendor. This may entail changing the name to something very similar so that it isn’t immediately apparent. For example, the user may change the name from AAA Office Services, Inc. to AAA Office Service, LLC.
It’s also important to note that you can be charged with embezzlement even if you didn’t keep the funds. Finally, some states do not have a separate embezzlement statute – embezzlement is simply charged as theft.
Phony Refund Schemes
Embezzlers can also use QuickBooks to facilitate a refund scheme. This involves overbilling vendors so that the user can then issue a refund for the amount they overpaid. However, the refund never gets to the vendor but goes to the embezzler instead.
Ways to Reduce the Risk of QuickBooks Embezzlement
While QuickBooks may make it easy for an employee to embezzle funds, most of these schemes can be prevented with some basic diligence.
- Users should have separate login credentials. Sharing login information makes it easy for someone to hide what they are doing.
- Restrict access. Not every employee needs full access to all QuickBooks functions. You can customize access for each employee. Ideally, you do not want the same person to be able to enter vendor information, enter bills, and make payments. You can reduce the risk of embezzlement considerably by assigning these tasks to users with restricted access.
- Regularly review the audit trail and make sure users cannot enable the “condense data” utility. The audit trail will reflect all transactions and any modifications to those transactions, making it possible to detect fraud. However, be aware that “condense data” utility in QuickBooks will remove any condensed transactions from the audit trail. As a result, you should make sure that very few users have access to this feature.
- Close the Books. Many embezzlers will try to hide what they are doing by adding transactions to past accounting periods. Make sure all financial transactions are closed at the end of each month.
Finally, the best guard against embezzlement is to make sure your business’s books are always up-to-date and in order and you have strong internal controls. Disorganization and poor oversight is fertile ground for embezzlement.
Work with an Experienced Lawyer if You’re Accused
Since poorly managed accounting can lead to embezzlement allegations, it is important to contact a skilled and knowledgeable attorney with a background in white collar defense if you’re ever questioned or charged. Embezzlement can lead to serious criminal penalties and devastating consequences if your livelihood depends on working with numbers.
Take these charges seriously from the start and consult Worgul, Sarna & Ness, Criminal Defense Attorneys, LLC as soon as possible. Call (412) 281-2146 or fill out our online contact form to set up a free, initial consultation.