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 5 Steps of Embezzlement Cases 

Michael Santos

Michael Santos

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Embezzlement or employee theft charges can be personally and professionally devastating. Follow our 5 Steps to obtain best possible outcome.

INTRODUCTION

Embezzlement or employee theft is the kind of criminal case that makes headlines. Whether the alleged theft is large or small, people want to know when someone in a position of trust misappropriates money or property. To make matters worse, the documentary evidence against the accused can be both straightforward and overwhelming. Everyone assumes the defendant is guilty. Everyone forgets that the accused is “innocent until proven guilty in a court of law.”

So what’s a person to do to defend against these charges?

Read about two recent embezzlement or employee theft cases below–a conviction and a dismissal. Then, read the 5 essential steps to consider when dealing with embezzlement or employee theft charges.

*Pro Tip: Embezzlement or employee theft is a serious charge that can be personally and professionally devastating. Those involved in any embezzlement or employee theft case must be proactive to mitigate the negative personal and professional consequences.

DISCUSSION

Frequently, employees and business executives receive financial authority at their place of business. Companies usually give trusted employees access to bank accounts, vendor relationships, or corporate credit cards. These employees and executives may face personal challenges or pressures in their personal lives that can affect their behavior and cloud their judgment. Many people who do not view themselves as “criminals” still find themselves accused of white-collar crimes, including embezzlement or employee theft.

As noted, embezzlement or employee theft typically occurs when someone steals money from an employer or business partner. Embezzlement is different from other types of theft or fraud. The employee has company permission to handle the company’s property but does not have permission to take it for personal use. Instead, the employee uses the position of trust granted by the company to take the property. In other theft or fraud cases, the employee never had permission to handle the property at all.

Under federal law, embezzlement is punishable by up to 20 years in federal prison and $50,000 in fines. Embezzlement or employee theft is also subject to state laws.

For added context, let’s look at two recent case scenarios, a conviction and a dismissal.

Embezzlement or Employee Theft Case: A Conviction

In May 2021, the Department of Justice (DOJ) announced the guilty plea of Arthur Penn, an executive with a labor union who embezzled $380,000 for personal travel and expenses. Penn served as the chairman of the Fraternal Order of Police Defense Protective Service Labor Committee. The union represented federal law enforcement officers protecting the Pentagon in Arlington, VA.

According to the DOJ, Penn’s embezzlement scheme took place from 1999 to 2015. Penn’s job duties included filing reports on finances to the union members regularly. Operating within the ordinary course of business, Penn would have to submit accurate financial statements to the Department of Labor’s Office of Labor-Management Standards (DOL). Instead, Penn filed misleading and fraudulent reports. Penn designed misleading and fraudulent reports to conceal his illegal activities. Penn siphoned off the unions’ bank accounts using cash transactions. The cash transactions assisted Penn in avoiding legitimate financial records. Prosecutors claimed that had Penn submitted accurate financial records, DOL employees would discover his embezzlement scheme.

As a result of his actions, Penn pled guilty to one count of wire fraud last May. The crime of wire fraud requires using some form of electronic communication in the commission of a crime. Examples of electronic communications include phones, fax, an email, an SMS message, or even a social media post.

A defendant convicted of wire fraud can face up to 30 years in federal prison. Penn awaits sentencing at this time.

Now that Penn has pled guilty, he will undergo a presentence investigation with a probation officer. The probation officer will complete a presentence investigation report (PSI) that the court will review before sentencing. The PSI is a critical piece of the sentencing puzzle. It includes details of the current offense and loss amount, and criminal history, if any. The PSI describes the defendant’s family history, education, employment record, military service, financial condition, and health. In short, it summarizes for the court background information relevant to determine an appropriate sentence.

Anyone in Penn’s position would be well-served by crafting an effective sentence mitigation strategy. Prison Professors, an Earning Freedom company, works alongside (not in place of) criminal defense attorneys to help clients proactively navigate through the federal sentencing process. Sentence mitigation strategies before and after sentencing are our specialty.

*Pro-Tip: Remember to consult criminal defense counsel for legal advice regarding any court case, including for the sentencing hearing.

Sentence mitigation strategies help to show the sentencing judge the defendant’s acceptance of responsibility and remorse. We help make the case that the defendant deserves leniency. The defendant’s job at sentencing includes powerful self-advocacy, demonstrating to the judge the lessons learned from the experience, the steps taken to make things right, and showing empathy for the victims. If possible, some defendants might even attempt to pay restitution to victims before the sentencing hearing. Of course, paying restitution is not always a feasible strategy.

Embezzlement or Employee Theft Case: A Dismissal

Conventional wisdom is that embezzlement or employee theft cases are slam dunks for the prosecution. Still, dismissals can and do happen. For example, in a reported case out of Pennsylvania, prosecutors charged a high-end Philadelphia restaurant manager with embezzlement under state law after ownership discovered money missing from the business. The manager could not account for the missing funds.

Ultimately, this case hinged on the prosecutor’s burden of proof. In every criminal case, prosecutors have to prove guilt beyond a reasonable doubt. Prosecutors have to come forward with sufficient evidence that someone committed a crime and that someone is the defendant at hand.

In the Philadelphia case, the defendant exposed the prosecution’s failure to establish the exact point in time the alleged funds went missing. Defense counsel argued that if the prosecution could not prove the precise time the funds went missing, it was fundamentally impossible to convict his client of the crime beyond a reasonable doubt. The judge agreed, and the restaurant manager was found not guilty of all charges.

The restaurant manager used an insufficient evidence defense, which applies when the prosecutor is missing critical information like the timetable of events or the paper trail. Indeed, press reports suggest that insufficient evidence is grounds for dismissal in approximately 40% of federal embezzlement cases.

*Pro-Tip: Remember to discuss all available legal defenses with criminal defense counsel.

Other defenses typically raised against embezzlement or employee theft charges include:

  • Duress: This may apply when defendants can show that either they embezzled or faced a significant risk of loss, such as a job loss.
  • Entrapment: This may apply when the government coerces someone into embezzling funds they would not have taken otherwise.
  • Lack of Criminal Intent: This may apply when defendants believed the property was legitimately theirs.
  • Incapacity: This may apply, for example, when defendants are under heavy medication at the time of the theft.
  • Repayment: While not technically a defense, those who can pay back the theft may use this to mitigate exposure.

It’s important to note that the facts and circumstances related to any of the defenses mentioned above could be beneficial for sentencing mitigation purposes.

5 Steps to Follow in an Embezzlement or Employee Theft Case

Anyone dealing with embezzlement or employee theft charges should take advantage of the following 5 steps:

Step 1: Be proactive and get informed. Learning about all the stages of the criminal process — from investigation to sentencing, including sentence reductions and post-conviction strategies (such as early release) — can make a significant difference in the overall results.

Step 2: Discuss with counsel and sentencing mitigation consultants all available defenses to embezzlement or employee theft. Even defenses that may not result in the dismissal of the charges altogether can make a significant difference at the time of sentencing and beyond. For example, the judge may consider at sentencing that a defendant was under the influence of alcohol, drugs, or medications at the time of the illegal activity. The judge may also recommend that the defendant complete a residential drug abuse program while incarcerated (RDAP). RDAP reduces a prison term for up to 12 months.

Step 3: Add experienced sentencing mitigation consultants to the defense team prior to  the presentence investigation and sentencing hearing. The options for probation or reduced sentences are much more limited after the sentencing hearing is over. In addition to the lawyer’s job for the sentencing hearing, there are significant steps individual clients can take to help the sentencing judge see them as worthy of leniency. Clients who take proactive measures in advance of the sentencing hearing tend to see much better outcomes. We recommend working with experienced mitigation experts on strategies for the sentencing hearing, including the presentence investigation report, as early as possible.

Step 4: Work with sentencing mitigation experts on a post-sentencing strategy. Even after the sentencing hearing, there are strategies available to lower the time spent away from home in federal prison. Our team is familiar with all the Federal Bureau of Prisons jobs and programs to help inmates gain skills while incarcerated, earn programming credits, and return home sooner.

Step 5: Prepare for life after the case. There is a future after dealing with embezzlement or employee theft charges. No doubt, a criminal investigation or prosecution can be very disruptive. However, people can and do emerge from the federal criminal justice system and rebuild their lives by executing a carefully crafted personal plan for success. We work with clients to help them define success, set their priorities, and create a self-driven plan for life after a criminal case.

CONCLUSION

People dealing with embezzlement or employee theft charges should be proactive to mitigate the short and long-term negative impact. Risks and consequences vary case by case. We guide clients through the 5 steps that will help them achieve better outcomes.


If you have any questions or are uncertain about any of the issues discussed in this post, schedule a call with our risk mitigation team to receive additional guidance.

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