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New York Criminal Defense Blog

Understand embezzlement if you are facing accusations

People who are put in positions of trust over a company's assets are expected to behave in an ethical manner. This includes everyone from cashiers at a grocery store to executives who handle multi-million-dollar accounts for clients. It is imperative that these individuals handle the money in a suitable manner.

There are times when mistakes are made. These may be misconstrued as a criminal act, which can lead to criminal charges. If you are facing accusations of embezzlement, there are a few things you need to know.

Campaign finance and the appearance of fraud

People in New York who may either run for public office themselves or who may choose to contribute to the political campaigns of others know that there are many laws governing the financing of political campaigns. As explained by the National Conference of State Legislatures, these laws cover three distinct areas, one of which is the public financing of campaigns. Other laws pertain specifically to the required disclosures associated with contributions that are made. The third type of law governs the caps on contributions.

In addition to attempting to prevent any type of fraud or corruption with a political campaign, campaign finance laws also aim to avoid a transaction or relationship appearing as some attempt at corruption or fraud. This is an important part of the laws because what may look like corruption may not actually be but the line between the two can at times be very thin.

Embezzlement allegations against former CFO dropped

When people in New York hear or read stories about financial professionals being accused of illegally or unethically obtaining or using company funds, they may automatically assume the person is guilty or has little to no option to defend themselves. That is certainly untrue as the justice and legal system is set up to allow all defendants the right to prove their innocence. Sometimes, charges can come to be dropped in what may seem to some by unusual circumstances.

A recent case involving a former hedge fund chief financial officer provides a good example of this. According to the Institutional Investor, the woman was hired in 2016 and reported directly to the chief executive officer. The company eventually initiated a claim against her alleging that she stole nearly $15,000 from the company via checks written to herself.

Defining money laundering

Most in New York are likely familiar with the term "money laundering" and might even have a general understanding of that it means: taking supposedly "dirty" money and making it appear clean. "Dirty money" is typically that which is gained unlawfully, and indeed, it is illegal to try and attempt to conceal its origin by making it appear as though one secured it through legitimate means. Yet the exact details of what activity actually qualifies as money laundering might be unknown to most. 

The federal jury instructions issued by the U.S. Department of Justice define money laundering as the attempt to conduct financial transactions or transfers (both to account inside or outside the U.S.) with money known to be the proceeds of illegal activity for any of the following purposes: 

  • To promote or proliferate further unlawful activity
  • To avoid incurring tax liabilities
  • To disguise the source or true ownership of the assets in question
  • To avoid reporting a transaction as required by federal or state law

Reviewing the issue of return fraud

You hear the word "fraud," and immediately may think of nefarious characters looking to steal millions from businesses or private citizens in New York. In reality, however, fraud accusations can be far-reaching. The Federal Bureau of Investigation defines it as "the intentional perversion of the truth for the purpose of inducing another person or other entity in reliance upon it to part with something of value or to surrender a legal right." This potentially broad application has led many of those that we here at Sapone & Petrillo, LLP have worked with to be unwittingly accused of conducted fraudulent activities. One such activity that is becoming increasingly prevalent is return fraud. 

You purchase an item from a seller or retailer with the expectation that you have the right to return it. Recent years, however, have seen businesses suffer from people taking advantage of return policies by either purchasing products, using them and then returning them claiming they were defective, or even going so far as to steal items and then returning them asking for refunds. A seller or retailer might easily mistake your attempt to return a product as this type of fraud if it questions your motives for returning it. 

Organized crime can lead to a host of criminal charges

Organized crime has a long history in this country. It has always been a portal for illegal drugs and financial crimes. The history of these organizations is checkered across the country. One thing that is fairly common is that the activities cross state lines. This means that the criminal charges are often federal.

People who are accused of being involved in organized crime could be facing a host of charges. Each has to be addressed individually since no two cases are exactly alike.

Is employing unauthorized aliens illegal?

The common assumption amongst most in New York is likely that it is impossible to "accidently" commit a crime (particularly a federal one). Thus, claims if innocence to criminal activity are often met with great deal of skepticism. However, there are indeed where circumstances unbeknownst to you could indeed invite criminal scrutiny, especially if you are in the business of employing the others. 

For example, you may have not been aware of the fact that employing an illegal alien is indeed a federal crime. Sure enough, Section 1908 of the U.S. Attorney's Criminal Resource Manual states that it is illegal to hire an unauthorized alien or to continue to employ one whose immigration status (at least with respect to his or her employment) had changed. Furthermore, you cannot refer employees (for a finder's fee) to other companies if those employees are in the U.S. illegally. Doing so could make you subject to significant fines and penalties. 

Answering the question of intent

Many in New York may view the question of you being accused of criminal activity as one that is fairly cut-and-dry: either you did commit an offense, or you did not. However, such a simplification does not always apply (particularly in cases involving perceived "white collar crimes" such as embezzlement). Many come to us here at Sapone and Petrillo, LLP having been accused of such a crime wondering how they landed in such a situation. After all, if your actions in managing another's property were genuine, how can you then be accused of a crime of this magnitude?

It all may come down to a question of intent. In defining "embezzlement," the U.S Department of Justice states that an intent on your part to deprive another of the benefits or use of his or her property musy be proven along with you converting or appropriating said property for own benefit. Say that a friend entrusted you with the management of some of his or her assets (with the supposed understanding that you would assume ownership of them after a certain time or certain conditions were met). It might be difficult proving that you intended to embezzle said assets if such an understanding was indeed in place. 

Participation in husband's ponzi scheme lands woman in jail

The popular representation of white collar crimes may often be that of a high-tech scheme concocted and carried out by sophisticated, "James Bond"-type perpetrators. Yet in reality, such offenses are typically committed by ordinary people caught up in fraudulent schemes. In fact, such crimes can often seem so unextraordinary that they could realistically be going on right under people's noses without them knowing about it. If and when such activity is brought to light, however, how those who find out about it react could potentially play a role in assigning culpability in the future. 

This point is clearly illustrated in a recent case involving a Minnesota woman. In late 2016, she allegedly discovered that her husband's options trading business was actually a ponzi scheme. Instead of investing his client's money, the man had used it to fund their lifestyle. Rather than insisting that he stop, however, she supposedly helped him carry on the scheme, sending reassuring emails and texts to clients while also helping to bring in new investors. In all, the couple reportedly stole over $1 million from 51 people. 

Authorities accuse man of running massive investor fraud scheme

Perhaps one of the reason why so many are seemingly quick to adjudicate those accused of crimes in New York as being guilty in the court of public opinion is that they view criminal activity as being largely "black-and-white" (either one did commit a crime, or he or she did not). Yet in many cases, it is not that simple. Cases involving fraud, for example, can often arise due to simple mismanagement or judgment errors (such as offering bad investment advice or inadvertently comingling funds). In these cases, the actions of the accused should be closely examined to see if there truly was any criminal intent involved.

If it is shown that there may be, then one may have to answer for it. That may be what is in store for a Texas man after he was arrested on charges of fraud and money laundering. Authorities say that the man lived a luxurious lifestyle, which they now believe may have been supported by inappropriate funds siphoned away from investor accounts for individual use. The charges against the man claim that he purposely embellished cost and production estimate, prompting investors to vastly overpay on projects whose profits he then largely diverted to himself, leaving them with in the way of returns. He is also believed to have had millions in personal expenses paid for by many of the companies he was affiliated with. 

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