With increasing frequency, small businesses are learning that they have been the victim of employee embezzlement. Whether the employee used the company credit card for personal gain or gave themselves unauthorized raises, victim businesses are often at a loss at where to turn and what to do next. What a victim business might not realize is that recovering their embezzled funds isn’t impossible.
While employee embezzlement occurs in businesses of all sizes, smaller companies are more susceptible. A smaller budget for oversight and the strong feelings of trust that develop after working with the same handful of people for years lulls many small business owners into believing that it could never happen to them. Representing victim businesses, we almost always hear, “we just never thought s/he would do something like that to us.” We have learned, unfortunately, that no size, sector, or type of business or non-profit organization is immune.
In most instances, the embezzlement is obvious once detected. Monthly auditing of company credit cards and banking statements would go a long way to detecting the majority of cases. Despite having clear and convincing evidence of employee embezzlement, however, few companies ever utilize the civil and criminal justice systems to recover their losses.
Some victim businesses do not come forward because they fear negative publicity, while others do not know to whom to turn. The latter should know that North Carolina has several effective civil remedies and both strong criminal penalties and criminal restitution provisions that should cause hesitant victim business to reconsider remaining silent.
Criminal Recovery Strategies for Employee Embezzlement in NC
In the North Carolina State Court System, two main criminal statutes are used to prosecute employee embezzlement — Embezzlement by Employee, and Obtaining Property by False Pretenses. Together these statutes criminalize the taking of your business’s money and the false statements made to accomplish the fraud.
Each time the employee steals from you — for example, by misusing the company credit card — they can be charged with a separate violation of employee embezzlement or obtaining property by false pretenses. Each offense is a Class H felony, and if the amount of the theft, either in a single transaction or in the aggregate, exceeds $100,000, they can be punished as a Class C Felon, which would require an active sentence in a North Carolina Department of Corrections of not less than 44 – 65 months of imprisonment.
More importantly, victims can have their losses repaid through a Restitution Order, which can require the employee/defendant to make a lump-sum payment, to make payment through prison earnings, or to make payments while on probation or post-release supervision. Outstanding restitution balances are also often reduced to civil judgments.
The physical location of the business and the offending employee’s conduct usually determines which law enforcement agencies will investigate and which prosecuting offices will handle the case. The Winston-Salem Police Department’s financial crimes section, for example, and capable financial crimes investigators, and the Forsyth County District Attorney’s Office routinely handles employee embezzlement cases. If the case is especially complex or document intensive, the North Carolina Conference of District Attorneys — who fund a regional financial-crimes prosecutor — may assist in the prosecution. Additionally, the U.S. Attorney’s Office for the Middle District of North Carolina, which has a panoply of federal charging options (including mail fraud, wire fraud, bank fraud, etc) has the authority to investigate financial crimes occurring in the Triad, including employee embezzlement.
Civil Recovery Strategies for Employee Embezzlement in NC
Recovery is also often possible without utilizing the criminal justice system. We have found that embezzling employees — once caught — are frequently eager to make amends and to avoid criminal charges. If the victim business chooses not to press charges, there are a number of civil remedies available. Settlement agreements, promissory notes, confessions of judgments, and structured payment plans are just some of the ways that victim businesses are able to recover their losses. Confidentiality and non-disparagement provisions also frequently bring reluctant embezzlers to the settlement table.
Anyone or any business can be a victim of embezzlement. And while many small business owners quickly want to brush the issue aside, it’s important to know what options are on the table.
About the Author
Mark A. Jones is an attorney at the law firm of Bell, Davis & Pitt and a board-certified specialist in both federal and state criminal law. Mark leads the firm’s White Collar and Business Crimes, General Federal Defense and Government Investigations practice, which routinely handles employee embezzlement matters. Prior to joining Bell, Davis & Pitt, Mark served as Assistant U.S. Attorney in the Western District of North Carolina, where he represented the government in hundreds of federal criminal investigations and prosecutions.