Embezzlement Against Estate - 18 U.S.C. § 153
Embezzlement, especially when it involves the estate of a debtor in bankruptcy proceedings, is a serious criminal offense. Understanding the severity of the situation is crucial. It is a federal crime under 18 U.S. Code 153.
This statute plays a pivotal role in safeguarding the integrity of the bankruptcy process. It does so by criminalizing the embezzlement, concealment, or fraudulent transfer of property belonging to a debtor's estate.
18 U.S.C. 153, says, "(a) Offense.
A person described in subsection (b) who knowingly and fraudulently appropriates to the person's use, embezzles, spends, or transfers any property or secretes or destroys any document belonging to the estate of a debtor shall be fined under this title, imprisoned, not more than five years, or both.
(b) Person to Whom Section Applies.
A person described in this subsection has access to property or documents belonging to an estate by virtue of the person's participation in the administration of the estate as a trustee, custodian, marshal, attorney, or other officer of the court or as an agent, employee, or other person engaged by such an officer to perform a service with respect to the estate."
The term "debtor" means a debtor concerning whom a petition has been filed under title 11.
Related 18 U.S.C. 157 defines bankruptcy fraud as "A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so-
Files a petition under title 11, including a fraudulent involuntary petition under section 303 of such title, or makes a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11 at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title."
If you have been accused of embezzlement against an estate, you could face up to five years in federal prison if you're convicted.
What Does the Law Say?
Embezzlement against an estate involves the unauthorized use, concealment, or destruction of property belonging to a debtor's estate.
18 U.S.C. 153 explicitly targets individuals with fiduciary responsibilities over an estate, such as trustees, custodians, marshals, attorneys, or other officers of the court involved in administering an estate.
These individuals have access to the estate's assets due to their official capacities, making any misuse of these assets a breach of trust and a violation of federal law.
The law clearly outlines that knowingly and fraudulently appropriating, spending, or transferring estate property constitutes a criminal act. The emphasis on knowledge and fraudulent intent is crucial, as it distinguishes deliberate misconduct from unintentional errors or misunderstandings.
Why Is This Law a Federal Crime?
While there are numerous federal and state laws criminalizing embezzlement in certain settings, embezzlement against an estate is specifically categorized as a federal crime because it directly impacts bankruptcy proceedings, which are handled at the federal level.
This also contrasts with the embezzlement of an estate of someone who is not a debtor, which might still be prosecuted at the state level.
The integrity of these proceedings is vital for ensuring that debts are appropriately managed and settled under federal bankruptcy laws. By criminalizing fraudulent activities that disrupt this process, the statute aims to protect creditors' rights and maintain the orderly administration of justice.
What Must Be Proven to Convict?
To secure a conviction for embezzlement against an estate, the prosecution must establish several key elements of the crime beyond a reasonable doubt. Understanding these elements will help you prepare for your case. The primary factors include the following:
- Access and Authority: The accused must have had legal access to the estate's property by virtue of their position.
- Debtor Status: The estate's assets must be in "debtor" status, meaning they are subject to claims in bankruptcy settlements.
- Fraudulent Intent: There must be proof of intent to defraud. This means that the accused knowingly engaged in activities that were unauthorized and intended to benefit themselves or others unlawfully.
- Misappropriation of Estate Property: The accused must have physically or constructively appropriated, concealed, or destroyed estate property.
What are Some Examples?
EXAMPLE 1: John is appointed as a bankruptcy trustee for a company undergoing Chapter 11 reorganization. As part of his duties, he gains access to the company's assets, including cash reserves meant to pay off creditors.
Believing that the process will take years and the funds will be noticed, John decides to transfer $50,000 from the estate's account into his account, planning to return the money before anyone notices. John may be prosecuted under 18 U.S.C. 153.
EXAMPLE 2: Lisa, a court-appointed custodian for a debtor's estate, is responsible for managing and selling estate assets to satisfy outstanding debts.
During the asset liquidation process, Lisa identified a valuable piece of artwork owned by the estate. Instead of selling it through the official channels, Lisa arranges a private sale to a friend at a significantly reduced price, receiving a personal kickback in return. Lisa can be charged for violating U.S.C. 153 over this misappropriation of an asset of the estate for her purposes.
What Are Related Federal Laws?
18 U.S. Code Chapter 9, Bankruptcy, has numerous related federal statutes, including the following:
- 18 U.S.C. 151 - Definition.
- 18 U.S.C. 152 - Concealment of assets; false oaths and claims; bribery.
- 18 U.S.C. 153 - Embezzlement against estate.
- 18 U.S.C. 154 - Adverse interest and conduct of officers.
- 18 U.S.C. 155 - Fee agreements in cases under title 11 and receiverships.
- 18 U.S.C. 156 - Knowing disregard of bankruptcy law or rule.
- 18 U.S.C. 157 - Bankruptcy fraud.
- 18 U.S.C. 158 - Designation of United States attorneys and agents of the Federal Bureau of Investigation to address abusive reaffirmations of debt and materially fraudulent statements in bankruptcy schedules.
What Are the Potential Penalties?
Embezzling against the estate of a debtor is a federal felony offense. If you are convicted, you could face:
- Fines of up to $250,000 and
- Up to five years in federal prison.
What are the Common Defenses?
If you are facing charges under 18 U.S.C. 153, a skilled federal criminal defense attorney can implement one or more key strategies to defend against the charges. Some common defenses that might be applicable include:
- Lack of Fraudulent Intent: If your attorney can demonstrate that you did not have the intent to defraud or were unaware that your actions were illegal, this could serve as a defense. For example, perhaps a mistake or clerical error that led to the transfer of funds.
- Claim of Right or Ownership: This defense applies if you believed, in good faith, that you had a legal right to the property or funds in question. If you can prove you had a legitimate claim or believed they were entitled to the assets due to some prior agreement or legal misunderstanding, this could also negate the fraudulent intent element.
- Duress or Coercion: If you can prove you were coerced or forced into embezzling the assets on the threat of harm to yourself or a loved one, this may count as a valid defense.
For additional information, contact our federal criminal defense law firm, Eisner Gorin LLP, based in Los Angeles, California.
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