The act of “embezzlement” involves the taking of property by someone to whom that property was originally lawfully entrusted. Although embezzlement comes in many forms, the most common form is an employee diverting to his own use money that belongs to his employer. The crime of embezzlement was created because theft involving funds or property that were originally entrusted to a person legally did not meet the elements of the common law crime of “larceny.” Under common law, larceny was defined as “the trespassory taking and carrying away of the personal property of another with the intent to permanently deprive.” However, because personal property involved in an embezzlement was legally taken, the element of a “trespassory taking” could not be met. As a result, a separate crime was created for property that was legally obtained by the possessor, but fraudulently converted to the possessor’s own use.
On January 18, 2012, David Newmark, of Towaco, N.J., admitted in federal court in Newark to embezzling more than $10.4 million from his employer. Between February 2008 and March 2011, Newmark was employed as the chief financial officer of an investment management firm in New Jersey. Newmark was able to embezzle the money by setting up a fake bank account using a name that sounded similar to the name of the company with which he was employed. Newmark then requested money transfers from several financial institutions that held money for his employer into the fake bank account. Newmark then took the money from the fake bank account for his own personal use. This is a case of embezzlement because, while as CFO Newmark had the legal right to obtain the funds and to request the money transfers, he did not have the legal right to convert the money to his own personal use.
Many state criminal codes have a statute criminalizing the fraudulent conversion of funds or property that was lawfully obtained by an individual. Some states, such as New Jersey, have gotten around the need for separate theft and embezzlement statutes by defining a theft as not only “unlawfully taking” property, but also “unlawfully exercising control” over property. However, since the federal criminal code does not contain a specific embezzlement statute, embezzlement is usually prosecuted under the very broad mail fraud and wire fraud statutes. These statutes make it a federal crime to use the mail or the wires respectively in furtherance of a scheme to defraud. In addition, it is a federal crime for a person not to report funds obtained through embezzlement on their income tax returns, so individuals accused of embezzlement are also usually charged with tax evasion.
David Newmark pled guilty to one count of wire fraud and one count of tax evasion. The basis for the wire fraud charge was that Newmark requested various wire transfers from banks in New York, New Jersey, and Connecticut into the fake bank account that he set up. As for the tax evasion charge, Newmark simply did not report the proceeds of his embezzlement to the government in his tax returns. The wire fraud charge carries a maximum penalty of 20 years in federal prison, and the tax evasion charge carries a maximum penalty of 5 years in prison. In addition, Newmark will be required to make restitution in the entire amount that he admitted to embezzling.
This article was written by New Jersey criminal defense lawyer Nace Naumoski.
