What is embezzlement, and how does it occur?

On Behalf of | Jan 4, 2023 | Embezzlement

Embezzlement charges in California or anywhere else can be jarring. As a federal, white-collar crime, it carries serious penalties and other consequences. A person or even an entity can commit embezzlement; this is how a company engages in it.

Defining embezzlement

Embezzlement is a theft crime that happens when a person or business misappropriates someone else’s funds or property for their own use. In the case of the latter, many companies exaggerate net worth so that investors continue to provide them with funding. However, when manipulation of financial records is a habit, it’s considered embezzlement and is also known as “cooking the books.” Companies that do this are usually in financial dire straits.

How companies commit embezzlement

There are numerous ways that a company can commit embezzlement. Inflating its revenue by using credit sales is one of the most common. This tactic is used because purchases made with credit can be claimed as sales even if the company allows customers to make payments over several months’ time. This ends up being counted as profits before the company even sees the money.

Another example of a company cooking the books is counting recurring expenses as a one-time, nonrecurring expense on its financial statements. This is done to exaggerate the business’ financial prospects so that they look rosier than they actually are; once this becomes a routine practice by a company, it equates to embezzlement.

A company preparing to engage in a merger can commit embezzlement if it pays for expenses before that merger occurs. This makes it appear that its earnings are higher than they are in reality.

Companies that cook the books risk their reputation and gamble with other people’s finances. Embezzlement hurts all involved parties.

FindLaw Network
Gary Jay Kaufman
"" ""