Embezzlement or misappropriation is a breach of fiduciary duty in a business situation.  When do you need an experienced civil embezzlement and misappropriation of funds attorney in San Diego or throughout California?  It is a civil offense (and potentially criminal) for anyone in a position of trust to unlawfully take, use or appropriate the assets or property of a business or individual they serve.

3 Key Takeaways About Embezzlement or Misappropriation:

• When an officer, owner, or investor in a company embezzles funds or misappropriates the assets of the business, it is a violation of law known as a breach of the fiduciary duty.
• A Fiduciary is a person who is in a position of trust, required by law to act in the best interest of the one(s) they serve – their fiduciaries.
• A civil lawsuit for embezzlement or misappropriation pursues civil remedies (financial damages) associated with the failures, actions, and inaction of the fiduciary.

Embezzlement or Misappropriation of Funds is Breach of Fiduciary Duty in California

Legally, the term which applies to the responsibilities of the person in a position of trust is a “fiduciary duty.”  In essence, the law requires those with a fiduciary duty to act in the best interest of their employer or client.  Why is a breach of fiduciary duty important from a legal perspective?  Here in California, a breach of fiduciary duty opens the door to a substantial number of remedies for our clients, such as the right to a full accounting of the situation, an award of financial damages, the disgorgement of any profit from self-dealing (the party who self deals must surrender all financial and other gains achieved through the breach of fiduciary duty), and in some cases the opportunity for an award for legal fees.

A Civil Lawsuit for Embezzlement or Misappropriation of Funds

A lawsuit or legal action for civil embezzlement or misappropriation of funds seeks financial damages associated with the actions of a fiduciary.  Usually, financial damages include but are not limited to reimbursement, losses due to the absence of the asset or property and amounts to punish the wrongdoer and set an example.

Misappropriation can occur a single time or it can be a sequence of events or scheme which unfolds across a period of time.  In many cases, an executive of a corporation, partner or fellow member of an LLC has inappropriately taken money out of the business or used it’s assets for personal gain.  Bookkeepers and accountants are often the source of misappropriated funds.

Pro-Tip: “Business partner fraud. This never happens until you make money.  It’s crazy. People with all the greatest virtues you’ve ever seen in your life, you’ve known your whole life. All of a sudden your company is expanding, doing well and money disappears. It’s just so tempting. It’s like gold fever. So that’s also includes shareholder fraud, officer, fraud director fraud, usurpation. That’s a fancy word for taking the company or corporate assets without any fair compensation or in secret. 

We had a case once where there were nine different business partners with different locations and they had an accounting system. And so they had one general administrative office to run them all. One of our clients who was one of the partners said, ‘you know, my accounting’s off about $5,000 every year and it’s not exactly 5,000, it’s like $3,222 or this number.’ And so I said, ‘well, can you come up with any reason why it would be off?’ And they said, ‘we’ll look.’ So they, they looked and they had their administrative people in-house look at it. And they really couldn’t say it was their fault, but they couldn’t say how it happened. So we hired one of our forensic CPAs to take a look at it. We wanted to do what’s called a spot audit.

They can tell you by just checking here, there and everywhere in a pattern that would say we’d find something off if it’s still off. And they found something. So then we said we need to look deeper. Well turns out that all nine partners were getting ripped off by somebody inside the hub, the administrative hub to the tune of they would charge everybody for a service when it should have just been one service split by nine. They would multiply it by nine and keep the extra money and put it in their pocket. But, and they did it for years and years and then that was a big deal. But it wasn’t as bad as the fact that they were also bringing in new partners.

And new partners were getting false accounting work. And they were paying money based on false representations. And so my client wanted to get out of the contract and they had about over a third of their members of their little entity who were bought in with false papers, false accounting. So we were able to enforce the “parent” to give up their interest, the general partner, because this one accountant, this one person who’s stealing money, defrauded everybody. And so we get to rescind. That’s another remedy of fraud is rescission. We got the demand rescission and a buyout based on the 12 year old price.  And our client came out very well!” – Dan Watkins, Founding Partner

How Can The Watkins Firm Help You?

A civil embezzlement or misappropriation of funds attorney at the Watkins Firm brings more than 40 years of experience to your situation, and will work with you to uncover the facts, recover any money or property and seek associated damages.  You will need legal investigation and forensic accounting to trace the actions and activities associated with the embezzlement or theft.  You can’t simply review the books.  In order for this type of scheme to work the perpetrator has usually created fictitious documents and entries to hide their actions.

This is why it is important to contact the Watkins Firm if you suspect an employee, fellow executive or partner of taking money from your company or using it’s assets for personal purposes. We invite you to review our podcast Episode 32 – Business Fraud as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.