Embezzlement - Embezzlement Versus Larceny

Embezzlement Versus Larceny

Embezzlement differs from larceny in two ways. First, in embezzlement, an actual conversion must occur; second, the original taking must not be trespassory. To say that the taking was not trespassory is to say that the person(s) performing the embezzlement had the right to possess, use, and/or access the assets in question, and that such person(s) subsequently secreted and converted the assets for an unintended and/or unsanctioned use. Conversion requires that the secretion interferes with the property, rather than just relocate it. As in larceny, the measure is not the gain to the embezzler, but the loss to the asset stakeholders. An example of conversion is when a person logs checks in a check register or transaction log as being used for one specific purpose and then explicitly uses the funds from the checking account for another and completely different purpose.

It is important to make clear that embezzlement is not always a form of theft or an act of stealing, since those definitions specifically deal with taking something that does not belong to the perpetrator(s). Instead, embezzlement is, more generically, an act of deceitfully secreting assets by one or more persons that have been entrusted with such assets. The person(s) entrusted with such assets may or may not have an ownership stake in such assets.

In the case where it is a form of theft, distinguishing between embezzlement and larceny can be tricky. Making the distinction is particularly difficult when dealing with misappropriations of property by employees. To prove embezzlement, the state must show that the employee had possession of the goods "by virtue of his or her employment"; that is, that the employee had formally delegated authority to exercise substantial control over the goods. Typically, in determining whether the employee had sufficient control the courts will look at factors such as the job title, job description and the particular operational practices of the firm or organization. For example, the manager of a shoe department at a Department Store store would likely have sufficient control over the store's inventory (as head of the shoe department) of shoes; that if he or she converted the goods to his or her own use he or she would be guilty of embezzlement. On the other hand, if the same employee were to steal cosmetics from the cosmetics department of the store, the crime would not be embezzlement but larceny. For a case that exemplifies the difficulty of distinguishing larceny and embezzlement see State v. Weaver, 359 N.C. 246; 607 S.E.2d 599 (2005).

North Carolina appellate courts have compounded this confusion by misinterpreting a statute based on an act passed by Parliament in 1528. The North Carolina courts interpreted this statute as creating an offense called "larceny by employee"; an offense that was separate and distinct from common law larceny. However, as Perkins notes, the purpose of the statute was not to create a new offense but was merely to confirm that the acts described in the statute met the elements of common law larceny.

The statute served the purpose of the then North Carolina colony as an indentured servant and slave based political economy. It ensured that an indentured servant (or anyone bound to service of labor to a master, e.g., a slave), would owe to their master their labor; and, if they left their indentured service or bound labor unlawfully, the labor they produced, either for themselves (i.e., self-employed), or for anyone else, would be the converted goods that they unlawfully took, from the rightful owner, their master.

Crucially (and this can be seen as the purpose of the statute), any subsequent employer of such an indentured servant or slave, who was in fact bound to service of labor to a pre-existing master, would be chargeable with misprision-of-a-felony (if it was proved in they knew that the employee was still indentured to a master, or owned as a slave); and chargeable as an accessory-after-the-fact, in the felony, with the servant or slave; in helping them, by employing them, in the unlawfully taking that which was lawfully bound (through the master servant relationship) in exclusive right, to the master of the indentured servant or slave.