Do you have a partner claiming embezzlement and theft? If YES, here are 8 strategies you can apply to deal and fight-off embezzlement claims. A business partner does not have to be your best friend, but choosing someone as a partner when forming a company requires a high level of trust. If any business partner betrays the trust by stealing or misusing funds that belong to the business, it can throw the business financial plans for the future into disarray.
Whether or not the partners decide to end the business partnership because of the stealing or misuse of company money, it is always a very shaky ground and will always require the expertise of a lawyer to avoid taking matters into your own hands and making the wrong decisions.
Table of Content
- What is Embezzlement in Business?
- 1. Have a Heart-To-Heart With Your Business Partner
- 2. Contact an Attorney
- 3. Look at the Partnership Contract
- 4. Gather Business Records
- 8 Strategies You Can Use to Fight Embezzlement Claims
- 1. Insufficient Evidence
- 2. Duress
- 3. Plea of Nolo Contendere
- 4. Incapacity or Insanity
- 5. Repayment
- 6. Entrapment
- 7. Absence of Intent
- 8. Expiration of Limitation Period
What is Embezzlement in Business?
Embezzlement in business is often referred to as a form of white-collar crime in which a person or entity misappropriates the assets entrusted to him or her. In this type of fraud, the embezzler accesses the assets lawfully and has the right to possess them, but the assets are then used for unintended purposes that go contrary to the business agreement. Embezzlement is more or less seen as breach of the fiduciary responsibilities placed upon a person.
Note that the nature of embezzlement can be both small and large. Embezzling funds can be as little as a business partner pocketing a few bucks from a cash register. On a bigger scale, embezzlement can also be when the executives of large companies falsely expend millions of dollars, transferring the funds into personal accounts. Depending on the scale of the crime, embezzlement can be punishable by large fines and time in jail.
Individuals who are entrusted with access to an organization’s funds are expected to protect those assets for their intended use. It is illegal in every sense to intentionally access that money and convert it to personal use. Note that such activities can include diverting funds to accounts that appear to be authorized to receive payments or transfers.
In the United States, embezzlement is believed to be more serious than theft because it involves violating the trust granted to the person who steals the money. Even if you take less than $1,000 in funds, you may face tens of thousands of dollars in damages. Your livelihood, reputation, and freedom are all at stake.
4 Steps to Take with a Partner That Claims Embezzlement in your Partnership
A business can end in many ways, from a successful sale to an unsuccessful bankruptcy. Although you best option will depend on the nature of the claim and the partnership, potential outcomes from issues pertaining to Embezzlement maybe dissolution of the business, holding a partner personally liable for a breach of contract, or expulsion of one partner from the business. Here are the steps that you can take should a Partner claims embezzlement in your partnership;
1. Have a Heart-To-Heart With Your Business Partner
The very first thing to do is to ask your business partner for a meeting to discuss what you both want for the company and to see if you can come to a compromise. In addition, if you have a hard time getting your points across to each other, enlist the help of a small business counsellor. A small business counsellor can help you better communicate your ideas to each other and remember what motivated you to co-own the business together.
2. Contact an Attorney
Since the outcome of embezzlement related claims between business partners can be so consequential, it is advisable to speak with a knowledgeable, local attorney in your area. An attorney can offer legal advice on the legal options that may be available in your specific case and help prepare you for any possible outcomes. Further, if the lawsuit continues to litigation, then an attorney will be able to advocate on your behalf in the courtroom.
3. Look at the Partnership Contract
When forming a partnership, most operators decide to create a “partnership agreement” which states their rights and responsibilities, as well as the process and available damages to each partner in the event of a lawsuit. Since not all of these provisions may be valid or enforceable, it is quite pertinent to have an attorney look over the partnership agreement to determine if that agreement is enforceable.
Additionally, an attorney can also explicitly explain the legal terms of the partnership agreement, ensuring that each business partner fully understands the terms of an agreement and how these terms may affect a partner’s rights and responsibilities.
4. Gather Business Records
Have it in mind that business records will be important in issues pertaining Embezzlement of company funds. These include financial statements, regulatory filings, and any document relevant to the claim. Sometimes, in the course of issues between business partners, one partner may limit access to these important documents.
For this reason, it is very crucial to always keep a copy of your business records whenever possible. Also note that your business attorney will need as much information as possible to be able to provide comprehensive advice on how best to proceed in issues like this.
8 Strategies You Can Use to Fight Embezzlement Claims
Claim of Embezzlement by a business partner can have serious, far-reaching consequences for you and your business, and it is very crucial for you to reach out to a lawyer who can ensure your legal rights are protected. However, it is important to keep these strategies in mind when situations like this arise.
1. Insufficient Evidence
According to reports, over 40 percent of federal embezzlement charges are dropped due to insufficient evidence. Note that is may be an ideal option for your defence if there is a lack of a paper trail. Nonetheless, this strategy works only if a jury finds you innocent beyond a reasonable doubt and if investigators are unable to put together a clear case.
If you earnestly believed you were at risk of significant loss unless you embezzled the funds, you may be able to use duress as your defence. Also note that this may only work if you faced the scenario of losing your business or job if you chose not to embezzle the funds, for example.
3. Plea of Nolo Contendere
In this plea, you decide to plead neither guilty nor innocent. It now rests with the court to determine the truth by examining the evidence presented by the defence. This plea can only be entered with court permission.
4. Incapacity or Insanity
Also note that you will have an easier time pleading incapacity than insanity. Once you can prove that while the embezzlement occurred, you were mentally incapacitated, this defence may stand. An example would be if you were heavily medicated at the time of the transactions.
Have it in mind that if you repaid your embezzled funds, you may receive a reduction in sentencing, depending on the length and severity of your case. But don’t expect repayment to completely recuse you from the charges.
Note that this situation happens when external pressure coerces an innocent person into embezzling funds they would not have taken of their own free will. Be aware that entrapment is a defence that the prosecution will fight, saying that you would have been likely to commit the crime regardless of the pressure you may have faced.
7. Absence of Intent
In the United States, Embezzlement is predicated upon the intent to commit a crime. If you can show that you thought you had the right to the property you allegedly embezzled, you may be able to stand upon this defence.
8. Expiration of Limitation Period
Also note that you can use this defence if the prosecution does not initiate proceedings within the period of limitation.
Business disputes about missing money can get messy, but a commercial litigation attorney can help defend your rights and ensure that you stay within the limits of the law. Don’t try to fight your claims or potential charges alone. Embezzlement is a serious charge, and you need experienced legal counsel to guide you through the process and advice you on which defence strategy are most likely to help you based on your specific circumstances.
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