Embezzlement

Embezzlement
Statute:	18 U.S.C. § 666; 18 U.S.C. § 641
Code:	Title 18, Chapter 31
Max Prison:	10 years
Max Fine:	$250,000
Guidelines:	USSG §2B1.1
Base Level:	6-7
Agencies:	FBI, OIG (various), DOJ Public Integrity Section
Related:	Wire Fraud, Bank Fraud, Bribery, Money Laundering

Embezzlement is a federal crime involving the fraudulent appropriation of property or funds by a person entrusted with their possession. The primary federal embezzlement statutes are 18 U.S.C. § 666 (theft from programs receiving federal funds) and 18 U.S.C. § 641 (theft of government property). These statutes protect the integrity of federal funds and government resources from misappropriation by those in positions of trust.

Federal Embezzlement Statutes

18 U.S.C. § 666 - Theft from Federally Funded Programs

Section 666 is the primary statute for prosecuting embezzlement from organizations that receive federal funding. It prohibits:

• Embezzling, stealing, or fraudulently obtaining property worth $5,000 or more
• From an organization, government, or agency that receives more than $10,000 in federal funds annually

This statute has broad reach because it covers not just government agencies but also private organizations—universities, hospitals, nonprofits, and businesses—that receive federal assistance.

18 U.S.C. § 641 - Theft of Government Property

Section 641 specifically addresses theft of federal government property. It prohibits:

• Stealing, selling, or conveying government property
• Receiving stolen government property with knowledge of its theft
• Applies regardless of the value of the property taken

Elements of the Offense

Section 666 Elements

To secure a conviction under 18 U.S.C. § 666, prosecutors must prove:

1. The defendant was an agent of an organization, state, local, or tribal government
2. The organization received more than $10,000 in federal benefits in a one-year period
3. The defendant embezzled, stole, obtained by fraud, or intentionally misapplied property
4. The property had a value of $5,000 or more
5. The defendant acted corruptly

Section 641 Elements

To prove a violation of 18 U.S.C. § 641, prosecutors must establish:

1. The property belonged to the United States government
2. The defendant stole, sold, conveyed, or disposed of the property
3. The defendant acted knowingly and willfully

Definition of Agent

Under § 666, an "agent" is broadly defined to include any person who is authorized to act on behalf of the organization. This encompasses:

• Employees at any level
• Officers and directors
• Contractors and consultants
• Volunteers with fiduciary duties

Statutory Penalties

Statute	Maximum Imprisonment	Maximum Fine
18 U.S.C. § 666	10 years	$250,000 or twice the amount obtained
18 U.S.C. § 641 (value > $1,000)	10 years	$250,000
18 U.S.C. § 641 (value ≤ $1,000)	1 year	$100,000

Mandatory Restitution

Under the Mandatory Victims Restitution Act, convicted defendants must repay the full amount embezzled to the victim organization. Restitution is mandatory regardless of the defendant's ability to pay and survives bankruptcy.

Federal Sentencing Guidelines

Embezzlement is sentenced under USSG §2B1.1, the general theft and fraud guideline.

Base Offense Level

• Section 666: Base offense level of 6
• Section 641: Base offense level of 6 (or 4 if value is $100 or less)

Loss Amount Enhancements

Loss Amount	Level Increase
More than $6,500	+2
More than $15,000	+4
More than $40,000	+6
More than $95,000	+8
More than $150,000	+10
More than $250,000	+12
More than $550,000	+14
More than $1,500,000	+16
More than $3,500,000	+18
More than $9,500,000	+20
More than $25,000,000	+22

Specific Offense Characteristics

• +2 levels - Abuse of position of trust (almost always applies in embezzlement cases)
• +2 levels - 10 or more victims
• +4 levels - 50 or more victims
• +2 levels - Sophisticated means
• +2 levels - Violation of judicial or administrative order
• +4 levels - Defendant was in the business of receiving stolen property

Public Corruption Enhancements

In 2023, the U.S. Sentencing Commission increased penalties for public corruption offenses, recognizing that embezzlement from public programs warrants enhanced punishment. Additional enhancements may apply when:

• The defendant was a public official
• The offense involved abuse of public position
• The conduct undermined public confidence in government

Types of Embezzlement Schemes

Financial Institution Embezzlement

Bank employees with access to customer accounts or vault facilities may embezzle funds through:

• Creating fictitious accounts
• Manipulating account records
• Skimming cash deposits
• Unauthorized wire transfers

Corporate Embezzlement

Employees with financial authority may embezzle from employers through:

• Payroll fraud (ghost employees, inflated hours)
• Expense reimbursement fraud
• Vendor kickback schemes
• Manipulation of accounts payable/receivable

Government Program Embezzlement

Embezzlement from government programs may involve:

• Diversion of grant funds
• False claims for benefits
• Theft from public pension funds
• Misappropriation of program assets

Nonprofit Embezzlement

Nonprofit organizations are particularly vulnerable to embezzlement due to limited oversight:

• Diversion of donated funds
• Self-dealing transactions
• Unauthorized use of organization assets
• False expense claims

Notable Cases

Rita Crundwell (2012)

Rita Crundwell, the comptroller of Dixon, Illinois, embezzled $53.7 million from the city over 20 years—the largest municipal embezzlement in U.S. history. She used the funds to finance a championship quarter horse breeding operation. She was sentenced to 19 years and 7 months in federal prison.

Bernie Madoff (2009)

While Bernie Madoff was primarily convicted of securities fraud, his Ponzi scheme involved elements of embezzlement as he misappropriated client funds entrusted to his investment firm. He was sentenced to 150 years in federal prison.

Pras Michel (2023)

Former Fugees member Pras Michel was convicted of conspiracy, acting as an unregistered foreign agent, and witness tampering in connection with embezzlement from the 1MDB Malaysian sovereign wealth fund. His associate, Jho Low, allegedly embezzled billions from 1MDB.

Statistics

According to the Association of Certified Fraud Examiners (ACFE):

• Median loss per embezzlement case: $117,000
• Average duration before detection: 12 months
• Organizations lose approximately 5% of revenue annually to fraud
• Most common perpetrators: Employees in accounting, operations, sales, and executive positions
• Red flags: Living beyond means, financial difficulties, unusually close relationships with vendors

Federal prosecution data shows:

• Average sentence for § 666 violations: 20-30 months
• Conviction rate exceeds 90%
• Most cases involve loss amounts between $100,000 and $1 million

Defenses

Lack of Intent

Embezzlement requires proof of intentional misappropriation. Defendants may argue:

• The taking was a mistake or misunderstanding
• They believed they had authorization
• They intended to return the property (though this is rarely a complete defense)

Authorization

A defendant may argue they had actual or apparent authority to use the property in the manner alleged. This defense requires showing:

• Express permission from someone with authority to grant it
• A reasonable belief that permission existed based on circumstances

No Federal Nexus (§ 666)

For § 666 prosecutions, the defendant may challenge whether:

• The organization actually received $10,000 or more in federal funds
• The defendant was truly an "agent" of the organization
• The value threshold of $5,000 was met

However, note that under Fischer v. United States (2024), the Supreme Court clarified that the embezzled property does not need to be the federal funds themselves—only that the organization meets the funding threshold.

Statute of Limitations

The general statute of limitations for federal embezzlement is five years from the date of the offense. For ongoing schemes, the limitations period may run from the last act of embezzlement.

Aggregation of Amounts

Prosecutors can aggregate multiple acts of embezzlement if they are part of a common scheme. This is important because:

• Individual thefts below $5,000 can be combined to meet the § 666 threshold
• Aggregation increases the loss amount for sentencing purposes
• Courts have upheld this approach for incremental embezzlement schemes

Collateral Consequences

Beyond criminal penalties, embezzlement convictions result in:

Employment Consequences

• Termination and difficulty finding future employment
• Professional license revocation (attorneys, CPAs, nurses, etc.)
• Bar from federal employment
• Prohibition from serving as fiduciary

Civil Liability

• Civil lawsuits from victims
• Treble damages under certain statutes
• Professional malpractice claims
• Personal liability for corporate debts in some cases

Security Clearance

• Automatic revocation of security clearances
• Permanent bar from positions requiring clearance
• Impact on family members' clearance eligibility

Relationship to Other Offenses

Wire Fraud (18 U.S.C. § 1343)

When embezzlement involves electronic transfers or communications, wire fraud charges are commonly added. Wire fraud carries up to 20 years imprisonment (30 years if affecting a financial institution).

Bank Fraud (18 U.S.C. § 1344)

Embezzlement from financial institutions may also support bank fraud charges, which carry up to 30 years imprisonment.

Money Laundering (18 U.S.C. § 1956)

If the embezzler attempts to conceal or spend the stolen funds through financial transactions, money laundering charges may apply, adding up to 20 years imprisonment.

Bribery (18 U.S.C. § 201)

When embezzlement involves public officials or is accompanied by corrupt payments, bribery charges may be added.

See also

• Wire Fraud
• Bank Fraud
• Money Laundering
• Bribery
• Bernie Madoff
• Federal Sentencing Guidelines

References

1. 18 U.S.C. § 666 - Theft or bribery concerning programs receiving Federal funds
2. 18 U.S.C. § 641 - Public money, property or records
3. United States Sentencing Commission Guidelines Manual
4. DOJ Criminal Resource Manual - Scope of 18 U.S.C. § 666
5. Association of Certified Fraud Examiners - Report to the Nations