Our White Collar Criminal Defense Group assists those accused of embezzlement against an estate to defend against such charges. We provide strong representation for attorneys, trustees, debtors, and other individuals accused of embezzlement.
Charges of embezzlement against a bankruptcy estate can affect a person’s entire life. Federal investigators will zealously investigate anyone who may have been involved.
They will employ sophisticated investigation tools to determine who committed embezzlement against an estate. This takes a toll on the person’s family, friends, and community.
We help our clients deal with government investigations and advise them on how to deal with law enforcement. If you or a loved one has been charged with embezzlement against an estate, call us now.
What is “Embezzlement against an Estate?”
Embezzlement against an estate is where someone embezzles property or destroys documents that are part of a bankruptcy estate. A bankruptcy estate will be explained in more detail.
While the term “embezzlement” is generally synonymous with embezzling from a corporation, it is also a crime to embezzle from a bankruptcy estate.
To be guilty of this crime, the following must exist:
- Someone knowingly and fraudulently embezzled, transferred funds, used, hid or destroyed documents associated with a debtor’s estate; and
- Those monies or documents were in the accused’s possession because the accused was acting as a trustee, custodian, representative, marshal, attorney, paralegal, administrative assistant, an officer of the court, employee, agent or person in a similar role tasked with performing a service for a bankruptcy estate.
The term “embezzle” generally means that a person took “trusted” money for personal use. Assets of a bankruptcy estate are trusted money that a limited group of people can access.
Note that the US Government aggressively investigates and prosecutes these crimes. Those convicted of this crime faces up to five years in prison and a hefty fine. Therefore, if you have been accused of embezzlement against an estate, you need a strong advocate on your side. The government will be zealous in their prosecution; you need someone who will be zealous on your behalf.
What is a Bankruptcy Estate?
Every year, there are thousands of bankruptcy filings in the United States. Upon filing a bankruptcy petition, all creditors of the debtor are “stayed” from taking any sort of collection action against the debtor and the assets of the debtor are placed into a “bankruptcy estate.” Under the rules of the United States Bankruptcy Code, a Trustee is appointed by a Bankruptcy Court to administer this estate.
A bankruptcy estate is the vehicle used for repaying creditors. Anyone who embezzled money or property from the estate hurts a creditor. While creditors often take a reduced repayment under a bankruptcy procedure, further depleting the assets of a bankruptcy estate reduces a creditor’s share in the estate’s proceeds. To that end, the government further criminalized embezzlement in a bankruptcy context.
What Does a Bankruptcy Estate Consist Of?
A bankruptcy estate consists of the property of the debtor, minus certain property that is excluded from the estate.
What Are Examples of “Excluded Property?”
Examples of excluded property are tools of a trade (e.g., hammer and nails for those involved in the construction business) and items of personality (e.g., family portraits).
Who Has Access To The Property In a Bankruptcy Estate?
The Trustee has certain powers as it relates to the estate. A Trustee also has access to certain documents, per the rules of bankruptcy estate administration. In addition to a Trustee, a representative to a creditors’ committee can also have access.
In large bankruptcy cases, which usually occur in corporate bankruptcy, creditors will form different committees and those committees will have representatives. The committees will usually be formed based on the order of priority.
That is to say; different creditors have priority over other creditors in the distribution of a bankrupt debtor’s assets. Some creditors are entitled to be fully repaid before other creditors can get their slice of the pie.
For example, tax creditors generally have priority over bank lender creditors. Secured creditors generally have priority over unsecured creditors.
Who can be held liable for embezzlement against an estate?
The law covers those who usually have access to bankruptcy estate property and anyone else involved in the administration of a bankruptcy estate. As mentioned, the Trustee and creditor committee representatives generally have access to the estate and can be held liable for embezzlement against the estate.
Moreover, anyone associated with these parties can be held liable. A paralegal working in the Trustee’s office or an administrative assistant to a representative of a creditors’ committee are all covered under the statute.
On the other hand, if a burglar illegally enters an office of the Trustee at night and embezzles money from a bankruptcy estate, then the burglar will not be liable under this law (though the burglar will have other legal liabilities). The law only covers individuals who have access to the bankruptcy estate by virtue of association with the administration of the estate.
What are the different types of bankruptcies?
Most bankruptcies will be filed under Chapter 7, Chapter 11, or Chapter 13 of the U.S. Bankruptcy Code. Individuals, legally referred to as consumers, are eligible for all three chapters whereas corporations are only eligible for Chapters 7 and 11. Consumers rarely file Chapter 11, and most consumer cases are filed under Chapters 7 or 13.
When a consumer debtor files a Chapter 7 or Chapter 13 bankruptcy petition, a Bankruptcy Court assigns a Trustee to administer the estate. The Trustee is tasked with administering the estate until the debtor “emerges” from bankruptcy.
- Chapter 7. To provide color, a Chapter 7 bankruptcy is a “straight bankruptcy” wherein a Trustee will sell assets of the estate and provide the proceeds of the sales to the creditors in satisfaction or partial satisfaction of the outstanding debt. This process generally endures for 4 to 8 months. Thereafter, the debtor emerges from bankruptcy with a “discharge,” which means that debts are wiped out.
- Chapter 13. Chapter 13, on the other hand, is known as the “wage earner’s bankruptcy” because only a debtor earning a wage is eligible. Under Chapter 13, the debtor creates a plan and submits the plan to a Bankruptcy Judge. The plan details the debtor’s expenses and outlines that proceeds above the expenses will be placed in the bankruptcy estate. Once in the estate, the Trustee will distribute those proceeds to the creditors. Upon approval from a Bankruptcy Judge, the debtor places money in the estate on a monthly basis for three or five years. Once the debtor completes the plan, he or she is granted a discharge.
- Chapter 7. Like a consumer under a Chapter 7 filing, a business or corporation filing a Chapter 7 bankruptcy petition will place all its assets in the bankruptcy estate for distribution to the creditors. The Trustee will be tasked with selling assets to satisfy creditors holding claims against the bankruptcy estate. Unlike a consumer Chapter 7, however, a corporate bankrupt debtor does not obtain a discharge upon completion of the sale of assets. Buyers seeking to purchase the business free and clear of liens would need to obtain a waiver from a Bankruptcy Court.
- Chapter 11. In contrast, a corporation that files a bankruptcy petition per Chapter 11 of the Bankruptcy Code can get a discharge when it emerges from bankruptcy. Under Chapter 11, the debtor negotiates a plan with the creditors under the auspices of the Bankruptcy Court. The debtor will leverage the bankruptcy to reconstitute the debt and try to obtain more favorable conditions for managing the debt. Large corporate bankruptcies like American Airlines lasted three and a half years because the numerous parties were negotiating terms over American Airlines’ restructuring.
During a Chapter 11 proceeding, the debtor often has powers of the Trustee. This is called a debtor in possession, or DIP. Because there is a DIP and in the event of an accusation of embezzlement, federal investigators will likely focus more on the DIP.
What is an “Automatic Stay?”
A main feature of the U.S. Bankruptcy Code is that it affords debtors an “automatic stay.” The automatic stay means that all creditors are “stayed” from any collections action against the debtor.
If a consumer owes large sums of money to a bank and files for bankruptcy, the law states that the bank cannot call or send letters to the debtor demanding repayment. Due to the automatic stay, creditors holding bankruptcy claims can only be satisfied from assets that are in the bankruptcy estate, not the debtor itself.
What Allows Others to Access the Assets of a Bankruptcy Estate?
The Trustee assigned to a bankruptcy estate has access the assets in the bankruptcy estate because the Trustee is tasked with selling the assets and repaying creditors. Agents and others associated with the Trustee will often also have access for the same reason. In addition, representatives of creditor committees and those associated with a representative will often also have access to a bankruptcy estate, usually to check the documentation or to determine the value of a debtor’s property.
Defenses Against Accusations of Embezzlement Against an Estate
In general, embezzlement is performed by sophisticated parties against corporations where the individuals are cognizant of the need to cover their tracks. They will often go to great lengths to cover up the embezzlement and embezzle the money in a clever and methodical way so that the corporation will not notice that funds are missing.
These individuals often embezzle small amounts over a long period of time where the seemingly insignificant amount may not be noticed by the corporation’s accounting department or embezzle large amounts of funds by “billing” the amounts payable for other items.
When defending against this charge, there are a few strategies to implement.
- Strategy #1. First, the prosecution must demonstrate, beyond a reasonable doubt, that you actually took the money, property or documents. Simply because you have access to assets in the bankruptcy estate and that the estate is missing property does not make you guilty. You may have accessed the bankruptcy estate to review documents; someone else may have taken those documents out of the estate. Our defense lawyers will challenge a prosecution to show more than a causal link between access to documents and the taking of documents.
- Strategy #2. Second, the statute requires that someone act “knowingly” embezzled assets or documents to be guilty of embezzlement against an estate. This means that even if someone removed assets or documents from the estate does not mean that they committed the crime if such person did not act knowingly. If someone reviewing documents accidentally hit delete then that person did not commit a crime. The prosecution will point to surrounding circumstances to make their case that documents were knowingly removed. Our lawyers will challenge the prosecution to demonstrate that the act was knowing.
Looking for a Criminal Defense Attorney? – Call Us Now.
Charges of embezzling money or property from a bankruptcy estate can have a devastating impact on your family, your business, and your future in the profession. As someone professionally associated with the administration of a bankruptcy estate, an accusation of embezzlement against a bankruptcy estate can permanently derail your career.
That is why you need an experienced white collar criminal defense attorney.
Our attorneys understand bankruptcy estate administration and can help you understand the charges that are being brought against you. We can accompany you to interrogations and ensure that your rights are not violated. Ultimately, our goal is to help you establish a legitimate defense.
We have the knowledge and background to successfully defend anyone prosecuted for embezzlement against a bankruptcy estate in both federal criminal and civil proceedings.
We have represented industry and corporate clients, lawyers, support staff, and other professionals accused of crimes that involve bankruptcy estate administration.
If you or someone you love has been charged with embezzlement against a bankruptcy estate, call our attorneys for a free legal consultation.