Mismanagement of funds occurs when a person fails to follow the rules or guidelines when handling money for another person or organization. The majority of mismanagement lawsuits involve some type of negligence or neglect on the side of the responsible party.
These types of cases are common in trusts, board of director litigation, and any time an agency relationship is discovered (as in a power of attorney or with an executor of an estate).
Mismanagement of funds is also known as misuse of funds or mishandling of funds.
These cases all involve the misappropriation of finances. While the person committing the violation had lawful access to the money, it is their use for personal gain or another unapproved purpose that makes it a crime.
Embezzlement and misappropriation of funds are two distinct theft offenses that are sometimes conflated.
While both entail the illicit use of another person’s assets (to which the accused individual had lawful access), embezzlement is the theft of money or property entrusted to an individual and misused for the advantage of someone other than the owner. On the other hand, misappropriation of funds is simply the theft of money.
People can be charged with both offenses in some cases.
What Are Some Examples of Mismanagement of Funds?
Many business disputes stem from the mismanagement of funds. Some examples of financial mismanagement include:
- Combining the funds with the individual’s personal accounts
- Disseminating information regarding the finances without the consent of the parties (i.e., breach of confidentiality)
- Using the funds for the individual’s own use
- Trustees’ breaches of fiduciary duty
- Failure to account for any trust account transactions or modifications
- Violations of several commercial or trust laws
Of course, the person or entity in charge of the funds is not required to execute exceptional feats of financial investing. Instead, the party must invest the cash in a “reasonable” and “prudent” manner. If, on the other hand, the party was employed particularly for their investment talents, they would be expected to execute in accordance with the conditions of the contract.
Consider the following scenario: A corporate executive is granted control of the company’s and many clients’ finances to be used for marketing and procurement. Instead of using the cash for the intended purpose, the executive uses them to pay off credit card debt and personal trip expenses. This is regarded as a financial misappropriation.
Another example would be a treasurer of an organization using donations made to the organization to buy home décor for their own home.
When someone obtains a trade secret using illegal means, such as theft, bribery, or fraud or publishes a trade secret obtained illegally, they may be guilty of trade secret misappropriation.
Violating the confidentiality provisions of an employment contract may also result in claims of misappropriation, such as bringing confidential material belonging to their company home with them.
Businesses can pursue civil claims in trade secret appropriation cases and sue in federal court if they feel trade secrets relating to a product or service involved in interstate or foreign commerce have been plundered.
Other assets can potentially be illegally utilized by a trusted individual. Inventory and firm equipment are common commercial assets involved in asset theft instances.
Misappropriation is a type of theft offense defined by the unique conditions of unlawfully taking or misusing finances or other assets entrusted to a person by the owner. It may be useful to compare misappropriation to other types of stealing offenses to better comprehend it. Three of the most common are listed below:
Larceny
Larceny may be the first crime that springs to mind when you discuss stealing. Simply put, larceny occurs when someone steals property that they do not already have legitimate possession of and that belongs to someone else. Larceny is defined as the theft of a DVD from a retail establishment.
Robbery
Many individuals confuse the terms robbery and larceny. However, there is a significant difference between the two offenses. Robbery occurs when someone steals another person’s property using force, fear, aggression, or restraint.
A person who, for example, pins another person to the ground in order to steal their wallet or threatens another person with a knife and demands that they hand over their jewels may be guilty of robbery.
Who Can Be Held Liable for Mismanagement of Funds?
Individuals who may be held liable for the misappropriation of funds include:
- Trustees (as in a trust dispute) (as in a trust dispute)
- Members of an agency’s board of directors or another equivalent oversight body
- Individuals who hold organizational positions, such as treasurer
- Individuals who have been given the authority to make financial decisions on behalf of another, as in a power of attorney arrangement.
The following is a general breakdown of the value of the obtained property or services in relation to the level of offense:
- A Class A misdemeanor of $1,000 or less is punishable by a fine of up to $2,500 and/or imprisonment for up to 11 months and 29 days.
- Between $1000-$2500 is a Class E felony, punishable by up to $3,000 in penalties and/or 1-6 years in jail.
- Over $2500 but less than $10,000 is a Class D felony punishable by up to $5,000 in penalties and/or 2-12 years in jail.
- Over $10,000 but less than $60,000 is a Class C felony punishable by 3-15 years in jail and/or a $10,000 fine.
- Between $60,000 and $250,000 is a Class B felony punishable by 8-30 years in jail and/or a $25,000 fine.
- Theft of more than $250,000 is a Class A felony punishable by 15-60 years in prison and/or fines of up to $50,000.
If you have been accused of misappropriation, you may be scared by the legal procedure and concerned about the possible penalties. While the charges may be serious, especially if they are federal, you may be able to use one of several tactics.
Your defense attorney will investigate the specifics of your case to decide the techniques that are most likely to result in the best possible outcome for you. The following are some common misappropriation defenses that you may be able to use against your charges:
- Lack of intent: You had no intention of stealing or misappropriating the monies or property.
- Permission: The owner of the funds or property granted you permission to keep or use them for your personal benefit.
- Ownership: You believed in good faith that you were the lawful owner of the monies or property.
- You were not the perpetrator: you were falsely accused or a mistaken identity victim.
- Entrapment: You were pressured into misappropriating funds by law enforcement.
- Duress: You were coerced into misappropriating cash by using violence, constraint, or threat.
- Inadmissible evidence: Evidence used against you was obtained illegally or is otherwise inadmissible in court.
- Inadequate evidence: The prosecution lacks sufficient evidence to establish beyond a reasonable doubt that you misappropriated the funds or property.
What Are Some Legal Remedies for Mismanagement of Funds?
Legal consequences for financial mismanagement will strive to be commensurate to the sort of conduct involved.
A common remedy may be the payment of monetary damages for financial losses caused by mishandling of finances.
Other remedies may include rewriting the financial agreement or replacing the person in charge of the funds.
Do I Need a Lawyer If I Have Legal Issues Involving a Mismanagement of Funds?
Any sort of financial mismanagement can pose numerous obstacles to an individual or a corporation. If you need legal advice or need to file a case, you should consider hiring a commercial lawyer. If required, your attorney can represent you in court.
You may also want to consult with a lawyer at the start of the management partnership to avoid conflicts from the start.
