According to the United States Sentencing Commission, 4,804 federal cases resulted in theft, property damage, and fraud sentences in fiscal year 2025. Embezzlement falls under this group of cases.

There are two legal actions often associated with the accusation of embezzlement. One is a criminal prosecution, and the other is a civil claim concerning the embezzlement. A criminal case will lead to different consequences, including jail time, probation, a fine, or restitution. Civil cases are more about compensating losses, like damages.

“What should you do if your employee embezzles money?” This is a common question from employers who have reason to suspect theft of company funds or business resources. Employers facing this situation should first preserve financial evidence. They should also lock the employee out of company systems and restrict access to company resources. Then they should perform an internal investigation. Employers are advised to seek legal assistance regarding criminal law. They can gain additional information about available legal actions during legal consultations. Employers may also report criminal theft to law enforcement. Most private employers have no general legal obligation to report such acts.

It’s impossible to plan a defense against civil embezzlement claims without understanding how those claims interact with the corresponding criminal defense. For that, it’s first necessary to become familiar with embezzlement claims. Knowledge of embezzlement helps explain how one accusation can lead to both civil claims and criminal charges.

Authorized Access Is What Makes It Embezzlement

Embezzlement occurs when someone steals funds from an organization for which they were authorized as a representative, such as when they were hired in a financial position. The manager, accountant, and bookkeeper all contributed to authorization and payment of those funds. To substantiate the embezzlement charge, the prosecution must show that this embezzler held a role of trust.

Intent must be proven, often through circumstantial evidence, and direct evidence can be tough to provide. Coding errors, employees with confusing reimbursement policies, the ability to grant authorization orally and be unable to verify such, and the lack of differentiation between different individuals’ actions all contribute to the opportunity for embezzlement.

Ledgers only show where the money went and not why.

 

The First Call Is Usually Not to the Police

Immediate reporting of any suspicion of embezzlement can lead to loss of control over the whole process. Such cases will rarely be limited to a minor financial portion of the company’s operations and may go beyond the capabilities of the local law enforcement agencies.

Employers are advised to prepare the documentation and get the help of a forensic accountant in detailing the course of events.

What a Quiet Investigation Requires

Employers can protect their financial documents before any case of embezzlement happens. The person subject to an embezzlement investigation may compromise the transaction history, access logs, emails, and back-ups when they become aware that they are being investigated. In case the documents are going to be used for legal proceedings, they have to be protected using forensic procedures. Guidance from NYC embezzlement lawyer Jonathan Savella can help employers handle that evidence before any report is made.

When allegations of embezzlement occur in the workplace, employers should keep their suspicions confidential until they have thoroughly investigated the issue. Aside from potential issues with at-will employment, sharing suspected embezzlement allegations will most likely result in damages to the suspect’s reputation. Divulging sensitive information, particularly with employees who don’t need to know or outside entities, can jeopardize an embezzlement case. Also, employers run the risk of becoming defendants in a defamation case.

Look at the fidelity bond in the very first week. Many policies on employee dishonesty have notice periods that start on the day the loss is discovered. Missing one can end the recovery the whole investigation was meant to produce.

What the Accused Still Has

At-will employment lets an employer end the relationship on suspicion. It does not allow the employer to do anything they want in connection with that decision. Focusing investigation efforts on one gender or racial group, even if the theft in question turns out to have not taken place, can result in claims of discriminatory conduct.

The Employee Polygraph Protection Act prevents most private employers from asking their employees to undergo polygraph examinations. There is an exemption for ongoing investigations, but it is highly conditional under Department of Labor rules.

The company has to show reasonable suspicion of the person in question, who has access to the property, with a written explanation of the reason given before the test and at least 48 hours of written notice of the exam, excluding weekends and holidays. Refusing the test cannot, by itself, justify a firing. 

Internal investigation statements can come up in subsequent criminal proceedings. Failing to provide employees with adequate preparation causes workers difficulty when attempting to explain the logic of their decisions. Such behavior is detrimental to investigations.

Recovery Does Not Wait on the District Attorney

Civil proceedings operate independently of prosecution and are usually more advantageous to the cash flow. In this type of action, the employer gains full control of the process and may seek prejudgment attachment of the assets involved, where statutory grounds are met, to safeguard the money during court proceedings. Criminal restitution is predicated upon conviction and an available defendant.

In cases where there is forgery or alteration of checks and other instruments, liability may arise for the bank under the Uniform Commercial Code. Deposit agreements can further shorten the one-year statutory deadline for filing claims. Cases involving federally insured banks, federal funds, or interstate business can also draw federal prosecution.

Both sides make their most consequential choices in the first week, before anyone has the full picture. The employer decides how much to preserve and how quietly. The employee decides what to say and to whom. Neither one looks like a legal decision at the time, and both of them are.