When someone uses funds meant for the government or a public institution without proper authorization for personal gain or unauthorized purposes, this is a misappropriation of public funds. This is an abuse of office. This act is deemed illegal and punishable by law. Misappropriation of public funds is a grave offense. It takes different forms, namely embezzlement, fraud, or theft. People responsible for managing public funds or working for the government can engage in these activities. For instance, public officials could use public funds for personal expenses or divert funds intended for public projects to their accounts or businesses. This behavior can adversely affect the public, including misallocating resources, delays or cancellations of public projects, and losing trust in public institutions.
As you will see in our information below, being charged and convicted of misappropriating public funds can have significant consequences. However, with the assistance of an Anaheim criminal defense attorney, you could challenge the charges and secure reduced penalties if not a dismissal. The California Criminal Lawyer Group is ready to represent and assist you in fighting the charges.
Misappropriation of Public Funds According to Penal Code 424
Penal Code 424 prohibits the misappropriation of public funds by public officials. The law states that public officials cannot use public resources for their benefit or to benefit others. Doing so will result in criminal charges whose conviction will result in penalties outlined under this statute. Misappropriating, stealing, or unlawfully using public funds is not allowed under any circumstances.
You will be deemed to have committed a crime if you were charged with the custody or control of public funds and willfully or knowingly retained, misappropriated, or unlawfully used the funds. You will be found guilty even if you intend to repay the funds later.
As mentioned before, misappropriation takes several forms, namely:
- Appropriating public resources without authority.
- Profiting from loaning or misusing public resources without authority.
- Fraudulently modifying or destroying accounts or falsifying accounts.
- Declining to transfer or pay public funds.
- Misappropriating minimal and incidental amounts.
Let us look at each form in detail.
Appropriating Public Resources Without Authority
All public funds are planned for and assigned to various projects. All appropriation goes through official channels and must be authorized. Any public official who uses the funds for non-authorized activities, either by law or by an authority, he/she commits an offense under PC 424. The likely scenarios include when individuals use public resources for personal purposes, a non-approved project or purpose, or in a way that exceeds the official's legal authority or responsibility.
Public funds aim to benefit the public for specific purposes authorized by law. Inappropriate use of the funds can lead to grave consequences. Waste of resources, delays or cancellations of public projects, and a loss of trust in public institutions are but some adverse outcomes.
Prosecutors must prove the following for the jury to return a guilty verdict when the case involves appropriating public resources without authority:
- You were a public official or a government employee with access to and control over public funds.
- You used public funds for a purpose not authorized by law, regulation, or established procedures.
- You acted with knowledge or with reckless disregard for the fact that your actions were not authorized or lawful.
- You aimed to deceive or defraud the public or gain an unfair advantage for yourself or a third party.
Public Officers or Public Funds Trustees
Individuals elected or chosen to hold positions of responsibility or public trust are public officers or officials entrusted with public funds. They are given access to and control over public funds. Thus, they are responsible for managing these funds transparently and accountable to the public. The list of public officers includes government officials, employees, contractors who handle public funds, and elected officials who oversee public funds.
Public officers or trustees of public funds are held to a high integrity standard. The public expects public officials to act in the public’s interest. Officials have a duty to ensure that public funds are utilized for their intended purposes and that they follow all the laws and regulations.
In addition, public officers have specific legal and ethical obligations. These include disclosing conflicts of interest, avoiding personal financial gain, and upholding the public trust. A departure from this could result in criminal charges under PC 424.
Appropriated Public Funds
When public money is appropriated, the resources have been specifically authorized for a particular purpose or project by a governing body or a legal authority.
For example, a city council could appropriate funds to construct a new public park. The funds are specifically designated for the park's construction in this situation. Channeling the money to other projects without proper authorization is misappropriating public funds.
Another violation occurs when you channel public resources for personal use. Public resources are meant for public endeavors and not personal use. Thus, the prosecution must prove that you directed the funds to individual projects and not for the intended public good.
Criminal Negligence or Knowledge
Knowledge or criminal negligence exists when individuals act knowing that their actions were not authorized or legal. Further, the individual should have known that his/her actions were illegal or contradictory to the established procedures.
Prosecutors must demonstrate that you understood that your actions were prohibited but chose to proceed. This knowledge can be inferred from various circumstances, like your experience handling public funds or your prior knowledge of the proper procedures for using public funds.
Consider a scenario where a public official knowingly diverts public funds to a personal account. He/she would be acting knowing that his/her actions are neither authorized nor lawful. Additionally, if the official is aware of the specific procedures to follow when using public funds for a particular objective but chooses to disregard the guidelines, he/she would act recklessly with regard to the law.
Prosecutors should prove that your actions show you had knowledge of and a disregard for the law. It shows that you knew or should have known that your acts were not lawful. This demonstrates that you acted with an intention that was against the law.
Profiting from Loaning or Misusing Public Resources Without Authority
Prosecutors can only assert loaning, profiting from, or misusing public funds without authority if they prove you used the money for personal gain. Likely, scenarios that demonstrate the use of public funds for personal benefit include paying for personal expenses or lending public money to friends or family without proper authorization.
For example, they might use public funds to pay for personal expenses or lend them to friends or family without proper authorization. This behavior is unethical and illegal because public funds should be used only for public purposes. Using these funds for personal gain goes against the public's trust and breaches that trust.
Prosecutors should prove the following elements to convince a jury to convict you of loaning, profiting from, or misusing public funds without authority:
- You were a public officer or person entrusted with public funds.
- You benefited, loaned from, or misused public funds.
- You did not have proper authority or approval to loan, profit from, or misuse the public funds.
- You acted with knowledge or with reckless disregard for the fact that your actions were illegal and not authorized.
Prosecutors could use a variety of evidence to prove these elements. They could use bank records, emails, witness testimony, or documentation of your job duties and responsibilities.
Fraudulently Modifying or Destroying Accounts or Falsifying Accounts
An individual falsifies, destroys, or fraudulently modifies accounts if he/she creates, changes, or erases financial records or other documents that relate to public funds. Further, he/she does so to deceive or defraud others. This behavior is illegal and unethical because it obstructs the ability to account for public funds accurately and can lead to the misuse of public resources.
The state must prove the following elements beyond a reasonable doubt. Only then will the jury find you guilty of falsifying, fraudulently altering, or destroying public accounts:
- You were a public official or person entrusted with public funds.
- You created, altered, or destroyed financial records or other documents related to public funds.
- You acted intending to deceive or defraud others.
- You did so with the knowledge or with reckless disregard for the fact that your actions were not authorized or lawful.
Prosecutors rely on various pieces of evidence to prove these elements. They could introduce email exchanges, internal memos, bank records, or witness testimony. The gravity of the wrongdoing and the potential outcomes vary.
False accounts, as well as fraudulently altering or destroying accounts, are both serious offenses. These actions undermine the transparency and accountability of public resources and erode the public's trust in government and public agencies.
Declining to Transfer or Pay Public Funds
You commit an offense when you intentionally withhold or delay payments or transfers of public funds without proper justification or authorization. This behavior is illegal and unethical because it can result in the mismanagement of public resources and disrupt the proper functioning of government programs and services.
To prove a case of refusing to pay or transfer public funds, prosecutors need to establish several elements, including:
- You were a public official or government employee, or an individual entrusted with public funds.
- You refused to pay or transfer public funds without proper justification or authorization.
- You acted with knowledge or with reckless disregard that your actions were not authorized or lawful.
Prosecutors rely on bank records, internal memos, or witness testimony as evidence to prove guilt.
Exception for Minimal and Incidental Amounts
Sometimes, there are situations where incidental and minimal amounts of public funds are misappropriated. Courts could make an exception, especially if the value is small or the misappropriation was accidental or unintentional. This scenario is referred to as the de minimis exception.
The de minimis exception recognizes that minor or incidental misuses of public funds are not worth pursuing in criminal or civil proceedings. The cost of investigation and prosecution could outweigh the harm caused by the misappropriation.
Note: The definition of "incidental and minimal amounts" differs from case to case. Further, the de minimis exception is not a complete defense. Even if the amounts involved are relatively small, a repeated or intentional misuse of the funds is an offense. Doing so could result in criminal or civil penalties.
Public officials should exercise appropriate care and diligence when handling public resources. Additionally, they should seek guidance or clarification if they are uncertain about the proper use of public resources.
Penalties if Convicted of a PC 424 Violation
Misappropriation of public funds is a felony offense. Convictions result in the following penalties:
- Formal probation or a prison sentence of two, three, or four years and/or
- A fine of up to $10,000.
It is worth noting that a conviction under PC 424 can also lead to a prohibition from holding public office. A ban from public office is a grave consequence for state employees.
Defenses You Can Raise in a Misappropriation of Public Funds Case
You can challenge the PC 424 violation charges through several defenses. The ideal defense strategy is based on the specific circumstances of the case. Some potential defense strategies your attorney could raise include the following:
You Had Authorization
The authorization defense asserts that you had the legal authority or permission to use the public funds in the way you did. You must demonstrate that you had legal authorization to use the funds. You make your case by introducing documents like a budget plan, an appropriations bill, or a grant agreement.
However, you could have had the legal authorization but exceeded the scope of that authorization, or you could have used the funds for a purpose that was not allowed. If this is the prosecutor’s assertion, you must demonstrate that the funds were within the limits of the authority granted.
Your attorneys could cite the lack of sufficient evidence in your case. This defense will likely be featured at the pretrial stage. Judges, during pretrial hearings, consider any pretrial motions filed by either the prosecution or the defense. They will then make rulings on issues involving the admissibility of evidence or the suppression of a confession.
Therefore, if the judge agrees with the defense that the state’s evidence in the case is insufficient or inadmissible, he/she will likely dismiss your case. If a dismissal is not likely, your charges could be reduced.
Note: Insufficient evidence defense differs from the presumption of innocence. When a defense attorney asserts insufficient evidence in a case, they argue that the evidence presented by the state is inadequate to find a defendant guilty beyond a reasonable doubt. On the other hand, the presumption of innocence is a crucial principle in criminal law. It affirms that every individual is innocent until proven guilty.
Mistake of Fact
While raising the mistake of fact defense, defense attorneys will argue that the defendant made an honest mistake and did not intentionally misuse public funds.
In this case, you must show that you had a mistaken belief about the facts about using public funds. Further, you will argue that this mistake was reasonable under the circumstances. The mistake should be a factual error and not a legal mistake.
You are a Victim of Entrapment
Under the entrapment defense strategy, you will argue that law enforcement agencies or other government officials induced or coerced you to commit the crime. This defense asserts that you would not have committed the crime if not for the government's actions.
You must demonstrate that you were not predisposed to commit the offense. Moreover, the government's conduct was so extreme that it overcame your will and led you to commit the crime.
Courts consider various factors to determine entrapment. They include the following:
- The type of inducement used by the government.
- Your background and tendency to commit the offense and
- The nature of the offense.
Note: The entrapment defense can be challenging to establish. You must prove that you were induced by the government and not predisposed to commit the offense. Moreover, the defense strategy is unavailable if you were planning to commit the crime or had previously engaged in similar activities.
If you are facing misappropriation of public funds charges and believe you were entrapped, contact an experienced defense attorney immediately. They will evaluate the circumstances of your case and help you understand your legal options.
Statute of Limitations
According to Penal Code 799, the state can institute criminal action against an individual who misappropriates public funds. Thus, the statute of limitations is not a defense in a PC 424 violation case.
Misappropriation of Public Funds at the Federal Level
You will face federal charges for the misappropriation of federal funds. Federal prosecutors pursue charges when individuals misuse or steal funds from the federal government or a federally-funded program. The Federal Bureau of Investigation (FBI), the Department of Justice (DOJ), or the Inspector General's Office will conduct investigations and subsequently prosecute the case.
You will face federal penalties outlined under 18 U.S. Code § 641 for the embezzlement, theft, or misappropriation of federal funds. Convictions result in:
- Imprisonment of up to 10 years,
- A fine of $250,000 or twice the value of the misappropriated property or money, whichever is greater, or both.
- Property forfeiture.
- A requirement to pay restitution to the government or other victims of the crime.
- Loss of gun rights.
- Immigration consequences.
- Disciplinary action initiated by a state or professional licensing agency — This could lead to suspending or revoking your license to practice in your field.
Further, you could be subject to additional penalties if you violate other federal statutes, namely the False Claims Act and the Anti-Kickback Act.
The False Claims Act
The False Claims Act (FCA) is a federal law that prohibits individuals and companies from submitting false claims for payment to the federal government. The FCA combats fraud and abuse in federal programs and operations by imposing liability on those who knowingly make false or fraudulent claims for payment.
Under the FCA, individuals, and entities who submit false or fraudulent claims for payment to the federal government could face significant penalties, fines, and treble damages, three times the amount of loss suffered by the government. The FCA also allows private individuals to file lawsuits on behalf of the government, known as “qui tam” suits, and receive a portion of any recovered damages.
The Anti-Kickback Act
The Anti-Kickback Act prohibits individuals and entities from offering, paying, soliciting, or receiving any remuneration in exchange for referrals or ordering any item or service covered by a federal healthcare program (Medicare or Medicaid). The law aims to prevent fraud and abuse in federal healthcare programs by prohibiting kickbacks and other illegal payment arrangements.
Under the Anti-Kickback Act, a violation of the law can result in significant criminal and civil penalties, including fines, imprisonment, and exclusion from participation in federal healthcare programs. The specific penalties for a violation of the Anti-Kickback Act can depend on various factors, including:
- The nature and severity of the offense.
- The amount of money involved, and
- Other relevant factors.
The law applies to a wide range of activities that involve federal healthcare programs. These activities include providing healthcare services, selling drugs or medical devices, and other healthcare-related activities.
This law applies to individuals or entities participating in federal healthcare programs, namely healthcare providers, hospitals, drug manufacturers, medical device companies, and others.
Contact an Experienced Criminal Defense Attorney Near Me
Misappropriation of public funds is a grave offense whose conviction has severe, life-long implications. You must seek legal advice from an experienced criminal defense attorney to fight the misappropriation of public funds charges. At California Criminal Lawyer Group, we pride ourselves on offering sound legal advice and representation to individuals facing the misappropriation of public funds charges in Anaheim. We work to ensure the best legal outcome in all cases. Contact us today at 714-766-0965 for a free case evaluation.