The N.C. Supreme Court has clarified what constitutes larceny and embezzlement. The ruling comes in the case of Robert Weaver, a Buncombe County man accused of aiding and abetting and conspiring with his wife Kimberly to embezzle funds from family-owned businesses. The high court found because Kimberly had not had lawfully control over the funds, her actions did not meet the legal definition of embezzlement. As a result, the court overturned Robert’s convictions.
North Carolina law is derived from British common law. Under the common law, while larceny was a felony, taking property entrusted to you for your use constituted only the misdemeanor crime of breach of trust. Embezzlement statues were adopted by the legislature in England (in 1799) and later North Carolina (in 1871) to eliminate this disparity.
The N.C. Supreme Court spelled out the difference between the offenses in 1953 in State v. Griffin, which the high court explicitly noted is still correct:
“While there is similarity in some respects between larceny and embezzlement, they are distinct offenses. Larceny is a common law offense not defined by statute; while embezzlement is a criminal offense created by statute to cover fraudulent acts that did not contain all the elements of larceny.
“Generally speaking, to constitute larceny there must be a wrongful taking and carrying away of the personal property of another without his consent, and this must be done with felonious intent… The embezzlement statute makes criminal the fraudulent conversion of personal property by one occupying some position of trust or some fiduciary relationship as specified in the statute.
“The person accused must have been entrusted with and received into his possession lawfully the personal property of another, and thereafter with felonious intent must have fraudulently converted the property to his own use. Trespass is not a necessary element. In embezzlement the possession of the property is acquired lawfully by virtue of the fiduciary relationship and thereafter the felonious intent and fraudulent conversion enter in to make the act of appropriation a crime.” (Emphasis in current decision.)
While this may sound simple in principle, as the case before the court of Robert Weaver illustrates, in the real world it can be anything but simple.
Robert’s parents, Dennis and Shirley Weaver, started R&D, a plastic injection molding corporation, in 1979. Dennis was the CEO and sole owner while Shirley was the secretary-treasurer. Robert served as plant manager and all company employees but his parents and one other person reported to him. Kimberly was also a company employee, and was being trained by Shirley Weaver to become the firm’s accounting manager. As part of her duties Kimberly would use with the specific approval of Shirley or Dennis Weaver a signature stamp to endorse checks. She was not authorized to sign checks for the company or us the signatory stamp without authorization.
In January 1997, Robert and Kimberly Weaver found themselves in financial difficulty. They decided to take money from R&D and other family businesses, by writing checks and endorsing them with the signature stamp. Kimberly hid the withdrawals by manipulating inventory records, underreporting deposits, and shifting funds from International Color, another family-owned business. The scheme was discovered in May 1998 when R&D bounced 11 checks.
Robert was put on trial and convicted of aiding and abetting and conspiring with Kimberly to embezzle more than $450,000. Upon appeal, however, two of the three judges of a N.C. Court of Appeals panel found that Kimberly’s actions did not constitute embezzlement and thus Robert’s convictions could not stand.
The high court agreed. “However, the State did not prove, and in actuality cannot establish, that Kimberly Weaver embezzled funds from these companies,” wrote Justice Edward Brady for the Supreme Court. “Kimberly Weaver unlawfully used Shirley Weaver’s signature stamp to come into possession of R&D and International Color funds; therefore, the facts appear to support the crime of larceny rather than embezzlement. Accordingly, the appropriate charges against defendant should have been aiding and abetting larceny and conspiracy to commit larceny.”
The court noted that Kimberly could not be considered an agent of R&D or International Color because she did not have the authority to act—write checks or use the signature stamp—without the approval of others.
The state had also argued that Robert’s convictions should stand as Kimberly had effectively come into possession of funds at the companies. The Supreme Court rejected this argument.
“The State’s argument fails because it is immaterial whether Kimberly Weaver had actual or constructive possession of the misappropriated funds. Because her possession, if any, was not lawful, the crime of embezzlement has not occurred.”
The case is State v. Weaver, (613A03).
Michael Lowrey is associate editor of Carolina Journal.