Misappropriation of Public Funds

What Constitutes "Misappropriation of Public Funds?"

Under California Penal Code section 424, misuse or misappropriation of government (public) funds is criminalized. The crime involves those who have been put in a position of public trust misusing their authority to wrongfully distribute or use funds placed under their care.

The crime is essentially equivalent to that of embezzlement, with the distinction that the funds or property embezzled or misused were public instead of private. However, those funds deriving from the sale of stocks/bonds and other types of securities can also count as "public monies" for the purpose of the statute.

Typically, it is state, county, municipal, or other government employees and officials who are charged with California Penal Code section 424, misappropriation of public funds. The reason is clear: since they have been put into positions of managing such funds, they are far more likely to be the ones who, unfortunately, sometimes misappropriate them.

And as there are few effective ways to check on those in certain government positions, taking public funds for personal gain is not nearly as uncommon as we might like to believe. On the flip side it is also easy to be falsely accused of this crime since "watchdog" groups and police are always on "high alert" with regards to this type of crime and they are sometimes quick to make a charge based on purely circumstantial evidence.

What Must the Prosecutor Prove?

To gain a conviction on the charge of misappropriation of public funds, the prosecution must prove beyond all reasonable doubt, the following elements of the crime:

• The defendant was in the employ of a state or local government, and thus, put into some kind of position of public trust.
• The defendant was put in charge of receiving, disbursing, storing, or transferring public funds.
• The defendant took advantage of his/her position of public trust and access to public funds and, in some way, misused or misappropriated those funds.

Misuse of Public Funds - There are a number of possible ways that the element of misuse of public funds can be satisfied, including:

• Unlawfully loaning out public monies to oneself or someone else.
• Using public monies to make a profit for oneself.
• Keeping a fake account or entering a fake entry into an otherwise valid account or erasing information from a public account.
• Refusing to pay out or appropriate public funds to appropriate parties who presented valid orders for a withdrawal to be made.

Possible Penalties for Misappropriation of Public Funds

Misappropriation of public funds (PC 424) is always charged as a felony in California. Upon a conviction, possible punishments include:

• 2 to 4 years in state prison.
• Formal probation.
• A fine of up to $10,000.

Whether one receives closer to the minimum or maximum of each sentencing element and what other sentencing elements, if any, are included, will vary from case to case. 

A prior criminal record, particularly with other theft crimes, a repeat offense of Penal Code section 424, or other felonies, can often result in harsher sentences. When larger amounts of public monies were taken or when the position of trust was violated in an especially reprehensible way, the sentence will also likely be very harsh.

And, in addition to the other punishments, those convicted of PC 424 lose the right to hold any public office in California, whether on the state or local level.

Varieties of Misappropriation of Public Funds Violations

As there are numerous different types of positions of public trust and numerous ways in which public monies could potentially be misused, Penal Code section 424, misappropriation of public funds, comes in a wide variety of specific forms.

Below, we look at some of these varieties of PC 424 violations and related matters.

1. Appropriation of Public Funds Without Proper Authority.

Appropriation of public monies without authority to do is the basic most common form of a Penal Code section 424 violation. It involves simply taking public funds and applying them to personal use or giving them unlawfully to another person.

To be convicted, it must be shown that you were an officer of a state or local government who was put in charge of managing public funds. This can include elected officials, those holding their positions by appointment, and those hired to work for the government. And the charge can even be made against those not actually "employees" of the government but nonetheless having control over government funding via some other position.

In many cases, the monies may have been taken for personal use. In other cases, it may have been to benefit a family member or friend. It makes no difference before the law to whom the monies were given, so long as they were illegally given to that person and by someone in a position of public trust.

To be guilty of the crime, you must also have known that the law disallowed the action you took in disbursing the funds or, at least, displayed criminal negligence by neglecting to try to discover if the appropriation was legal or not before making it.

Note that knowledge of your appropriation being illegal does not imply full knowledge and understanding of all the details of the law. It simply indicates that you knew the action taken was not permissible under California law.

Criminal negligence in failing to find out if your action was legal or not goes beyond ordinary negligence. The latter involves a failure to exercise proper and reasonable care; but the former involves reckless behavior that anyone should have known was likely to result in a misappropriation of funds.

2. Loaning Out or Profiting From Public Funds.

This variety of misuse of public monies involves lending them out in order to gain interest from them or otherwise using the funds to profit from them. Unlawfully using the funds to gain profit, thus, is distinguished from simply taking and consuming the funds themselves, though both are violations of Penal Code section 424.

Ordinarily, no public official (or anyone else for that matter) is permitted to loan out public money to gain a profit from it. If you did so, or otherwise illegally used the public funds to gain a personal profit, and you knew or should have known that this was illegal, you would be guilty of this variety of misappropriation of public funds.

3. Making False Accounts or Unlawfully Changing Public Accounts.

This crime involves knowingly creating or keeping fully or partially false records of how public funds were used. It covers entering all manner of false information on a public record, deleting or wrongfully omitting true information, or changing information already present from true to false.

There must have been, along with the keeping of false accounts of public funds, an accompanying purpose to defraud the government of its funds or defraud the rightful recipients of government funds from receiving them.

Thus, the making of a false account is criminalized in and of itself, though it is really just the means by which one may have misused or attempted to misuse public funds.

4. Wrongfully Refusing to Pay/Transfer Public Funds.

While not appropriating funds may seem to be an unnatural fit for the crime of appropriating funds, Penal Code section 424 nevertheless includes the illegal refusal to pay out or transfer public monies.

When a valid draft, order, or warrant for public funds is submitted by a valid authority person asking you to release government funds in accordance with the dictates of the law, it is criminal activity to refuse to comply.

As always, however, you must have been aware that your actions were illegal or criminally negligent in not knowing this before a conviction can be gained on this charge.

Defending Against the Charge of Misappropriation of Public Funds

At the Criminal Law Office of Leah Legal, we understand the gravity of facing the charge of misappropriation of public funds (PC 424), especially to show who in public employ would see their careers destroyed by a PC 424 conviction. Additionally, these kinds of cases can often get a lot of exposure in the media, which exacerbates the damage done to one's reputation.

We have deep knowledge and experience in defending against these charges, and there are many possible defense strategies that can be used, but here are two of the most commonly deployed defenses we successfully use:

1. Lack of Knowledge and Lack of Negligence

It may be that you did misappropriate public funds but did so without realizing that your actions were against the law. If you made no attempt to hide what you were doing, a credible defense of simple lack of knowledge of the law could be argued.

However, even if you did not know the law, you had an obligation to seek to know it. If "reasonable" efforts were not made to discover if your actions were legal, and a reasonable person would have made such efforts, you can be tagged with negligence. But that is not enough for a PC 424 conviction. It must have been criminal negligence. That is another way of saying gross or aggravated negligence. It is not easy for prosecutors to prove that high a degree of negligence, and a good defense attorney will often be able to defeat PC 424 charges on the basis of a lack of criminal negligence.

2. Incidental or Minimal Amounts Involved

There is an exception clause that applies even when all other elements of the crime of misappropriation of public funds have been satisfied. The public monies in question cannot have been for merely incidental or minimal amounts. In essence, this means it cannot have been for a very small amount of money.

There is not straightforward, all-encompassing definition of what amount of money is considered incidental and minimal in the statute, and therefore, this must be determined on a case by case basis and based on precedents.

A few dollars would certainly always fall into this exception category, but even several hundred or several thousand dollars could as well, depending on the situation. 

Two Related Offenses

Along with or in place of Penal Code section 424 misappropriation of public funds, other crimes are also often charged. Two of the most common of other offenses that come up in PC 424 cases are:

1. Embezzlement (PC 503): In California embezzlement is defined as the fraudulent misappropriation of funds/property by someone in a position of trust. Embezzlement normally concerns misuse of private instead of public funds. But, in some cases you could be charged with embezzling public property, which would be a felony charge.
2. Bribing a Public Official (PC 67/68): The charge of bribing or attempting to bribe a government employee can be charged against government employees themselves or against others. Offering money or property to a public official for the purpose of getting him/her to act illegally is a violation of PC 67 or 68. While this crime can be either a felony or misdemeanor, it is always a felony when committed by a government employee.

Contact Us Today For Help

At Leah Legal, we have the legal expertise and long practical experience in local L.A. Area courts to give you the advantage over the prosecution. If you have been accused of misappropriation of public funds, we can help build a solid defense, challenge the evidence and the arguments of the prosecutor, and get the best possible outcome for your case.

Call us at 818-484-1100, anytime 24/7/365, for a free consultation and immediate attention to your case.