Embezzlement is the fraudulent conversion of the property of another by one who already has possession of it. "Conversion" is an act of interference with the owner’s rights to the property. It requires a use of the property by the defendant that goes against the terms of the arrangement by which the defendant has the property. For example:
Howard gives John, his stockbroker, $100,000 under an agreement that John will invest the money for Howard. Instead, John uses the money to buy himself a new boat. In this case, John has fraudulently converted Howard’s money. By spending the money for himself, John has committed an act of interference with Howard’s ownership rights over the money and he has used the money in a way that is inconsistent with the arrangement under which John came to be in possession of the money in the first place. Therefore, John has embezzled Howard’s money. See People v. Schnepp, 200 N.E. 338 (Ill. 1936).
Typically the property that can be the subject of embezzlement is defined more broadly than the property that can be the subject of larceny. For example, real property can be the subject of embezzlement. For example:
Michael owns a parcel of land in Las Vegas. Michael is about to move overseas for a period of two years and he gives over care of his land to Fredo while he is gone. During the time that Michael is away, Fredo draws up a false deed naming himself as the owner and, when Michael returns from his trip, Fredo refuses to return the land to him. In this case, Fredo has wrongfully converted Michael’s property that was in Fredo’s lawful possession, and he did so with the intent to defraud Michael. Therefore, he has committed embezzlement.
Please note that, if two people co-own property and one of them misappropriates that property, he cannot be convicted of embezzlement because it is not considered the property of another.
In order to be convicted of embezzlement the defendant must have had lawful possession of the property at the time he committed the act of conversion. If he obtained the property unlawfully, the conviction, assuming he meets the other requirements, would be for larceny.
However, if the defendant honestly believes that he has a right to the property, the act of conversion will not be embezzlement because the mens rea requirement that the defendant intend to defraud the victim will not be present in that case.