The phrase “white collar crime” usually conjures up an image of some type of massive fraud like a Ponzi scheme. But even seemingly ordinary business disputes can lead to criminal charges in Texas. For example, the Texas Property Code defines “misapplication of trust funds” as a criminal offense. “Misapplication” refers to a case where a trustee “uses, disburses, or otherwise diverts trust funds” before paying any existing obligations against the trust.
Court Allows Contractor to Withdraw No Contest Plea in Misapplication Case
This does not necessarily mean that a trustee must commit fraud or embezzle trust funds. It can simply refer to a situation where a person presents a claim against the trust and is not paid. In a recent criminal case from Austin, for instance, prosecutors charged the owner of a construction company with misapplication of trust funds after a billing dispute arose between the defendant and some of his subcontractors.
Essentially, prosecutors claimed the defendant failed to pay two subcontractors about $86,000. The defendant entered a “no contest” plea admitting that he retained the funds in question and did not pay the disputed invoices. But the defendant made it clear to the trial judge he did not intend to defraud the subcontractors in any way. The defendant continued to view this as a simple billing dispute.
Under Texas law, a no contest (or “nolo contendere” plea) has the same legal effect as a plea of guilty, but it does not constitute an admission of guilt that can be used in any separate civil lawsuit.
But the defendant later attempted to withdraw his plea after the judge determined the facts of this case supported a felony, rather than a misdemeanor conviction. The problem here is the way the misapplication statute was written by the Texas legislature. The statute provides that misapplication of $500 or more in funds is a Class A misdemeanor, but if the misapplication was “with intent to defraud,” it is a third-degree felony.
This is an important distinction. The maximum penalty for a Class A misdemeanor in Texas is a $4,000 fine and no more than one year in jail. But a third-degree felony conviction may result in a prison term of up to 10 years and a $10,000 fine.
In this case, the judge said the defendant acted “with intent to defraud” because the amount involved was more than $500 and the evidence therefore supported a felony conviction. The judge did not sentence the defendant to prison but rather entered a “deferred adjudication,” effectively putting him on probation for 10 years. The defendant then tried to withdraw his plea, and when the judge refused, he appealed.
A Texas appeals court agreed that the trial judge acted incorrectly under the circumstances. Since the defendant repeatedly “contested the very element that elevated the offense to a felony”–i.e., the intent to defraud–and the prosecution “presented no proof on the issue,” the judge was wrong to simply assume there was intent based solely on the amount of money involved.
Have You Been Charged With a White Collar Crime?
Cases like this illustrate the importance of good representation. The appeals court specifically cited the defense attorney’s actions in preserving his client’s arguments regarding the lack of intent to defraud. This potentially spared the defendant a felony conviction.
If you are faced with a similar situation it is critical to work with an experienced Texas white collar crime lawyer who understands the law and will make sure the courts respect your rights. Contact the Law Offices of Tad Nelson & Associates in Houston, League City, or Galveston today.