Misapplication of Fiduciary Funds in Texas

If you serve in a fiduciary role for someone else, you must not “misapply” any funds entrusted to your care. This is a white collar crime under Texas law. Specifically, Section 32.45 of the Texas Penal Code states an individual “commits an offense if he intentionally, knowingly, or recklessly misapplies property he holds as a fiduciary or property of a financial institution in a manner that involves substantial risk of loss to the owner of the property or to a person for whose benefit the property is held.”

Court Affirms Conviction of El Paso Accountant Who Misappropriated Client Funds

Note that Texas authorities can pursue a misapplication case against you even if the alleged victims live in another state. For example, the Texas Eighth District Court of Appeals in El Paso recently upheld the misapplication and theft convictions of a man charged with defrauding two former customers who lived in New Mexico. The appeals court noted the defendant was still subject to the “territorial jurisdiction” of Texas because the underlying acts of misapplication–as well as forming the intent to commit the crime–occurred in this state.

Here is briefly what happened. A married couple in New Mexico operated a number of small businesses in their state. In 1996, they decided to hire an accountant to help manage their business finances. Through a mutual friend, the couple contacted and eventually hired the defendant, who held himself out as a certified public accountant based in El Paso.

Over the next 17 years, the couple paid the defendant to perform accounting services. However, in 2013 the wife discovered the defendant paid himself $3,000 using a blank check from the couple’s business. When the husband called the defendant to ask him about this transaction, the defendant hung up and refused to return the couple’s phone calls.

The couple then learned the defendant failed to remit their New Mexico state sales tax payments dating back to 2007. They subsequently contacted the El Paso Police Department. A detective opened an investigation into the defendant’s activities. She discovered the defendant was in fact not a licensed CPA and that he “cashed or deposited” at least 37 client checks into his personal account without performing any accounting services.

The detective interviewed the defendant and invited him to bring her “records to support his services before she submitted the case to the District Attorney’s office.” At trial, the prosecution asked the detective if the defendant ever produced the requested documents. She replied he did not.

The defense objected to this question, arguing that it improperly suggested the burden of proof was on the defendant to prove he did nothing wrong. The trial judge limited the prosecution’s questioning in this area but denied a defense motion for a mistrial. The jury found the defendant guilty. On appeal, the defendant argued the trial court violated his Fifth Amendment right against self-incrimination, but the Eighth District declined to reverse the conviction.

Contact a Texas White Collar Criminal Defense Lawyer Today

The moment a police officer asks to speak with in connection with a fraud investigation, you need to call a lawyer. Never assume you can “talk your way out of” a white collar crimes charge. If you live in the Houston, Galveston, or League City areas and need legal advice, call (281) 280-0100  or contact the Law Offices of Tad Nelson & Associates right away.