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Criminal Misapplication

Criminal misapplication of funds of a financial institution is a federal crime. The elements of the offense involve:


  • an officer, director, agent, or employee affiliated with a financial institution wilfully converted funds for his or her own use;

  • the financial institution was a member of the Federal Reserve Banking System or was federally insured;

  • the defendant acted with the intent to injure or defraud the financial institution; and

  • the defendant willfully misapplied money or funds entrusted to the custody or care of the financial institution.

In order for the prosecution to be successful in a prosecution for criminal misapplication, it must show that a nexus existed between the misapplication and the defendant’s status with the financial institution.

Moreover, the prosecution must prove that the defendant acted in an intentional and willful manner to harm the financial institution. The prosecution may show that the defendant acted intentionally if it is established that the defendant had either the intent to injure or the intent to defraud the financial institution. The intent to injure or defraud is different from the concept of maladministration. Maladministration is the failure to follow the law and rules, but does not require proof of criminal intent. In order to constitute misapplication, the defendant’s conduct must include the intention to harm the financial institution.

Further, the prosecution must prove that the defendant willfully misapplied money or funds of the financial institution. The defendant may engage in various types of transactions in his attempt to willfully misapply the funds of the financial institution.

Penalties

If the defendant is convicted of criminal misapplication of an amount exceeding $100, the defendant may be fined up to $1,000,000, sentenced up to 30 years in prison, or both.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.

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