Money is improperly transferred by an employee, the employee doctors the books, and the business suffers a loss as a direct result.
Typically, this scenario means that an act of theft has occurred. But what if the employee never actually takes the money for himself?
This unusual fact pattern was presented in a recent decision in the Minnesota Court of Appeals: TCI Bus. Capital, Inc., vs. Five Star Am. Die Casting, LLC, et al., No. A16-0741, 2017 WL 279571, at *2 (Minn. Ct. App. Jan. 23, 2017). Apparently motivated by a desire to make himself look good in his job, the defendant in TCI Business created a somewhat elaborate series of false transactions involving customers, false invoices, purchasing orders, packing lists, bills of lading, and accounting adjustments. The defendant transferred money around (including outside the company) so it appeared a customer/debtor he was responsible for pursuing had already paid $250,000. In reality, the customer had not. Here’s the twist: the defendant had good instincts about his lack of job security. Thus, before the defendant was able to complete the scheme by selling some of the debtor’s equipment and re-adjusting plaintiff’s internal accounting records, the defendant was terminated for reasons unrelated to the accounting shenanigans.
After the plaintiff discovered the scheme, one of the intriguing questions was whether the defendant was liable under the Minnesota Civil Theft statute. Ordinarily, the statute is a powerful tool for the business litigator because a “person who steals personal property from another is civilly liable to the owner of the property for its value when stolen plus punitive damages of either $50 or up to 100 percent of its value when stolen, whichever is greater.” Minn. Stat. § 604.14, subd. 1 (2016).