Yes. Having an ownership interest, a partnership share, or signing authority on a shared business account does not, by itself, protect you from an embezzlement charge if you fraudulently use the funds for a purpose outside what you were trusted to do with them. A California appeals court has held that a partner can embezzle from the partnership, because the embezzlement statutes reach anyone entrusted with property for someone else’s use, not only people with no ownership stake.

Co-ownership is not an automatic defense

The commentary to CALCRIM No. 1806, the embezzlement jury instruction, says under its Alter Ego Defense heading that “a partner can be guilty of embezzling from his own partnership,” quoting the Court of Appeal’s decision in People v. Sobiek (1973) 30 Cal.App.3d 458. Sobiek reasoned that the Penal Code requires property to be “of another” for larceny but not for embezzlement, and that taking the part of the partners’ shares that does not belong to you is no different from stealing anyone else’s property. So a partial ownership interest does not, by itself, defeat the charge.

The statute reaches well beyond employees and strangers. Penal Code section 506 covers trustees, agents, and any other person “intrusted with or having in his control property for the use of any other person” who fraudulently appropriates it to a use “not in the due and lawful execution of his trust.” Sobiek concluded that a partner fits that description, because the section requires that property be entrusted for another’s use, not that it belong to someone else. Whether another co-ownership arrangement fits depends on who owned the funds and on what terms you controlled them. The basic definition in Penal Code section 503 still has to be met: the funds must have been entrusted to you, and you must have fraudulently appropriated them.

What actually separates a business disagreement from a crime

Under CALCRIM No. 1806, a person acts fraudulently when they take undue advantage of another person or cause that person a loss by breaching a duty, trust, or confidence. Spending or moving business funds in a way your co-owner disagrees with is not automatically that kind of breach; disagreements about business judgment, bookkeeping, or how expenses should be allocated can be civil accounting questions rather than criminal ones. The prosecution has to prove that you fraudulently converted or used the money for your own benefit and intended to deprive the business or the other owners of it, and the same instruction recognizes that a good-faith belief that you were authorized to use the property is a defense.

The claim-of-right defense has a built-in limit

If you openly took property under a good-faith claim that it was yours, Penal Code section 511 makes that a defense to embezzlement, even if the claim turns out to be untenable. The same section, though, does not excuse keeping another’s property to offset or pay a demand you hold against them, and CALCRIM No. 1863 adds that the claim-of-right defense does not cover offsetting a claim of an undetermined or disputed amount, or a taking you tried to conceal. An argument over your fair share of a partnership, or over what the business still owes you, is usually exactly that kind of disputed or undetermined claim, so these limits, not the general good-faith rule, tend to control.

Intending to true up the account later does not protect you

A plan to repay or reconcile the account later is not a defense. Penal Code section 512 bars even using that intention to reduce the punishment if the money was not restored before charges were filed, and under Penal Code section 513, actually restoring it before charges still is not a defense; it only gives the court discretion to lessen the punishment.

Handling a shared-account dispute the safer way

  • Get a real accounting of the shared account before taking any additional funds out of it yourself, rather than after.
  • Route a disagreement over your share or a reimbursement through the partnership agreement, a bookkeeper or accountant, or civil counsel, instead of unilaterally adjusting the account.
  • If a co-owner has already accused you of taking funds, gather the partnership records, account access history, and any agreement about how funds could be used before you speak with investigators.

If a dispute with a business partner or co-owner has escalated into an embezzlement accusation, the Law Offices of David S. Chesley can look at the account records and whether a claim-of-right defense fits your situation. Call (800) 755-5174.