Many Colorado employers put the company’s finances into their employees’ hands. In most cases, this trust is well-placed. However, employee theft does happen.
At first, you may look the other way. Or you may feel angry and be tempted to react. These are understandable responses to employee theft, but neither will have a good outcome. Instead, take measured legal action. This article outlines your legal options for dealing with employee theft and how to obtain restitution for your loss.
Talk to an Employee Embezzlement Attorney
It’s shocking to learn a trusted employee is stealing from you. Not only is it a major betrayal, but your company’s bottom line will almost definitely suffer from it. The employment attorneys at Robinson & Henry, PC, can help recover what you lost to employee theft. Call 303-688-0944 today to schedule your free case assessment.
What is Embezzlement?
Embezzlement is a form of theft that violates the inherent trust in an employment relationship. In other words, embezzlement is the crime of stealing or misappropriating assets or funds from:
- an employer
- business partner
- another person who trusted the embezzler with the asset
Embezzlement is different from fraud or larceny. In these cases, the alleged embezzler has permission to handle the property in a certain way. In employee theft cases, your employee uses the position of trust you have granted them to convert your property for their own benefit.
How Employees Embezzle on the Job
An employee who takes money or property from an employer and uses it for personal benefit commits embezzlement. Here are a few examples:
Let’s take a look at a case in which one Colorado woman stole more than $700,000 from her employer.
Duckels Construction vs. Driggers
In 2019, a top employee at a Steamboat Springs construction company reported a theft to local law enforcement. During an annual audit, accountants noticed several files had been deleted from the company’s financial accounts.
An outside company was able to recover the deleted information, the Steamboat Pilot reported. The files matched up with a banking reference number associated with Susan Driggers, the company’s office manager and corporate secretary.
Employees learned that Driggers “had entered into the payroll system and paid herself for approximately forty to fifty hours of unauthorized overtime for every week from 2011 through 2016.” Driggers was able to do this because she “controlled the company’s payroll and was responsible for correctly entering her own time and issuing her own paychecks.” Duckels Constr. v. Driggers, District Court of Colorado, Routt County
By manipulating computerized internal bookkeeping records, Driggers was able to steal more than $300,000 by paying herself for overtime hours she never worked, the Pilot reported. She also stole more than $400,000 by writing checks to herself and to vendors working on a house she was building.
A Routt County jury convicted Driggers of four felonies, including theft, cybercrime, identity theft, and forgery. However, Driggers’ legal woes did not end there.
The company filed a civil suit against Driggers for deceit and fraud, concealment, civil theft, and breach of fiduciary duty. A Colorado district judge ruled in Duckels’ favor. Driggers was ordered to pay more than $4.6 million in damages.
Legal Options if an Employee is Stealing from You
Criminal Penalties for Embezzlement
If you are dealing with a situation in which an employee has stolen from you, you have a few options. You can file criminal charges against the employee.
In Colorado, embezzlement of private property is charged as theft. Charges are based on the amount of money or value of the assets allegedly taken.
Civil Remedies for Employee Theft
File a Civil Theft Claim
Colorado law provides a private civil remedy for theft victims looking to recover their stolen property. These rights are enshrined in what is known as the Rights in Stolen Property Statute:
“All property obtained by theft, robbery, or burglary shall be restored to the owner, and no sale, whether in good faith on the part of the purchaser or not, shall divest the owner of his right to such property. … In any such action, the owner may recover two hundred dollars or three times the amount of the actual damages sustained by him, whichever is greater, and may also recover costs of the action and reasonable attorney fees; but monetary damages and attorney fees shall not be recoverable from a good-faith purchaser or good-faith holder of the property.” C.R.S. § 18-4-405
While this statute does not define theft, the law is found in the Colorado Criminal Code. The terms used in the statute are therefore defined within the statutory framework of that criminal code.
Theft is defined as “knowingly obtaining or exercising control over anything of value of another without authorization, or by threat or deception, and . . . intending to deprive the other person permanently of the use or benefit of the thing of value.” C.R.S. § 18-4-401
Recover Three Times the Damages with a Civil Theft Claim
In 1973, the Colorado General Assembly amended the Rights in Stolen Property statute to include the remedy of treble damages. This means the court may increase the damages award to up to three times the amount of actual damages.
This amendment provided an avenue for companies to recoup losses due to employee theft in cases where the government failed to bring criminal charges. Itin v. Bertrand T. Ungar, P.C., 17 P.3d 129, 134 (Colo. 2000)
How to Prove Civil Theft
To file a civil theft claim under Colorado law, you must show that the opposing party committed the elements of criminal theft:
- your employee knowingly obtained control over your property without authorization; and
- he or she did so with the specific intent to permanently deprive you of the benefit of the property.
A Criminal Conviction is Not Necessary
The employee does not have to be charged with or convicted of a crime in order for you to file a civil theft suit against him or her. You merely have to prove the statutory definition of theft to recover damages.
Criminal Conviction and Employee Theft
The Collateral Estoppel Doctrine
If your employee is convicted of theft in a criminal case, you do not need to prove that theft occurred for your civil lawsuit. Theft has already been proven beyond a reasonable doubt. This is due to the legal doctrine of collateral estoppel:
A-1 Auto Repair & Detail, Inc. v. Bilunas-Hardy, 93 P.3d 598, 599 (Colo. App. 2004)
Elements of Collateral Estoppel
In Colorado, four elements must be satisfied for a court to apply collateral estoppel or issue preclusion:
- the issue precluded is identical to an issue actually litigated and necessarily adjudicated in the prior proceeding
- there was a final judgment on the merits
- the party against whom issue preclusion is asserted was a party to, or was in privity with a party to, the prior proceeding; and
- the party against whom issue preclusion is asserted had a full and fair opportunity to litigate the issue in the prior proceeding.
A-1 Auto Repair & Detail, Inc. v. Bilunas-Hardy, 93 P.3d 598, 599 (Colo. App. 2004)
Let’s examine how collateral estoppel was invoked in the civil case cited above.
A-1 Auto Repair & Detail, Inc. v. Bilunas-Hardy
After Angela Bilunas-Hardy was fired from her job at a Breckenridge auto repair shop, her former employer discovered she had overpaid herself on her final paycheck.
A-1 Auto Repair & Detail hired an accountant who determined Hardy had overpaid herself nearly $6,000 during her employment. The auto repair shop also discovered approximately 69 missing job invoices. The invoices were marked “paid cash,” but the cash was never deposited into A-1’s bank account. The auto repair shop alleged Hardy took the cash paid by the customers, destroyed related records, and kept the cash.
Hardy was convicted in criminal court on two counts of theft. A-1 then sued her in Summit County district court for civil theft and conversion. Summit County ruled in favor of A-1 on the conversion claim:
“We conclude the conversion issue here — that Hardy exercised unauthorized possession of the overpayments belonging to A-1 — is identical to the issue actually litigated in the criminal proceeding. Therefore the first condition for issue preclusion is satisfied.”
A-1 Auto Repair & Detail, Inc. v. Bilunas-Hardy, 93 P.3d 598 (Colo. App. 2004)
The court ordered Hardy to pay her former employer $13,830.51 in damages.
File a Claim for Conversion
Conversion of property is a tort claim where a plaintiff seeks damages for another individual interfering with his or her property. Conversion is similar to civil theft, but your employee does not have to have an intent to permanently deprive you of this property.
In order to establish a conversion claim in an employee theft case, you must show that your employee committed a distinct, unauthorized act of dominion or ownership over your personal property. In other words, your employee took control of your property without your permission.
“A successful conversion claim requires a showing that the owner demanded return of property and the controlling party’s refusal to return it.” Dunwody v. Vision Entrp Co, 2020, Colo. Dist. Denver District Court, May 13, 2020
Talk to an Employment Law Attorney
It goes without saying that you put a lot of work into your business. You don’t deserve to have your profits stolen from you by someone you trusted. The employment law attorneys at Robinson & Henry will help you fight to recover the maximum amount of damages. Give us a call at 303-688-0944 today to schedule your free case assessment.