Section 523(a)(4) excepts from discharge debts "for fraud or defalcation
while acting in a fiduciary capacity, embezzlement, or larceny." (57) A recurring fact pattern involves a debtor who was an insider of a corporation, and who misappropriated or fraudulently transferred property of the corporation at a time when the corporation was insolvent.
An equally unfortunate but common assumption is that CPL cover all acts of fraud, theft and defalcation
. They don't.
As such, while they may be large in size, many practical business controls may not be in place to prevent or detect common defalcations
Perhaps the most serious setback was the defalcation
of 1932, a financial and moral disaster in which the college and diocese together lost around $1 million.
He was recently appointed as outside counsel to a title insurance company to investigate multiple claims of alleged fraud and defalcation
against a settlement agent which had appeared for numerous banks.
Unlike an old-fashioned bank embezzler, who stuffs cash into a valise and blows town, modern defalcation
schemes typically involve adding or removing accounting entries into a computer or remitting payments to spurious addresses.
A bond protects you against any acts of defalcation
. Don't be surprised that an attorney that didn't remit to you, most likely didn't remit on other cases.
To avoid defalcation
, institute a system of check requisitioning that creates a paper trail designed to ensure that no client trust account checks can be disbursed or negotiated without sufficient documentation.
Obviously, if fraud or defalcation
is involved, serious consequences cannot be averted.
Clench misappropriated funds from the sale of the lands of other First Nations as well and actions against him became known as the Clench Defalcation
Claim, which was the subject of investigation from 1847 to 1854.
Perhaps it was curiosity that led me to admit him to the conversation despite his defalcation
. If so, it was well rewarded.
Generally, this is appropriate even though the matter might be considered inconsequential [e.g., a minor defalcation
by a low-level employee].