Embezzling Church Funds: A Case Study

Is a 32-year prison sentence too harsh?

As hard as it may be to believe, embezzlement is a relatively common occurrence in churches. As a result, it is important for church leaders to take this risk seriously. A recent case illustrates the serious consequences that are often associated with this crime.

The case. A church business administrator (“Steve”) kept the church’s books and controlled the church’s bank accounts. Over a four-year period, he embezzled $350,000 in church funds by engaging in the following activities:

  • Writing unauthorized checks to himself and others from the church’s accounts.
  • Using the church’s credit card on over 300 occasions to purchase personal items for himself and his family, including several luxury items. He knew that he was not permitted to use the church’s credit card for these purchases but continued to do so anyway.

Eventually, church leaders became suspicious. When Steve arrived at church one morning he was confronted by the senior pastor and some church members, who shared their suspicion that he was embezzling church funds. Steve immediately admitted what he had done. Police officers were called and he made a full confession, cooperating with the church’s attorney and the police during the course of the investigation. The church eventually secured a $1 million civil judgment against him.

The state charged Steve with several felonies, including four counts of forgery, four counts of theft, and one count of corrupt business influence. He pleaded guilty as charged. The plea agreement provided that the state would make no sentencing recommendation and set a cap of 30 years imprisonment.

At a sentencing hearing the trial court considered both “aggravating” and “mitigating” factors in deciding on an appropriate punishment. The court concluded that the “nature and circumstances” of the crimes was an aggravating factor. Specifically, the court mentioned the following factors:

  • The large amount of money that had been stolen.
  • The care and planning that went into the crimes.
  • The concealment of the crimes.
  • The fact that a great number of checks were stolen and unauthorized credit card charges made without any cessation.
  • Steve had breached the trust of the church and its pastor.
  • Steve made no restitution to the church for the monies he had stolen despite his agreement to do so.
  • Steve’s crimes caused financial harm to the church in addition to the loss of funds. This additional harm included tax liens, interest, and penalties resulting from the thefts.

The court found Steve’s remorse to be a mitigating factor, though it faulted him for not selling some items or his home to attempt to repay some of the restitution. The court also found Steve’s full cooperation with the police and church leaders to be a mitigating factor. One additional mitigating factor noted by the court was Steve’s lack of any criminal record.

The trial court concluded that the aggravating factors outweighed the mitigating factors, and sentenced Steve to 32 years in prison. It then converted six years to supervised probation for a total sentence of 26 years, six years of which it ordered to be served on work release and 20 years of which it ordered to be served in the state penitentiary. Steve appealed this sentence.

The appeals court’s ruling. On appeal, Steve argued that a 32-year sentence for embezzling church funds was too harsh and should be reduced. The court noted that in examining the propriety of a sentence, an appellate court must consider “both the nature of the offense and the defendant’s character.” However, “the burden is on the defendant to demonstrate that his sentence is inappropriate.”

Nature of the offenses

The court, calling Steve’s offenses “despicable,” observed several tragic consequences of his behavior:

  • He breached a position of trust with the church by stealing approximately $350,000 over the course of four years.
  • He repeatedly, and without cessation, wrote unauthorized checks to himself and others and used the church credit card for personal purposes.
  • He was financially solvent prior to his crimes, and did not need to steal church funds.
  • He could have earned extra money in other ways.
  • He used the money that he stole to purchase, among other things, luxury items.
  • To conceal his offenses, he willfully destroyed checks and credit card statements, falsified financial records and reports to church officials, liquidated church assets, and shifted money away from legitimate business expenditures, such as the church health insurance and pension plans covering its employees.
  • Among other things, his failure to pay church employee health insurance premiums resulted in the lapse of health insurance for a pregnant church employee. When this employee discovered that she had no health insurance and went to Steve, he assured her that it was just a “glitch” that she should not mention to anyone. Steve failed to rectify the problem, resulting in the church paying a large portion of the employee’s medical bills. This incident resulted in the employee’s credit rating being ruined.
  • While depriving the church employee of her health insurance, Steve used church funds to pay the premiums for unauthorized health, dental, and life insurance policies for himself and his family.
  • Part of the money that Steve stole came out of special needs collections for tsunami, earthquake, and hurricane victims, hampering the church’s social justice mission.
  • Although the actual amount stolen totaled $350,000, the total financial loss to the church, including interest, delinquency fees, and finance charges, totaled $655,000.
  • Because Steve had failed to pay the church’s state and federal tax bills, 12 tax liens were filed against the church’s property.
  • The congregation experienced great turmoil, with the personal reputation of the pastor and that of the congregation itself called into question.
  • The church was forced to curtail its work and faces uncertainty about its future.

The court concluded:

The nature of Steve’s offenses is undeniably despicable. He abused a position of trust with the church, ruined the credit rating of a fellow church employee, and caused potentially irreversible damage to the congregation and its pastor. He stole repeatedly and without cessation and went to great lengths to conceal his unauthorized activities. We must also consider his character, however, and we place great weight on the complete absence of a prior criminal history. Similarly, it is significant that he immediately admitted to his crimes and pleaded guilty as charged. Ultimately, we find the nature of the offenses and his character to be in equipoise and conclude that the sentences imposed by the trial court were inappropriate.

The court reduced Steve’s sentence to 16 years, and directed the trial court to decide “how he should serve those 16 years, keeping the goal of monetary restitution to the church in mind.” 887 N.E.2d 102 (Ind. 2008)

Relevance to church leaders. This case is instructive for church leaders for several reasons, including the following.

1. It illustrates the seriousness of the crime of embezzlement. The trial court announced a sentence of 32 years for the embezzlement of $350,000 in church funds, with 20 of those years being served in the state penitentiary. While the appeals court concluded that this sentence was too harsh, it did approve a sentence of 16 years.

2. The court’s description of the many collateral consequences of Steve’s crimes is compelling. Embezzlement is not a victimless crime. Steve’s acts caused considerable damage not just to himself, but also to a fellow employee, and to the church.

3. At Steve’s sentencing hearing before the trial court, the state offered evidence, which was admitted over his objection, that while employed by a prior church he used a church credit card to purchase luxury items for himself. He eventually admitted that he had stolen the money but the church decided not to file criminal charges, believing that he had “learned his lesson.” If true, this evidence illustrates an important point—the tendency of church leaders to show mercy to an embezzler may be creating a problem for future employers. This is an important point for church leaders to consider in deciding how to respond to such crimes.

4. It seems inconceivable that Steve could have written unauthorized checks, and made unauthorized charges to the church’s credit card, “repeatedly, and without cessation.” The trial court identified 300 such unauthorized transactions. While this may seem unbelievable, it is entirely possible in any church that lacks an adequate system of internal control. The table below lists several causes of embezzlement, and appropriate internal controls that can reduce or eliminate each risk.

Key Point. The most important point to emphasize is “division of responsibilities.” the more that tasks and responsibilities are shared or divided, the lower the risk of embezzlement.

Key Point. Many churches refuse to implement basic principles of internal control out of a fear of offending persons who may feel that they are being suspected of misconduct. The issue here is not one of hurt feelings, but accountability. The church, more than any other institution in society, should set the standard for financial accountability. After all, its programs and activities are rooted in religion, and it is funded with donations from persons who rightfully assume that their contributions are being used for religious purposes. The church has a high responsibility to promote financial accountability. This duty is simply not met when the practices described in the accompanying table are followed.

Church leaders can reduce the risk of embezzlement by reviewing common examples of poor internal controls, such as one person counts church offerings.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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