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Introduction

“Conversion,” in the legal sense, is

an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to anothe , to the alteration of their condition or the exclusion of the owner’s rights. An unauthorized act which deprives an owner of his property permanently or for an indefinite time. Unauthorized and wrongful exercise of dominion and control over another’s personal property, to the exclusion of or inconsistent with the rights of owner.4

So by stealing the chips, the employee also engages in conversion of the company’s property. The legal term for stealing is “larceny,” which is

felonious stealing, taking and carrying, leading, riding, or driving away with another’s per- sonal propert , with the intent to convert it or to deprive the owner thereof. The unlawful tak- ing and carrying away of property of another with the intent to appropriate it to a use inconsistent with the latter’s rights. The essential elements of a “larceny” are an actual or con- structive taking away of the goods or property of another without the consent and against the will of the owner and with a felonious intent. Obtaining possession of property by fraud, trick or device with preconceived design or intent to appropriate, convert, or steal is “larceny.”5

As a matter of law, the employee in question could be charged with a wide range of criminal and civil conduct: fraud, embezzlement, obtaining money under false pre- tenses, or larceny. As a practical matter, he probably will be charged with only one of- fense, commonly larceny.

“Larceny by fraud or deception” means that

a person has purposely obtained the property of another by deception. A person deceives if he purposely: (1) creates or reinforces a false impression, including false impressions as to la , value, intention or other state of mind; but deception as to a person’s intention from the act alone that he did not subsequently perform the promise; or (2) prevents another from ac- quiring information which would affect his judgment of a transaction; or (3) fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relation- ship; or (4) fails to disclose a known lien, adverse claim, or other legal impediment to the enjoyment of property which he transfers or encumbers in consideration for the property ob- tained, whether such impediment is or is not valid, or is or is not a matter of official record.6

The fraudulent aspect of occupational frauds, then, deals with the employee’s fidu- ciary duties to the organization. If those duties are violated, that action may be considered fraud in one of its many forms. Under the definition of occupational fraud and abuse in this book, the activity must be clandestine. Black’s defines “clandestine” as “secret, hid- den, concealed; usually for some illegal or illicit purpose.”7

Defining Abuse

A litany of abusive practices plagues organizations. Here are a few of the more common examples of how employees “cost” their employers. As any employer knows, it is hardly out of the ordinary for employees to:

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