Court Can Reject Repayment Defense in Embezzlement Cases - Criminal Law - U.S. Eighth Circuit
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Court Can Reject Repayment Defense in Embezzlement Cases

Bad news for defendants in embezzlement cases: Iowa courts do not have to consider the but-I-put-the-money-back defense at trial.

The Eighth Circuit Court of Appeals ruled this week that an Iowa court did not err in barring evidence that an accused embezzler returned stolen money to his employees’ Individual Retirement Account (Simple IRA).

James Norman Van Elsen solely owned Van Elsen Consulting, Inc. (VEC), a small actuarial business that serviced insurance companies. In September 2002, Van Elsen established a “Simple IRA” for his employees’ benefit.

When Van Elsen established the Simple IRA, he was advised of his legal obligation to deposit Simple IRA contributions as soon as the money could be reasonably segregated from VEC's general assets but not later than 30 days after the last day of the month in which the monies were withheld.

In 2005 and 2006, while working on plans to start a life insurance company, Van Elsen withheld retirement money from his employees' paychecks, but failed to deposit the Simple IRA contributions. Throughout 2005 and 2006, Van Elsen's employees filed complaints about the Simple IRAs with the Department of Labor. When contacted, Van Elsen made excuses about isolated mistakes and hard times.

At the same time the Van Elsen wasn't paying into the employees' simple IRA, he withdrew $213,000 from the company's account that he used for personal purchases and expenses, vacations, and a boat. Van Elsen's house of cards came tumbling down when the Internal Revenue Service placed a $17,000 levy on one of VEC's company accounts because, in addition to not paying the Simple IRAs contributions, Van Elsen also was not paying payroll taxes.

Van Elsen and his wife filed for protection under Chapter 11 of the Bankruptcy Code. Van Elsen repaid the Simple IRA deposits to the Labor Department in January 2010 by depositing all past-due monies plus interest into his employees' accounts in accordance with his bankruptcy proceeding. Van Elsen's repayment occurred approximately six years after the payments were due, seven months after his indictment, and just two weeks before trial.

While the trial court permitted Van Elsen to make plenty of excuses for his embezzlement to jury - stress of starting a new company, health problems, and intent to repay - the court shut Van Elsen down when he tried to offer evidence of actual repayment. The jury convicted Van Elsen. He appealed, claiming that the court erred in rejecting his eventual repayment evidence.

The Eighth Circuit Court of Appeals upheld the trial court's decision, noting that, because the intent to permanently deprive is neither a required element of, nor a defense to, embezzlement cases, the district court did not abuse its discretion when it excluded evidence of Van Elsen's eventual repayment of his employees' Simple IRA contributions in a bankruptcy proceeding as irrelevant.

This is a sad day for affirmative defenses. The but-I-put-the-money-back defense was second in our hearts only to the popular he-needed-killin' affirmative defense. May it rest in peace.

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