By Criminal Defense Lawyer Jeremy Rosenthal
Misapplication of fiduciary property occurs when a person in a fiduciary role takes money typically held in trust for another and misuses those funds.
The applicable statute is Tex.Pen.C. 32.45.
What is a Fiduciary?
In law school they teach a fiduciary relationship is like “a mama’s relationship with her baby.” It is someone whose knowledge, expertise and position of trust puts them in a special relationship of care or control over another person or their funds.
There is no exhaustive list for what is a fiduciary but it includes attorneys, guardians, executors, conservators or receivers. In certain instances employees given high levels of trust can be held to be fiduciaries.
What is Fiduciary Property?
It is normally money held in trust. But it can go beyond money kept in a trust account. For example, let’s say an employee is given a deposit to take to the bank for the business. This is known as a bailment. The employee pockets $100 of the deposit. The employee has committed theft and misapplication of fiduciary property.
What is Misapplication?
Misapplication is handling of the property (usually money) in a way either contrary to an agreement or court order – or in some other way which causes a substantial risk of it being lost. The most common example would simply be stealing but in theory if a guardian took money designated for their ward to the race track – win or lose they are subjecting it to substantial risk of being lost.
Where This Statute Gets Tricky
A fiduciary does have a duty to do what is in the best interest of the person they are a fiduciary on behalf of. This means large sums of money held in trust over long periods of time should be invested so the owner gets the benefit. But there is a difference between taking the money to the racetrack and investing it in the oldest and most trustworthy stocks on the market.
Though the money could be lost either way – the statute provides misapplication is committed where the fiduciary exposes the property to “substantial risk of loss to the owner.”
Punishment for Misapplication of a Fiduciary Property
The degree of offense under Texas law is based on the “value ladder” of the amount in question. The more money misapplied – the higher the punishment.
*Jeremy Rosenthal is board certified in criminal law by the Texas Board of Legal Specialization. He is recognized as a Texas Super Lawyer by Thomson Reuters.