Also known as: misappropriating funds · misappropriated funds · misappropriates funds · misappropriation
Written by attorneys · grounded in primary & secondary sources — see below
The unauthorized taking or use of funds entrusted to a fiduciary or agent for a particular purpose.
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Miranda Morales entrusted settlement proceeds to her attorney for safekeeping. The attorney diverted the funds into a personal account and used Morales's name in promotional materials to attract new clients. Morales discovered the depletion and sued for recovery of the misappropriated amount.
Marcus Mitchell learned from a client that another lawyer had withdrawn client funds without authorization. Mitchell's client asked him not to disclose the diversion. Mitchell reported the misappropriation to disciplinary authorities anyway.
Ming Ma, a solo practitioner, transferred client settlement money from the trust account to cover firm expenses. Ma intended to repay the amount later but never did. The state bar pursued disbarment based on the knowing misappropriation.
Mariam Mansour served as a director of Matrix Technologies. She failed to monitor the treasurer, who diverted corporate funds to personal accounts. The corporation suffered losses and sued Mansour for breach of oversight duties tied to the misappropriation.
Mason McCarthy, a law firm associate, learned of a pending acquisition while handling client matters. He used the information to trade securities and funded the purchases with misappropriated client retainer funds. Federal prosecutors charged him with securities fraud.
Madison Meyers, a program manager at Majestic Construction, diverted federal grant funds intended for infrastructure work into a personal venture. The government indicted her for the misappropriation under fraud statutes.
The lawyer must know the funds belong to the client and take them without authorization. Intent to repay or absence of client loss does not excuse the violation.
Yes. The reporting obligation under rules modeled on Model Rule 8.3 applies when the misconduct is serious and the information is not protected as confidential under Rule 1.6.
A person with only limited authority holds custody, so misappropriation constitutes larceny. Discretionary authority creates possession, and misappropriation then does not qualify as larceny.
…Hanover Milling Co. v. Metcalf , 240 U.S. 403, 413. In recent years, its scope has been extended. It has been held to apply to misappropriation as well as misrepresentation, to the selling of another's goods as one's own, — to misappropriation of what equitably belongs to a competitor. International News Service v. Associated…