What (who) is defalcation - definition

MISAPPROPRIATION OF FUNDS BY AN ENTRUSTED PERSON

Defalcate

defalcation

Diminution, abatement, reduction, deduction, discount.

Deficiency, deficit, default, shortage, short-coming, falling short.

Fraudulent shortage (in accounts), defaulting, breach of trust, embezzlement.

Defalcation

·noun That which is lopped off, diminished, or abated.

II. Defalcation ·noun An abstraction of money, ·etc., by an officer or agent having it in trust; an Embezzlement.

III. Defalcation ·noun A lopping off; a diminution; abatement; deficit. Specifically: Reduction of a claim by deducting a counterclaim; set- off.

defalcation

v. from Latin for "deduction," withholding or misappropriating funds held for another, particularly by a public official, or failing to make a proper accounting.

Wikipedia

Defalcation

Defalcation is misappropriation of funds by a person trusted with their charge; also, the act of misappropriation, or an instance thereof. The term is more specifically used by the United States Bankruptcy Code to describe a category of acts that taint a particular debt such that it cannot be discharged in bankruptcy. The United States Supreme Court addressed the issue in 2013, holding that "defalcation" in the context of the U.S. Bankruptcy Code requires proof of "a culpable state of mind… involving knowledge of, or gross recklessness in respect to, the improper nature of the relevant fiduciary behavior."

In accounting terminology, especially with respect to the area of audit, defalcation means a misappropriation of assets or theft of assets by employees or officers of a corporation.

Defalcation occurs when a debtor commits a bad act while acting in a fiduciary capacity. The classic example of defalcation is when a trustee recklessly invests trust funds and loses the money. If the beneficiary wins a judgment against the trustee, and the trustee files for bankruptcy, the debt (the judgment) cannot be discharged in bankruptcy because the debt was the result of a defalcation.

Defalcation, for example, applies when a debtor is acting in a fiduciary capacity. To constitute a defalcation, the conduct involves a degree of culpability that is greater than negligence, but the act does not need to rise to the level of a "fraud" under common law. Defalcation requires showing of conscious behavior or extreme recklessness.

The term is used in legal proceedings other than bankruptcy to refer more generally to embezzlement; it is often used in the context of the title insurance business. A title agent who misuses funds intended to be used to close insured transactions is said to be involved in a defalcation. Many title insurers have their own "defalcation units"

Sometimes defalcation has been pronounced for very small amounts as under 2 £ and cents, even if it was claimed to be an error in handling change.

https://en.wikipedia.org/wiki/Defalcation

Examples of use of defalcation

1. Yunis Bin Ali Al Balushi as well as Mahmoud Munawer Ali were convicted of accepting bribes, and being involved in defalcation, forgery, misuse of job position and divulging professional secrets.

2. In fact he has selected known and prominent persons involved in serious and criminal corrupt practices and acts of misappropriations and defalcation that were being investigated by the NAB, as members of his Cabinet and seeks to run the entire government of Pakistan through such personalities, the Resolution reads.