[Charge] Embezzlement in the course of duty

[Handling Attorney] Li Bin

[Features] A not-guilty defense lasting two years, involving three court hearings. During the trial phase following the prosecution’s indictment, the procuratorial authorities conducted two rounds of supplementary investigations. The defense counsel vigorously countered by gathering rebuttal evidence, leading to the summoning of key witnesses to the courtroom for direct confrontation. Ultimately, the court delivered a verdict of not guilty for the defendant.

[Party Involved] n Defendant: Han某

[Case Summary]

The defendant, Han, has a rather complex background: for a period of time, he served as the project manager at BL Decoration Company; at the same time, he also operated under the guise of BL Company, independently undertaking renovation projects. Due to a dispute between the defendant Han and the legal representative of BL Company, the latter initially reported that Han had accepted a kickback of 50,000 yuan when procuring construction materials for the company, allegedly constituting the crime of bribery by a non-state employee. However, during the investigation, the Supreme People's Court issued a judicial interpretation revising the threshold for initiating a case to 60,000 yuan, prompting the withdrawal of the original case. Subsequently, the legal representative again reported that Han had taken advantage of his position to embezzle over 230,000 yuan in wages entrusted to him by the company for workers' expenses—this is the case at hand. [Embezzlement of Corporate Funds]

Based on the report filed by the legal representative of BL Company, on March 15, 2017, the People's Procuratorate of Tiexi District, Shenyang City, instituted public prosecution against the defendant Han at the People's Court of Tiexi District, Shenyang City. The indictment alleges that the defendant Han took advantage of his official position to misappropriate three sums of funds from BL Company, totaling 236,296 yuan, as follows:

The first transaction occurred on January 27, 2014, when BL Company transferred 227,296 yuan to the defendant Han. The prosecution argues that this sum was intended for settling labor costs with Zhou, the contractor in charge of two construction projects in Shenyang and Benxi. However, the defendant Han only transferred 70,000 yuan to Zhou on that same day, while misappropriating the remaining 157,296 yuan.

The second payment was transferred by BL Company to the defendant on May 17, 2014. Han Mou RMB 9,000; on May 26, BL Company transferred the funds separately to the defendant. Han Mou 50,000 yuan, totaling 59,000 yuan—the prosecution argues that this sum was intended to cover the labor costs of carpenter Liu for the No. 28 land plot project in Tianjin, and all of it was misappropriated by him.

The third transaction occurred on July 11, 2014, when BL Company transferred 20,000 yuan to the defendant Han. The prosecution argues that this sum was intended to cover the labor costs of electrician Chai for the Tianjin Plot No. 28 project, but was instead misappropriated by him.

[Judicial Authority] People's Court of Tiexi District, Shenyang City

[Judgment/Content] The defendant is found not guilty.

[Lawyer’s Perspective]

1. Regarding the defense argument concerning the first instance of embezzlement of 157,296 yuan in labor costs from contractor Zhou.

After taking on the case, the defense counsel spoke with the defendant, Han, and learned that several financial personnel from BL Company who testified in this case were all related to the whistleblower. The contractor, Zhou, was actually carrying out construction work for the defendant, Han. The two projects in Shenyang and Benxi were, in fact, personally contracted by the defendant, Han, through his affiliation with BL Company. However, due to the defendant Han’s weak legal awareness, he failed to sign either an affiliation contract with BL Company or a construction contract with Zhou. Moreover, Zhou did not tell the truth: he denied having any direct contractual relationship with Han and instead confirmed that he had a contractual relationship with BL Company. As a result, on the surface, it appeared that BL Company and Zhou had a legal relationship as employer and contractor, while the defendant, Han, ended up being treated as an employee of BL Company.

Given the above-mentioned doubts, the defense counsel carefully examined the case files and paid particular attention to the relevant construction contract. During the review of the files, it was discovered that the construction contract had been signed between BL Company and Mr. Zhou. However, the contract did not specify a date of execution, and the amount of the project payment stipulated in the contract precisely matched the amount alleged by the prosecution—round numbers with no fractional cents—which defied common sense. Therefore, during the indictment stage, the defense counsel requested an expert appraisal to determine the time when the seal on the construction contract was affixed. Yet, after the defense counsel submitted its request for the appraisal, both BL Company and Mr. Zhou claimed that the original document had been lost and could not be provided. As a result, the key documentary evidence upon which the legal relationship at issue in this case depended—the original contract—was now unavailable.

To clarify the factual truth, the defense counsel requested that the defendant Han obtain bank statements, thoroughly review them, and meticulously list—by date and transaction—his bank transactions with BL Company and Zhou. The defense counsel also asked for documentary evidence such as receipts issued by Zhou himself or his workers to the defendant Han. After compiling these pieces of evidence, it was discovered that on January 27, 2014, prior to BL Company transferring 227,296 yuan to the defendant Han Dong, the defendant Han had already paid engineering funds from his personal account to Zhou, and the amount of these payments exceeded 227,296 yuan. Moreover, some of the receipts explicitly indicated that the payments were for engineering projects in Shenyang and Benxi. All these crucial documents were generated before the 227,296 yuan alleged by the prosecution. Therefore, the defense counsel submitted this set of evidence to the court to prove that, prior to BL Company’s transfer to the defendant Han, the defendant Han had already personally funded and paid engineering fees to Zhou, and the amount he paid exceeded the amount transferred by BL Company. Under these circumstances, regardless of the legal relationship between the two parties, the charge of embezzlement could not stand. After verification by both the court and the procuratorate, this set of evidence was ultimately accepted by the court, and the first alleged act of embezzlement charged by the prosecution failed to be established.

2. Regarding the defense argument concerning the second instance of misappropriation of RMB 59,000 in labor costs for carpenter Liu from the Tianjin Plot No. 28 project.

This sum consists of a transfer of 9,000 yuan on May 17, 2014, and a transfer of 50,000 yuan on May 26, 2014. The primary evidence presented by the prosecution to support the charge in this regard is the bank transfer records and the accounting vouchers issued by a certain company. However, these accounting vouchers contain only information on the purpose and amount of the funds, but bear no signatures from any personnel.

This case consists of six volumes. The first five volumes pertain to the charge of embezzlement by a public official, while the sixth volume contains the file related to the earlier allegation that the defendant Han accepted bribes as a non-state employee. While reviewing the file on the charge of bribery by a non-state employee, the defense counsel noticed that this file also includes a transfer of RMB 9,000 made to the defendant Han on May 17, 2014. However, the accounting voucher for this transfer clearly states that the funds were intended to reimburse the defendant Han for hospitality expenses incurred in connection with the Tianjin project. The voucher provides detailed information about the guests and their respective numbers. This document was one of many financial vouchers submitted by BL Company to the public security authorities at the time, precisely to establish the defendant Han Dong’s status as an employee of the company. Moreover, the accounting voucher bears signatures from both the defendant Han himself, as the claimant seeking reimbursement, and from the relevant financial personnel in the review section. By contrast, the accounting voucher for the RMB 9,000 transfer included in the embezzlement file presented by the prosecution lacks any signature whatsoever. Given that the same sum of money could not simultaneously serve two different purposes on the same day, one of these records must necessarily be false. Therefore, the defense counsel submitted this set of financial documents to the court. After verification, the court accepted these documents as evidence, and the prosecution’s allegation that the defendant had misappropriated RMB 9,000 from this transfer was subsequently dismissed by the court.

The additional 50,000 yuan was discovered by examining the defendant Han’s bank statements: on the very day BL Company transferred this 50,000 yuan to the defendant Han—May 26, 2014—the defendant Han also transferred 30,000 yuan to Zhou’s wife. This at least indicates that 30,000 yuan of the sum was not misappropriated. This view was ultimately adopted by the court.

3. Regarding the defense argument concerning the second instance of misappropriation of 20,000 yuan in labor costs for electrician Chai from the Tianjin Plot 28 project.

The transfer of this sum took place on July 11, 2014. After speaking with the defendant Han, we learned that during 2014, the defendant Han did indeed assist BL Company in overseeing the engineering project at Plot No. 28 in Tianjin. Starting from March 2014, BL Company paid the defendant Han a monthly management fee of 10,000 yuan as compensation. Based on the defendant Han’s statement and combined with his bank transaction records, the defense counsel found that during the four months of March, April, May, and August 2014, BL Company generally transferred funds to the defendant Han around the middle of each month, with each transfer amounting to 10,000 yuan. However, there was no record of any transfer in June 2014; instead, on July 11, 2014, BL Company made a single lump-sum payment of 20,000 yuan. Judging from the pattern of these transfers, it appears that BL Company had failed to pay the defendant Han’s salary for June, and then paid two months’ worth of wages—June and July—in one go on July 11. Therefore, the 20,000 yuan transferred on July 11, 2014, should be regarded as the defendant Han’s rightful salary for the months of June and July. The accounting voucher presented by the prosecution for this sum also lacked any signatures from relevant personnel, raising further doubts. In addition, the prosecution relied on the testimony of two witnesses to support its allegation that the defendant Han had embezzled the 20,000 yuan. These witnesses claimed that the defendant Han’s salaries for June and July 2014 were paid in cash, and that the 20,000 yuan transferred on July 11, 2014, was not Han’s salary but rather a separate payment for electrician labor costs. However, after reviewing the case files, the defense counsel discovered that both witnesses were relatives of the legal representative of BL Company. Moreover, by comparing the several different interrogation records of these two witnesses, the defense counsel found that their accounts of key details—such as the location and method of payment—were inconsistent and contradictory.

The defense counsel presented the aforementioned doubts and arguments to the court and requested the court to investigate and verify the expenditure records of BL Company for other employees at the same time period—in June and July 2014. After thorough investigation and verification, it was confirmed that BL Company had not paid salaries to other employees in June 2014 either. Furthermore, in July 2014, the amount of salary paid to other employees was twice the usual wage level. This factual evidence substantiated the defense counsel’s arguments and was ultimately adopted by the court. Consequently, the prosecution’s allegation regarding this 20,000-yuan sum was also found to be unsubstantiated.

In summary, due to the Shenyang Tiexi District Procuratorate’s insistence on prosecution and its refusal to withdraw the indictment, the Shenyang Tiexi District People’s Court issued a first-instance judgment on May 25, 2018, acquitting the defendant Han. Dissatisfied with this judgment, the procuratorial organ filed an appeal; however, it subsequently voluntarily withdrew the appeal at the Shenyang Intermediate People’s Court. As a result, the judgment has now become legally effective.

[Reason for Recommendation]

This case involves the crime of embezzlement in the course of one’s official duties. The core argument for acquittal hinges on demonstrating through evidence that, prior to the company’s funds being transferred into the defendant’s account, the defendant had already made expenditures (or advances) from his own funds. In handling this case, we thoroughly investigated the identity and financial interactions between the defendant and the whistleblower, first meticulously listing all bank transaction records. Then, by carefully reviewing the chronological order of fund transfers, we identified discrepancies and exploited loopholes in the prosecution’s evidence as well as transaction records preceding the entry of the misappropriated funds into the defendant’s account. By systematically offsetting each alleged misappropriated amount against these pre-existing transactions, we successfully refuted the prosecution’s charges and achieved a verdict of not guilty, thereby safeguarding the defendant’s legitimate rights and interests.