1. Start with Collectability before Expanding the Investigation
The ledger total is not always the amount worth litigating over. An embezzlement and breach of fiduciary duty attorney should first separate loss, disputed transactions, and realistic recovery sources. That distinction matters from the start. Penal Law § 155.05 treats embezzlement as a form of larceny, while a fiduciary-duty claim still depends on the relationship and duties involved.
Define the Loss before Paying to Trace It
- List disputed transfers, withdrawals, reimbursements, vendor payments, and other transactions.
- Separate confirmed losses from unexplained entries that still need review.
- Compare the loss with assets, insurance, and collection paths before widening the inquiry.
<H3>Match the Claim to the Person’S Role
- Do not assume every employee owes fiduciary duties merely because company money was involved.
- For directors or officers, Business Corporation Law § 720 may support an accounting or other relief when its requirements are met.
- Use internal investigation services when the record is incomplete or several people may be involved.
2. Spend on Forensics Where It Changes the Recovery Picture
Forensic work is useful when ordinary records cannot answer a recovery question. Bank statements, ledgers, and prior audits may already narrow the period. Broader reconstruction should have a defined purpose before costs expand.
Use Existing Records before Rebuilding Everything
- Start with ledgers, bank records, invoices, payroll, expense reports, and prior audit work.
- Identify gaps that prevent the company from tying a transaction to a person, purpose, or destination.
- Add forensic accounting when tracing, reconstruction, or loss calculation requires specialized work.
Escalate Asset Work Only When Facts Support It
- Preserve key custodians first instead of collecting every mailbox and device at once.
- Target bank, vendor, processor, or service-provider records that confirm the money path.
- If facts suggest fraudulent asset dissipation, assess prejudgment attachment under CPLR grounds rather than assuming a restraint is available.
3. Keep Discovery Proportional to the Money Still at Stake
Discovery costs can rise quickly as custodians, accounts, and third parties multiply. Each request should answer a liability, tracing, or collectability question. Depositions, subpoenas, and document review should move recovery forward rather than enlarge the record.
Focus Discovery on Recovery Questions
| Discovery Tool | Main Cost Driver | Recovery Use |
|---|---|---|
| Document review | Custodians and data volume | Confirm transactions and knowledge |
| Third-party subpoena | Institutions and response disputes | Trace transfers and counterparties |
| Deposition | Witness count and preparation | Test explanations and asset facts |
Sequence the Expensive Steps
- Use targeted requests before opening every discovery channel.
- Schedule depositions after core records are reviewed so questions address known transactions.
- Use civil litigation planning when formal discovery becomes a major expense.
4. Compare Settlement, Civil Recovery, and Criminal Restitution
Settlement, a civil judgment, and criminal restitution are different recovery paths. A payment plan may offer earlier value, while litigation may fit when liability or collectability remains disputed. Penal Law § 60.27 treats restitution or reparation as part of criminal sentencing after conviction, not as a substitute for the company’s civil claim.
Measure Settlement against the Next Litigation Spend
- Compare a proposed payment with expected discovery, expert, motion, and trial-preparation costs.
- Test installment terms against actual ability to pay, not only the settlement’s face amount.
- Document payment dates, defaults, releases, security, and collection rights.
Keep Restitution and Civil Damages Distinct
- Section 60.27 addresses restitution of offense proceeds and reparation for qualifying out-of-pocket loss.
- The statute includes amount limits and exceptions, so a restitution order may not equal the full civil claim.
- Payments under § 60.27 do not impair civil liability for damages above the amount paid.
5. Treat Insurance and Fees As Part of Net Recovery
A valid claim can still be uneconomic if legal costs consume the expected recovery. Insurance and attorney fees belong in the same budget model, but neither should be assumed to fund the case. Policy language and the engagement agreement control what is available.
Read the Policy before Counting Insurance
- Check crime, fidelity, or other coverage for covered loss, notice, proof, and timing requirements.
- Confirm whether forensic, investigation, or legal expenses are covered instead of assuming reimbursement.
- Use claims adjustment and settlement review when policy terms affect the recovery model.
Set Fee Controls Around Defined Work
- Ask for staffing plans that separate routine investigation work from senior strategy and major decisions.
- Use phase budgets, caps, or fixed fees where the work product can be defined in advance.
- Discuss hourly, blended, or recovery-based structures only when appropriate and permitted by applicable fee rules.
6. Frequently Asked Questions
Can a company pursue civil recovery before a criminal case ends?
Potentially. Civil claims and settlement talks can move on a separate track, but timing should account for evidence, parallel proceedings, insurance, and available assets.
Can a company freeze an employee’s assets after suspected embezzlement?
Not automatically. CPLR Article 62 attachment depends on a statutory ground, and CPLR 6301 injunctive relief has separate requirements. Suspicion alone does not create a general right to restrain assets.
Does crime insurance replace a civil recovery claim?
Not necessarily. Coverage, deductibles, exclusions, subrogation rights, and offsets depend on the policy and the facts, so the insurance and civil routes should be reviewed together.
Is a forensic accountant necessary in every employee embezzlement case?
No. Existing records may be enough when the transactions are clear. Forensic accounting is more useful when tracing, reconstruction, or loss calculation cannot be done reliably from ordinary records.
7. Build the Recovery Plan Around Net Value
SJKP’s attorneys can review loss scope, tracing needs, discovery, civil recovery, restitution, insurance, and fee structure as one recovery plan. The review can identify which work may add recovery value, which costs can be contained, and when settlement or litigation warrants further investment.
20 Aug, 2026
