What Should a Business Do if an Employee Embezzles Company Funds in Arizona?
Discovering that an employee stole from your business is only the beginning. What you do in the days that follow, on both the civil recovery side and the criminal referral side, shapes how much you actually get back.
By Simon Touma · Updated August 15, 2026
What Are My Options if an Employee Embezzled From My Business?
Quick answer: You generally have two separate, parallel tracks: a civil lawsuit to recover the stolen funds and related damages, and a criminal referral to law enforcement for prosecution under Arizona’s theft statute. The civil track, which is what a business litigation attorney handles, is your path to actual financial recovery, restitution through the criminal system is often limited and slow.
On This Page
- What Are My Options if an Employee Embezzled From My Business?
- Recognizing the Signs of Employee Embezzlement
- Two Separate Tracks: Civil Recovery and Criminal Prosecution
- Civil Claims a Business Can Bring
- What You Can Recover Civilly
- Should You Report to Police in Addition to Pursuing a Civil Claim?
- Preserving Evidence the Moment You Discover a Problem
- Employee Dishonesty Coverage: A Recovery Source Many Businesses Overlook
- FAQs
Recognizing the Signs of Employee Embezzlement
Embezzlement often surfaces gradually, not all at once: unexplained discrepancies between bank statements and internal books, vendors reporting invoices the business never issued, an employee who resists sharing financial records or delegating tasks, lifestyle changes that don’t match known compensation, or irregular patterns in expense reports and reimbursements. By the time embezzlement is confirmed, it has frequently been happening for longer than the business initially realizes, which is exactly why moving quickly once it’s discovered matters.
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Two Separate Tracks: Civil Recovery and Criminal Prosecution
Embezzlement, legally, is a form of theft, converting property entrusted to you (money, in most embezzlement cases) with the intent to permanently deprive the owner of it. Under Arizona law, this is prosecuted criminally under the state’s general theft statute, A.R.S. § 13-1802, which covers theft by breach of a position of trust among other forms of theft. But criminal prosecution and civil recovery are separate, independent processes, run by different people, with different goals.
A criminal prosecution is handled by a county attorney’s office and is aimed at punishing the wrongdoer, not compensating the victim. Restitution can be ordered as part of a criminal sentence, but it is often a small fraction of the actual loss, and collection can be slow or incomplete. A civil lawsuit, which a business litigation attorney handles on your behalf, is specifically aimed at recovering your actual financial losses, and gives you considerably more control over the process and timeline.
Civil Claims a Business Can Bring
Conversion – wrongfully exercising control over the company’s money or property.
Breach of fiduciary duty – if the employee held a position of trust, an officer, a manager, someone with financial control.
Breach of the duty of loyalty – a more general claim available against any employee who acted against the company’s interests.
Unjust enrichment – recovering the value the employee improperly gained at the company’s expense.
Fraud – if the embezzlement involved falsified records or misrepresentations to conceal the theft.
What You Can Recover Civilly
A successful civil claim can generally recover the actual amount stolen, plus, in cases involving fraud or a serious breach of fiduciary duty, potentially punitive damages. Civil litigation also allows for pre-judgment remedies in appropriate cases, like freezing assets, that can help preserve your ability to actually collect a judgment once you win one, something the criminal system generally does not offer a business victim directly.
Should You Report to Police in Addition to Pursuing a Civil Claim?
In most cases, yes. Reporting creates an official record, can support your civil case, and holds the individual criminally accountable in a way civil litigation alone cannot. Because the two tracks are independent, pursuing a civil claim does not require waiting for a criminal case to resolve first, and in many situations, moving forward on both fronts strengthens your overall position.
Preserving Evidence the Moment You Discover a Problem
- Don’t confront the employee before securing evidence – this risks destruction of records or immediate flight.
- Preserve financial records – bank statements, accounting software backups, and any physical documents.
- Restrict system access – cut off the employee’s ability to alter records once evidence is secured.
- Document the discrepancy – a clear timeline and financial summary of what was taken and when.
- Consult a business litigation attorney before taking further action – to properly sequence civil claims, employment decisions, and any criminal referral.
Employee Dishonesty Coverage: A Recovery Source Many Businesses Overlook
Some business insurance policies include employee dishonesty or fidelity bond coverage, specifically designed to cover losses from employee theft or embezzlement. Checking your existing policies immediately after discovering a loss can uncover a recovery source independent of, and often faster than, either the civil or criminal process, and pursuing an insurance claim generally does not preclude also pursuing the employee directly for any shortfall.
Discovered employee theft or embezzlement in Arizona? Talk to our litigation team before you respond.
Call 602-932-6010Related Practice Areas
Business Protection and Asset Risk ManagementFraud and Misrepresentation LitigationWhat Should a Business Do if an Employee Embezzles Company Funds in Arizona? FAQs
Can I fire the employee immediately after discovering embezzlement?
Generally yes, but the timing matters for your case, terminating before you’ve fully preserved evidence and financial records can make it harder to prove the full scope of the theft.
What is Arizona’s statute of limitations for a civil embezzlement claim?
This depends on the specific legal theory brought, conversion and fraud claims are generally subject to Arizona’s tort statute of limitations, so it’s important to get a specific answer for your facts promptly.
Do I need to involve police for my civil case to succeed?
No, a civil claim can proceed independently of a criminal referral, though a police report and any resulting investigation can provide useful supporting evidence.
What if the employee already spent the stolen money?
You can still generally obtain a civil judgment against them, and depending on the amount and their assets, various post-judgment collection tools may be available, though actual recovery depends on the individual’s ability to pay.
Is embezzlement always a felony in Arizona?
The classification depends primarily on the dollar amount involved under Arizona’s theft statute, A.R.S. § 13-1802, with higher amounts generally resulting in more serious felony classifications.
Should I check my insurance before hiring an attorney?
It’s worth doing both promptly; checking for employee dishonesty coverage and consulting a business litigation attorney can generally happen at the same time, since they address different, complementary recovery paths.
Can other employees be liable if they helped cover up the embezzlement?
Potentially, yes, depending on their specific knowledge and involvement, which is why a full investigation of who had access to the affected records matters.
Key Takeaways
- Civil recovery and criminal prosecution for embezzlement are separate, parallel processes with different goals.
- Arizona prosecutes embezzlement under its general theft statute, A.R.S. § 13-1802.
- A civil claim, not criminal restitution, is generally the more reliable path to actual financial recovery.
- Preserve evidence and restrict system access before confronting the employee.
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