Contrary to popular opinion, under the law of Pennsylvania, New Jersey and other states, an unlimited gifting authority in a power of attorney does not protect the agent from criminal liability for self-dealing. A recent appeals court decision in Pennsylvania demonstrates this legal principal. Commonwealth of Pennsylvania v. Patton
David L. Patton was arrested in 2012 and charged with the theft of $282,905.55 from his 86-year-old aunt, Betty Wetzel. Patton used a general durable power of attorney signed by Ms. Wetzel to withdraw money from her accounts, gift all the money to himself and use it all for his own benefit.
The general durable power of attorney at issue here was executed in in 2007 in Pennsylvania, and provided, in relevant part, as follows:
To the extent that the following powers may not explicitly be set forth hereinabove, I further hereby grant to my said agent the following powers:
(1) To make limited or unlimited gifts.
(14) To engage in banking and financial transactions.
During a preliminary hearing, Ms. Wetzel testified that she did not authorize her nephew to transfer any money from her accounts into his own, personal accounts and that she did not authorize Patton to take her money and spend it for his own, personal benefit. Moreover, Ms. Wetzel testified that, because of her nephew’s actions, she now has “no money at all” and that she received no benefit from his transactions.
Before trial, Patton filed a pre-trial motion and claimed that the trial court must quash the charges because: 1) the power of attorney authorized him to make “unlimited gifts” of Ms. Wetzel’s assets – and, therefore, the power of attorney allowed him to empty Ms. Wetzel’s bank accounts and “gift” the money to himself; and, 2) Pennsylvania has no law that criminally punishes the abuse of a power of attorney.
The trial court held a hearing on defendant’s pre-trial motion, during which time defendant presented the testimony of the scrivener of the power of attorney, attorney David P. Brandt. On cross-examination, attorney Brandt testified that the power of gift-giving – like every authority in the power of attorney – was subject to the condition that the agent “exercise the power for the benefit of the principal.” As a result, the trial court denied defendant’s motion.
After a non-jury trial, the trial court found Patton guilty of 95 counts of theft by unlawful taking and 95 counts of theft by failure to make required disposition of funds received, sentencing him to a term of 30 to 60 months in prison.
Defendant appealed, claiming that the evidence was insufficient to support his conviction because: 1) the unlimited gift provision in the power of attorney allowed him to self-gift all of Ms. Wetzel’s money to himself; 2) Defendant, as Ms. Wetzel’s agent, was not required to use the gift-giving power for Ms. Wetzel’s benefit; and, 3) even if his actions were not authorized, defendant lacked the necessary mens rea to commit the theft crimes because he was acting under a power of attorney.
The appeals court rejected all of defendant’s arguments. The court rejected defendant’s first claim that the “unlimited gift” provision in the power of attorney provided defendant with a license to steal Ms. Wetzel’s assets and use all of her money for his own benefit. To the contrary, the court found that the gifting power was clearly subject to the condition that defendant use the power “for [Ms. Wetzel’s] benefit” – and defendant clearly violated this condition when he took all of Ms. Wetzel’s money and used it as if it was his own.
The court also rejected defendant’s second argument, holding that “we have long held that fiduciary can be convicted of an embezzlement-type offense . . . [such as] [(theft by failure to make required disposition of funds received)] . . . if he or she misappropriates funds for a use inconsistent with the purpose for which the funds are held.”
Third, and last, the court agreed with defendant that Pennsylvania has no criminal statute specifically governing the misuse of a power of attorney, but upheld defendant’s conviction because he was prosecuted under the theft statutes under which, as previously explained, a fiduciary “can be convicted of an embezzlement-type offense.
The case (along with all the underlying opinions) is annexed here – Commonwealth of Pennsylvania v. Patton
The law in New Jersey would yield an identical result. In State v. Kennedy, 61 N.J. 509 (1972), Kennedy obtained a power of attorney that was assumed to have been executed by the elderly victim, authorizing Kennedy to draw upon the victim’s bank accounts. Kennedy misappropriated most of the money in those accounts. The New Jersey Supreme Court affirmed a conviction of embezzlement. In so doing, it made the following comments regarding the abuse of a power of attorney:
A power of attorney of course is not an instrument of gift. In itself, it is no more than the term, power of attorney, imports – an authorization to the attorney to act for the principal. Although as between the bank and the principal, the bank was relieved [by the terms of the power of attorney] to inquire as to whether any withdrawal was in the agent’s interest rather than the principal’s money. In short, the instrument was the means whereby the agent was able to get his hands on the moneys, but when the moneys were thus obtained, the agent received them as agent for the principal, and the fraudulent appropriation of the moneys thus obtained to his own use constituted embezzlement. In other words, it is no defense to embezzlement that the moneys reached the agent with the consent of the principal. On the contrary, such entrusting is the necessary setting for the crime… It is no defense to embezzlement that the victim trusted the culprit
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