Present: Hassell, C.J., Koontz, Kinser, Lemons, Goodwyn, and
Millette, JJ., and Lacy, S.J.
FRANCIS HABO GEORGE
v. Record No. 080339 OPINION BY SENIOR JUSTICE
ELIZABETH B. LACY
COMMONWEALTH OF VIRGINIA October 31, 2008
FROM THE COURT OF APPEALS OF VIRGINIA
In this appeal, Francis Habo George asks us to reverse
his four felony convictions for embezzlement in violation of
Code § 18.2–111. He asserts that the Court of Appeals erred
in holding that the evidence was sufficient to support those
convictions and in refusing to address his argument that there
was a fatal variance between the indictments, evidence and
jury instructions because he failed to raise that issue in the
trial court. For the reasons stated below, we will affirm
George’s felony embezzlement convictions because the evidence
was sufficient to support those convictions and, although the
Court of Appeals erred in holding that George did not raise
the fatal variance issue in the trial court, no such fatal
variance existed.
FACTS
Code § 58.1-461 requires employers to withhold funds from
their employees’ wages. These funds reflect the employees’
expected state income tax liability. The funds are to be
reported and paid to the Commissioner of the Virginia
Department of Taxation. Code § 58.1-472. Code § 58.1-474
provides that “sums withheld in accordance with the provisions
of this article shall be deemed to be held in trust for the
Commonwealth.”
George, a physician, owned and operated a general medical
practice in Page County from 1996 to 2004. In 2000, a tax
representative with the Virginia Employment Commission
informed George that he could not treat his nurses and
assistants as independent contractors but had to treat them as
employees and withhold employee income taxes. From 2000 to
2004, George withheld income taxes from his employees’ wages
but did not remit those funds to the Virginia Department of
Taxation. George used a single bank account to operate his
medical practice and pay personal and business expenses. The
funds withheld from employee wages were not segregated in a
separate account. Bank statements showed that at times
between 2001 and 2004, George’s bank account balance
registered below the amount of funds withheld from the
employees’ wages.
George was indicted for four counts of “unlawfully and
feloniously embezzl[ing] money belonging to the Commonwealth”
in violation of Code § 18.2-111. 1 At his jury trial, following
1
Code § 18.2-111 states in relevant part:
2
the conclusion of the evidence, the Commonwealth proposed the
following jury instructions:
Instruction No. 3
The defendant is charged with four counts of the
crime of embezzlement. In regard to each of those
four offenses, the Commonwealth must prove beyond a
reasonable doubt each of the following elements:
(1) That the defendant wrongfully and
fraudulently used, disposed of or converted to the
use of himself or his business the wages of his
employees withheld by him; and
(2) That the wages had been received by the
defendant, in trust, by virtue of his position as
their employer; and
(3) During each of the four periods specified
in each of the four indictments, the amount of the
wages withheld from the employee’s pay was more
than $200.
Instruction No. 4
All sums withheld by every employer from an
employee’s wages for the purpose of paying state
income taxes are deemed by law to be held in trust
for the Commonwealth.
George objected to Instruction 3 arguing that he was indicted
for embezzling funds belonging to the Commonwealth but the
instruction referred to funds belonging to his employees.
George further argued that Instruction 3 was “an incorrect
statement of the law of embezzlement.” The trial court
If any person wrongfully and fraudulently use,
dispose of, conceal or embezzle any money . . .
which he shall have received for another or for
his employer, principal or bailor, or by virtue
of his office, trust, or employment, or which
shall have been entrusted or delivered to him by
another or by any court, corporation or company,
he shall be guilty of embezzlement.
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overruled George’s objection. The jury convicted George on
all counts. The trial court entered judgment on the jury’s
verdict, sentenced George to serve consecutive six-month jail
terms and pay a $2500 fine for each count, and denied George’s
motion to set aside the verdict. 2
The Court of Appeals affirmed George’s felony
convictions, George v. Commonwealth, 51 Va. App. 137, 146-47,
655 S.E.2d 43, 48 (2008), and George filed a timely petition
for appeal with this Court, assigning three errors to the
judgment of the Court of Appeals.
DISCUSSION
I.
In his first assignment of error, George asserts that
the evidence was insufficient to support his embezzlement
convictions. George first argues that the embezzlement
statute, Code § 18.2-111, requires proof that the defendant
lawfully acquired possession of another’s property and then
wrongfully converted it to his own use. See Evans v.
Commonwealth, 226 Va. 292, 297, 308 S.E.2d 126, 129 (1983).
The evidence in this case, George contends, showed that the
funds at issue were not funds of another but were his own
2
George was also charged with and convicted of nine
misdemeanor counts of failure to file tax returns, violations
of Code § 58.1-1814, but these convictions are not at issue in
this appeal.
4
funds. According to George, the funds he deposited in his
bank account were funds owed to him by his patients for
services rendered, “although a portion of that money would, at
some point, be owed to the Commonwealth for withheld income
taxes.” Citing Dove v. Commonwealth, 41 Va. App. 571, 586
S.E.2d 890 (2003), George asserts that he had a debtor-
creditor relationship with the Commonwealth and that type of
relationship cannot support a charge of embezzlement.
The Commonwealth replies that George’s argument ignores
Code § 58.1-474, which imposes a trust for the benefit of the
Commonwealth on funds withheld from employees’ wages for
payment of their state income tax liability. According to the
Commonwealth, the trust relationship created by Code § 58.1-
474 between the employer and the Commonwealth negates the
existence of any debtor/creditor relationship. In support of
its position, the Commonwealth cites Begier v. IRS, 496 U.S.
53 (1990). 3 In that case the United States Supreme Court
considered the federal statute addressing withholding funds
from employees’ wages for purposes of federal income tax
liability pursuant to 26 U.S.C. § 7501. 4 The Supreme Court
3
The federal cases cited by George are not persuasive
because they were decided before Begier.
4
26 U.S.C. § 7501(a)(2006) provides that when a person is
required to withhold “any internal revenue tax” from another
and to pay such tax to the United States, the amount of the
5
first held that the collection of the tax funds occurred at
the time the employer paid the employee his net wages, even if
the employer neither placed the taxes it collected in a
segregated fund nor paid them to the government. Begier, 496
U.S. at 60. The Court also observed that under these
circumstances the employer “does not own an equitable interest
in property he holds in trust for another,” id. at 59, and
that the statutory trust, although “radically different from
the common-law paradigm, . . . creates a trust in an abstract
‘amount’ – a dollar figure not tied to any particular assets –
rather than in the actual dollars withheld.” Id. at 62.
The Virginia statute, Code § 58.1-474, is virtually
identical to the federal statute and, like the federal
statute, creates a statutory trust imposed on the funds
withheld from employees’ wages for state income tax liability.
When such funds are withheld they are no longer the property
of the employer or the employee. Consequently the
relationship between the employer and the Commonwealth with
regard to the funds withheld from the employees’ wages is not
a debtor/creditor relationship as George contends.
George argues further, however, that even if Code § 58.1-
474 imposes a type of trust on the withheld wages, its
tax withheld “shall be held to be a special fund in trust for
the United States.”
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application should be limited to civil matters and should not
apply in a criminal prosecution. George contends that if the
General Assembly had intended to subject an employer to
prosecution for embezzlement if he failed to withhold or remit
employees’ wages, it would have specifically stated that such
actions constituted embezzlement as it did with regard to
collection of food and beverage taxes, Code § 58.1-3833(C),
and would not have imposed a misdemeanor penalty for failure
to withhold or remit wages withheld from employees in Code
§ 58.1-485.
We reject George’s contentions. The fact that the
General Assembly does not denote a specific course of conduct
as a particular crime does not preclude prosecution for and
conviction of that crime if the necessary elements of the
crime are proven. Furthermore, the wrongful and fraudulent
use of withheld funds by the employer, an element of an
embezzlement prosecution, is far more culpable than the simple
failure to withhold or remit such funds and accordingly,
supports a different and more severe criminal sanction. More
importantly, nothing in Code § 58.1-474 limits its application
to civil matters or precludes its use in a criminal
prosecution. George’s proposed limitation on the application
of Code § 58.1-474 requires that we add language not contained
in the statute. It is a matter of well-settled law that
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courts do not engage in rewriting statutes. See Town of
Leesburg v. Giordano, 276 Va. 318, 323, ___ S.E.2d ___, ___
(2008) (citing Jackson v. Fidelity & Deposit Co., 269 Va. 303,
313, 608 S.E.2d 901, 906 (2005)); Young v. Commonwealth, 273
Va. 528, 534, 643 S.E.2d 491, 494 (2007).
In summary, we hold that Code § 58.1-474 imposes a
statutorily created trust on funds withheld from employees’
wages for state income tax liability purposes. Such funds are
held in trust for the benefit of the Commonwealth and are not
the property of the employer. Because the funds at issue were
not George’s property but the property of another, the
evidence was sufficient to sustain the embezzlement
convictions. 5
II.
George’s second and third assignments of error relate to
his contention that his convictions should be vacated because
there was a fatal variance between the indictments and the
evidence and jury instructions. The Court of Appeals did not
address this issue because it held that the issue was not
raised before the trial court and therefore would not be
entertained for the first time on appeal. George, 51 Va. App.
at 148, 655 S.E.2d at 48-49. George challenges this holding,
5
George did not challenge the sufficiency of the evidence
with regard to the other elements of the crime, such as
wrongful and fraudulent conversion.
8
arguing that the issue was sufficiently raised in the trial
court and reasserts his contention regarding the fatal
variance.
The record shows that George argued to the trial court
that jury Instruction 3, the finding instruction, defined the
crime as embezzling funds belonging to the employees, while
the indictments defined the crime as embezzling funds
belonging to the Commonwealth. Although George did not use
the phrase “fatal variance,” his arguments before the trial
court were sufficient to put that court on notice of his
position regarding the inconsistency between the indictments
and the jury instruction. Therefore, we hold that the Court
of Appeals erred in concluding that the issue was not
presented to the trial court. Nevertheless, the record also
demonstrates that there was no such fatal variance.
Subparagraph (1) of Instruction 3 stated that the funds
George embezzled were the wages “of his employees withheld by
him.” This phrase, George contends, places the ownership of
the funds at issue in the employees, not in the Commonwealth
as set out in the indictments. George misapplies this phrase.
This phrase does not denote or establish ownership of the
funds at the time they were withheld; rather the phrase is a
prepositional phrase identifying the funds which were at
issue. Instruction 4, reciting the applicable provision of
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Code § 58.1-474, told the jury that, as a matter of law, the
funds did not belong to the employees but were held in trust
for the Commonwealth. Therefore, the ownership of the funds
was not a matter for jury determination in this case and there
was no fatal variance between the indictments and the evidence
and jury instructions.
CONCLUSION
We hold that funds withheld by an employer from
employees’ wages for purposes of state income tax liability
are not funds belonging to the employer. From the time such
funds are withheld they are held in trust for the Commonwealth
pursuant to Code § 58.1-474. The wrongful and fraudulent use
of such funds can be the basis of an embezzlement prosecution
and the evidence in this case is sufficient to sustain
George’s convictions for embezzlement. Finally, there was no
fatal variance between the crimes charged in the indictments
and the evidence and jury instructions. Accordingly, for the
reasons stated, we will affirm the judgment of the Court of
Appeals.
Affirmed.
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