The act of taking funds out of the cash register and diverting them for some illegal, unintended or illegitimate purpose is commonly called “skimming”.  One who is caught engaging in such activity at say a casino, often disappears for eternity.

A “defalcation” is an amount of funds misappropriated (a/k/a “stolen”) by a person trusted with receiving and disbursing funds for the benefit of other people.  An agent, rep or stock agency which receives funds at least a portion of which are intended for a photographer or artist stands in what is called a “fiduciary relationship” with that artist.   Defalcation is the term used by Bankruptcy Courts to describe a category of bad acts such as  embezzlement or misappropriation that cannot be discharged (forgiven) in a bankruptcy proceeding.  These acts do not need to rise to the level of criminal conduct but generally need to be something more than mere mistakes or negligence.  These activities are viewed as being so bad that the Court won’t let the bad guy off the hook.

An agent or rep who takes funds due the artist and uses them for their own purposes has “converted” those funds and may be subject to civil (or criminal) penalties which far exceed the amounts stolen.

Recently Ed had two cases where the Courts awarded photographers punitive damages as a result of their agents not paying the sums due the artists in a timely fashion – or at all.  Every state has different standards on how to assess the amount of money a “thieving” agent must pay the artist who has been wronged.  These damages often called “punitive damages”, may be assessed as a penalty and can far exceed the amount of money misappropriated by a rep or agent.  This is but one of the reasons why we urge all artists to do their own billing and pay their agent rather than the other way around.

So why are we covering this important topic again?  Well it seems that in yet another litigation where Ed is representing an artist whose monies had “gone missing” while in the hands of a rep, the rep admitted in Court that “yes” it is true that there are funds due the photographer which have been diverted by the rep without consent of the photographer… “…but this figure represents only 2.1 % of all monies handled by the rep on photographer’s jobs over the years”.

Adding up all of the payments made on photographer’s invoices issued by the rep during their relationship yields a number in the neighborhood of 4 Million Dollars.  The rep has thus admitted to diverting “only” about 80,000 bucks US.  Hey no biggie because according to rep, 97.9% of the funds were handled pretty well.  The rep was utterly blasé and heck why not,after all it was not her $80,000. Of course it became her $80,000.

The cavalier attitude that agents and reps have with respect to their artists’ hard earned money, endures over the decades.  It persists because many artists are equally as cavalier about not doing their billing, not having accountants check their agent’s records or foolishly trusting in reps as if their first names started with “Saint”.

Rest assured that a cashier at a Denny’s a or a teller at Bank of America would be looking at the inside of a prison cell if 2.1% of the money they handled found its way into their pockets.  A business owner who skimmed (or failed to report) 2.1% of gross sales in an effort lower his tax bill, would similarly be talking with a lawyer and meeting lots of folks with IRS badges. Such conduct is unacceptable, unethical and typically criminal in almost any line of work.

This is hardly the first rep that a photographer/client of Ed has caught misappropriating funds. The rep’s boasting of an “efficiency rate of 97.9% while handling photographer’s jobs” was however, more than a tad surprising.  As the great Lily Tomlin said, “I try to stay cynical but it’s never enough to keep up”.