Embezzlement Pay-Back Ruled No Defense : Law: State high court voids ‘no harm, no foul’ decision by appellate judges. Breach of trust found to be key element.

The California Supreme Court on Thursday barred judges from following an appellate ruling that gives embezzlers a “no harm, no foul” chance to avoid prosecution by returning the stolen money before charges are filed.

In a brief order, the justices withdrew legal recognition from a state Court of Appeal decision in October that held that state law provided thieves with a “window of opportunity” to make amends after the misappropriation of funds was discovered.

State and local prosecutors urged the high court to invalidate the appellate decision, saying it marked a devastating departure from rulings that for more than 100 years provided no such amnesty for embezzlers.

“This case could have created a lot of mischief had it remained on the law books,” state Deputy Atty. Gen. Barry J. T. Carlton said. “I’ve been getting calls from D.A. offices all over the state saying this ruling was totally throwing off embezzlement prosecutions. The defendants were all rushing to give the money back.”

Carlton said the appellate court failed to recognize that the harm of the crime cannot be removed by returning the money. “The evil of embezzlement is in the initial taking--the breach of trust,” he said.

Defense attorney David L. Kelly of San Diego, representing a lawyer convicted of embezzlement in the case, rejected the prosecutors’ contentions and said the appellate court properly recognized a limited opportunity for the return of funds without prosecution.

“The attorney general claims this would create a big crime wave,” Kelly said. “That’s just absolute baloney.”

In the case before the court, San Diego attorney Leo Shaw was accused of improperly taking $70,000 from a real estate partnership without telling his business associates.

Shaw had begun making repayments after the shortage was discovered by his partners, but did not complete the restitution until after he was charged with embezzlement in May, 1990. He was convicted, placed on probation and ordered to perform 500 hours of community service.

Last fall, an appellate panel in San Diego ruled 2 to 1 that defendants can be entitled to amnesty when they intended to restore the funds.

“When full restoration of the property taken is timely made . . . a ‘no harm, no foul’ view could be taken toward the offense,” Appellate Justice Richard D. Huffman wrote for the majority.

But the appeals court ruled that Shaw was not entitled to a new trial under its ruling because he had not made full restitution before being charged.

On Thursday the high court ordered the appellate ruling not to be published in official law reports, thus barring its use as a precedent binding on trial courts. Justice Stanley Mosk cast a lone vote to hear arguments and rule later on the issue.

In other action, the justices ruled 6 to 1 that the Chino Unified School District cannot impose a special tax on residential developers to cover the cost of building schools.

The court, in an opinion by Mosk, said that a 1987 state law allowing school districts to charge a fee of $1.50 per square foot on a development preempted their ability to impose a voter-approved special tax on developers.

Lawyers for Pacific Legal Foundation had urged the high court to bar the tax, noting that school construction fees already were adding $30,000 or more to the price of new homes in Southern California.

The court agreed to decide whether murder charges can be reduced to manslaughter in the case of a Dana Point teen-ager accused of killing a reputed skinhead he said was threatening him.

A state appeals court held in November that the charge must be reduced because the teen-ager, identified as Christian S., had an honest although unreasonable belief that he was in imminent danger from the victim, Robert Elliott.

State prosecutors contended to the high court that under a 1982 anti-crime initiative, a mistaken belief in the need for self-defense is not grounds for reducing a murder charge.