The Collaborative International Dictionary of English v.0.48:

Defalcate \De*fal"cate\, v. t. [imp. & p. p. Defalcated; p.
   pr. & vb. n. Defalcating.] [LL. defalcatus, p. p. of
   defalcare to deduct, orig., to cut off with a sickle; L. de-
   + falx, falcis, a sickle. See Falchion.]
   To cut off; to take away or deduct a part of; -- used chiefly
   of money, accounts, rents, income, etc.
   [1913 Webster]

         To show what may be practicably and safely defalcated
         from them [the estimates].               --Burke.
   [1913 Webster]

The Collaborative International Dictionary of English v.0.48:

Defalcate \De*fal"cate\, v. i.
   To commit defalcation; to embezzle money held in trust. "Some
   partner defalcating, or the like." --Carlyle.
   [1913 Webster]

WordNet (r) 3.0 (2006):

defalcate
    v 1: appropriate (as property entrusted to one's care)
         fraudulently to one's own use; "The accountant embezzled
         thousands of dollars while working for the wealthy family"
         [syn: embezzle, defalcate, peculate,
         misappropriate, malversate]