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Criminal Fraud

Criminal Fraud

Criminal fraud is a crime that involves a scheme to cheat or deceive another individual or entity in order to obtain a financial gain or similar type of gain. It is considered a white collar crime. According to criminal fraud law, any action intended to deceive another through false representation of fact that results in legal detriment to the individual who relied on the information can be an act of criminal fraud.

Put simply, if an individual knowing lies about an important or key fact in a transaction or relationship and the other party relies on that misrepresentation of fact and suffers harm, fraud has occurred. It does not occur when an individual provides a fact they believe to be true, even if they are mistaken.

Different Types of Fraud

There are many types of fraud, although the basic elements of fraud remain the same. Examples of fraud may include:

  • Mail fraud;
  • Romance scam fraud;
  • Identity theft;
  • Gambling fraud;
  • Bankruptcy fraud;
  • Wire fraud;
  • Pharmacy fraud;
  • Securities fraud;
  • Check fraud;
  • Charity fraud;
  • Insurance fraud;
  • Welfare Fraud;
  • Forgery;
  • Credit and/or debit card fraud;
  • Perjury; and
  • Pigeon drop scams.

This is, of course, not an exhaustive list of all types of fraud.

The basic component of all types of fraud is that criminal fraud occurs when:

  • An individual lies or conceals a material truth; and
  • Another party or entity justifiably relies on that false information; and
  • That party suffers an injury based on their reliance.

There are several elements of criminal fraud. In order for an individual to be convicted of criminal fraud, the prosecution must prove:

  • There was a misrepresentation of a material fact;
  • By an individual who knew the material fact was false;
  • And intended to defraud;
  • A person or entity who justifiably relied on the misrepresentation of fact; and
  • The individual or entity suffered actual injury or damages as a result of their reliance on that false fact.

Difference between Criminal Fraud and Civil Fraud

The basic elements of fraud in both civil fraud cases and criminal fraud cases are the same. A criminal fraud conviction, however, can result in fines and/or jail time. In addition, criminal law has a higher standard of proof, which is beyond a reasonable doubt. Each element of the crime, discussed above, must be proven beyond a reasonable doubt in order for a defendant to be convicted.

In criminal fraud cases, whether or not the fraud was actually successful is not a factor. The mere fact that an individual attempted and intended to commit fraud is enough. Depending on the jurisdiction and the facts of the case, criminal fraud may be charged as a misdemeanor or a felony crime.

In civil fraud cases, the individual who was the victim must prove the fraud elements discussed above and prove they suffered damages as a result of the fraud. The difference between a civil and criminal fraud case is that in a civil case, the individual must show actual damages and in a criminal case the prosecution only needs to show that the defendant attempted fraud.

Telemarketing and Telemarketing Fraud

Telemarketing is the act of selling goods and/or services over the telephone. Automated telemarketing calls which feature a recorded sales pitch, sometimes referred to as “robocalls,” are largely illegal especially when they involve telemarketing fraud. The Federal Trade Commission (“FTC”) has made it illegal to use pre recorded telemarketing calls, unless the telemarketer has obtained the express written permission of the person who is being called.

Additionally, there are many state laws in place which further regulate robocalls. Depending on the specific state, a telemarketer may need to do any or all of the following in order to legally telemarketer:

  • Obtain a license;
  • Only call during certain hours;
  • Make specific disclosures; and/or
  • Ask for permission to continue the call once they have identified themselves as telemarketers.

An example of this would be how in California, a live person must identify the source of the call. The recipient of the call must then consent to hear the recorded message, and the call must be disconnected once the recorded pitch concludes.

To reiterate, fraud is the act of making a statement with the intent to deceive the recipient by falsely representing a fact. This misrepresentation of the fact is what causes the victim to rely on it when making a decision, and to their legal detriment.

Telemarketing fraud, then, refers to the making of a false statement of a fact over the telephone in order to induce a victim to make a financial transaction. Telemarketing fraud occurs when someone calls a victim and makes a false statement to them. The misrepresentation causes the victim to complete a financial transaction with the caller that they otherwise would not have made.

Telemarketing fraud generally takes the following forms:

  • Prize offers;
  • Sweepstakes winnings;
  • Receiving free and/or discounted anti-virus software from an unfamiliar company;
  • Illegitimate credit card offers, magazine sales, and loan offers;
  • Work from home programs offered by an unfamiliar company; and
  • Fraudulent vacation offers.

Prosecution of Telemarketing Fraud

As previously mentioned, The Federal Trade Commission (“FTC”) is responsible for proving that an individual is guilty of telemarketing fraud. Once someone has filed a complaint with the FTC, the agency investigates the complaint; if a violation has in fact occurred, the agency will begin adjudication proceedings in order to prosecute the violator. Additionally, each state maintains its own telemarketing fraud laws, and may pursue the scammers as well.

The FTC may take action when receiving:

  • Letters from consumers and/or businesses;
  • Pre-merger notification filings;
  • Congressional inquiries; and/or
  • Articles on consumer or economic subjects.

If the FTC believes that a company has violated a fraud or consumer protection law, the Commission may first attempt to obtain voluntary compliance by entering into a consent order with the company. Essentially, this means that the company agrees to stop its practices. However, if the FTC cannot reach such an agreement, the Commission may issue an administrative complaint or seek injunctive relief from the courts.

If a violation is indeed found, the violating company may be ordered to cease and desist. The FTC may also issue Trade Regulation Rules. It is important to note that the FTC's investigations are generally non-public in an effort to protect the investigation, as well as the companies that are involved. During the rulemaking proceedings, however, the public is allowed to attend hearings and file written comments regarding a proposed rule.

Real Estate Fraud

The crime of real estate fraud occurs when one person in a real estate transaction makes false representations of relevant information to another person in the transaction. Or, the person may fail to disclose relevant information to the other. The other person then acts on the false information or omission to their financial detriment.

Fraud in real estate transactions can take place in any phase of a real estate transaction from the mortgage application or approval phase through the  closing of a sale or purchase of a piece of real property, Prospective renters can also be the victims of real estate fraud. The crime of real estate fraud may be punishable by time in jail or prison  and the imposition of a fine.

Common Types of Real Estate Fraud

Real estate fraud cases can arise from any kind of transactions that involve the buying, selling, renting and renovation of real property. Some perpetrators engage in fraudulently selling a house. A seller can make false statements to a buyer about a property they are selling. Or, a seller can fail to tell a prospective buyer an important fact about the condition of the property they are selling in order to make the sale.. 

Buyers can make fraudulent statements to a mortgage lender in order to qualify for a loan. Real estate agents and brokers can make false statements, hide known defects or try to inflate the price of properties.

Even renters can be victimized by fraud. A prospective landlord can fail to disclose defects about a rental property. A prospective tenant can make false representation to qualify to rent a property. Any aspect of real estate transactions can give rise to fraud.

Elements of Real Estate Fraud

The elements of real estate fraud that must be proven by the evidence for the prosecution to obtain a conviction are:

  • A person made a misstatement, or failed to communicate a material (relevant) fact to another party to a real estate transaction;
  • The party making the misstatement or omission intended to commit fraud;
  • The other party relied upon the misstatement in making a decision, such as a decision to approve a loan or to purchase a home; and
  • The other party, as a result of that reliance, suffered a financial loss.

A loss must be shown. Paying far more for a property or giving someone money and getting nothing in return for it can be losses suffered because of real estate fraud.

Buyer Real Estate Fraud

It is common for home buyers to take out a loan to finance the purchase of real property. This loan is known as a mortgage loan. The loan application is analyzed by a mortgage lender, which can be a bank or credit union. When a buyer applies for a loan, the buyer may make any number of false representations on the loan application in order to improve their chances of getting a loan. These include:

  • Attempting to report a credit score that is higher than the buyer's real credit score;
  • Providing an income figure that is higher than the buyer's actual income;
  • Falsely representing the amount of debt or the kinds of debts the borrower owes to creditors creditors; and
  • Giving the lender false paycheck stubs or statements, or false tax statements.

Additional types of buyer fraud include:

  • Buying with a Stolen Identity: Here, the buyer commits identity theft and then uses the stolen name, credit history, and other information of the person whose identity was stolen on the loan application;
  • Using a So-Called “Straw-Buyer”: Here, the borrower applies for a loan with information that belongs to another person, the so-called “straw buyer”. The buyer might even use the name of the “straw buyer” instead of their own name; this differs from buying with a stolen identity because the “straw buyer” is part of the fraud and allows use of their information;
  • Using a “Silent Second”: In this type of real estate fraud, the buyer is unable to afford the down payment that must be paid when buying a home. Without the lender's knowledge or approval, a buyer might get a second mortgage from a different lender to finance the down payment.
    • A lender usually requires the buyer to report the source of the funds the buyer will use for the down payment. When a buyer does not report the source of a down payment truthfully the buyer commits fraud by failing to disclose a relevant fact.

When a buyer intentionally misrepresents or omits a relevant fact when a purchase is finalized, the buyer commits another form of real estate fraud. If that misrepresentation or omission causes the seller to go forward with the sale, when disclosure of the truth would have caused the seller not to go through with the transaction, then the buyer has committed fraud.

Seller Real Estate Fraud

Sellers can commit real estate fraud at any point in the process of selling property. If a seller intentionally misrepresents a fact or fails to disclose known facts that are relevant to a buyer about the seller's house, and the buyer relies on the misrepresentation or omission, then the seller has committed fraud.

For example, a seller may know that the property has a serious defect. The defect is one that is not apparent. The buyer is unlikely to discover it through an ordinary inspection. If the buyer relies on the seller's failure to report the defect and purchases the house, then the seller has committed real estate fraud.

Lender Real Estate Fraud

Lenders and real estate brokers commit a type of fraud known as appraisal fraud. Mortgage loan officers as well as real estate brokers and agents are paid a commission for their work. This means that they receive a percentage of the price for which a home sells. So, lenders, brokers and agents may be motivated to see that a buyer qualifies for a loan in the highest possible amount.

In appraisal fraud, the real estate agent or broker, possibly the loan broker, and the appraiser, work together to deliberately inflate the value of the purchase price. They do this in order to increase their own commissions. If a buyer, relying on the inflated price, purchases the home, then the parties to the inflation of the value have each committed real estate fraud.

Mortgage-loan lending can give rise to other types of real estate fraud. If a homeowner with a mortgage stops making the required payments, the mortgage goes into a process known as foreclosure, in which the lender of the mortgage attempts to take possession of the house from the homeowner. 

There are perpetrators of fraud who try to prey on people trying to save their homes from foreclosure. They may falsely represent themselves as having the ability to stop the foreclosure by taking over the loan. They promise to rent the house to the homeowner who, in time, will be able to get the home back. These perpetrators take money from the homeowner and then disappear; the homeowner remains in default on their mortgage and remains at risk of losing their home.

Another scam is to offer the homeowner refinancing on the mortgage loan. The problem is that the terms of the loan are so unfavorable to the homeowner that they will never be able to pay it off. 

People looking for rental housing can also be victimized by fraud. A perpetrator shows them a rental, collects the security deposit and the first and last month's rent and disappears. The prospective renter is left to discover that the perpetrator did not have any property to rent at all.

Penalties for Committing Real Estate Fraud

The crime of real estate fraud may be charged as a misdemeanor or a felony, depending upon the severity of the crime and the law of the state in which the fraud is committed. A misdemeanor is punishable by up to a year in prison, and/or monetary fines. A felony is punishable by a prison sentence of one year or more, as well as payment of a more substantial fine. 

Real estate fraud can also be charged as a federal crime by federal authorities in some circumstances. It might lead to charges of bank fraud or wire fraud under federal law which could lead to a lengthy term of imprisonment in a federal penitentiary. 

Making false statements on loan and credit applications can be a federal crime punishable by up to 30 years in prison and a fine of up to $1 million. Other federal charges that could be brought against a perpetrator involved in identity theft, aggravated identity theft and fraud in relation to records of title to property. 

Charity Fraud

Charity fraud is when someone takes advantage of a charitable or non-profit organization for their own personal gain. Fraud is defined as intentional deception or misrepresentation made for personal gain. Defrauding a charity can be anything from falsely claiming to be a victim of the disaster in order to get money from the charity, to stealing donations from the collection tin, to setting up a fake charity and pocketing the donations.

Fraudulent activity can also occur when people make dishonest or inflated claims about how much money they have raised or how much it has helped the cause.

Some of the most common ways to commit charity fraud include:

  • Pretending to be a charity or falsely claiming to be affiliated with a legitimate charity in order to solicit donations
  • Making false representations about the cause or the amount of money that will be donated to the cause
  • Diverting funds raised for charitable causes to personal use
  • Falsifying receipts or other documents to make it appear as if donations were made when they were not
  • Fraudulently inflating the value of donated items or services
  • Tampering with books or records

Types Of Crimes For Charity Fraud

Charity fraud typically falls into three categories: (i) the theft or other unlawful taking of money or property belonging to an individual or organization that solicits donations on behalf of a cause (e.g., false pretenses, larceny by trick, or fraud); (ii) the misrepresentation of an organization's charitable status in order to solicit donations from individuals or businesses; and (iii) the misappropriation of funds raised by a charity for its intended purpose.

In false pretenses cases dealing with charity fraud, the crime of false pretenses is committed when a person accepts money by offering charitable goods or charitable services through intentional false statements, with the intent to never deliver the goods or services that were promised or agreed upon.

Some states have the added element of “an existing material fact.” In other words, some jurisdictions require that in order to be charged with false pretenses, there has to be a false statement of an existing fact such as the charitable work to be performed. If the charity is fake, and you lie or misrepresent the facts to something that doesn't exist (like a fake charity), then you may not meet the statutory requirements of false pretenses.

In larceny by trick cases, the false representation may involve false statements about what will be done with donated funds. However, it also can include the non-disclosure of facts that would influence a donor's decision whether or not to donate to the charity.

For example, someone who starts a foundation for terminally ill children and then through misrepresentation, steals the donations or does not perform as promised. False representations about what will be done with donated funds is the most common type of charity fraud.

This can involve false statements about what percentage of donations will go to the charitable cause, misrepresenting how the donated money will be used, or failing to disclose relevant information about the charity or its directors.

The second most common type of charity fraud is misrepresentation of an organization's charitable status in order to solicit donations from individuals or businesses is also a common type of charity fraud. This can involve claiming to be a registered charity when the organization is not, making false statements about the percentage of donations that will go to the charitable cause, or failing to disclose details about how the donated money will be used.

The third most common type of charity fraud is misappropriation of funds raised by a charity for its intended purpose. In many states this type of theft is referred to as embezzlement. This often occurs when an employee of a charity or non-profit uses donated funds for personal gain rather than for the charitable cause they were meant to support.

Charity Fraud Crimes

Nonprofits and charitable organizations are particularly vulnerable to fraud schemes. This is because they often come into contact with significant sums of money that can be diverted for personal use by internal personnel. In addition to the crimes discussed above, a person can be charged with money laundering, wire fraud, bank fraud, or IRS violations for misappropriating funds, fraud, theft, or other offenses. This depends on the severity of the crime and the way in which the mismanagement or scheme is carried out.

A charity cannot give out a small grant as part of its philanthropic capacity, and then use the majority of the donations for personal expenses of the members. In addition, no part of the net earnings from a charity should solely belong or give benefit to any private shareholder or individual.

If you are convicted of fraud against a nonprofit, you may have to pay back taxes on any income you received that was related to the fraud. You may also be subject to additional penalties and interest. In some cases, you may even lose your right to claim tax deductions and credits for future years.

Penalties For Charity Fraud

The penalties for committing charity fraud and the other financial crimes associated with theft by non-profit organizations, real or fake, can be severe. They often include incarceration, significant fines, and restitution.
In some cases, a person may also be subject to civil penalties such as the forfeiture of assets. It is important to remember that individuals who commit these crimes will likely face criminal prosecution.

The penalties for committing fraud or other financial crimes can be severe, and often include incarceration, significant fines, and restitution. In some cases, a person may also be subject to civil penalties such as the forfeiture of assets, and paying damages.

Charity fraud can occur on a small scale, with one individual being defrauding someone they know. It can also occur on a large scale when several perpetrators join forces to fleece the public of millions of dollars each year through bogus appeals and fake fundraising campaigns.

The consequences of charity fraud go beyond the criminal justice system. Not only does it deprive legitimate charities of much-needed funds, it also can erode trust in the charitable sector. This means that genuine organizations may find it harder to raise money in future. 

What To Do If I'm Accused of Criminal Fraud?

A criminal fraud conviction can carry serious consequences. The penalties for a criminal fraud conviction will vary depending on:

  • The jurisdiction;
  • The severity of the fraud;
  • The person or entity that was a victim of the fraud; and
  • The amount of money or property lost as a result of the fraud.

A conviction of criminal fraud may include penalties such as:

A court will take several factors under advisement when determining sentencing for a criminal fraud conviction, including:

  • The severity of the fraud;
  • Whether the defendant has any prior convictions;
  • If the defendant is currently on probation or parole;
  • The amount of money or property that was stolen; and
  • The person or entity that was the targeted victim.

The penalty may also be influenced by the attitude of the community and/or the court towards this type of crime. If the entity that was a victim of the fraud is the Federal Government, the charges may be brought under federal law instead of state law and may result in harsher penalties.

What To Do If I'm a Victim of Criminal Fraud?

If an individual believes they are a victim of criminal fraud, they should contact their local law enforcement and report the fraud. If sufficient evidence exists, the case will be forwarded to the local prosecutor or District Attorney's office for prosecution of the individual who committed the fraud.

It is important to keep records of any and all losses that resulted from the fraud. This may be especially important where restitution is a possible penalty. It is also important to consult with an attorney to determine if an individual will be able to pursue a civil fraud case as well as the criminal fraud case.

Potential Defenses Against an Accusation of Fraud

There are several defenses that may be available to a charge of criminal fraud. These include:

  • Insufficient evidence;
  • Lack of intent to commit a crime;
  • Non-fraudulent statements; and/or
  • Entrapment.

Insufficient evidence means there is not enough evidence available to show that the defendant was the individual responsible for the fraudulent acts. It may also indicate there is not enough evidence to prove the defendant's actions amounted to fraud as defined in the statute.

A second possible defense is lack of intent to commit a crime. In order to obtain a fraud conviction, the prosecution must prove the defendant intended to deceive another individual or entity. Sometimes, it is difficult to prove intent. For example, an individual may accidentally use their friend's insurance card, which is not fraud. However, if they did so intentionally, it would be fraud.

Non-fraudulent statements may be made by accident, especially if an individual believes they are true. In addition, not all false or deceitful statements are considered fraudulent. Mere statements of opinion are not considered criminally fraudulent. In order to be fraudulent, a misleading statement must be related to an existing fact. It must not be based on a promise to complete a future action.

Entrapment is another possible defense to a criminal fraud charge. It occurs when law enforcement or the government compels an innocent person to commit a crime they otherwise would not have committed. Entrapment may be difficult to prove in court because simply being presented with an opportunity to commit a crime is not considered entrapment. In addition, the government will most likely argue against this defense and cite a reason the defendant intended to commit the crime anyway.

An experienced attorney will be able to assist in presenting any defenses during a criminal trial. An attorney will be knowledgeable how to successfully present the defense and argue against the evidence presented by the prosecution.

Unemployment Fraud

Unemployment fraud occurs when a person knowingly and willingly uses misrepresentation, lying, or deceit to collect unemployment insurance benefits. This is a very specific type of white-collar crime that can involve both employers and employees.

Requirements for collecting unemployment vary by state. In most states, employment benefits can only be collected if the person is unemployed, actively seeking work, or has had their hours reduced to less than full-time. If a person makes any misrepresentations in order to collect unemployment or to help someone illegally collect unemployment, they may face legal consequences.

Common Forms of Unemployment Fraud

Unemployment fraud can come in many different forms, including:

  • Working while collecting unemployment benefits
  • Collecting under a false or fictitious name
  • Cashing another person's unemployment check without their permission
  • Falsifying reasons for unemployment
  • Not actively seeking work while collecting unemployment
  • Attempting to collect unemployment benefits from another state in an illegal manner
  • Failing to report income and other benefits properly

As mentioned above, a person can also face legal consequences if they assist another person in unemployment fraud. For instance, if the employer takes part in the misrepresentation, they may face penalties as well.

Legal Penalties for Unemployment Fraud

Unemployment fraud can result in various penalties, including criminal fines, jail time, and loss of benefits.

There may be defenses available to criminal charges, depending on the facts of the case. For instance, a person can avoid liability for reasons such as:

  • Mistaken identity– Since unemployment fraud is a white-collar crime, a person might be mistaken for another person based off of their name or other information
  • Lack of intent– The defendant needs to intentionally use misrepresentation and must be intending to collect unemployment based off of the fraud
  • Insufficient evidence– Like any other crime, the defendant must be proven guilty beyond a reasonable doubt according to sufficient evidence

As mentioned, state laws may vary when it comes to penalties and defenses for unemployment fraud crimes.  

How Can A Lawyer Help Me With My Criminal Fraud Charges Issues?

Yes, it is important to consult with an experienced fraud lawyer if you are facing criminal fraud charges. Whether you are charged with a misdemeanor or a felony, the consequences may be serious and long-lasting. An attorney will be able to review your case, determine what defenses may be available to you, and represent you during any court proceedings, if necessary.

If you are a victim of fraud, it is also important to consult with an attorney. An attorney will help you gather necessary evidence, review your case, determine whether you can also pursue a civil case, and represent you during any court proceedings, if necessary.