What is Fraud? Fraud occurs when someone gains something of value, usually money or property, from a victim by knowingly making a misrepresentation of a matter of fact. Fraud commonly occurs in the buying or selling of property, particularly real estate and stocks, or in falsifying reports such as taxes and Medicare claims made to obtain benefits from the state or federal government.
While fraud itself is an independent criminal charge, it can also appear in other charges as the means used or the intent required to commit a crime. For example, identity theft charges often require that a defendant steal another’s personal information with the intent to defraud them. Although fraud would be involved, that defendant could be charged with identity theft or criminal use of personal identification information rather than fraud - depending on the state.
Types of Fraud: Because fraud covers a diverse array of actions ranging from white collar crimes to petty theft, it can be helpful to divide it into three general categories: consumer fraud, employee fraud, and fraud committed against a governmental institution or business. Consumer fraud covers instances where individual consumers are defrauded. It includes identity theft, mortgage fraud, telemarketing scams, Ponzi schemes, and check fraud.
The most common federal charges are for mail and wire fraud, which involve using the mail or interstate wires such as the phone or internet to further a scheme to defraud. This category also includes securities fraud, which occurs when investors buy or sell based on false information provided by another party, such as a stockbroker or financial advisor. Real estate contracts may also be involved, particularly if a realtor or home seller lied or failed to disclose important information to a home buyer.
Employee fraud occurs when an employee violates his fiduciary duties to the company or its customers by embezzling funds, selling trade secrets, or accepting bribes. Lastly, there are attempts to defraud the government or businesses. This includes insurance fraud, tax fraud and tax evasion, counterfeiting, healthcare fraud, bankruptcy fraud, Medicare and Social Security fraud, and welfare fraud.
Penalties for Fraud: Fraud can be both a criminal and civil offense, so if a prosecutor does not pursue criminal charges, victims of consumer fraud may file suit in civil court. Criminal penalties vary widely depending on several factors including the type of fraud and the amount of money involved, but can range from suspended sentences, and probation and fines to prison sentences of up to fifteen years. Generally, however, fraud is a felony charge with a potential sentence of six months to five years. Additional charges can be filed for each instance of fraud committed, so someone who passes several bad checks or uses a stolen credit card several times can be charged for each of those actions. Civil penalties typically involve fines allowing the victim to recover the amount he or she lost as a result of the fraud, including attorney’s fees and any money the victim spent to clear his or her credit record.
Proving Fraud: The elements required to prove fraud vary in state and federal laws, but generally, one must prove that there was a misrepresentation of an important fact by a person who knew it was false to a victim who reasonably relied on the misrepresentation, and who suffered an actual loss or injury because of that reliance. Additionally, the misrepresented fact must be important and must have substantially influenced the victim’s decision to act. It must be a fact; offering an opinion such as “this is the best house on the block” would not be considered fraud. Getting Help: Because fraud covers so many various actions carrying civil or criminal penalties that vary by state, you should contact a local attorney to discuss your case if you have been accused of or are the victim of any type of fraud.