Crimes deal with situations in which a person wrongfully obtains money, property, or other benefits by deceit. In the criminal context, fraud is typically charged as a felony, meaning that a conviction can result in a year or more of incarceration. Criminal penalties can also include statutory fines, restitution (victim reimbursement), community service, and the loss of civil rights associated with a felony conviction.
In civil court, financial compensation is generally the plaintiff's sole remedy. The defendant may be ordered to pay restitution if the suit is successful.
Proving a fraud case can be tricky, even for government prosecutors with entire investigative agencies at their disposal. They can prove this element easily: financial records are usually available, and it is usually relatively easy to show the victim suffered a loss. The difficulty lies in proving the defendant acted with criminal intent; in other words, direct evidence is lacking.
What makes the above example different from this one? In both situations, a man sells his used truck to a neighbor. However, in the second case, the truck suffers from a transmission problem shortly after the man sells it to his unsuspecting neighbor. This is considered fraudulent behavior, and the jury would rule in favor of the plaintiff.
But we have received information that a mechanic was called out to fix the truck earlier, and the person's vehicle was towed and repaired at a local transmission shop. The repair cost amounted to $900. The defendant claims to have not known that the repair was necessary (even though the truck is a Volkswagen model, out of the car industry for years, and the transmission is notoriously known to overheat) and says that he would have stopped repair payment had he known about the repairs. Given the repair estimate, the jury can infer that the defendant had reason to know the truck would break down before the sale. This suggests that the sale of the truck was a fraudulent conveyance.
Unfortunately, many victims of fraudulent conveyance cannot collect because the circumstances that indicate fraud are not available to them.
Common Types of Fraud Crimes for Entities
Today, technology allows us to perform many tasks with minimal effort. To make a purchase, we put our card into a machine and key in our PIN. We don't even have to wait in line at the cashier, as machines can process our transactions in a matter of seconds.
But, with that convenience comes risk. Criminals can use online systems to commit fraud, which is often easier than it takes to steal a physical object. In a recent study, 20-30 percent of all online purchases involve some fraud.
One common fraud type is someone using a stolen credit card number to complete a purchase online. To cover their tracks, they use a different computer that doesn't have access to any information. When done, they use spyware and other tools to disguise their activity with the merchant. This may not be a big deal, but credit card fraud costs American merchants billions of dollars each year.
When a fraudster uses your credit card without your permission or knowledge, that's credit card fraud. For example, they may have gotten access to your card by stealing it from you or borrowing it from a friend. Alternatively, it's possible they got into your account through the insecure processes used by most websites, such as phishing or skimming information from a gas pump.
They use your account to make purchases or withdraw cash at an ATM. Your bank may contact you, and when they aren't able to reverse the transaction, your bank account may be temporarily depleted until you can figure out what happened and close the fraudulent card.
Financial fraud can take many forms, including:
- money laundering;
- investment schemes;
- mortgage and foreclosure scams;
- identity theft; and,
- fraud in bankruptcy.
Non-financial fraud can include medical fraud, psychological services fraud, investment schemes, fake hedge funds, overseas romance scams, charitable fakes, employment fraud, and identity crimes such as counterfeiting or identity theft.
Specific schemes like lottery or sweepstakes fraud may cross into civil and criminal law. Other frauds, such as bribery and corruption, may violate state and federal laws. Although it is not an exhaustive list, it is essential to be familiar with some common types of fraud.
Case: The People vs. Robot
Victims of fraud may be able to recoup some or all of their losses if it becomes apparent that the defendant is avoiding paying restitution. They do this by hiring a lawyer and filing a legal action. Unfortunately, the road to the civil courts can be a slow one.
To succeed in a tort of a fraud claim, the plaintiff only needs to prove their case by a "preponderance of the evidence." This is an easier burden to meet than the "beyond a reasonable doubt" standard in criminal proceedings. However, civil litigants are also entitled to discovery, meaning they can force the defendant to turn over financial records, email, and other evidence necessary to build a fraud case. Indeed, if a plaintiff cannot recover compensation in civil court, it is probably because the defendant no longer has the money to pay the judgment - not because the plaintiff cannot prove their fraud case.