What is fraud?

Fraud occurs when someone gains something of value, usually money or property, from a victim by knowingly making a false statement or misrepresentation of a matter of fact.

In the United States, fraud commonly occurs in the buying or selling of property, particularly real estate and stocks, or in falsifying reports such as taxes and Social Security or 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 in the commission of a crime. For example, identity theft charges often require that a defendant is accused of stealing another’s personal information with the intent to defraud them. Although a fraud scheme would be involved, that defendant could be charged with identity theft or criminal use of personal identification information violation rather than fraud – depending on the state.

Read on to learn more about the different types of fraud, and the consequences of scams. If you have been charged with fraud or are the victim of any type of fraud, just enter your ZIP code to get help from an attorney.

What are the types of fraud?

Because fraud covers a diverse array of fraudulent activity ranging from white-collar crimes to 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, credit card 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 for personal gain. This category also includes securities fraud, which occurs when investors buy or sell based on a false representation of fact made 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.

What Are Some Examples of Frauds?

Common types of fraudulent activities include the following:

• Embezzlement (e.g., theft of cash)
• Forgery or alteration of documents (e.g., checks, time cards, receipts, contracts, purchase orders, expense reimbursement paperwork, etc.)
• Fraudulent financial reporting.
• Impropriety in the handling or reporting of cash or financial transactions
• Authorization or receipt of payment for goods not received or services not performed (e.g. payments to fictitious employees or vendors)
• Authorization or receipt of unearned wages or benefits.
• Identity theft
• Destruction, removal, or inappropriate use of records

What are the penalties for fraud?

Fraudulent acts can be both criminal and civil offenses, so if a prosecutor does not pursue criminal charges, victims of consumer fraud may file a civil action. 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 financial 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 monetary loss as a result of the fraud, including attorney’s fees and any money the victim of fraud spent to clear his or her credit report.

How is fraud proven?

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.

Case Studies: Understanding Fraud

Case Study 1: Securities Fraud

In this case, a stockbroker named John intentionally provides false information to his clients about a particular stock to manipulate its value. As a result, his clients make investment decisions based on the fraudulent representation, leading to financial losses. John’s actions constitute securities fraud, a criminal offense with severe penalties, including fines and potential imprisonment.

Case Study 2: Identity Theft

In this scenario, Sarah steals personal information from several individuals, including their social security numbers and credit card details. With this stolen data, she engages in credit card fraud, opening accounts in the victims’ names and making unauthorized purchases. Sarah’s actions constitute identity theft and credit card fraud, both of which are serious criminal offenses carrying significant jail time and fines upon conviction.

Case Study 3: Insurance Fraud

In this case, a business owner named Michael purposely exaggerates the extent of damage to his property in an insurance claim. He seeks to receive a larger insurance payout than justified by the actual loss suffered. Michael’s actions amount to insurance fraud, a criminal offense that can result in substantial fines and imprisonment upon conviction.

How Can I Get Legal 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.