Perhaps the most glaring example of fraud in recent U.S. history came with the collapse of the energy company Enron in 2001. Its shenanigans even led to the recall of a sitting California governor who had been duped and defrauded by the company, leading to massive energy shortages in the state.

In the end, 22 Enron executives were convicted, and many went to prison and had their life savings impounded. Their crimes? Overvaluing assets, shifting debts from one subsidiary to another to hide them, and thus duping investors out of millions of dollars.

Fraud cases aren’t always so large. Garden variety consumer fraud is probably the most frequent type, but fraud at the corporate level and among business owners is not uncommon.

What if you suspect fraud among your business partners, or what if you’re being accused of fraud? What is your recourse?

If you’re located in or around the greater San Francisco Bay Area, contact the Law Offices of David H. Schwartz, INC. Attorney David Schwartz has been handling business and corporate litigation cases for 45 years. He will vigorously represent you, whether you’re seeking to sue or being sued, or just need to resolve a crisis before it ends up in court.

What is Business Fraud?

In California, there is not just one comprehensive fraud law that covers every single act that can be considered fraudulent. Instead, fraud is covered by many laws, some specific, others generic. Generally speaking, though, fraud can be defined as:

  • Committing an act that results in unfair or undeserved benefit for yourself

  • Causing loss or harm to another

Fraud is often committed for financial gain, but it can also be deployed in an effort to escape criminal liability. Fraud, when all is said and done, is the act of deceiving others through misrepresentation, concealment, and other acts (verbal or behavioral) for personal gain and/or for harm to others.

Examples of Fraud

In California, common types of fraud include insurance fraud, real estate and mortgage fraud, financial fraud, forgery, identity theft, predatory lending, and more.

On the business and corporate level, fraud can rise to greater heights, including:

  • Embezzling (taking company funds for one’s personal gain)

  • “Cooking the Books” (falsifying of financial records)

  • Transferring business assets fraudulently (see the Enron example)

  • Misrepresenting revenues or assets (again, Enron)

  • Falsifying or evading the filing of tax returns or paying taxes

  • Seeking unlawful business loans for personal gain

  • Committing securities fraud by overvaluing assets

  • Overstating claims to insurance companies

In a business or corporate setting, one bad apple can ruin the entire operation. If one partner or executive seeks personal benefit at the expense of others, fraud has probably reared its ugly head. Matters may be resolved internally before they are subject to criminal prosecution or civil recriminations, but the advice and guidance of experienced legal counsel are essential. If you suspect fraud in your company hierarchy, contact an attorney immediately.

Penalties for Fraud

Since there is no one statute that prescribes penalties for fraud, the nature of the fraud will largely determine the possible penalties. Often referred to as “white-collar” crimes, acts of fraud can carry hefty fines and even jail time. Though some forms of fraud are automatically booked as felonies, fraud is often considered a “wobbler” offense, meaning that it can be tried as either a misdemeanor or a felony, depending on the circumstances and severity of the act. In some cases, you can be charged under both state and federal law.

In addition to fines and jail terms, you can have your professional license revoked and the assets gained through your fraud seized — including cash, houses, cars, boats, and more.

Proving Fraud

When it comes to proving fraud, whether as a civil or criminal offense, four different definitions of fraud require somewhat different elements of proof. The four types are:

  • Intentional Fraud: The defrauder uses deceit and/or false information to get the victim to take certain actions, which in turn harm the victim(s).

  • Promissory Fraud: The defrauder makes a promise that he or she never intends to carry out, resulting in harm to the victim(s).

  • Concealment Fraud: The defrauder deliberately fails to reveal important information when there is a duty of full disclosure, such as in investment advice.

  • Constructive or Negligent Fraud: The defrauder may honestly believe that the false representation is true, but the victim is harmed anyway because of the defrauder’s lack of due diligence.

The common denominator in proving any of these types of fraud is to show that an act or acts of misrepresentation or concealment led to damages to the victim, along with showing that the defrauder intended to induce reliance based on the fact or facts represented.

How a Skilled Attorney Can Help

If you suspect one of your partners, fellow owners, or executives in a business enterprise is out for personal gain at the expense of the others, business fraud and its consequences might be looming. The entire ship could sink because of one person’s actions. You need to involve experienced legal counsel immediately before matters get out of control. 

Worse yet, if you or someone in the company has been charged with fraud, seasoned and aggressive legal representation is all the more essential.

Business Fraud Litigation Attorney
Serving San Francisco, California

In business law matters, you can rely on the nearly half-century of business and corporate litigation experience of attorney David Schwartz. If business fraud is troubling your firm, contact the Law Offices of David H. Schwartz, INC, immediately. The firm proudly serves clients in the San Francisco Bay Area, including San Jose, Santa Clara, San Mateo, Oakland, and Alameda County.