The “term corporate” fraud encompasses a wide range of unethical and illegal practices that corporate officers and employees can make. Not all corporate fraud is necessarily criminal, but there are laws that punish certain types of activity as crimes. While anyone in an organization can commit a corporate fraud crime, they are typically committed by managers, executives, corporate officers, or others in a position of authority within the organization. Corporate fraud crimes exist at both the state and federal level.
In the broadest terms, a fraud occurs whenever someone intentionally deceives others for personal gain. Corporate fraud cases can involve multiple people and complicated schemes aimed at deceiving the public, auditors, investigators, or others. A corporate fraud scheme might, for example, involve corporate officers who use an accounting scheme to conceal how much debt a corporation has in order to make it appear more financially sound than it is. The scheme allows those officers to benefit from inflated stock prices, increased salaries, or other benefits. These types of activities can violate numerous state and federal criminal laws.
While many fraud investigations begin as civil cases, they can often turn into criminal fraud when someone destroys evidence, misleads investigators, or takes similar activity designed to thwart investigators or other government agents. Such actions are examples of the crime of obstructions of justice, another crime that is commonly charged in many corporate fraud cases. Almost anyone can commit obstruction of justice by intentionally misplacing documents, destroying them, altering them, or forging false records. Obstruction of justice also occurs when a person intentionally makes misleading statements to, or lies to, investigators, regulators, or other government officials. To learn more, see our article on Obstruction of Justice.
Some corporate fraud cases involve insider trading, a form of securities fraud. Insider trading occurs when a corporate officer uses information that is unavailable to the public to buy or sell securities. While corporate insiders are allowed to trade securities of their own corporations after filing appropriate reports with the Securities and Exchange Commission, illegal insider trading occurs when they use insider information to make illegal trades or by providing tips or hints to others to help them profit by making trades. Insider trading cases can involve people employed by a corporation as well as others connected to it who are privy to insider information, such as outside attorneys, accountants, or even government investigators.
Schemes to defraud often involve the mail, phone lines, or emails and other forms of internet communications. Under federal law, using any of these methods as part of a scheme to defraud is a crime. Mail fraud charges apply whenever someone uses the mail or other mail carrier, such as FedEx, to commit a fraud; while wire charges apply when a person uses a phone or other electronic communication device as a part of a fraud scheme. Because of the broad reach of the federal wire and mail fraud laws, these charges can become a part of almost any corporate fraud case.
Corporate fraud cases can involve a range of different laws, each of which provides for its own penalties. This makes the penalty range in any corporate fraud case quite broad, with some cases involving relatively minor penalties while others have significant possible sentences. Regardless of the specific crime a person is convicted of, criminal sentences involve the same types of penalties.
Fines. Fines are very common in criminal fraud cases. Because both individuals and corporations can be charged with corporate fraud crimes, fines are commonly used as penalties against both. Corporate fines can be significant, reaching into the billions of dollars, while individual fines can exceed $250,000 or more.
Incarceration. Individuals who commit corporate fraud can face jail or prison time in addition to fines or other penalties. Corporate fraud crimes are often felonies, meaning the potential sentence is a year or more in prison, while a person convicted of a misdemeanor crime faces up to a year in jail. Incarceration sentences differ widely based on the specific crime, but sentences of five to 10 years in prison, or longer, are possible.
Restitution. When an act of corporate fraud results in others losing money, those convicted will also face a restitution order. Restitution is money a person convicted of fraud must pay to victims to compensate them for their losses. Restitution differs widely between cases, but can easily reach into the millions of dollars, especially when multiple victims have been harmed.
Probation. Probation sentences are also possible in corporate fraud cases. Probation will usually last at least one year, but multiple-year sentences are common. When on probation a person must comply with numerous court condition and limitations, such as not committing more crimes, paying all restitution and fines, regularly reporting to a probation officer, and not traveling outside the jurisdiction without approval from the officer.
Corporate fraud crimes are serious crimes that can lead to years in prison and multimillion dollar fines. If you are even suspected of or asked about your involvement in any type of corporate fraud, you need to seek out a local criminal defense attorney as soon as possible. Only a local attorney who understands the laws in your area and who has personal experience with local prosecutors, courts, and investigators can give you advice about your case. Failing to have adequate legal advice, even if you are only suspected of a crime, can seriously affect your rights, your career, and your ability to defend yourself against any criminal charges.