Business, Legal & Accounting Glossary
intentional deception resulting in injury to another person. Fraud includes lies and half-truths, such as selling a lemon and claiming “she runs like a dream.”
Wrongful or criminal deception intended to result in financial or personal gain.
n. the intentional use of deceit, a trick or some dishonest means to deprive another of his/her/its money, property or a legal right. A party who has lost something due to fraud is entitled to file a lawsuit for damages against the party acting fraudulently, and the damages may include punitive damages as a punishment or public example due to the malicious nature of the fraud. Quite often there are several persons involved in a scheme to commit fraud and each and all may be liable for the total damages. Inherent in fraud is an unjust advantage over another which injures that person or entity. It includes failing to point out a known mistake in a contract or other writing (such as a deed), or not revealing a fact which he/she has a duty to communicate, such as a survey which shows there are only 10 acres of land being purchased and not 20 as originally understood. Constructive fraud can be proved by a showing of breach of legal duty (like using the trust funds held for another in an investment in one’s own business) without direct proof of fraud or fraudulent intent. Extrinsic fraud occurs when deceit is employed to keep someone from exercising a right, such as a fair trial, by hiding evidence or misleading the opposing party in a lawsuit. Since fraud is intended to employ dishonesty to deprive another of money, property or a right, it can also be a crime for which the fraudulent person(s) can be charged, tried and convicted. Borderline overreaching or taking advantage of another’s naivety involving smaller amounts is often overlooked by law enforcement, which suggests the victim seek a “civil remedy” (i.e., sue). However, increasingly fraud, which has victimized a large segment of the public (even in individually small amounts), has become the target of consumer fraud divisions in the offices of district attorneys and attorneys general.
Fraud is the intentional deception by one person committed against another person which creates a misrepresentation.
There also must be some type of loss, generally monetary.
There are many types of fraud, but fraudulent activities can usually be grouped into three basic categories: government, employee, and consumer.
Under the common laws of the United States fraud includes the following:
A common type of fraud is identity theft. In this case, it is not necessarily illegal to lie to someone about your name, but if your steal another person’s identity and you cause financial loss to that person due to your lies, then this is considered fraud. Fraud can be considered a criminal offence or a civil offence. If you sue someone for fraud you may win your case even if they are not criminally prosecuted.
For most people, the act of lying is considered to be fraudulent, but in a legal sense lying is only one small element of actual fraud.
A salesman may lie about his name, eye color, place of birth, and family, but if he has not said any lie about the product he sells, then he will not be found guilty of fraud. Deliberate misrepresentation of the product’s condition must be there and there must be an occurrence of monetary damages.
Complicated financial transactions are involved in many fraud cases that are conducted by ‘white-collar criminals’, business professionals with specialized knowledge and criminal intent. By an unscrupulous investment broker, an opportunity to purchase shares in precious metal repositories may be presented to clients, for example. Such credibility is given to him by his status as a professional investor, which can lead to a justified believability among potential clients.
Those investors by whom it is believed that the opportunity is legitimate to contribute substantial amounts of cash and in return, they also receive authentic-looking bonds.
If it is known by the investment broker that no such repositories existed and he has still received payments for worthless bonds, then victims may sue him for fraud.
It is not easy to prove fraud in a court of law. Laws concerning fraud may vary from state to state, but in general, there are many conditions that must be met. One of the most important things that has to be proven is a deliberate misrepresentation of the facts.
Was this fact known by the seller beforehand that the product was defective or the investment was worthless? Sometimes a product might be sold by some employees of a large company or they may offer a service without personal knowledge of a deception.
The account representative by whom a fraudulent insurance policy has been sold on behalf of an unscrupulous employer may not have known at the time of the sale that the policy was bogus. If the accuser wants to prove fraud, then he must demonstrate that the accused had prior knowledge and the facts have been voluntarily misrepresented by him.
Another important element that has to be proved in a fraud case is justifiable or actual reliance on the expertise of the accused. If a stranger approached you and asked you for ten thousand dollars to invest in a vending machine business, then you would most likely walk away. But if a well-dressed man by whom an investment seminar has been held and he has mentioned his success in the vending machine world, you might rely on his expertise and perceived success for making the decision to invest in his proposal.
After that, a few months have elapsed and the person has not contacted you or hasn’t delivered any vending machines, then you might reasonably assume that fraud has occurred. In a court of law, you are required to testify that your investment decision was partially based on a reliance on his expertise and experience.
The element of fraud which tends to prevent successful prosecution is the obligation to investigate. It is the responsibility of potential investors or customers that they should fully investigate a proposal before any money exchanges hands.
If an investor failed to take appropriate measures at the time of the proposal then it can seriously weaken a fraud case in court later. It can be claimed by the accused that the alleged victim had every opportunity to discover the potential for fraud and he had failed to investigate the matter thoroughly.
If you have realized that you are a victim of fraud, then you should consult a legal professional and collect all tangible evidence of damages. You have to keep in your mind that fraud is not easily proven in a court of law, although the court of public opinion may be squarely on your side.
Blue Sky Laws
Investment Advisers Act
Victim Impact Statement
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This glossary post was last updated: 13th November, 2021 | 0 Views.