Fraud involves intentional deception to gain something of value, usually money. One commits fraud through false statements, misrepresentation, or dishonest conduct intended to mislead or deceive. This article looks at types of fraud crimes and the criminal and civil penalties for fraud.
Types of Fraud
The term "fraud" covers a wide range of crimes. In most instances, fraud cases involve deception that the fraudster uses to their advantage. Many fraud schemes involve stealing others' Social Security numbers or other sensitive information. Other scams involve computer viruses or malware spread through hyperlinks in phishing emails.
Fraud offenses include the following, among others:
- Insurance fraud can include several types of fraud. For example, if insurance agents keep insurance premiums for themselves rather than send them to the underwriter, that constitutes insurance fraud. Health insurance fraud works similarly. The Federal Bureau of Investigation (FBI) estimates insurance fraud costs Americans approximately $40 billion annually. That equates to roughly $400 to $700 extra in premiums per family per year.
- Credit card fraud involves taking someone's credit or debit card information and purchasing goods or services with it. Fraudsters may use the information to make a counterfeit card for purchases or other financial gain. Credit card fraud is a form of identity theft.
- Mail fraud involves using the United States Postal Service (USPS) to commit fraud. If someone mails a contract regarding a fraudulent deal via the USPS, the government could likely secure a fraud conviction against the person who sent the contract.
- Securities fraud occurs when someone makes a false representation regarding the value of a company's stock value. It may require someone to make a financial decision based on the false representation. It also includes insider trading.
- Check fraud involves someone creating counterfeit checks to defraud another. Someone attempting to give a bad check to a bank to withdraw money that isn't theirs would be check fraud.
- False representation occurs when someone presents false information as if it is true. A business owner who knowingly left out a material fact about the company's finances before selling the company would likely be found guilty of defrauding the buyer by a court.
- Mortgage fraud involves misrepresentations on mortgage documents. For example, suppose someone lied about the value of their real estate, and a buyer relied on the valuation in purchasing the real estate. The person who lied likely committed mortgage fraud.
- Wire fraud involves using electronic communication, such as a telephone or email, to commit fraud. Phishing schemes or other email scams are examples of wire fraud. Scams committed over the phone, such as tricking someone into buying gift cards, also constitute wire fraud.
- Welfare fraud occurs when someone receives government benefits through false representations. If someone falsely claims they are disabled and subsequently receive Social Security Disability benefits, they have committed welfare fraud.
FindLaw's articles about white-collar crimes and financial fraud include in-depth information about these and other fraud schemes.
The Coronavirus pandemic gave rise to a new kind of fraud involving unemployment benefits and identity theft. Some scams took advantage of the public's fear of the pandemic, while others falsely promoted COVID-19 help. Such scams often require people to provide personal information, which the fraudster could use for financial gain.
In 2020, the Department of Justice (DOJ) charged over 135 medical professionals with healthcare fraud. More than $1 billion in fraud was committed with false charges for telehealth services. The scam included forged prescriptions for opioids.
The DOJ said telemedicine executives paid doctors and nurse practitioners to order unnecessary equipment, diagnostic tests, and pain medications either without speaking to the patient or speaking to them only briefly without ever meeting. The executives received kickbacks and bribes in exchange for those orders and falsely billed Medicare and insurers.
Fraud is a criminal offense, but a person alleged to have committed fraud can also be taken to civil court. A prosecutor brings criminal charges in criminal court. A fraud victim may file a civil lawsuit against the alleged scammer to recover money. Sometimes, both civil and criminal cases are brought against a person accused of fraudulent activity.
Fraud in Civil Court
In civil lawsuits, the standard of proof is lower. Instead of proving guilt beyond a reasonable doubt, the attorney for the victim only needs to prove guilt by a preponderance of the evidence. Another way to say that is, "It's more likely than not that the alleged circumstances occurred in that manner."
If a victim wins a civil case, the defendant does not go to prison. Instead, the court requires them to pay restitution (return the victim's money). The judge may also order monetary damages.
When federal government regulators, such as the Federal Trade Commission (FTC), file civil lawsuits against large or small businesses accused of fraudulent activity, they may seek injunctions to stop the behavior. They may also seek restitution for the victims and fines.
Criminal Fraud Charges
In criminal law, prosecutors must prove fraud beyond a reasonable doubt. This means the evidence is satisfactory, and the government proves facts and establishes guilt. This is a higher degree of certainty than a civil case. The penalties are harsher if found guilty.
The prosecutor must prove the following to get a conviction:
- There was a purposeful deception, such as a false statement or misrepresentation of an important fact
- There was intent to deprive the victim of something, usually money
- The victim suffered or could have suffered an actual loss due to the fraudulent activity
The nature of the fraud may determine whether a victim brings their case to state or federal court. For example, if someone attempts to defraud the federal government, the prosecution will likely be in federal court.
Criminal Penalties for Fraud
The penalties for fraud depend upon the type of fraud, the number of victims, and the amount of financial loss. Punishment usually includes a prison sentence, an order of restitution to make the victim whole again, and fines.
State and federal laws determine the criminal penalties for fraud. For example, state law may deem fraud a misdemeanor or felony based on the amount of money the fraudster obtains.
Talk to a Criminal Defense Lawyer
Fraud charges can carry a lengthy prison sentence. Contact a criminal defense attorney near you to protect your legal rights. If you are the victim of fraud, consider contacting a consumer protection attorney near you. An experienced attorney can provide helpful legal advice regarding the following:
- Whether the alleged fraud is a state or federal crime and how that may affect your case
- General information about fraud laws and the criminal justice system
- Whether law enforcement violated any of your constitutional rights when arresting you
If you are involved in a fraud case, do not delay in contacting a criminal defense or fraud lawyer.