Generally, fraud is an intentional and deceptive act that is intended to give the alleged perpetrator unlawful gain or deny rights to the victim. It involves the false representation of facts by intentionally withholding important information or giving false statements. The purpose is to gain something that was unavailable before committing the fraudulent act.
Proving fraud requires evidence that the perpetrator provided false information as an important fact. Next, the perpetrator had to know the alleged fact was untrue. Third, the perpetrator had to intentionally deceive the victim. Next, the victim had to rely on the false information. Finally, the victim had to suffer damages by relying on the false information.
The interstate nature of the activity gives the federal government authority over numerous fraudulent activities, such as credit card fraud, wire fraud, securities fraud and bankruptcy fraud. Federal tax evasion covers the submission of a federal tax return with fraudulent information.
Laws on fraud often followed notorious corporate fraud cases. For example, executives at the energy-company Enron used numerous methods to disguise the corporations' financial condition, such as deliberate concealment or unclear reporting of revenue and misrepresentation of earnings. When the fraud was disclosed, share prices dropped from $90 to $1 in one year, company employees' equity was eliminated, and Enron declared bankruptcy. This led to the passage of the 2002 Sarbanes-Oxley Act regulations in 2002.
Government prosecutors have significant discretion. They may pursue criminal charges and seek imprisonment and substantial fines. Prosecutors may also seek a settlement if this may lead to a quicker and less costly resolution.
Non-government parties may also pursue fraud through civil litigation in some cases by filing a lawsuit seeking recovery of the funds. Where no funds were lost, they may seek a resolution that reestablishes the rights of victims.
The consequences of fraud charges may include imprisonment, financial penalties and other long-term consequences. An attorney should be consulted as soon as possible to help protect rights.