Introduction to Fraud Against Business

Fraud against business institutions has a number of names among lawyers and federal agencies. A federal defense lawyer may refer to these as occupational fraud, internal fraud, or simply, business fraud. All of these terms reference the same set of criminal and civil offenses – fraud by an employee, customer, or other internal actor against a private business.

Business Fraud at the Small Business

While large corporate entities might be a risk for bigger losses due to fraud, small businesses are the far more likely targets. Companies that employ less than 100 people sustain the majority of cases involving fraud against business institutions. This fraud can reach hundreds of thousands of dollars before it is detected by the organization or federal investigators.

Reports on business fraud have found that small businesses sustain 100 times (or more) the amount of fraud per employee as larger institutions. These smaller companies are also less equipped to detect and report these frauds, which leaves substantial work for a federal investigator when the matter is criminal.

Actions That Constitute Fraud Against a Business Institution

In most instances, criminal fraud charges are investigated and lodged by a federal investigator or agency, but when that fraud is against a business institution, it’s possible for the company to initiate the lawsuit. Through private prosecution, the business can initiate a fraud investigation and charges acting on behalf of a federal agency, such as the FBI.

There are several criminal statutes that can be used to criminally prosecute fraud against a business. These statutes are also applicable to other fraud cases – meaning fraud against a business institution is defined by the actors involved, not the specific type of fraud committed.

Definition of “Fraud” Under Federal Law

To win a conviction, the prosecutor must show that the actions by an employee or other internal actor meets the federal definition of fraud. This definition isn’t provided in a specific statute, but rather defined in federal law by prior cases. A fraud is:

  • The intentional or deliberate use;
  • Of false documents or statements, misrepresentations, concealments, or deceptive information;
  • In a scheme or artifice.

Generally, the existence of a “scheme or artifice” is what separates fraud from other theft offenses. A scheme or artifice is a plan to defraud, rather than just the intention to do so. Typically, scheme or artifice is proven by ongoing attempts or successes in deception and falsification.

What to Do When Accused of Fraud Against a Business

Fraud against business institutions is difficult to prosecute. While other federal fraud offenses and white-collar crimes result in an accessible paper trail, fraud in an internal company requires significant cooperation and diligence by the business. A company might be unwilling to comply because internal fraud leads to increased costs for investigation, bad publicity, and damage to the company’s reputation.

Even if a federal investigator or auditor has knowledge of ongoing fraud, it can be impossible to accumulate the documentation and evidence needed to bring a case. For this reason a significant amount fraud against business institutions unfolds without criminal consequence.

The lack of reporting by businesses and cooperation should inform your steps if accused of fraud against a business institution. Here’s why.

  • It is likely to take a federal investigator longer to obtain documents and other information related to potential fraud, so contacting a federal defense lawyer early gives you greater advantage over a prosecutor.
  • You should collect competing documentation or files when you first learn of a potential fraud. This can include collection of reporting requirements and company procedures, along with evidence that these best practices were followed.
  • Don’t share information with the board or other business executives. Your interests will become substantially divergent from the company’s, even if you are entirely innocent of fraud. Anything you share, explain, or provide to the company could be used in your prosecution.
  • Talk with your lawyer about handling daily work responsibilities during an ongoing investigation or audit. In some instances, it might be appropriate to excuse yourself from certain projects or duties. Alternatively, distancing yourself from current responsibilities could hurt your case.
  • Finally, don’t try to cover-up documentation or information that is already available to prosecutors or company executives. Attempting to remove, alter, or falsify files only creates a bigger paper trail for an investigator to follow. Speak with your lawyer about any existing information that could incriminate you in a fraud.

Hiring a Federal Defense Lawyer

The most important step you take if accused of business fraud is hiring a lawyer. Your choice of legal counsel will inform the strategy of your case and influence the outcome. It’s important to contact a lawyer early and find a federal defense lawyer that has experience with fraud against business institutions.

Find a defense lawyer near you, right here.