Under California law, corporate fraud refers to an individual or company's illegal and unethical activities. Often, these fraudulent acts are done for the undeserving benefit of the party. There is no specific statute under California law that addresses corporate fraud. This is because the offense can be committed in various ways. Corporate fraud schemes often go beyond the scope of a person’s position and authority and are charged based on their complexity and impact on the business or outside parties.

Common acts that could result in an arrest, investigation, and prosecution for corporate fraud include pyramid schemes, return fraud, allowances fraud, false accounting fraud, and exploiting assets. Depending on the circumstances of your case and the value of property or money involved in the crime, you could face a felony or misdemeanor conviction for corporate fraud.

The penalties you face for corporate fraud are severe and could impact your life for a long time. Therefore, if you battle these charges in Los Angeles, CA, you will need the expert guidance we offer at Los Angeles criminal attorney. Our skilled attorneys will protect your rights and help you build a defense to fight fraud charges and secure a favorable outcome in your case.

Overview of Corporate Fraud in California

Corporate fraud is a white-collar crime that involves illegal acts committed by a person or company. Although the crime is committed in various ways, corporate fraud is committed by taking advantage of access to confidential and important information and documents and leveraging large sums of money or assets. This type of fraud is often hidden within legitimate business activities. Multiple stakeholders who turn a blind eye to these schemes could be prosecuted alongside the actual perpetrators of the offense.

Some of the common acts that could fall under corporate fraud include:

  • Fraudulent transfer of assets for personal gain. If you have access to asset documentation and transfer it in your name or to a third party, you risk facing an arrest and charges for corporate fraud.
  • You make false transactions or fraudulent purchases. Individuals in an organization's procurement department could be caught up in this crime for false purchase transactions aimed at defrauding the company.
  • You alter or doctor financial documents.
  • False misrepresentation of assets in financial reports
  • Falsification or evasion of tax returns
  • You seek unlawful business loans for personal use

Types of Corporate Fraud

Company owners and senior executives could make risky yet illegal choices to increase their company's profits or gain financial advantages. If you engage in an unlawful or fraudulent act for the personal benefit or the benefit of your company, you risk facing an arrest and charges for procurement fraud. Different crimes constitute corporate fraud, including:

  1. Ponzi/Pyramid Schemes

A pyramid scheme is an unsustainable and fraudulent investment pitch that promises unrealistic returns from fake investments. Early investors often receive high returns, which pull more people into the scheme who end up losing their money or assets from the schemes.

Since the pyramid schemes are unauthorized and are not attached to any products, individuals who invest in them will not recover from the investment. Still, the top-ranked executives in the scheme collect all the assets for personal gain. If law enforcement officers receive word that you or your company is involved in pyramid schemes, you can be charged with corporate fraud.

  1. Return Fraud

Return fraud involves two basic steps, which include:

  • Acquiring goods through theft, trick, or purchase of stolen property
  • Return of a stolen or fraudulently acquired product with a forged receipt for cash

Engaging in acts like switching price tags in a store, repackaging stolen items, or working with an employee to steal and return products from a store will result in serious fraud charges. Depending on the circumstances and exact act in which you engaged, the prosecution can file charges for:

  • Petty theft. You commit the crime of petty theft when you steal property worth $950 or less.
  • Shoplifting is a crime that involves entering an open business to steal goods worth $950 or less.
  • Grand theft. Penal Code 487 defines grand theft as taking another person’s property worth more than $950.

Return fraud can attract felony or misdemeanor charges depending on the value of the items involved in the fraudulent acts.

  1. Contract Fraud

A contract is a legally binding agreement between individuals. You commit the crime of contract fraud when you make false statements to entice another person to enter a contract with you. Such acts trick the alleged victim into signing a contract they would not sign otherwise. For all types of contracts, there should be mutual consent from the involved parties. Additionally, you must allow the other party some time to read through the contract and freely sign it.

Contract fraud may also involve tricking someone into signing documents they know nothing about. Misrepresentation of facts in a contract fraud can be categorized into:

  • Innocent misrepresentation. This misrepresentation occurs when a defendant is unaware that the information or facts they provide are false.
  • Negligent misrepresentation. A negligent misrepresentation of facts when you offer false statements but do not try to verify the information before including it in a contract.
  • Fraudulent misrepresentation. You will be found guilty of contract fraud if you provide false information to another person to mislead them and gain an advantage from the situation.
  1. Pension Fraud

Pension is the payment you receive after retirement. These payments are distributed in increments and come from the worker’s investment funds. The pension payments are paid depending on the agreement you entered into your employment contract. Pension fraud is a crime that involves misrepresentation or deception associated with the pension claim. Pension fraud can occur in the following scenarios:

  • Fraudulent acts are used during the distribution of pension benefits. This type of fraud may involve a worker and their employer. The dispute can arise when an employer attempts to cheat the employee out of their pension.
  • Deceitful acts aimed at stealing another person’s pension payment. You can be charged with corporate fraud if you acquire information about another person’s employment contract and try to gain their pension payments fraudulently.

Pension and retirement benefits involve large sums of money. Therefore, if you are arrested for causing another person to lose their benefits, the charges against you will be severe.

  1. Information Fraud and Exploiting Assets

Exploiting assets and information is a corporate fraud crime that occurs when an organization's assets are used for unofficial purposes. The prosecution can bring corporate fraud charges related to exploiting information and assets on individuals who provide crucial company information to outsiders for personal gain. Employees' theft of company assets like stationery will not result in these charges.

Some examples of information fraud include faking sickness to obtain a sick leave and work in another company, misuse of company assets, and abuse of the company symptoms.

  1. False Accounting Fraud

False accounting fraud involves overstating the assets or understating company liabilities to strengthen the appearance of your business. Acts that result in false accounting fraud include destroying or altering accounts so they do not reflect their true value. Several reasons can compel people to create false accounts:

  • Obtain additional financial assistance from the bank
  • Inflate price of shares
  • Hide company losses
  • Report unrealistic losses
  • Attract more customers by appearing more successful
  • Cover-up theft and other fraudulent acts
  • Achieve bonuses from high performance

You could be charged with corporate fraud for engaging in these activities with fraudulent intent.

  1. Payment Fraud

You can be cited for payment fraud when you illegally create or divert payments for another person's undeserving personal benefit or benefit. For example, if you are an executive employee who transfers company finances, creating fake bank accounts to channel company money will attract corporate fraud charges.

Another way you could be involved in payment fraud is by altering payee details, intercepting employee payments, or making fraudulent payments to your bank account using company funds.

  1. Procurement Fraud

Procurement fraud involves manipulating a procurement process aimed at acquiring contracts or services or obtaining an unfair advantage during the procurement process. Different types of schemes affect the bidding and awarding of contracts. Fraud during d=bidding includes bid rigging, incorrect pricing, and fraudulent statements of work and specifications.

On the other hand, fraud that occurs after awarding contracts may include withdrawal of low false prices used to make the bid attractive, false certification, and mischarging for different services included in the contract.

Another form of procurement fraud that could attract criminal charges for corporate fraud is product substitution. You commit this crime by supplying materials that do not conform to the contract requirements. A product can either be outdated, uninspected, or poor quality. Upon winning a contract, you must honor it by meeting all the requirements specified during the bidding process.

Sentencing and Punishment for Corporate Fraud in California

Since there is no specific statute addressing all acts of corporate fraud, the crime attracts different charges. If your offense is more serious or caused substantial loss to another person, you risk facing felony charges and severe punishment. Most corporate fraud cases begin with suspicion or anonymous tips. Therefore, law enforcement officers and the FBI must investigate your case's factors before making an arrest or filing criminal charges.

When the investigation ends, the law enforcement officers will obtain an arrest warrant and take you into custody. The prosecutor will then file criminal charges that correlate with the evidence obtained. Prosecutors file charges for the most serious crime that their evidence can support. Therefore, you must contact your attorney as soon as you learn of an ongoing investigation.

The details of sentencing and punishment for fraud crimes are addressed under California Penal Code 186.11. Since corporate fraud crimes are charged differently, you will face a sentence corresponding to your charges. For example, if you commit return fraud, the prosecution can file charges for petty or grand theft. The penalties you face in this case correspond with your exact charges.

Under PC 186.11, you will receive an additional sentence for corporate fraud that involves more than one felony. This penalty enhancement could also apply for a first felony corporate fraud involving $100,000 or more. Often, the additional sentence is consecutive to the punishment for the underlying offense. If you defraud $500,000 or more, you will face a prison sentence of up to five years. The court may also impose fines that amount to twice the value of property or money you stole.

In addition to the prison sentence, CPC 186.11 comprises the Freeze and Seize law, where the court can freeze your bank accounts and seize your property. The property or assets the court seizes are used to pay court fines and restitution for the victims of your fraudulent acts.

If you have transferred money or assets to a third party pending a corporate fraud case, the party's lawyer could go to court to cease the seizure. However, the person going to court must provide sufficient evidence showing their lack of knowledge that another person was claiming the alleged property.

Receiving a sentence enhancement may mean spending a lot of time behind bars. Therefore, dealing with the enhancements will require you to defend against the underlying charges aggressively. Seeking legal guidance is key when facing corporate fraud charges in California.

Defense Against Corporate Fraud Charges in California

Corporate grand laws address different criminal acts. Therefore, there is no standard defense strategy to avoid a conviction. With the help of a competent lawyer, you can use the following arguments to formulate a defense against your specific charges:

You Acted Under Duress

Although some people engage in fraudulent acts because of greed or a need for money, there are other situations when individuals violate the law for fear of their safety. Duress is used as a defense when you commit a crime because another person threatened to harm you or your loved one for failure to cooperate. Although outside pressures are not a justification for committing a crime, the law can be more lenient when substantiating the excuse.

Before the court accepts your duress defense in a corporate fraud case, it must be clear that a reasonable person in your position would have acted under the threats. Additionally, a duress defense requires you to show that you did not have an alternative to engaging in the criminal act. Mounting enough evidence to establish Duress will require the insight of a reliable criminal lawyer.

Legitimate Purpose

Most acts of corporate fraud involve acting in a manner that causes loss to another person. When battling your charges, you can claim that your actions were legitimate. A knowledgeable attorney can help you show that you acted in good faith.

Lack of Criminal Intent

For most fraud crimes, the prosecution must establish that you intended to defraud the alleged victim. Criminal intent plays a significant role in obtaining a conviction for fraud crimes. Therefore, if there is no evidence proving your intent beyond a reasonable doubt, the prosecution’s case will be weak, and you can avoid a conviction.

Insufficient Evidence

The state prosecution team that files your corporate fraud case bears the burden to prove all the elements of your crime beyond a reasonable doubt. The facts of the crime can be proven through physical and substantial evidence collected to support the criminal allegations. If the prosecutor fails to prove one element, you can claim that they lack enough evidence to prove your guilt under this statute.

Lack of evidence may indicate that the prosecution cannot prove your involvement in the fraudulent acts or that your actions amounted to corporate fraud. When prosecutors have a weak case, they easily reduce your charges or dismiss them.

Entrapment

Law enforcement officers could set traps during investigations for white-collar crimes to uncover fraudulent schemes and nab the involved parties. Although these investigative techniques are legal, law enforcement officers cannot coerce you into committing a crime. Entrapment occurs when police officers cause you to engage in an act that you would not engage in without their pressure. By arguing entrapment, you can avoid the harsh consequences that accompany convictions for corporate fraud.

Illegal Search and Seizure

When a case of corporate fraud is reported, law enforcement officers could storm into your home to search your computers and devices, so you do not have an opportunity to delete the evidence. A search without a valid warrant or beyond a warrant's scope is illegal. If the evidence used in your corporate fraud case was obtained in an illegal search and seizure, you could petition the court to exclude it.

Crimes Related to Corporate Fraud

Corporate fraud is a white-collar crime. The prosecution can choose to charge you with these related offenses instead of corporate fraud:

Forgery

Under California PC 470, forgery is the crime you commit when you alter, use, or possess a false document to commit criminal fraud. Fraud is a white-collar crime involving scheming to deceive others and gain undeserving benefits. Before you are convicted for forgery in California, the prosecutor must prove these elements:

  • You altered, made, or possessed a false document. You can be charged with forgery for creating a false document or altering an existing one.
  • You intended to defraud someone else.

Violation of PC 470 can be a misdemeanor or a felony, depending on the fraud you committed. Misdemeanor forgery attracts a one-year jail sentence and $1,000 in fines. When you face misdemeanor charges, you can avoid spending time in jail by serving informal probation. Informal probation lasts one to three years, and you must follow all the probation conditions.

A felony conviction will cause you to spend a maximum of three years in jail and fines that do not exceed $10,000.

Embezzlement

Embezzlement is the fraudulent appropriation of money or property by a person entrusted to the property. The elements that must be clear to establish your guilt under this statute include the following:

  • A property owner entrusted the property to you.
  • The owner did so because they trusted you.
  • You fraudulently used the property.
  • You acted with an intent to deprive the property owner of its use.

Embezzlement can be charged as petty theft. The nature of your charges is determined by the value of the property that you misappropriated. When the property involved in the crime is worth less than $950, you will face petty theft charges. A conviction for petty theft is a misdemeanor punishable by a one-year sentence. When embezzlement is charged as grand theft, you could face misdemeanor or felony charges. As a felony, embezzlement attracts a prison sentence of one to three years.

Insurance Fraud

You could face criminal charges for insurance fraud when you make a false insurance claim or purposively destroy property so you can claim compensation. Insurance fraud is charged under different statutes, including the following:

  • Fraudulent insurance claim under PC 550.
  • Destruction of insured property under PC 548.

Insurance Fraud could attract felony or misdemeanor charges depending on the circumstances. As a misdemeanor, the crime attracts one year in jail.  Felony insurance fraud is punishable by five years in prison.

Find a Skilled Criminal Lawyer Near Me

You could be arrested for corporate fraud when you engage in illegal or fraudulent acts to benefit yourself or your company. Although corporate fraud is not considered a violent crime, a conviction for the criminal acts that fall under this definition attracts severe and life-changing consequences.

Often, the consequences of fraud crimes go beyond jail time and fines. A misdemeanor or felony corporate fraud conviction will leave behind a permanent criminal record. Criminal convictions are public records. Therefore, potential employers can uncover the conviction and use it to discriminate against you.

If you or your loved one faces charges for corporate fraud in California, you must take immediate action to fight the charges. Corporate fraud charges are complicated and could be very confusing. Therefore, hiring and retaining a defense lawyer is vital. At Los Angeles Criminal Attorney, we offer top-notch legal guidance for all our clients battling fraud charges in Los Angeles, CA. Contact us at 424-333-0943.