You have seen in the news outlets how corporate fraud stories keep popping every now and then in Los Angeles and the larger California. The stories paint pictures of how multinational corporations are involved in massive embezzlement and corruption. Because of corporate fraud, the economy has melted down, suppliers have been left counting losses, employees have lost wages, and shareholders have lost a lot of money.
These fraud cases resulted in California lawmakers passing stringent laws that curb the vices. It is essential that you, who is facing corporate fraud charges, find a reputable lawyer and one with experience with handling fraud cases. At Los Angeles Criminal Attorney, we have handled complex white-collar crimes and successfully helped several clients get acquitted.
What is Corporate Fraud Under California Law?
Unlike other criminal offenses, corporate fraud doesn’t fall squarely under one charge of the statute. Per California law, corporate fraud means any fraud types that corporations or their executives commit. This means corporate fraud encompasses various fraudulent acts such as:
- Transferring business assets fraudulently or for your gain
- Making false transactions and other fraudulent purchases
- Misrepresenting revenues or assets in reporting and accounting
- Falsifying and evading the filing of tax returns
- Seeking unlawful business loans and taking the money for your use as a senior executive
- Doctoring/ faltering financial document and reports fraudulently
Identify theft, embezzlement, and “cooking the books” for federal filing are other actions the law considers as corporate fraud. How you commit these fraudulent activities is not what connects them, but that they are engaged in a huge corporation or by a person holding top positions. Then again, your corporation could be the fraud victim.
Example of Corporate Fraud
The Enron Scandal is an example of a widely known corporate fraud case. In 2002, Enron, an accounting company, appeared in many news outlets after an expose of the company’s deep-rooted fraud. While corporate fraud sounds academic, several shareholders incurred a lot of losses. The company used loopholes and fraudulent ways to cover debts of billions to the extent of luring auditors to conceal the debt and destroy financial reports. Enron’s bankruptcy not only cost stockholders billions of dollars in investments, but also caused the loss of jobs, loans, and pensions.
In the end, several senior executives from the company went to prison and had their life savings frozen. The collapse’s exodus began after a whistleblower reported about mistreatment at Enron. After the expose, the firm restated its financial statements. On getting wind of the allegations, investors panic-sold off their stock after losing faith in the accounting firm. Afterward, the value of stock shares nosedived from shopping $90 to below $1.
Different Types of Corporate Fraud Explained
Company owners and senior executives alike could make dubious risks to increase profits in their companies or even take money/ property for personal use. When you get involved in unlawful activities in a bid to increase your company's profits or scam the company you commit corporate fraud. Different corporate crimes involve various fraudulent activities, and they include:
Institutional Investment Fraud
This type of fraud consists of other scams like:
Pension Fund and Share Sales
. A Chief finance officer (CFO) could commit fraud by targeting investors to make financial investments with a promise of receiving high profits, which is always a scam. The CFO could mislead other corporations and institutions by making false disclosures and concealing some information regarding the investment opportunity.
Ponzi Schemes/ Pyramid Fraud
. In Los Angeles, Ponzi Schemes are a leading type of corporate fraud. Pyramid schemes involve non-sustainable business models where investors who join later are used to pay investors who joined earlier. The investments of the early investors appear to soar; hence, attracting several investors. Ponzi schemes could collapse when investors want to remove their money or when someone exposes their fraudulent businesses.
Corporate Service Fraud
Corporate service fraud comprises fraud types like:
. You are said to commit receipt fraud when you use your company's assets for purposes other than which the management allows. An example of receipt fraud is offering information to outsiders for your gain. However, this type of fraud does not include stealing physical assets belonging to the company, like stationery by insiders.
. You subject yourself to allowance fraud when you do certain activities such as completing false claims or creating fraudulent employee records. You can commit these fraud crimes through:
- Stating mileage that was never covered
- Failing to repay salary overpayments deliberately
- Overstating claims
- Altering timesheets fraudulently
- Forging signatures to authorize payments
- Making fraudulent client entertainment claims
- Creating non-existent personnel on payrolls
Information Fraud and Exploiting Assets
. You, as a company employee, can commit information fraud by using deceit for advantage, for example, providing untrue qualifications or incorrect references to land a job opportunity. You fraudulently exploit company assets when you take sick leave when you have no sickness just to work in another company, misuse working hours, and abuse flexible company time systems.
. If you are in the procurement department of a company, you are tasked with acquiring goods and services from third parties. You commit procurement fraud when you conspire with someone else to commit fraud that covers tendering irregularities, the manipulating bids, or claims for payment. This is regarding goods/ services that supplier/ service providers did not deliver or are lesser than what was stated in the order.
False Accounting Fraud
. With this fraud type, you alter the company accounts' genuine presentation not to reflect the company's accurate financial status. Fraudulent activities that constitute false accounting fraud include understating liabilities or overstating the company’s assets. You can commit false accounting for different reasons, like securing financing or reporting inaccurate profits to increase the share price.
. You commit payment fraud by illegally creating and diverting payments, for example, creating fake bank accounts and records with the intent of channeling fraudulent payments. You can also get involved in payment fraud when you alter payee details, intercept employee payments, make fraudulent payments to your bank account, and generate false payments.
The Criminal Process When Charged with Corporate Fraud in California
California Corporate Fraud crime attracts different sentences, which the judge determines on a case by case basis. If your offense is more serious, the state could seek more severe punishment. Law enforcement officers like the FBI investigates your fraud case for a particular period then forwards the case to the prosecutions for lawsuit filing.
Thus, you need to hire an astute criminal lawyer as they could be necessary during the early stages of your case. Another reason you need to talk to your lawyer the moment you learn that you are being investigated is that early interventions could result in the case being dropped. The mediation could also cause a reduction in charges that the prosecution decides to file in court.
After the law enforcers conclude their investigation, they seek a warrant of arrest in court. If the court rules that you have a case to answer and that there is a probable cause of your crime commission, the police receive the arrest warrant. At that point, you get arrested and stay in detention until police post bail. If need be, the prosecution could file a motion per California PC Section 1275. The Penal Code states that the prosecutor must validate your bail source to ensure you don’t use fraud proceeds. For instance, you cannot use the money you obtained through embezzlement to pay bail.
After posting bail and getting released, the judge schedules a court date for arraignment. During your arraignment, the judges inform you of the charges the prosecutor files as a complaint. After reading your charges, the judge asks for a guilty or not guilty plea. The rest of the court process is similar to other Californian court cases. They include:
- Arguing bail after you plead not guilty
- The judge sets your case for a preliminary hearing or an early disposition if it’s a felony crime
- The court sets your case for pre-trial if it’s a misdemeanor crime and the discovery process starts
- After the preliminary hearing, the case proceeds to the felony arraignment if you have a case to answer
- Next is the pre-trial conference, where your lawyer and the prosecution can discuss your case with the judge
- The case proceeds to trial, where the judge determines if you are guilty or not guilty
- If you are found guilty, the court sets the case for sentencing. Here, you could learn what penalty the judge imposes. The court ends the lawsuit is the prosecution did not prove the case beyond a reasonable doubt
What Are the Penalties for Corporate Fraud?
California PC Section 186.11 details the sentencing, punishment, and penalties to white-collar crimes. California law states that you get additional consecutive prison sentences of up to five years in your corporate fraud involving more than two felonies. Penalty enhancement also applies to one-time fraud cases that involve more than $100.000. if the judge enhances your penalty, you serve the prison time right after serving prison time for the underlying felonies.
If you stole more than $500,000, you are likely to serve time in prison for not more than five years. The court could choose to fine you as high as $500,000 or even twice the property value or money you fraudulently took. The judge determines the years you spend in prison by the amount of money you took through fraud. You could serve time in jail for one or two years if you stole:
- An amount less than $500,000
- An amount more than $100,000
PC 186.11 comprises the "Freeze and Seize" law, where the court is authorized to freeze your bank accounts and seize your property/ assets. The money and assets seized are used in paying court fines and victim restitution. The judge could order the seizing of:
- Property or assets you could have transferred to a third party
- Property or assets that you control and manage
If you had transferred your assets to a third party, the lawyer of that party can move to court and cease impending seizure. However, the party must prove that they had no knowledge that someone else had a claim to it. The state can authorize the court to provide a preliminary injunction or temporary restraining order to assume control of assets.
Legal Defenses Against Corporate Fraud Charges in California
Your legal defense to a corporate fraud charge hangs on the facts surrounding your case. A criminal lawyer cannot offer a one-size-fits-all strategy, but instead, they build your defense after exhaustive conversations or review of wide-ranging facts and documents. You also need a renowned defense attorney who can piece together various defense strategies wisely and represent you in the court.
Examples of potential defenses against your corporate fraud charges are:
You Acted Under Duress
You can argue in court that you commit corporate fraud under duress with the help of an experienced defense lawyer. Proving this argument beyond a reasonable doubt is simple as you only need to admit committing the offense. However, evidentiary support is required showing that violence was involved or you received threats of harm if you refused to commit the crime.
You Had A Legitimate Purpose
You can commit fraud when thinking your actions are for a legitimate business purpose. If you are facing charges, your defense attorney can present evidence in court to prove you were only acting for a legitimate purpose and in good faith. All that is needed is concrete evidence that you had a reasonable belief that your actions were not fraudulent.
You Had Zero Criminal Intentions
Criminal intent is a crucial element that the prosecution must prove beyond a reasonable doubt before the jury can pass judgment. This means you have no case to answer if you did not have criminal intent during your crime commission. Your corporate fraud lawyer can cast doubt in your case if the prosecutor fails to prove intent.
Lack of Enough Evidence
The state or prosecutor who files your corporate fraud in court bears the burden to offer enough evidence tied to your charges. In the event the prosecution fails to establish this burden, it is easy for your lawyer to use insufficient evidence as a potential defense.
Lack of enough evidence means that the prosecution could not prove that you were liable for the crime or that your actions amounted to the definition of corporate fraud per Californian corporate fraud statute. Therefore, if the court cannot prove that you are guilty, you have no case to answer, and the judge should reduce or dismiss your charges.
What Other White-Collar Crimes Relate Closely to Corporate Fraud?
Corporate fraud is a white-collar crime that closely relates to other crimes that the prosecution can choose to charge you together with or in place of them. These crimes include:
California PC Section 518: Extortion
Extortion is a common white-collar crime in Los Angeles. You violate California PC 518 when you use a threat of violence or fear on someone else to get money or property from them or another person. You are guilty of extortion the instance you involve force or threat of harm.
California PC Section 470: Forgery
According to California Penal Code 470 PC, you commit forgery in California when you create or alter a written object, and assume its ownership or the object in fraud commission. Examples of these objects include credit cards, cheques, and other financial instruments.
California PC Section 504: Embezzlement
In California, embezzlement cases have been on the rise over the past decade. Per PC 504, you are said to commit embezzlement when you are in a supervisory/ management position at a company or someone else’s property and use the money or property for your gain. Examples of embezzlement are when you, as a worker in an accounting firm or bank, steal funds entrusted to you for your benefit.
California PC Sections 67 and 68: Bribery
In Los Angeles, this is among the most prosecuted white-collar crimes. You violate California Penal Code 67 PC when you unlawfully offer someone else a valuable item such as services or money in exchange for another service, opinion, goods, or money that they would not have provided without the bribe. Under California law, Both the giver and receiver of the bribe can face bribery charges.
California PC Section 550: Insurance Fraud
Like forgery, insurance fraud is fast becoming the topmost fraud in Los Angeles. Often, people who are susceptible to this white-collar crime include chiropractors, doctors, lawyers, business professionals, and persons who file claims for non-existent damages or harm. California PC 550 states that you commit insurance fraud when you file fraudulent claims hoping that the insurance firm doesn’t perform any investigation.
Contact a Los Angeles Criminal Attorney Near Me
Whistleblowing of corporate fraud crimes has gained traction in Los Angeles since the exposure of Enron in 2001. Since then, the state has laid down strict measures, policies, laws, and penalties to reduce the cases. Because of the severe consequences tied to conviction, it is appropriate to search for the best legal counsel.
Los Angeles Criminal Attorney is a premier Los Angeles corporate fraud law firm that can help you solve your issues with the law. Working with us guarantees you a strong defense against your white crime charges. To receive help with navigating your corporate fraud charges and getting out of trouble, contact us at 424-333-0943, and we will leave no stone unturned.