White Collar Crimes

Los Angeles Criminal Fraud Lawyer

In criminal law, fraud is the crime or offense of deliberately deceiving another in order to damage them — usually, to obtain property or services unjustly. [1] Fraud can be accomplished through the aid of forged objects. In the criminal law of common law jurisdictions it may be called “theft by deception,” “larceny by trick,” “larceny by fraud and deception” or something similar.

Fraud can be committed through many methods, including mail, wire, phone, and the internet (computer crime and internet fraud).

Acts which may constitute criminal fraud include:

  • Bait and switch
  • Confidence tricks such as the 419 fraud, Spanish Prisoner, and the shell game
  • False advertising
  • Identity theft
  • False billing
  • Forgery of documents or signatures
  • Taking money which is under your control, but not yours (embezzlement)
  • Health fraud, selling of products of spurious use, such as quack medicines
  • Creation of false companies or “long firms”
  • False insurance claims
  • Bankruptcy fraud, is a US federal crime that can lead to criminal prosecution under the charge of theft of the goods or services
  • Investment frauds, such as Ponzi schemes
  • Securities frauds such as pump and dump

Is a legal concept in the United States Code which provides for enhanced penalty of any criminally fraudulent activity if it is determined that the activity involved electronic communications of any sort, at any phase of the event. As in the case of mail fraud, this statute is often used as a basis for a separate federal prosecution of what would otherwise have been only a violation of a state law.

Wire Fraud

The legal definition of wire fraud in the US is:

TITLE 18 > PART I > CHAPTER 63 > § 1343. Fraud by wire, radio, or television 2004-08-06

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

In one important case (United States v. LaMacchia — text at eff.org), an MIT student was charged with wire fraud when he could not be charged with criminal copyright infringement (having not personally profited from the online distribution of millions of dollars worth of illegally copied software). The United States District Court, District of Massachusetts, dismissed the charges, noting they were an attempt to find a broad federal crime where the more narrowly defined one had not occurred. Congress promptly amended the copyright law to limit further use of this loophole.

Mail Fraud

Mail fraud refers to any scheme which attempts to unlawfully obtain money or valuables in which the postal system is used at any point in the commission of a criminal offence. Mail fraud is a legal concept in the United States Code which provides for enhanced penalty of any criminally fraudulent activity if it is determined that the activity involved using the United States Postal Service. As in the case of wire fraud, this statute is often used as a basis for a separate federal prosecution of what would otherwise have been only a violation of a state law. The concept is irrelevant and largely non-existent in countries with non-federal legal systems: the activities listed below are likely to be crimes, but the fact that they are carried out by mail makes no difference to which authority may prosecute or the penalties which may be imposed.

Contents Non-Delivery or Misrepresentation of Mail-Order Merchandise

This scheme exists in various forms; order an item, make payment, receive nothing is the simplest form of mail fraud. Other variants include misleading descriptions (advertisement says an expensive camera is available by mail-order, when the item arrives it turns out to be a toy camera), deliberate sale of defective merchandise or even stolen merchandise. High-ticket items such as computer hardware are particularly tempting targets for scam artists.

The same scams now exist online; non-delivery of auction or mail-order merchandise advertised on Internet sites is a common complaint.

Another variant involves shipping merchandise which was never ordered, obtaining a signature on delivery (or even COD), demanding payment for the items on the basis that they were signed for at destination.

Promotions selling services or data delivered entirely online are also particularly high-risk; if the “send a money order to Texas, we'll make a few phone calls and tell you what your employment references have really been saying behind your back” refuses to deliver as advertised, a fraud may be much more difficult to prove than if the seller is obliged to ship a parcel which requires a signature at destination.

Internet Fraud and Online Auction Fraud

Internet fraud or wire fraud schemes may also qualify as mail fraud if the mails are being used at any point in the scheme, including a request that a money order be sent to pay for non-existent or undelivered auction merchandise. Many of these schemes are merely variants on the fraudulent mail-order scams in which the merchandise is never delivered as described or delivered at all.

Online schemes claiming that “a hot female escort will give you access to her entire pornography collection on some Internet site if you send a money order to a drop box in Barrie”, if payment is accepted by postal money order and the product never received, would also qualify. The original solicitation is made online, the supposed product claims to be delivered online, but use of the mails at any point (such as to receive money or negotiable instruments) could easily qualify such a scheme as mail fraud.

Impersonation

A number of schemes which misrepresent the identity of the sender, delivering forged documents or bogus requests for personal info (see Bank fraud, Phishing) have also been perpetrated by mail; one version involves sending bogus forms which claim to be from taxation authorities requesting or demanding banking info in order to collect tax on deposit interest. The information obtained is then used in other frauds or in theft of identity schemes.

Promotional Cheques

It looks like a coupon and is formatted to appear like a cheque; “oh look, XYZ long distance company wants to send you $10″. Look a little more closely and this supposed “cheque” contains slippery fine-print wording which authorises the company to change your default telephone long-distance carrier or incurs other obligations on your behalf.

Solicitations in the Guise of an Invoice

This is not an invoice. This is a solicitation. You are under no obligation to make any payments on account of this offer unless you accept this offer.

— PLEASE PAY THIS AMOUNT —>

So begins the wording on some rather slippery documents which look like they're bills or invoices even though they're not. The wording of the disclaimer is taken directly from the US Postal Service Domestic Mail Manual; the intent is to be able to claim that this document is not a fake invoice while still retaining a format which allows a small percentage of recipients to mistake it for a bill and send payment. If the amounts requested from businesses by these “solicitations” are in the hundreds or thousands of dollars, even a fraction of a percent response rate suffices for the scheme to be profitable.

Schemes involving actual fake bills or invoices (such as one where copies of a bogus dry-cleaning bill are mailed to every restaurateur in town with a “your server spilled food on my expensive suit, pay my cleaner's bill” note) have also been used to attempt to take unsuspecting victims to the cleaners.

Get-Rich-Quick Schemes

These take a number of forms, such as the Ponzi scheme or pyramid scheme in which the addressee is invited by a “chain letter” to send money to the first of a list of names and addresses before forwarding the letter to several more people. The person starting the Ponzi scheme claims to have become rich (the infamous Dave Rhodes letter with its claim to have made $50000 is an online variant of this) but the people at the bottom of the pyramid receive nothing. In some cases, every address on the chain letter will be a drop box controlled by the person sending the letters or by one or more accomplices.

Another common get-rich-quick scheme is the Nigerian 419 scam which claims that someone wants to transfer some large amount of money out of their country (or is making a deathbed effort to donate it all to your church or charitable organisation); all you need to do is send all your bank account information and some inflated advance fee to pay for the cost of the transfer or the cost of legal counsel. Of course the massive fortune in foreign money never arrives; the scheme exists to victimise the greedy and the gullible.

Work-At-Home Scams

The ad claims that a small fortune can be easily earned “working at home”, “assembling small products in your spare time” or “stuffing envelopes” (presumably for a few dollars per piece, not the few cents that business actually pay to have a machine do this). Just send $29.95 for more info! Another variant claims that manufacturers are providing sample quantities of laptop computers or other high-ticket items for virtually nothing or that info can be obtained on purchasing motor vehicles for a few dollars at a secret government auction.

The info, if it ever arrives, turns out to be worthless as the easy-money opportunities do not exist as described.

Fraudulent Charities and “Religious” Donations

A number of organizations have been set up, claiming to be charities that solicit donations to assist poor and needy families in need of financial aid, food aid and/or medical assistance. While many charitable organizations are legitimate and respected, the more unscrupulous organizations have been known to solicit large sums of money in donations, but actually contribute a very small percentage (or even none at all) to the actual persons in need of assistance.

In a similar vein, various “religious” organizations have been known to seek donations of money from well-meaning persons. These appeals for assistance often target senior citizens, mentally handicapped persons, and even homeless persons — people who are often susceptible to pleas for mercy and compassion. A number of televangelists have been known to employ sophisticated marketing and mass-mailing companies to seek donations from people all across the United States for allegedly “religious” purposes. At least one self-proclaimed minister, James Eugene Ewing, has built a source of considerable income based solely upon soliciting “donations” through mass-mailing and correspondence; his organization has been criticized for allegedly preying on low-income families and senior citizens.

Theft from the Mails

Sometimes the mail itself has been the target of thieves; parcels containing merchandise or envelopes with “pay to the order of…” visible in the window are prime targets, as are credit cards or payment cards mailed by banks to their depositors. The most notorious incident of theft of mail was the Great Train Robbery, in which a gang of robbers stopped an entire mail train by tampering with railway signal lights, then robbed the train of registered mail containing valuables being sent by local banks to their head offices.

Embezzlement

Embezzlement is the fraudulent appropriation by a person to his own use of property or money entrusted to that person's care but owned by someone else. For instance, a clerk or cashier can embezzle money from his employer; a public officer can embezzle funds from the treasury.

Embezzlement differs from larceny in two ways. First, in embezzlement, an actual conversion must occur; second, the original taking must not be trespassory. That is, the embezzler must have had the right to possess the item, and used that position of trust to convert the property. Embezzlement may range from the very minor, involving a few dollars to immense, involving millions of dollars and very sophisticated schemes.

Conversion requires that the theft seriously interfere with the property, rather than just relocate it. As in larceny, the measure is not by the gain to the thief, but the loss to the true owner. Embezzlement was statutorily created to deal with situations where theft could occur while the thief himself was innocent of larceny — typically because of the “lawful possession” element. That is, embezzlement fills in the blanks where larceny cannot.

Embezzlement sometimes involves falsification of records in order to conceal the theft. Embezzlers commonly steal relatively small amounts repeatedly over a long period, although some embezzlers steal one large sum at once. Some very successful embezzlement schemes have continued for many years before being detected due to the skill of the embezzler in concealing the nature of the transactions.

One of the most common methods of embezzlement is to under-report income, and pocket the difference. For example, in 2005, several managers of the service provider Aramark were found to be underreporting profits from a string of vending machine locations in the eastern United States. While the amount stolen from each machine was relatively small, the total amount taken from many machines over a length of time was very large.

Another method is to create a false vendor account, and to supply false bills to the company being embezzled so that the checks that are cut appear completely legitimate. Yet another method is to create phantom employees, who are then paid with payroll checks.

The latter two methods should be uncovered by routine audits, but often aren't if the audit is not sufficiently in-depth, because the paperwork appears to be in order. The first method is easier to detect if all transactions are by check or other instrument, but if many transactions are in cash, it is much more difficult to identify. Employers have developed a number of strategies to deal with this problem. In fact, cash registers were invented for just this reason.

Retrieved from “http://en.wikipedia.org/wiki/Embezzlement

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