Fraud

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In the broadest sense, a fraud is a deception made for personal gain or to damage another individual. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and is also a civil law violation. Many hoaxes are fraudulent, although those not made for personal gain are not technically frauds. Defrauding people of money is presumably the most common type of fraud, but there have also been many fraudulent "discoveries" in art, archaeology, and science.

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Definition

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 for profit involves industry professionals. There are generally multiple loan transactions with several financial institutions involved. These frauds include numerous gross misrepresentations including: income is overstated, assets are overstated, collateral is overstated, the length of employment is overstated or fictitious employment is reported, and employment is backstopped by conspirators. The borrower's debts are not fully disclosed, nor is the borrower's credit history, which is often altered. Often, the borrower assumes the identity of another person (straw buyer). The borrower states he intends to use the property for occupancy when he/she intends to use the property for rental income, or is purchasing the property for another party (nominee). Appraisals almost always list the property as owner-occupied. Down payments do not exist or are borrowed and disguised with a fraudulent gift letter. The property value is inflated (faulty appraisal) to increase the sales value to make up for no down payment and to generate cash proceeds in fraud for profit.

Marriage Fraud can take several forms and is the act of entering a marriage for personal gain rather than a genuine desire to enter into a sincere marital relationship. Marriage Fraud is usually associated with obtaining immigration benefits. In the United States, marriage fraud for immigration purposes is punishable under INA §204(c)(1) and the Immigration Marriage Fraud Amendments of 1986. Possible criminal penalties include $250,000 and 5 years in prison as well as deportation and a permanent bar against receiving future immigration status. Marriage Fraud can be either unilateral or bilateral Unity and Immigration Policy in the United States. In a unilateral marriage fraud, only one party is aware of the fraud and the fraud is against both the immigration service as well as the other party. The innocent party may file a lawsuit and/or annulment of the marriage. In a bilateral fraud, both parties are aware of it and both parties are subject to criminal penalties.

In academia and science, fraud can refer to academic fraud the falsifying of research findings which is a form of [cientific misconduct and in common use intellectual fraud signifies falsification of a position taken or implied by an author or speaker, within a book, controversy or debate, or an idea deceptively presented to hide known logical weaknesses. Journalistic fraud implies a similar notion, the falsification of journalistic findings.

Fraud can be committed through many methods, including mail, wire, phone, and the internet (computer crime and internet fraud). The difficulty of checking identity and legitimacy online, the ease with which hackers can divert browsers to dishonest site and steal credit card details, the international dimensions of the web and ease with which users can hide their location, all contribute to making internet fraud the fastest growing area of fraud.

Acts which may constitute criminal fraud include:

  • bait and switch
  • bankruptcy fraud, is a US federal crime that can lead to criminal prosecution under the charge of theft of the goods or services,
  • charlatanism (psychic and occult),
  • confidence tricks such as the 419 fraud, Spanish Prisoner, and the shell game
  • creation of false companies or "long firms"
  • embezzlement taking money which is under your control, but not yours,
  • false advertising
  • false billing
  • false insurance claims
  • forgery of documents or signatures,
  • health fraud, selling of products of spurious use, such as quack medicines,
  • identity theft
  • investment frauds, such as Ponzi schemes
  • marriage fraud to obtain immigration benefits INA §204(c)(1),
  • security (finance)|securities]] frauds such as pump and dump
  • taking payment for goods sold online, by mail or phone, such as tickets, with no intention of delivering them.

Fraud, in addition to being a criminal act, is also a type of civil law violation known as a tort. A tort is a civil wrong for which the law provides a remedy. A civil fraud typically involves the act of intentionally making a false representation of a material fact, with the intent to deceive, which is reasonably relied upon by another person to that person's detriment. A "false representation" can take many forms, such as:

  • A false statement of fact, known to be false at the time it was made;
  • A statement of fact with no reasonable basis to make that statement;
  • A promise of future performance made with an intent, at the time the promise was made, not to perform as promised;
  • A statement of opinion based on a false statement of fact;
  • A statement of opinion that the maker knows to be false; or
  • An expression of opinion that is false, made by one claiming or implying to have special knowledge of the subject matter of the opinion. "Special knowledge" in this case means knowledge or information superior to that possessed by the other party, and to which the other party did not have equal access.

Common law fraud has nine elements: (1) representation of an existing fact; (2) its materiality; (3) its falsity; (4) the speaker's knowledge of its falsity; (5) the speaker's intent that it shall be acted upon by the plaintiff; (6) plaintiff's ignorance of its falsity; (7) plaintiff's reliance on the truth of the representation; (8) plaintiff's right to rely upon it; and (9) consequent damages suffered by plaintiff. Most jurisdictions in the United States require that each element be proved with clear, cogent, and convincing evidence (very probable evidence) to establish a claim of fraud. The measure of damages in fraud cases is to be computed by the "benefit of bargain" rule, which is the difference between the value of the property had it been as represented, and its actual value. Special damages may be allowed if shown proximately caused by defendant's fraud and the damage amounts are proved with specificity.

In the UK a report concluded that the total costs of fraud and dealing with fraud in the year 2005-2006 was at least 13.9 Billion GBP.

Notable frauds

  • Frank Abagnale Jr., US impostor who wrote bad checks and falsely represented himself as a qualified member of professions such as airline pilot, doctor, and attorney. The film Catch Me If You Can is based on his life.
  • Eddie Antar, founder of Crazy Eddie, who has about $1 billion worth of judgements against him stemming from fraudulent accounting practices at that company.
  • Ramón Báez Figueroa, banker from the Dominican Republic and former president of Banco Intercontinental. Sentenced on October 21, 2007 to ten years in prison for a US$2.2 billion fraud case that drove the Caribbean nation into an economic crisis in 2003.
  • Cassie Chadwick, who pretended to be Andrew Carnegie's daughter to get loans.
  • Charles Dawson, an amateur British archeologist who claimed to have found the Piltdown man.
  • Richard Eaton , an English businessman who was business partners with mobster Paul Vario and Jimmy Burke and was involved in the Lufthansa heist.
  • Bernard Ebbers, founder of WorldCom, which inflated its asset statements by about $11 billion.
  • Martin Frankel is a former U.S. financier, convicted in 2002 of insurance fraud worth $208 million, racketeering and money laundering.
  • Konrad Kujau, German fraudster and forger responsible for the "Hitler Diaries".
  • Kenneth Lay, the American businessman who built energy company Enron. He was one of the highest paid CEOs in America until he was ousted as Chairman and was convicted of fraud and conspiracy, although as a result of his death, his conviction was vacated.
  • Nick Leeson, English trader whose unsupervised speculative trading caused the collapse of Barings Bank.
  • James Paul Lewis, Jr., ran one of the biggest ($311 million) and longest running Ponzi Schemes (20 years) in US history.
  • Gregor MacGregor, Scottish conman who tried to attract investment and settlers for the non-existent country of [Poyais.
  • Bernard L. Madoff, creator of a $50 billion Ponzi scheme -- the largest investor fraud ever attributed to a single individual.
  • Colleen McCabe, British headmistress who stole £½ million from her school.
  • Gaston Means, a professional conman during U.S. President Warren G. Harding's administration.
  • Michael Milken, "The Junk Bond King".
  • Barry Minkow and the ZZZZ Best scam.
  • Michael Monus, founder of Phar-Mor, which ultimately cost its investors more than $1 billion.
  • Lou Pearlman, former boy-band manager indicted by a federal grand jury in Orlando on charges that he schemed to bilk banks out of more than $100 million.
  • Frederick Emerson Peters]], US impersonator who wrote bad checks.
  • Charles Ponzi and the Ponzi scheme.
  • Alves Reis, who forged documents to print 100,000,000 PTE in official escudo banknotes (adjusted for inflation, it would be worth about US$150 million today).
  • Christopher Rocancourt, a Rockefeller impersonator who defrauded Hollywood celebrities.
  • John Spano, a struggling businessman who faked massive success in an attempt to buy out the New York Islanders of the NHL.
  • John Stonehouse, the last Postmaster-General of the UK and MP who faked his death.
  • Richard Whitney, who stole from the New York Stock Exchange Gratuity Fund in the 1930s.

References

External links

Law is a system of rules, enforced through a set of institutions, used as an instrument to underpin civil obedience, politics, economics and society. Law serves as the foremost social mediator in relations between people. Writing in 350 BC, the Greek philosopher Aristotle declared, "The rule of law is better than the rule of any individual."

Law consists a wide variety of separate disciplines. Contract law regulates binding agreements which may relate to everything from civil purchase to trading on derivatives markets. Property law defines rights and obligations related to the transfer and title of personal and real property. Trust law applies to assets held for investment and financial security, while Tort law allows claims for compensation if an individual or their property is injured or harmed. If the harm is criminalised in penal code, criminal law offers means by which the state can prosecute the perpetrator. Constitutional law provides a framework for the creation of law, the protection of human rights and the election of political representatives. Administrative law regulates the activities the administrative agencies of government, while International law governs affairs between sovereign nation states in activities ranging from trade, environmental regulation or military action.

Legal systems elaborate rights and responsibilities in a variety of ways. A basic distinction is generally made between civil law jurisdictions and systems using common law. In some countries, religion informs the law. Scholars investigate the nature of law through many perspectives, including legal history and philosophy, or social sciences such as economics and sociology. The study of law raises important and complex issues concerning equality, fairness, liberty and justice. "In its majestic equality", said the author Anatole France in 1894, "the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread." The central institutions for interpreting and creating law are the three main branches of government, namely an impartial judiciary, a democratic legislature, and an accountable executive. To implement and enforce the law and provide services to the public, a government's bureaucracy, the military and police are vital. While all these organs of the state are creatures created and bound by law, an independent legal profession and a vibrant civil society inform and support their progress.

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