When the FBI Comes Calling…®
CORPORATE FRAUD CRIMES
WHEN THE FBI COMES CALLING…®
You may be charged with:
CORPORATE FRAUD CRIMES (18 U.S.C. § 1341 & 1346, 15 U.S.C. 77 & 78)
Although no individual statute exists specifically addressing Corporate Fraud Crimes, federal offenses such as Mail Fraud, Wire Fraud and Securities Fraud exemplify the most commonly charged federal crimes. While Mail Fraud, Wire Fraud, and Securities Fraud charges are routinely brought against individuals, the distinguishing characteristic placing these offenses into the corporate world is that the individual charged is an agent for a corporation and is acting within the scope of his or her employment.
Like other forms of white collar fraud, the objective of corporate fraud is to accomplish a desired result by deception, trickery, concealment, and/or dishonesty. The key elements may be either through the use of the United States Mail Service or other private/commercial interstate carriers; placing this form of fraud into the purview of "wire fraud" is the use of interstate wire communications or other forms of facilitating communications, such as television, radio, microwaves, or the internet or by violations of federal law under today's applicable statutes include such acts as: 1) insider trading, 2) buying or selling securities not registered with the Securities and Exchange Commission (SEC), 3) willfully making false statements or omissions of fact in documents filed with the SEC, and/or 4) engaging in interstate communications with prospective purchasers or securities, where such communications employ any device, scheme, or artifice to defraud, or contain false statements or omissions of fact calculated to mislead.
So how have the courts interpreted Corporate Fraud violations?
A. Deprivation of the right to a defendant's honest services is one of the types of scheme that satisfies the first element of mail fraud. Properly interpreted, "honest services" are services owed to an employer under state law and, thus, the government must prove that the defendant deprived the employer of such services. United States v. Caldwell, 302 F.3d 399 (5th Cir. 2002).
B. In order to establish good faith in a wire fraud case involving investment in a business, the defendant must prove that he actually believed the information that he sent to his investors, not that he believed that he would eventually pay them back. An instruction informing the jury that a defendant's honest belief that he will ultimately be able to perform what he has promised is not in itself a defense to the crimes charged is a proper instruction. United States v. Mabrook, 301 F.3d 503 (7th Cir. 2002).
C. A tippee assumes a fiduciary responsibility to the shareholders of a corporation not to trade on material nonpublic information only when the insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee and the tippee knows or should know that there has been a breach. A tippee cannot be held liable for a federal securities fraud violation simply because he or she in fact traded in securities or helped others to trade in securities based on the material nonpublic information. Rather, the key factor was the tipper's intent in providing the information. United States v. Falcone, 257 F.3d 256 (2nd Cir. 2001).
Potential Punishment:
For Mail Fraud and Wire Fraud, one may be found guilty of a felony, imprisoned up to 5 years, and fined up to $250,000. If a financial institution is involved, one may be imprisoned up to 30 years and fined up to $1,000,000. For Securities Fraud, one may be found guilty of a felony, imprisoned up to 10 years and fined up to $1,000,000. A corporation committing securities fraud may be fined up to $2,500,000.
Frequently, the prosecuting Assistant U.S. Attorney (AUSA) will secure a Federal Indictment from a Federal Grand Jury and charge a defendant not only with corporate fraud crimes, but also with securities fraud, wire fraud , bank fraud, money laundering, public corruption, or RICO crimes and conspiracy to commit the aforementioned crimes. One should also be aware that since 1987 parole has been abolished in the Federal System. Expungement (removal of conviction from public records) is also not available.