3 forms of corporate fraud that can lead to prosecution

On Behalf of | Nov 21, 2023 | Criminal Defense |

Small acts of deception often play a role in business transactions and marketing. People can exaggerate their opinions of goods and services or try to manipulate how people view a product or brand. There is a fine line between seeking to maximize a company’s profits and engaging in outright fraud.

Many executives, accountants and other corporate employees cross that line and can end up implicated in a criminal matter if the government becomes aware of their misconduct. Fraud involves misrepresentation, often with the goal of financial benefit. Corporate fraud involves financial misrepresentation that benefits a business rather than a person and may involve multiple active participants.

Businesses obviously have a profit incentive that could lead to fraudulent conduct by numerous different workers. If regulatory agencies uncover actionable fraud, they may prosecute key players at a company. The following kinds of corporate fraud are among the most common reasons for prosecution.

Payroll fraud

Many businesses engage in fraudulent conduct related to worker wages. Some companies manipulate employees into doing uncompensated work. Others intentionally alter timeclock records to diminish how much they pay specific workers. Corporate payroll fraud can result in lawsuits brought by frustrated workers and criminal charges pursued against those implicated in the situation.

Tax fraud

The Internal Revenue Service (IRS) offers many deductions and credits for income taxes that apply to both individuals and organizations. Businesses may sometimes violate tax statutes by misrepresenting the company’s finances, taking inappropriate deductions and otherwise underpaying tax obligations. Even the decision to misclassify employees as independent contractors could constitute a form of tax fraud that leads to the prosecution of the people involved.

Billing fraud

Some businesses will fraudulently bill consumers and other companies for services not rendered or goods never transferred. Others try to tack on charges and fees during the billing process as a way to get as much capital as possible from each account. Some go so far as to improperly bill government agencies, possibly through publicly-funded health insurance coverage. Railroad companies and healthcare providers sometimes bill the government inappropriately. Billing fraud allegations can lead to prosecution and massive financial losses.

Insider trading and investment fraud intended to trick people into bad investments are also very common. Oftentimes, individual employees will bear a significant amount of the burden in such cases.

Many cases of business-related fraud result in federal prosecution rather than state charges. Seeking legal guidance to better understand the nature of the offense and the penalties possible may help those implicated in corporate fraud choose a truly informed response after an arrest.