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In the video under analysis, Michael Kridel walks us through every relevant element of a fraud investigation that may or may not end up in a court of law. He said every fraud investigation begins with an end in mind. The endgame in a fraud investigation could be an indictment, the plea compromised and/or conviction, the recovery and/or restitution, the imprisonment, the revenge, or in a perfect world the prevention.
It is likely that there are multiple interdependent objectives. It is needed to know whether they can be sequential and/or concurrent and whether the objectives require a trial. This depends on jurisdictions, the alternatives to trial, the trial decision tree, who plays which role, and when and where the case starts.
The video addresses important elements in the fraud investigation such as identifying who the client is, classifications of evidence, the role of the Fourth Amendment, the definition of crime, the estimation of the damages, the role of the False Claim Acts, the process of the Fraud and Corruption Investigations, the factor of solvability, and the differences between Privilege and Confidentiality.
In general, the video is very instructive and provides us with important keys to successfully completing a fraud investigation.
In this post, I am going to refer to the elements required to prove fraud in court.
Fraud is a term that refers to the use of intentional deception to gain something of value, usually money. Fraud is generally committed through the use of false statements, misrepresentation, or dishonest conduct intended to mislead or deceive (FindLaw Staff, 2022).
Fraud is a criminal offense but a person alleged to have committed fraud can also be taken to a civil court. A government prosecutor brings charges in criminal court. A victim of fraud would file a civil lawsuit against the alleged scammer to recover money. Sometimes, both criminal and civil actions are brought against a person accused of fraudulent activity (FindLaw Staff, 2022).
Many people believe they have been defrauded in a business or consumer transaction. Fraud, however, has a very specific and narrow meaning under the law. To bring an action for fraud, a victim must be able to prove the following elements.
First, the victim must prove that the defendant intentionally made a misrepresentation of material facts to the victim. A misrepresentation is a false statement, in other words, a lie. Note that the misrepresentation must be material. This means that the misrepresentation must affect something important to the transaction, not a trivial or minor point. Mere statements of opinion do not normally qualify as misrepresentations. Likewise, a mere promise to do something in the future does not qualify as a misrepresentation, unless the victim can prove that, at the time the defendant made the promise, he or she had no intention to follow through on that promise. Also, the law recognizes that telling half the truth can be the same as telling a lie. This is called an omission. If a defendant conceals important information from the victim, for example, this can be the same as making a material misrepresentation to the victim (Rabin Kammerer Johnson, n.d.).
Second, the victim must prove that the defendant intended that the victim would rely upon the false statement of material fact or omission (Rabin Kammerer Johnson, n.d.).
Third, the victim must show that he or she reasonably relied on the misrepresentation. Note that the victim’s reliance must be reasonable. A victim may not rely on a false statement if he or she knew the statement was false or if its falsity was obvious to the victim (Rabin Kammerer Johnson, n.d.).
Finally, the victim must show that, as a result of his or her reliance on the misrepresentation or omission, the victim was actually damaged and suffered harm. As a general rule, fraud that does not result in damage is not actionable (Rabin Kammerer Johnson, n.d.).
The final legal element of fraud concerns damages—usually in terms of money. In some federal criminal cases—for example, bank frauds—an actual loss is not required. But normally, even when there is a material false statement, intent, and victim reliance, there is no fraud if the victim is not damaged. There are two major types of damages: actual and punitive. The fraud examiner will assist the attorney in determining actual damages; the judge and jury will assess other damages, subject to statutory limitations (Lawrence et al., 2004).
