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Matthew A. Radefeld and Daniel A. Juengel

Understanding corporate fraud

On Behalf of | Sep 23, 2022 | Uncategorized |

Corporate fraud involves unethical or illegal actions that a company or an individual commits on behalf of the business. This action is usually done to give an undue advantage to the company perpetrating it.

Most corporate fraud cases run into millions of dollars. Typically, the victims of fraud are shareholders, investors, creditors and clients. When discovered, corporate fraud may give rise to legal challenges from various people that have come across defective investment opportunities or products.

Examples of corporate fraud

Someone could be accused of any of these two white-collar crimes.

Falsifying your accounts

If someone fails to provide accurate books of accounts while the business is not doing okay, they may be charged with corporate fraud. Falsifying books of accounts may be seen as an attempt to avoid paying taxes or make the company look profitable in the eyes of investors.

The IRS may detect inaccuracies and an audit is done on the company before you get charged. The Securities and Exchange Commission and local authorities may also investigate suspected fraud cases before taking action.

Hiding issues or defects in products

Someone may be accused of fraud if they hide defects or problems associated with products. For example, as the head of a pharmaceutical company, someone may hide particular side effects or dangers associated with a specific drug the company sells or manufactures. If the product later causes problems for those who use it, you will be charged for failing to reveal all the information about the product. Such cases involve the FBI (Federal Bureau of Investigations) investigating these charges.

What are the consequences of corporate fraud?

Corporate fraud cases cause significant economic consequences for the perpetrator. These results may include decreased investor confidence, damage to the reputation, increased costs of financing and the reduction of the company’s net worth.

The company’s top-level management is usually blamed for the fraud under their guidance. If you are top-level management and found guilty, the penalties may vary according to the extent and subject of the fraud. However, you could serve jail terms of up to 25 years.

Sometimes these crimes give rise to federal charges that may carry a longer jail term. There could also be a form of restitution or fines, depending on the amount for which you are found guilty.