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Fraud Charges: Texas Criminal Defense Overview

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Fraud can mean many things, but for our purposes it involves an illegal act as defined by state or federal law.  Almost a century ago, the Supreme Court of the United States (SCOTUS) explained that to commit the crime of fraud is “to defraud” someone, by “… wronging one in his property rights by dishonest methods or schemes,” through “the deprivation of something of value by trick, deceit, chicane, or overreaching.” Hammerschmidt v. United States, 265 U.S. 182, 188 44 S.Ct. 511, 512, 68 L.Ed. 968  (1924).

Fraud Criminal Defense Can Be Complicated

Defending those accused of committing one or more acts of fraud can be complicated.  First, the evidence alone can be complex, particularly when it involves advanced computer technology (including hacking) or an extensive amount of documentary support.  Files can be huge in fraud cases.

Second, the charges can involve state or federal law, based upon statute or case precedent, which may or may not jive with the actual evidentiary foundation supporting the prosecution’s case.  Zealous ADAs or AUSAs may be optimistic in choosing which fraud laws fit with the facts at hand (or those that withstand search and seizure scrutiny).

Another complication: fraud can form the basis of both a criminal proceeding and a civil lawsuit for damages.  It is possible for the criminal defendant to find himself or herself simultaneously fighting against charges in criminal court and claims for damages in civil court.  Discovery overlaps between the two cases, among other things, will be a continuing concern for the criminal defense attorney representing someone accused of fraud.  For more here, read “Misapplication Of Fiduciary Property By Trustees, Guardians, Executors, Administrators, Managers In Texas: Fiduciary Criminal Charges.”

There is No Umbrella “Fraud Law”

Neither the federal government nor the State of Texas has one basic, all-encompassing “fraud” law.  In Texas, someone can be arrested for any number of actions if the authorities assert their activities fit a particular statute or case precedent.  Arrests can be made based upon either Texas or federal fraud laws.

There are Lots of Bases for Fraud Charges – State and Federal

From the government’s point of view, there is an assortment of “fraud” choices both when making arrests and when deciding on formal charges, for local police and state agencies as well as federal law enforcement.

From a defense perspective, the allegations presented by the government, and the evidence supporting those allegations, must be carefully reviewed against the specific law, statute, or court-defined fraud that the accused is charged with violating, element by element.

Defining Federal Fraud

Under federal law, there are a variety of statutes passed by Congress to outlaw certain acts which the federal lawmakers consider to be type of fraud.  Congress, of course, is free each year to pass new definitions of actions that will be considered illegally fraudulent in the future.

Currently, federal fraud includes federal statutes defining the following as illegal activities as involving things like credit card fraud; computer fraud; mail fraud; wire fraud; bank fraud; and healthcare fraud, among other things:

  • 18 U.S.C. §§ 152 – 157 (bankruptcy fraud);
  • 18 U.S.C. § 287 (false claims as fraud against the government);
  • 18 U.S.C. § 371 (conspiracy to defraud the government as fraud against the government);
  • 18 U.S.C. § 666 (government program fraud and bribery);
  • 18 U.S.C. § 1001 (false statements, fraud against the government);
  • 18 U.S.C. § 1029 (fraud in connection with access devices and credit cards);
  • 18 U.S.C. § 1030 (computer fraud);
  • 18 U.S.C. §1341 (mail fraud);
  • 18 U.S.C. §1343 (wire fraud);
  • 18 U.S.C. §1344 (bank fraud); and
  • 18 U.S.C. § 3486 (health care fraud).

SCOTUS is also able to define and to expand the definition of fraud, as for example the currently pending Kelly v. United StatesIn the upcoming 2019-2020 term, the High Court will have to decide if it is “fraud” for a public official to give a deceptive explanation for why she did something that spent taxpayer dollars.  Specifically, there will be another type of federal fraud on the books if SCOTUS rules that Bridget Kelly, ex-aide to New Jersey Governor Chris Christie, committed a fraudulent act by spending $3600 in toll collector overtime pay to shut down two lanes of the George Washington Bridge not as part of a “traffic study” but instead as a political whammy for a mayor who failed to endorse Christie’s re-election.

Defining Texas State Fraud Charges

Most fraud charges brought in state court will be based upon laws found in Chapter 32 of the Texas Penal Code, which currently lists numerous types of actions that are considered to be illegal acts of fraud under state law.

These Texas statutorily-defined fraud crimes include:

  • 21 Forgery;
  • 315 Fraudulent Use of Possession of Credit Card or Debit Card Information;
  • 32. False Statement to Obtain Property or Credit or in the Provision of Certain Services;
  • 34. Fraudulent Transfer of a Motor Vehicle;
  • 45. Misapplication of Fiduciary Property or Property of Financial Institution;
  • 46. Securing Execution of Document by Deception; and
  • 51. Fraudulent Use or Possession of Identifying Information.

Key to Fraud: Proof of Trickery or Deception

As SCOTUS explained back in 1924, fraud by definition involves a manipulative plan or scheme which involves trickery, deceit, chicanery, or overreaching.  Hammerschmidt, 265 U.S. at 188.  This is how fraud differs from theft:  in a fraud case, there is some kind of grifting involved while in a theft, the thief simply and directly takes property that he or she doesn’t own.

As discussed above, there are a lot of different criminal fraud charges available to prosecutors (ADAs and AUSAs), but here in Texas it is most likely that the criminal defense attorney will be challenged with the following fraud allegations:

Bank Fraud

Bank fraud, as the name implies, involves a plan or scheme to defraud a financial institution of money or property.  The circumstances vary.  Forged checks can be the basis of a fraud arrest.  Bank officers improperly accessing or using bank deposits is another.

For more, see:  Arrested for Bank Fraud in Texas.

Credit Card Fraud

Identity theft is a common thread in many arrests for credit card fraud in Texas. The crime itself involves someone using another’s personal information to open bogus credit accounts with stores, credit card companies, etc., or sometimes, to create phony credit cards.

For more, read:

Health Care Fraud (Medicare Fraud, Medicaid Fraud, Tricare Fraud)

Charges for health care fraud are happening more and more often in Texas.  Arresting health care professionals for fraudulent billing to a government insurance coverage source (Medicare, Medicaid, Tricare) has been seen as a tool to combat the growing problem of opioid addition in our state.

For more, see:

Insurance Fraud

Other plans to get money from insurance companies outside of inflated or fake medical insurance claims to Medicare, Medicaid, or Tricare (see health care fraud, above) can be charged as basic insurance fraud crimes.  Allegations of insurance fraud can be brought for any claim presented for payment to an insurance carrier that is inaccurate and inflated or an outright sham.  This might be a situation where a loss is made up (like damage after a hurricane) or where someone boosts the damage estimates for a loss that has occurred (inflating the numbers after a car wreck).

See:  Consumer Insurance Fraud: Crime Involving Submission of Insurance Claims.

Mail Fraud and Wire Fraud

Mail fraud and wire fraud are allegations made solely by the federal authorities since by definition, these crimes involve crossing the state line and therefore, interstate commerce.  Federal statutes outlaw both mail fraud (plans to defraud someone using the United States Postal Service or other commercial mail carrier, like FedEx, in some way) and wire fraud (same type of scheme, involving communications over the telephone or internet (as well as radio, television, and cable)).

See:

Mortgage Fraud

There will be times when mortgage fraud will be considered a form of bank fraud (see above), however given the variety of institutions and the rapid evolution of the home loan industry in the 21st Century, mortgage fraud cases are being given independent consideration according to the Federal Bureau of Investigation (FBI), which considers mortgage as a “sub-category” of bank fraud.

The FBI defines mortgage fraud as a “…crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender. A lie that influences a bank’s decision… is mortgage fraud.”

As for those facing charges of mortgage fraud, the defendants can be bank officers, contractors, investors, builders, foreclosure rescue operations, and more.  The FBI warns that investigators “particularly in the wake of the housing market collapse,” will go after “distressed homeowners” for mortgage fraud.

For more, read:

Cyber Fraud or Internet Fraud

Cyber Fraud and Internet Fraud charges are often the result of extensive investigations by the federal government (again, the FBI) perhaps in a joint effort with state or local law enforcement.  In these fraud cases, the plan to defraud involves accessing online information in order to get financial access, personal information, etc.  Accessing a university network to change a GPA or invading a company’s private server for financial information or trade secrets are all examples of cyber fraud situations.

For more:  Cyber Fraud Manhunt – FBI’s Most Wanted List for Internet Crime Gets Five New Additions: Computer Crimes and Internet Fraud Very Profitable.

Sentencing Concerns in Fraud Cases

Once someone has been arrested and charged with a serious fraud crime under either federal or state law, the criminal defense strategy must be built making sure that no stone is left unturned.  All the supporting evidence must be reviewed and understood.  The crimes that have been charged and those which were not included must be examined and evaluated.

In many instances, the defense lawyer will whittle things down, both factually and legally, only to negotiate a plea deal with the prosecutor for the person facing felony fraud charges.  Many of these fraud cases will result not in a dismissal or a trial, but in a plea agreement.

In federal matters, the defense attorney needs to be aware of the official stance taken by the Office of the Attorney General in the current DOJ Manual (9-16.040):

“When possible, United States Attorneys should require an explicit stipulation of all facts of a defendant’s fraud against the United States when agreeing to a plea bargain, including acknowledgement of the financial consequences or damages to the government. A good example of this approach and its usefulness in ensuing civil litigation may be found in United States v. Podell, 436 F. Supp. 1039, 1042-1044 (S.D.N.Y. 1977),aff’d 572 F.2d 31, 36 (2d Cir. 1978). Concerning such pleas, USAs should also be aware of JM 9-2.1599-27.641 (Multi-District (global) Agreement Requests); 9-42.010 (Coordination of Civil and Criminal Fraud Against the Government); 9-42.451 (Plea Bargaining in Medicare/Medicaid Cases); and 9-16.030 (Investigative Agency and Victim to be Consulted).”

For more on sentencing concerns in defense of fraud cases, see:

Defense in Texas Fraud Crime Charges

Being charged with commission of a fraud under either state or federal law is very serious for the accused, since these are likely to be complex matters with felony sentences.  Things are even more severe for the person who is facing federal fraud charges.  Not only will they have to deal with federal sentencing guidelines, but they will likely be charged with a number of related felonies, including but not limited to things like RICO violations or money laundering.

Anyone concerned that they may be the subject of a criminal investigation for fraud would be wise to contact an experienced and aggressive fraud defense attorney.  Professionals should not dismiss their suspicions when their gut instinct is something is afoot.  The faster a criminal defense investigation can begin and a strategy set in motion, the better for the accused and their loved ones.

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For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth articles,” Pre-Arrest Criminal Investigations” and “White Collar Crime: Indictments Of Texas Professionals.

 

 


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