Fraud and Corporate Crime

Fraud and Corporate Crime  Introduction

Fraud the Crimes Act 1900 (NSW) (‘The Act’), in Section 192E denotes that one is guilty of fraud if he/she uses deception or dishonesty to obtain property belonging to another (s192E(1a)) or obtains any financial advantage or causes any financial disadvantage (s192E(1b)). The maximum period of imprisonment for such an offence is 10 years.

Fraud Offences are often raised in acts pertaining to corporate crime. Corporate Crime refers to criminal acts committed either by a corporation or by individuals acting on behalf of a corporation or other such business entity. The case of Saloman v Saloman [1987] AC 22, in conjunction with the Corporations Act 2001 (Cth) make it clear that a business entity does have a separate legal personality from the natural persons who manage it.

Both fraud and corporate crime interlay in an area of law known as white-collar crime; financially motivated nonviolent crimes which are committed by businesses and natural persons alike. While both white-collar crime and corporate crime deal with business entities, white-collar crime benefits the individual involved, where as the corporate crime benefits the corporation itself.

It is important to understand that such fraud offences are only culpable if the deception is reckless and intentional, and permanently deprives the other of such property. As such, fraud offences, especially pertaining to Corporations are numerous.

Notably, the case of Rajina Rita Subramanium, an accountant illustrates the various types of fraud and corporate crime that intermingle. The woman was convicted of such embezzlement after she defrauded ING (her employer) of tens of thousands of dollars. It is noted that, while she was not motivated by money, she had intentionally decided to embezzle money from her employer and did so by various dishonest means including altering and destroying accounts to her financial advantage.

B Embesslement

Section 157, Embesslement by clerks or servants, states that ‘Whosoever, being a clerk, or servant, fraudulently embessles, either the whole or any part of, any property delivered to, or received, or taken into possession by him or her, for, or in the name, or on the account of, his or her master or employer, shall be deemed to have stolen the same, although such property was not received into the possession of such master, or employer otherwise than by the actual possession of such clerk, or servant, and shall be liable to imprisonment for ten years’. In layperson terms, a simple example of embesslement would be where an administrative assistant collects money on behalf of his/her employer, but does not duly forward it on to his/her employer. Potential defences include necessity, duress and intoxication.

C Dishonest Destruction of Accounting Records, Omission of Certain Entries and Publication of Dishonest Statements

As per Section 192F, the intention to defraud by destroying or concealing accounting records is punishable by a 5 year imprisonment. A person remains at risk of being convicted as per this section, if he/she: (a) obtained property belonging to another, or (b) obtained financial advantage or caused financial harm to another as a result of their dishonesty in relation to accounting records. In this section, ‘destroy’ includes to obliterate (s192F(2)). Any person within a company can commit this offence; whether they are officially employed or not is insignificant.

Simply put, the offence is committed where a person with an intention to obtain a financial advantage or cause a financial disadvantage dishonestly destroys or conceals an accounting record. The prosecution must prove that the accused (a) Accused destroyed (or concealed) an accounting record; and (b) The destruction or concealment was dishonest (as defined); and (c) The accused intended to obtain property belonging to another, or obtain a financial advantage, or cause a financial disadvantage.

Similarly, Section 192G deals with those who intend to defraud by false or misleading statements. As such, a person who dishonestly makes or publishes, or concurs in making or publishing, any statement (whether or not in writing) that is false or misleading in a material particular with the intention of: (a) obtaining property belonging to another, or (b) obtaining financial advantage or causing financial disadvantage will be guilty of this offence and face a 5 year imprisonment. It must be proven that the accused did make or publish a statement, and the making or publishing was dishonest and the accused thus intended to obtain property belonging to another, or another, or obtain a financial advantage or cause a financial disadvantage.

D Obtaining Credit by Fraud

While Section 192G deals with those who intend to defraud by false or misleading statements, Section 192H is more specific in that it requires an element of deception. Section 192H thus deals with those who knowingly make a dishonest statement intentionally deceives members or creditors of the organization about the organizations affairs. However, while this section requires a deception, an intention to gain an advantage or cause a loss is not required. The maximum penalty for the offence of intention to deceive members or creditors by false or misleading statements by an officer in an organization is 7 years.

For such a charge to be successful, it must be proven that, (a) the accused was an officer of an organization; and (b) the accused made or published a statement; and (c) the making of the statement was dishonest and (d) the statement was knowingly false or may be false; and (e) the making or publishing of the statement was intended to deceive members or creditors of the organization about its affairs.

E Corrupting Commission or Rewards

Offences pertaining to corrupt commissions and rewards are contained in Section 249B of theCrimes Act 1900 (NSW). Subsection 1 relates to those who while acting as agents receive or solicit a benefit from another party  (a) as an inducement or reward for or otherwise on account of: (i) doing or not doing something, or having done or not having done something, or (ii) showing or not showing, or having shown or not having shown, favour or disfavour to any person, in relation to the affairs or business of the agent’s principal. This includes an expectation for such a reward as well as actually obtaining such a reward. Subsection 2 relates to those who give or offer to give to any agent or any other person with the consent or at the request of any agent, any benefit as an inducement or reward for or otherwise on account of the agent’s: (i) doing or not doing something, or having done or not having done something, or (ii) showing or not showing, or having shown or not having shown, favour or disfavour to any person, in relation to the affairs or business of the agent’s principal. This includes the receipt or any expectation of which would in any way tend to influence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent’s principal. Both of these subsections carry a maximum prison term of 7 years. For a successful conviction, the police must prove that (a) the accused was an agent of a principal (b) the accused corruptly received or solicited or corruptly agreed to receive or solicit from another person for the agent or for anyone else (c) for any benefit and that (d) the benefit was an inducement or reward for or otherwise on account of doing or not doing something, or having done or not having done something, or showing or not showing, or having shown or not having shown, favour or disfavour to any person in relation to the affairs or business of the agents principal.

F Tax Fraud and Evasion

Another type of fraud, impliedly contained within the Criminal Code 1995 (NSW) is tax fraud and evasion. Unlike other offences, a tax fraud cannot be corrected by mere repayment of the amount owed. This serious offence caries up to 10 years of imprisonment. Two aspects are to be considered: (a) the obtainment of financial advantage by deception and (b) the conspiracy to defraud. First, in order to prove that tax fraud has occurred with deception, it must be clear that the person obtained a financial advantage by deception against a Commonwealth entity (including the Australian Tax Office). Second, the conspiracy to defraud must show intention to dishonestly obtain a financial gain against the Commonwealth entity. An example of such fraud is the case of R v Pearce [2001] where accountants conspired along with their clients to defraud the Commonwealth. A more recent example is the case of R v Ridley (2007), where the NSW Court of Criminal Appeal held that the defendant had submitted false statements, avoiding up to 3 million in tax and thus sentenced to 8 years in prison.

If you have been charged with Fraud, Tax Evasion or a Corporate Fraud Offence you need the advice of an experienced Criminal Lawyer. Contact our Fraud Lawyers Sydney for further advice.

We are here to help you and if you have questions in relation to your case our criminal defence lawyers are always on hand.

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