The word “fraud” often evokes feelings that something terrible has happened.  Fraud is the word loosely ascribed to situations where one person has obtained something of value from someone else by deceit.  In the legal context, fraud has several specific forms.  As a general rule, civil fraud consists of the following elements: (1) the defendant made a material representation; (2) the representation was false; (3) when the defendant made the representation, the defendant knew that it was false, or made it recklessly, without knowledge of its truth as a positive assertion; (4) the defendant made the representation with the intention that the plaintiff would act upon it; (5) the plaintiff acted in reliance upon it; and (6) the plaintiff suffered damage.

For example, if Seller sells a car to Buyer and prior to the sale, states to Seller that the car gets 50 miles per gallon, but in reality, the car only gets 10 miles per gallon, the seller may be liable for fraud.  That depends on whether the seller knew or reasonably should have known that the statement was false.  If the seller stated that the car got 15 miles per gallon, when in reality, it got 10 miles per gallon, the representation may not be material enough to support an action for fraud.

Civil fraud is not the only type of fraud.  There are many criminal fraud statutes at the state and federal level.  For example, “mortgage fraud” is the label applied to situations whereby a borrower (or a mortgage broker, or loan officer, or any combination of individuals in the loan procurement process) submits false information to a lending institution for the purpose of obtaining a mortgage loan.  The elements are similar to those of civil fraud.  That is, the borrower knowingly submits false information to the bank so that the bank will give the borrower money.

If the perpetrator of a fraud uses the mail system, a telephone, a computer or other form of electronic information to accomplish the fraud, he may also be criminally liable for mail fraud, wire fraud or other serious criminal violations.

The bottom line is that nothing good can come out of fraud, which is basically a shorthand way of describing what is otherwise known as lying, cheating and stealing.  Fraud usually affords the perpetrator a short period of gain followed by a much longer period of misery. 

 

— Kassem Dakhlallah is a senior partner with At Law Group, PLLC.  His practice focuses on complex litigation, including class actions, representative actions, commercial litigation, civil forfeiture and personal injury. He can be reached at (313) 406-7606 and kd@atlawgroup.com.