Fraud

Unlike many offences on our statute books, Fraud is not defined in the primary legislation that we look too, to identify Crime in New Zealand; the Crimes Act 1961. Rather the Act has various sections that deal with dishonesty offences. The New Zealand Courts have taken the view that where appropriate, certain dishonesty offences may be labeled “Fraud”.

The reluctance to define fraud arises in part from the ever-increasing complexity of commercial arrangements whereby elements of contract, statute, and the common law come together to define business practices that evolve according to the needs, desires, cunning, marketing skills and administrative necessity of people in business.

However, what has emerged over time are some common precepts that most authors’ accept as setting the parameters for identifying conduct such that, it may be deemed dishonest and by its nature, fraudulent.

The United States Supreme Court has identified nine elements that it says, when present, meet the “test” that a fraud has been perpetrated. We have broken these down into four separate groupings:

THE MISREPRESENTATION 

• a representation of an existing fact 

• it's materiality

• it's falsity

THE ALLEGED OFFENDERS INVOLVEMENT

• the "speaker's" knowledge of its falsity

• the speaker's intent that it shall be acted upon by the plaintiff

THE VICTIMS INVOLVEMENT

• plaintiff's ignorance of its falsity

• plaintiff's reliance on the truth of the representation

• plaintiff's right to rely upon it

THE EFFECT OF THE MISREPRESENTATION

• consequent damages suffered by a plaintiff

While these are not necessarily the elements that need to be met in New Zealand, the list does provide an excellent reference point to measure an allegation of fraud against.

Fundamental to the prosecution of a complaint will be the element of intent. Did the person accused of perpetrating the fraud intend the alleged victim to be deceived, or was the alleged deception merely an innocent misrepresentation?

Lawyers and law enforcement debate this issue every time that an allegation of fraud is made, for if the misrepresentation was innocent, even though a loss was sustained by the complainant, the remedy may lie in the civil and not criminal courts. On many occasions over many years as investigators and analysts of alleged fraud, we have found that the remedy to an alleged fraud is, in fact, a claim in tort or contract, rather than a criminal complaint.

If the complaint might not be fraud why lay fraud complaints?  There are a number of reasons for this.

• Ignorance. They have not taken professional advice and, believing they have been criminally wronged they lay a complaint with the Police. Unfortunately, by the time the Police have had a chance to prioritise the complaint, investigate and report back, valuable time will have been lost if a civil remedy could have been pursued instead.

• No money. Without funds to pay for professional advice “victims” of a deceit resort to laying a complaint with the Police in the hope that they will investigate, prosecute and “right the wrong” that has befallen them.

• Bad advice. A friend, an advice bureau, free legal services agencies, accountants and solicitors may all give what amounts to “bad” advice on suspected fraud. While not intentionally giving bad advice, these advisors can only give advice on the facts as presented to them by the “victim” and taking into account the resources of the victim to take the fight further. A “little knowledge” in these circumstances can be a bad thing.

Perhaps the biggest failing of persons who consider they are victims of fraud is the belief that by complaining to the Police, that even if the offender is successfully prosecuted, that they will get their money (or whatever) back. The Police and the Crown are not a recovery agency for persons who have been defrauded. If a fiscal recovery is the objective of prosecution then that would only be possible if the alleged offender has resources to meet a claim.

Most appearing before the courts do not. At best some may go to prison for their offending, but that is also far from certain. After months (possibly years of personal torment and anguish the victim may see the offender sentenced to something far less than what the personal cost and tragedy of the offence has cost them.

If the alleged offender does have resources then initiation of a civil action may well yield a more satisfactory result for a complainant. However, the cost will be significant both in personal and professional time.

Accordingly, before embarking on a course of action, either criminal or civil, it pays to step back from the entire subject, get some INDEPENDENT advice (not your neighbour, best friend or Aunt Sally) and then decide on the best course of action going forward. That action may require an investigation being undertaken into the alleged offender's background, resources and ability to meet any successful claim.

It will certainly cover an estimation of the risks and costs of pursuing a claim, the advantages/disadvantages of civil and criminal proceedings, the jurisdiction in which claims can be pursued, the team that will need to be involved, the victim's input and the potential outcomes from any action taken.

Our Forensic Accounting team is experienced in bringing the resources together to meet the needs of clients faced with the dilemma of “fraud”. We work with key investigative professionals, the Police, prosecutors and barristers experienced in pressing the claims of victims. We provide an initial without obligation meeting and complimentary preliminary advice in order that least a victim can begin to formulate a plan for recovery.

To contact us to discuss any fraud matter click here to contact us.