Fraud occurs when a person or business intentionally deceives or misrepresents material facts for financial gain. Fraud can also occur when a person conceals material facts when the person has a duty to speak, or when a person voluntarily discloses some information but fails to disclose key facts that cause the information disclosed to be deceptive.

Business fraud is one species of fraud that refers to fraudulent activities committed by individuals or organizations within a business or corporate setting. Business fraud can take many forms, including embezzlement, financial statement fraud, bribery, kickbacks, and more. Business fraud also occurs in business transactions, such as when a manufacturer misrepresents its production capacity or capabilities or when the seller of a business misrepresents the company’s financial position during a sale of some or all of the business’s stock or membership units.

Consumer fraud refers to deceptive or unfair practices committed by businesses or individuals to gain financial benefit at the consumer’s expense. Examples of consumer fraud include false advertising, identity theft, telemarketing scams, phishing scams, pyramid schemes, and more. Many legal remedies are available to redress consumer fraud, such as the Texas Deceptive Trade Practices – Consumer Protection Act (the DTPA). The DTPA allows consumers to recover not only their monetary damages but in many situations also damages for mental anguish, as well as treble damages and attorney fees.

Like the DTPA, special laws provide relief for victims of real estate fraud through Chapter 27 of the Texas Business and Commerce Code. When a buyer or seller commits fraud in a transaction involving real estate, a victim of real estate fraud can recover actual damages, punitive damages (or “exemplary damages”), and attorney fees. Moreover, Chapter 27 extends liability not only to the parties to the real estate transaction but also to third parties who had actual awareness of the falsity of a representation or promise made by another person if they failed to correct the false representation and then benefitted from it—such as a transaction broker.

All variations and types of fraud can have serious financial and legal consequences for both the parties involved. Parties sued for fraud may lose insurance coverage, and lenders frequently require borrowers to disclose any lawsuits involving fraud allegations. Moreover, lawsuits claiming consumer fraud or shareholder fraud can damage the reputation of an organization, resulting in loss of customers, decreased investor confidence, and reduced market value.

Fraud cases are rarely clear cut. Fraudsters seek to obfuscate their fraudulent scheme, destroying or losing documents, lying, and falsifying evidence. Consequently, proving fraud often requires circumstantial evidence—such as catching the fraudster destroying or concealing evidence through a detailed understand of all relevant documents and communications.

Once fraud is suspected, it is critical to act promptly to protect your interests. Preserving evidence of the fraud and your damages is crucial. You should also consult an experienced lawyer to help you preserve and gather evidence, investigate the fraud, and vigorously pursue your legal rights.

Shawn A. Johnson’s background in accounting and information technology and extensive experience in lawsuits involving fraud claims presents a unique skill set to efficiently and effectively pursue and defend fraud claims. If you believe you have been a victim of business, consumer, or real estate fraud, or are being accused of fraud, contact Mr. Johnson to discuss your next move.