Business Fraud

Fraud in business and commercial transactions is more common than people realize. Transactions fail or disputes arise often as a result of intentional acts, rather than simple mistakes or misunderstandings. And, while the law provides remedies for parties to business transactions that are damaged by a simple breach of contract, very often fraud is the true cause of the dispute and a basis for recovery.

Norton & Associates has over 30 years of experience handling fraud claims, including a punitive damages verdict and award of over $70 million for fraud and intentional misrepresentation. Pursuing fraud requires an in-depth analysis and investigation of documents and records, which often reveal fraudulent intent and misrepresentations made with intent to defraud.

In fact, intentional fraud and misrepresentation occurs in many real estate transactions, construction projects, construction bidding, and construction change orders and in any commercial transaction where one side has superior knowledge and information regarding the transaction and operates from a position of trust that the other party is relying on. Shrewd and unscrupulous persons look to take advantage of and defraud others in every transaction they enter into, using every transaction to defraud others.

Proof of such claims, while difficult to obtain, can be a powerful weapon in settlement negotiation and trial. Jurors often look to financial motives and results when determining whether someone acted in good faith or with fraudulent intent, and when looking to understand a person’s actions.

Different Types of Fraud

While any deception can be the basis of a claim for fraud, fraud generally occurs in three basic ways. First, intentional misrepresentation, where someone deliberately misrepresents the facts in order to deceive another. Second, concealment, where someone has a duty to disclose certain important facts and conceals the truth, often by silence. And, the third basic type is a false promise, where someone promises something of value with the intent to deceive with no intention of performing.

The challenge in proving fraud is proving intent, that is, what someone was thinking in their mind at the time. While getting inside of someone’s mind at the time may seem impossible to prove, very often the perpetrator of the fraud provides proof of their own fraud through written statements and by their own conduct and actions. Intent is often very clearly shown through emails and actions that prove fraud.

Discovering Fraud

Because of the nature of fraud, where a party to a transaction is deceived, the fraud is almost always discovered later, sometimes soon after the transaction or in many instances, years later. The law protects defrauded persons who discover the fraud at a later time, however, it is important that when the signs of fraud come to your attention, you act quickly. Consulting with an attorney as soon as you become aware or have an idea you may have been defrauded is critical.

Fraud and Litigation

The most common response to fraud is to avoid it as being too difficult to prove. Allegations of fraud are not to be taken lightly, but if the evidence supports the claim, and the investigation is careful and thorough, then fraud can be pursued. Claims of fraud, when sound and pursued vigorously, provide an essential weapon in litigation and a key component of litigation strategy.

California Fraud Statutes

Under California law, there are several statutes that very specifically define and describe fraud and its various types There are basically three types of fraud: Fraud by intentional misrepresentation, fraud by concealment and fraud by false promise. Another type of fraud is negligent misrepresentation: all discussed below.

Fraud by Intentional Misrepresentation

Fraud by intentional misrepresentation is exactly that: Where someone with a duty to represent material facts accurately, completely and truthfully, and intentionally misrepresents the facts that they know not to be true to another person who in reliance on those misrepresentations of fact, acts to their detriment, such as agreeing to enter into a contract in reliance on false statement or misrepresentations.

Fraud by Concealment

Fraud by concealment is a very common form of fraud, that occurs in situations where someone has an affirmative duty to disclose certain material facts and knows of certain facts that this person has a duty to disclose to another and either conceals those facts, or as is often the case, is silent where they have a duty to speak and disclose, and the other person relies on the absence of information silence on that particular subject, again to their detriment, such as agreeing to enter into a contract in reliance on the silence.

Fraud by False Promise

False promise is as the phrase suggests, simply where someone makes a false promise in order to lure another into relying on that promise, which the person making the promise has no intention of performing. Many promises are not kept, but where a promise is made and the person making the promise makes no effort to perform, doesn’t prepare to perform, or doesn’t indicate readiness to perform, this is often the best evidence that they never intended to perform in the first place. False promise is also called promissory fraud.

Fraud by Negligent Misrepresentation

Negligent misrepresentation is where the defendant makes false statements, honestly believing they are true, but without reasonable ground for such belief. To be actionable deceit, the representation need not be made with knowledge of actual falsity, but need only be an assertion, as a fact, of that which is not true, by one who has no reasonable grounds for believing it to be true and made with intent to induce reliance by the recipient of the representation to alter his or her position to their detriment.

Constructive Fraud

Constructive fraud is a more complicated type of fraud, that may occur in situations where there is a fiduciary relationship and a fiduciary duty to disclose material facts and doesn’t. This may constitute constructive fraud.

Your California Business Fraud Attorney

If you are looking for help with any case involving business fraud, or if you suspect that a business transaction has been affected by fraud or intentional misrepresentation, Timothy Norton of Norton & Associates can evaluate your claim and help you decide on the best course of action. Contact Norton & Associates at 310-706-4134 for a consultation.