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Criminal Defense Firm Serving Northeastern And Central Pennsylvania

Miele & Rymsza, P.C.
Miele & Rymsza, P.C.

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3 common types of corporate fraud

| Jan 23, 2018 | Uncategorized |

Business owners must take risks and work hard to bring their companies to success, but sometimes the motivation for success goes too far. If the desire for success at any cost consumes a business owner, he or she may partake in an illegal activity to achieve that goal. 

When company management participates in illegal activities to boost their success, they may be committing corporate fraud. However, there are many different types of corporate crimes that are important to know about.

1. Payment fraud

A business owner or company manager may create false payments or divert other payments. According to AccountingTools, payment fraud may take the form of these actions:

  • Diverting business funds to oneself
  • Generating false payments
  • Altering dollar amounts on payment orders or checks

Sometimes, someone in a senior position personally partakes in these activities or intimidates an inferior employee into handling payments illegally.

2. Accounting fraud

A business may alter its accounting details to falsely showcase high profits or revenue. Companies may do this to disguise certain shortcomings:

  • Declining sales
  • Slow revenue
  • A net loss
  • Hefty expenses

Some companies may also use false accounting to make the business appear attractive to potential investors or buyers. 

3. Pyramid scheme fraud

Sometimes businesses partake in a pyramid or Ponzi scheme in order to maliciously increase profits. This type of fraud occurs when a company comprises a pyramid-like model, in which later investors pay earlier investors, making it appear as if the initial investments dramatically increase in a short period of time. 

There are a wide variety of fraudulent actions that may occur within a corporation. These activities may consist of civil or criminal violations. Whether a business hides debt, overstates earnings or diverts funds, there may be drastic consequences. Potential penalties for fraud include jail time, fines, layoffs and bankruptcy.

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