BORROWER AND FRAUD

Borrower and Fraud

Borrower and Fraud

Describing deceit, trickery, sharp practice, breach of confidence, and the like, fraud is a widely used term in both law and common discourse. Legal usage, either civil or criminal, generally requires intentional deceit to gain advantage. Although sometimes a part of ancient criminal law, fraud is generally not one of the first crimes to develop in a society (Eichenwald 2005, 12-23). It was not one of the original felonies, for example, in medieval England's largely agricultural society. Only after trade and commerce developed did the Court of the Star Chamber begin to punish fraud and corruption. Civil remedies and specialized crimes soon evolved, but the first general fraud crime did not appear until 1757. In response to the rise of banking and the Industrial Revolution, Parliament created false pretenses a crime punishing intentional false representations that led to transfers of title. By the end of that century, Parliament and the courts had added larceny by deceit and embezzlement to the arsenal against fraud.

These laws provide the basic framework for the modern American law. Most of the frauds reported annually to the police in the United States, for example, fall into one of these basic crimes. Other common crimes involving fraud include bribery, forgery, counterfeiting, intentionally passing bad checks, and tax evasion. Crimes such as vote fraud serve as a reminder that one can employ deceit for noneconomic as well as economic goals.

If the borrower lies then different problems can take place within and outside the office. Generally hidden and often difficult to discover, many frauds are never reported to the police. Even when reported, the police often lack the resources or specialized expertise necessary to deal effectively with the problem. Using grand juries and other investigative tools not always available to the police, local or state prosecutors frequently do a better job. Wide-ranging and more complicated frauds may involve federal investigative and prosecutorial agencies having the legal authority to cross state lines as well as greater expertise and resources. (Rosoff, Pontell, & Tillman, 2002)

Recognizing that prevention is often better than prosecution, the English Parliament in 1677 required that some important contracts be made in writing. Although still using statutes of frauds, modern governments have vastly expanded their preventive efforts. Employing a wide array of agencies and laws, they encourage citizen education, require disclosure, and regulate troublesome transactions. When enforcement is necessary, governments often employ civil techniques that are cheaper and sometimes more effective than criminal prosecution. Federal agencies such as the Securities and Exchange Commission, the Federal Trade Commission, bank examiners, and postal inspectors seek to create a climate that makes fraud difficult. Insurance commissions, weights and measures inspectors, and a wide variety of other agencies seek the same goals at the state and local level. Because legislation authorizing preventive efforts often includes new crimes, there are now many specialized fraud crimes.

Despite intense governmental and private preventive efforts, fraud remains a widespread offense. Some argue it is the most common criminal ...