No one likes feeling conned, least of all Minnesotans. That’s why they come down so hard on this type of white-collar crime. A guilty finding for fraud imperils businesses and relationships, so it behooves a person to know about fraud law. It is more complicated than many people realize.
According to Bench And Bar of Minnesota (the legal magazine of the state), fraud is a representation that is false and that the representor knows is false. That may seem a little obvious, but that’s the over-all definition. The legal definition consists of several parts. Back in 1960, U.S Supreme Court Justice Blackmun broke it down into 11 steps:
1. Representation
2. Was False
3. Concerning past or present fact
4. That is material
5. And someone could find out this fact
6. The representor either knew it wasn’t true or represented it without checking if it was true
7. And the representor intended to get the other person to act
8. The other person actually did act
9. The other person relied on the representation
10. And suffered damages
11. Because of the misrepresentation
Most Minnesota courts follow this definition, but several have reduced this down to five points by condensing most of the steps and skipping the “Must be something someone could find out”part. The fourth point also reads “The claimant must be induced or justified in acting” while relying on what the accused represented. This is a little more in the prosecutor’s favor.
It is important to note that if the misrepresentation was about something in the future, or was vague or indefinite, it isn’t considered fraud. Statements of law are exempt because courts assume everyone knows the law equally well. Minnesota also makes allowances for “puffing” products. “Puffing” is when a person gives an opinion of a product that no reasonable person would take seriously, such as when a used-car salesman claims that a car is the greatest thing since sliced bread.
Types of Fraud
There are lots of varieties when it comes to fraud. There is negligent misrepresentation, which is when someone who has a pecuniary interest doesn’t take care to find out or communicate something, and so provides false information while guiding a business transaction.
There is bankruptcy fraud, which is frequently a federal crime where people try to hide their assets from creditors.
There are the classic investor frauds, such as Ponzi and Pyramid schemes. The first is where a person lies about having a great investment opportunity and then uses the money from a second investor to pay off the first investor. Pyramid schemes are very similar, only the investors are supposed to recruit more investors to recoup their investment. Nolo.com has some excellent information on the subject.
Then there are public assistance fraud and insurance fraud. Each type has its own legal intricacies. There are way more than one post can cover.
Expected Punishment
Bench and Bar notes that Minnesota generally goes by the “out-of-pocket” rule for compensation to victims. That means that they get the difference between what they were told a thing was worth and what it is really worth, plus damages that the fraud proximately caused. There are times when a judge may rule that the defendant owes the plaintiff lost profits as well.
Of course, it depends on the type of fraud a person is being accused of, too. Bankruptcy fraud can net you up to 5 years in prison and $250,000 dollars in fines, according to the Cornell Law Review. Insurance fraud means paying restitution and being fined as much as $3,000. Ask a lawyer about the penalties for particulars.
Defenses
There is a limited amount of time that a person can bring charges after a fraud crime. In Minnesota, this is generally 6 years, with certain exceptions. If the action is based on the strict liability of the defendant, the time frame is 4 years. For insurance fraud, the clock starts running from the time that the company discovers the fraud, but it can’t exceed 7 years after the crime.
You can also claim that the representation was puffery, and no reasonable person would take it as anything but opinion.
There is no way to cover all the flavors of fraud and fraud law in one blog post. You will definitely want to get a lawyer should you have to defend yourself against such a charge. If you find yourself in that situation, feel free to contact us. We have experience with both state and federal cases, and we will help you in this trying time.