The FBI’s pursuit against corporate fraud

Corporations, specifically C Corporations, are the subject of regulation by federal and state laws, perhaps more stringently than other types of business formations. When upper management errs in failing to ensure compliance with regulations and laws concerning the operation of the corporation, those with involvement may suffer serious legal consequences.

According to the Federal Bureau of Investigation, white collar crime, in particular corporate fraud, is one of the Bureau’s top priorities in terms of criminal investigation and prosecution. It causes tremendous injury to the nation’s economy as well as investor’ faith.

The main areas of enforcement include crimes involving senior corporate management engaging in self-dealing and accounting schemes. Obstruction of justice with regard to prevention of the discovery or investigation of these white-collar crimes is also an activity the FBI will pursue.

Accounting abuses

Accounting manipulations as a form of corporate fraud generally occurs when there is an intention to fool others, such as potential investors and auditors, about the real financial status of the business. The company’s condition will be the subject of false inflation by manipulating stock price, fiscal numbers and forms of valuation.

Corporate managers may manipulate fiscal data via engaging in false bookkeeping, illegal transactions in an effort to evade regulators, and fraudulent stock trades to increase appearance of profits or to conceal losses.

Insider conflicts of interest

With regard to self-dealing, upper management may illegally make trades on the basis of relevant but nonpublic information. This conflict of interest is known as illegal insider trading. In some cases, management may use corporate property for personal use, which would typically be illegal as well.

Market timing manipulations by fund management

Another area of focus by the FBI includes fraudulent behaviors within a fund operation that otherwise operates legally. Some inappropriate and often illegal activity includes manipulating the values of net assets, engaging in late trading and other schemes to time the market.

Obstruction

When corporate individuals seek to conceal any of the criminal activities noted above, this may rise to the crime of obstruction of justice. A person who did not commit the underlying fraud, but later assists in the concealment, may be in danger of charges of obstruction. If the concealment hinders regulatory agencies such as the U.S. Securities and Exchange Commission or the Commodity Futures Trading Commission, the FBI may be more apt to pursue charges.