Accounting fraud

“ The fraud, thus developed, was accomplished at the time by means of false certificates of the receipt of the purchase money by the receiver, which were given by him in the usual way, as the entries for the several tracts of land were made at the register's office, and also by entering and keeping the accounts with the government the same as if the money had been actually paid as fast as the lots were entered. The monthly or quarterly returns to the proper department would thus appear unexceptionable, and the fraud concealed until payment of the balances should be called for by the Government. ”

“ This instruction was certainly correct, if the 66th section of the revenue collection act of 1799, ch. 128, now remains in full force and unrepealed; for it can never be permitted, that a party, who perpetrates a fraud upon the custom-house, and thereby enters his goods upon false invoices and false valuations, and gets a regular delivery thereof upon the mere payment of such duties as such false invoices and false valuations require, can avail himself of that very fraud, to defeat the purposes of justice. ”

“ But, although it is no doubt true that such a process might have been gone through, and that, if gone through, the fraud would have been discovered, can it be truly said that the auditors were wanting in reasonable care in not thinking it necessary to test the managing director's return? I cannot bring myself to think they were, nor do I think that any jury of business men would take a different view. It is not sufficient to say that the frauds must have been detected if the entries in the books had been put together in a way which never occurred to any one before suspicion was aroused. ”

“ The sixty-sixth section limits the forfeiture to the case of fraud in making up the invoice prices below the actual cost of the goods, but leaves the time and place of detection unrestricted. Under this section, whether the discovery of the fraud be made by the custom-house officers while the goods are passing inspection, or afterwards, is immaterial. ”

“ Concealing Assets or Income
An intent to evade tax may be inferred from "concealment of assets or covering up sources of income". Spies, 317 U.S. at 499. Engaging in transactions likely to mislead or conceal is evidence of fraudulent intent. Id.; see also Simco Auto. Pump Co. v. Commissioner, T.C. Memo. 1999-235, slip op. at 18-19, aff'd without published opinion, 238 F.3d 422 (6th Cir. 2000) . A taxpayer's use of a business to conceal the personal nature of expenses is evidence of fraud. ”

“ It is too obvious for comment that in all this the only use of the words fraud and fraudulent is to stigmatize acts which are adverse to the plaintiff's view of his own rights. But there is not a syllable which defines an act fraudulent in nature, or done or performed under the influence of corrupt motives, or by corrupt means, by the defendant or by any of the land officers who have had to deal with his claim. ”

“ A pattern of substantially underreporting income for several years is strong evidence of fraud, particularly if the reason for the understatements is not satisfactorily explained or due to innocent mistake. ”

“ Was it to mislead him by holding out false hopes of consummating an arrangement by which his cotton-tie could be introduced into the market, and was this in order to secure the defendants themselves against competition? Deceit in effecting such a purpose lay at the basis of the action. But how can such a purpose by shown when it has not been avowed? Actual fraud is always attended by an intent to defraud, and the intent may be shown by any evidence that has a tendency to persuade the mind of its existence. ”

“ The defendants insist that it was made with the fraudulent purpose, on the part of the vendors, of cheating, hindering, and delaying their creditors, and that the vendees either intended by their purchase to aid in accomplishing that result, or, at and before their purchase, were chargeable in law with notice of the fraud designed by the vendors. It is unnecessary to set out all the facts which, according to the bill of exceptions, the evidence tended to establish. ”

“ Contrary to the majority, I do not read the Court of Appeals' en banc opinion as holding that either § 206 (1) of the Investment Advisers Act of 1940, 54 Stat. 847 (prohibiting the employment of 'any device, scheme, or artifice to defraud any client or prospective client') , or § 206 (2) , 54 Stat. 847 (prohibiting the engaging 'in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client') , is confined by traditional common law concepts of fraud and deceit. ”

“ A court of equity will not stop half-way in the investigation of a fraud which is quite apparent, to give one of the parties to it affirmative relief at the expense of the other. In such cases better is the condition of the defendant.
It is also argued that the fraud was against the creditors of the company, and the assignee can pursue the party who defrauded them. ”

“ As an initial matter, I note that §17 (a) (2) does not require scienter, so the maker of the statement may still be liable under that provision. Aaron, supra, at 695–697. Moreover, an ongoing, “egregious” fraud is likely to independently constitute a primary violation of the conduct-based securities laws, wholly apart from the laws prohibiting fraudulent misstatements. ”

“ Fraud in law consists in acts which, though not fraudulently intended, yet as their tendency is to defraud creditors, if they vest the property of the debtor in his grantee, they are void for legal fraud, which is deemed tantamount to actual fraud, full evidence of fraud, and fraudulent in themselves, the policy of the law making the acts illegal. ”

“ The invoice spoken of in this section of the act, is one which does not represent truly the facts the importer is bound to disclose at the date of his entry, and which are exhibited by an original and true invoice, and where the misrepresentation, whether by falsehood, forgery, or fraud, is with the design to evade the duties. It is admitted that this act provides for cases never before comprehended in any revenue law. For the attempt to defraud is punished as well as the consummate effort. ”

“ Intention to defraud the government is not imputed, either to the corporations or to the plaintiff, unless the investment, in view of the circumstances, and the refusal of the plaintiff to add the proportional amount of the same to his list of annual gains and profits, constitute such fraud by implication of law; but the defendant contends that the plaintiff was required by law to pay the regular income tax on such proportion of the entire net profits made by the two companies as his stock bore to the whole stock of the corporations. ”

“ In determining whether further regulations are reasonably necessary to prevent frauds against our revenue it is not conclusive, at least, to say that frauds against the revenue under the existing system have not been discovered. The question is, Are the regulations such as to provide proper safeguards against fraud, or are they such as to make fraud easy to those who have the disposition to commit it? ”

“ In fact, the gravamen of the offense consists in the evil design with which the misapplication is made, and a count which should omit the words 'willfully,' etc., and 'with intent to defraud,' would be clearly bad. While it is entirely true that an allegation of fraud is insufficient, either in an indictment or in a bill in equity, without giving the particulars of the fraud, an intent to defraud is only to be gathered by the jury from all the facts and circumstances of the case. ”

“ Who, having knowledge or information of the violation of any revenue law by any person, or of fraud committed by any person against the United States under any revenue law, fails to report, in writing, such knowledge or information to his next superior officer and to the commissioner of internal revenue ”

“ When a forfeiture has been incurred by reason of a fraud, not even the secretary of the treasury and collector of the customs are authorized to remit or mitigate it, much less the appraisers and other subordinate officers of the collection of the revenue. ”

“ Fraud is deception; it is inducing the other party to believe something which is not true, and, by inducing him to believe that, influencing his action. The ordinary way in which fraud is manifested is by misrepresentations. A purchase or sale of stock or of goods may be induced by fraud. A loan may be obtained from a bank by fraud, that is, by misrepresentation of material facts which influence the other side to act. ”

“ It is mistake to suppose that in stating the facts which constitute a fraud, where relief is sought in a bill in equity, all the evidence which may be adduced to prove that fraud must be recited in the bill. It is sufficient if the main facts or incidents which constitute the fraud against which relief is desired shall be fairly stated, so as to put the defendant upon his guard, and apprise him of what answer may be required of him. ”

“ It is good between the parties, and good as to all the world, unless it is liable to impeachment for fraud; which is of two kinds, fraud in fact, and fraud in law. The first is an intention or design to defraud, delay, injure or prevent creditors from receiving their just debts, by a sale, deed, settlement or agreement, by which the property of a debtor is withdrawn, or attempted to be withdrawn, from their reach. ”

“ But before we can say that it is a fraud in law, to expend $5000 in furnishing a house costing $13,000, and the establishment to be supported by the income of an investment of $40,000 in productive funds, we must be satisfied, that it is, at the first blush, an extravagant and unwarranted expenditure under all the circumstances in evidence, and to an extent indicating some fraudulent or other motive unconnected with the fair execution of the contract, of which we are not satisfied ”

“ When fraud is alleged as a ground to set aside a title, the statute does not begin to run until the fraud is discovered; and this is the ground on which the complainant asks relief. But, in such a case, the bill must be specific in stating the facts and circumstances which constitute the fraud ”

“ But we are not. To obtain money was the sole object of this fraud. The use of the mails was crucial to the total success of the fraudulent project. We are not justified in chopping up the vital banking phase of the scheme into segments and isolating one part from the others. That would be warranted if the scheme were to defraud the collecting bank. ”

“ After paying the attorneys' fees and court costs, the surplus is not enough to pay the debt secured in full.
In view, therefore, of the concurrence of both courts in finding that no actual fraud was intended, we shall pass at once to the question of constructive fraud.
Fraud in law is predicated upon the fact that the assignor took from the assignees the agreement above set out, and did not file it with the clerk of the court, as he did the assignment itself. ”

“ Imposing exemplary damages on the corporation when its agent commits intentional fraud creates a strong incentive for vigilance by those in a position "to guard substantially against the evil to be prevented." ”

“ There was, however, no evidence as to the circumstances under which her name was signed to the application addressed to the comptroller, or under which the checks were indorsed in her name; absolutely none upon which to base the theory of fraud or false representations. It is true, as already suggested, there was evidence tending to show that the transfers of stock were made originally without defendant's knowledge; and the jury might reasonably have concluded, under all the evidence, that the transfers were made, and caused to be made, by her husband. ”

“ If any board which is an essential part of the taxing system intentionally, and therefore fraudulently, violates the law, by uniformly undervaluing certain classes of property, the assessment by other boards of other classes of property at the full value, though a literal compliance with the law, makes the whole assessment, considered as one judgment, a fraud upon the fully assessed property. ”

“ But where forged checks have been paid and charged in the account and returned to the depositor, he is under no duty to the bank to so conduct the examination that it will necessarily lead to the discovery of the fraud. If he examines the vouchers personally, and is himself deceived by the skillful character of the forgery, his omission to discover it will not shift upon him the loss which, in the first instance, is the loss of the bank. Banks are bound to know the signatures of their customers, and they pay checks purporting to be drawn by them at their peril. ”

“ Petitioner did not timely file tax returns for 1998-99 and 2000-06. Petitioner's untimely filing of her tax returns over an extended period is circumstantial evidence of fraud.
h. Extensive Dealings in Cash
Extensive dealings in cash to avoid scrutiny of a taxpayer's finances is a badge of fraud. See Bradford v. Commissioner, 796 F.2d at 307-308. Fraudulent intent may be inferred when a taxpayer handles his or her affairs in a manner designed "to avoid making the records usual in transactions of the kind". ”

“ Their language is that the officers and people have conspired together for the purpose of defrauding the plaintiffs, and to prevent them from obtaining service of process. Is it fraud in a debtor to endeavor to evade the service of process? Is it any more fraudulent than it is not to pay the debt? Fraud is not the proper term to apply to such conduct. It may be morally wrong. It may be dishonest; but it is not fraudulent in the legal sense of the term. Inability to serve process on a defendant has never been deemed an excuse for not commencing an action within the prescribed period. ”