Fraudulent Schemes and Illegal Enterprise

Fraudulent Schemes and Illegal Enterprise

Fraud and illegal enterprise crimes apply to a large assortment of criminal activity, ranging from drug trafficking to white collar crime. Arizona law specifies different categories of these crimes and the associated penalties. Many people are unsure how this complex of laws works. Below we explain the Arizona fraud- and illegal enterprise statutes.

What is the Criminal Fraud Statute in Arizona?

Prosecutors may charge any person with fraud who knowingly obtained a benefit through a scheme to defraud. The means of obtaining the benefit include fraudulent pretenses, false representations, bogus promises or material omissions.

Defendants convicted of a violation of Arizona’s criminal fraud law faces a Class 2 felony, which carries a presumptive prison sentence of five years. Judges impose the presumptive sentence when no aggravating or mitigating circumstances apply. In some cases, we can successfully argue mitigating circumstances exist and receive a reduced sentence. The toughest cases occur when serious aggravating circumstances apply, such as an extensive criminal history or a fraud crime that caused unusually cruel damage to the victim.

Arizona law also requires heavier penalties when the fraud netted over $100,000 in value and/or involved the sale of opioids. In these cases, the law forbids suspended sentences, probation, pardon or early release. For example, an employee who embezzled over $100,000 must serve the full prison term.

Fraud in opioid sales has become a salient political issue due to the opioid epidemic. Therefore, Arizona law punishes harshly cases of selling fraudulently obtained prescription- or illegal opioids. In addition, opioid dealers who misrepresent the content of pills may face additional charges, such as manslaughter or murder, if a buyer dies as a result.

For example, many dealers sell fake Oxycontin on the Internet. The purported Oxycontin may actually be deadly Fentanyl obtained from China. Since Fentanyl is much stronger than Oxycontin, this creates a dangerous situation where an accidental overdose becomes many times more likely.

Categories of Criminal Fraud in Arizona

Because fraud covers such a large variety of crimes, the law divides them into three broad categories: consumer fraud, employee fraud and fraud against a government or a business.

Consumer Fraud

In these cases, perpetrators defraud individual consumers. Identity theft serves as a common example. Fraudsters steal personal information, such as Social Security numbers, and use it to obtain loans or credit cards.

Ponzi schemes are another common fraud type. Securities fraud and telephone scams are another. If you have seen the movie Boiler Room, you are familiar with securities fraud and a telephone scam rolled into one. The “brokers” called their victims and sold them non-existent securities.

Employee Fraud

This type of fraud occurs with regularity. Embezzlement, whether for petty cash or large sums, serves as a common example. Employee fraud may also include accepting bribes. For example, a purchasing agent accepting kickbacks to steer business to a vendor that charges inflated prices.

The black-market sale of trade secrets provides another instance of employee fraud. For example, an employee may know the formula for a pharmaceutical company’s new medication and sell it to a competitor.

Fraud Against the government or a business

Fraudsters target many government agencies. Welfare fraud, such as claiming non-existent dependents, is a frequent form of fraud against a government, as is Medicare and Social Security fraud. Unemployment fraud, including failing to report earnings while collecting, provides another common case of fraud against a government.

Businesses are also often targeted. For instance, insurance companies often receive false or inflated claims. Property may even be intentionally damaged, such as by setting a fire, to collect policy proceeds.

Federal Versus State Charges

Civil Fraud in Arizona can be charged at the state- or federal level. Federal charges often result from crimes that cross state lines. For example, a case of selling fraudulent prescriptions on the Internet to people in other states may be federally charges. Counterfeiters, because the crime involves U.S. Government currency, also face federal prosecution.

Civil Versus Criminal Charges

Not all cases of fraud rise to the level of a crime. To prove criminal fraud beyond a reasonable doubt, prosecutors must demonstrate intent. Where the fraud occurred because of bad dealing but where no intent to defraud occurs, the victim can receive recompense in civil court.

Civil court penalties reprimand the defendant and resort the plaintiff to his or her previous financial position.

Enterprise Crimes

Like fraud, enterprise crimes cover a wide range of criminal activity. Traditionally, organized crime ran illegal businesses, known as “rackets”. These businesses were obviously illegal ones, such as illegal casinos and weapons, prostitution, drug trafficking and human trafficking. Extortion, such as protection rackets, have long been part of enterprise crimes.

Recently, cyber extortion has become a problem. In these crimes, a hacker installs malware onto the victim’s computer that blocks access to data. The hacker then demands money in exchange for restoring access.

Fencing rackets are also a traditional staple of organized crime. These occur when a group participates in stealing goods and reselling them at a low price to unsuspecting buyers.

Racketeering also occurs when illegal proceeds are used to fund a legitimate business. Often, organized crime bosses need a way to make their illegal enterprise profits seem legitimate. Through fraud, they can make it seem like the illegal profits came from the legitimate business.

More recently, a trend has emerged with corporations funded with legal money engaging in widespread fraud. Governments have expanded the definition of RICO to include many of these businesses.

For example, a pharmaceutical company may qualify as engaging in racketeering if it bribes doctors to hand out unnecessary prescriptions to boost profits. In the case of Purdue Pharma, a racketeering scheme contributed to the opioid epidemic through the over prescription of Oxycontin. The result was widespread addiction that led to massive fraudulent prescriptions and a black market in counterfeit Oxycontin.

Under Arizona law, anyone controlling or participating in an illegal enterprise can be charged with illegally controlling an enterprise, running an illegal enterprise or participating in one.

Provided the crimes occurred within Arizona, the charges are pursued at the state level. Should investigators find the criminal enterprise extended beyond state line, a federal prosecution may ensure.

To face conviction under Arizona law, the state must prove that the defendant knowingly participated in an illegal enterprise. As in the case of Bernie Madoff, only those who knowingly worked at the firm despite its criminal activity are eligible for prosecution.

Illegal Enterprise Penalties

Anyone convicted of the above racketeering crimes faces a Class 3 felony, which carries a range of two-and-a-half years to seven years in prison. If there are no aggravating or mitigating circumstances, a judge is likely to impose the presumptive sentence of three-and-a-half years.

Sex trafficking and engaging minors in an illegal enterprise constitutes a Class 2 felony. This applies to anyone who hires or engages a minor for any conduct related to this section of the law.

A Class 2 felony carries a penalty of four to 10 years in prison, with a presumptive sentence of five years. The judge will likely impose the presumptive sentence if there are no aggravating of mitigating factors.

Fraud- and illegal enterprise charges cover a lot of legal ground. Charges range from civil to criminal, misdemeanor to major felony and federal to state. If you have been charged or think you will be charged with fraud or illegal enterprise violations, consult an attorney at the earliest possible time. Many innocent people are implicated in these types of crimes, and it may not be too late to prevent a case against you from going forward.

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