When Fraud Is Not a Fraud.


When a Fraud is Not Really a Fraud.

You just lent $10,000 to a “friend”.  He says he’ll pay you back and gives you three signed checks for $2000, $4500, and $4500 (the extra $1000 is interest).  He says he can’t pay all at once, which is why he has the checks postdated and staggered.  He says he has some money coming in and will have the moneys available at the end of each month and asks you to deposit them when they are due.

You deposit the $2000 check the first month and it goes through.  You deposit the $4500 check the next month and it bounces.  You call your friend and he states he has some money coming in next week and asks you to deposit it after one week.  When you deposit that check after a week it bounces.  Now the friend is evading your call.  You deposit the last $4500 check and it too bounces.  You call and call but your friend does not answer.  When you track him down he says he can’t pay back the money right now but promises to pay you back and writes a promissory note to that effect.  He still doesn’t pay and keeps evading you.  You are furious and tell me that you want my help in filing criminal charges against this friend for deceiving you and issuing fraudulent checks.

Sufficient act for criminal charge of fraudulent check?  Not exactly.  Just because you feel you’ve been “cheated” doesn’t mean it’s a crime.  You, or the police officer, have to find the specific criminal statutes that fits your fact scenario.  There are 5 separate crimes on issuing bad checks.

In the above example, the law says you are guilty of issuing bad checks if you “make or deliver a check … with the intent to defraud … knowing at the time of such delivery, that you do not have sufficient funds … in a bank … for the payment of such check.”  Va. Code 18.2-181.  In other words, when you deliver a check to someone you are implying that the check is good and that it will not bounce.  If you had insufficient funds in your bank and it was impossible to honor that check, you are guilty of issuing bad checks.

However, the “friend” expressly told the client that he didn’t have sufficient funds and that the client should wait until funds were available at a later date.  In that instance, the friend may be able to escape criminal charges of issuing bad checks by showing that the checks tendered were evidence of one’s promise to pay and not check fraud as defined in the statutes.  The fact that the borrower subsequently wrote a promissory note to pay also complicates the problem with regard to criminal charges.  That doesn’t mean the client has no recourse – the client is certainly entitled to file a civil lawsuit for the return of money and will likely win.

But a breach of contract is not fraud.   A broken promise is just that – a broken promise.  And not all broken promises are converted to criminal fraud charges.  People break promises all the time.  If you can’t pay your monthly credit card statement, you’ve broken a promise to pay the money when due.  But it is unlikely that the credit card company will file criminal charges against you.  In an often cited Virginia Supreme Court case, the court stated that a contractor’s use of an inferior construction material and attempts to hide it was not fraud but a breach of contract, since what was promised via a contractual agreement was not delivered.

So when is a fraud not a fraud?  It may seem like common sense that when one is cheated or if a promise to pay is not honored, that’s fraud.  But the law is very specific on what constitutes fraud in criminal proceedings, and just because you’ve been wronged does not make that conduct a fraud.

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