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Opinion 1
Fraud is a broad term that refers to acts intended to swindle someone. In essence, it is the use of intentional deception for monetary or personal gain.Thousands of people each year fall victim to it. Fraud always includes a false statement, misrepresentation, or deceitful conduct. The purpose is to gain something of value, usually money, by misleading or deceiving someone into believing something that the perpetrator knows to be false.
Fraud is covered by both criminal and civil laws. The most obvious differencehas to do with who files the legal case. Only government prosecutors can bring criminal charges, but a victim of fraud can file a civil lawsuit. Sometimes a person who commits fraud is both criminally prosecuted and sued in a civil action.
In civil litigation, allegationsof fraud might be based on a misrepresentation of fact that was either intentional or negligent. For a statement to be an intentionalmisrepresentation, the person who made it must either have known the statement was false or been recklessas to its truth. The speaker must have also intended that the person to whom the statement was made would rely on it. The hearer must then have reasonably reliedon the promise and also been harmed because of that reliance.A claim for fraud based on a negligentmisrepresentation differs in that the speaker of the false statement may have actually believed it to be true; however, the speaker lacked reasonablegrounds for that belief.
A civil action, as opposed to a criminal action, is an action for wrongdoing that does not result in a criminal fine or incarceration. In contrast to criminal actions, which are brought by the government, civil actions may be brought by private individuals or organizations, usually without the involvement or permission of the government or court. However, government entities may also bring civil actions to pursue noncriminal remedies against other parties. Civil actions, if successful, result in an award of civil remedies.There are a variety of substantive civil causes of action, but the two main causes that fraud examiners are likely to come across are contract actions and civil wrongs (or delicts)
A criminal action is a complaint brought by the government, acting on behalf of citizens and the interest of the jurisdiction, against a person accused of violating a law. Increasingly, most criminal offenses are codified in statutes or regulations. Criminal cases are punished by outcomes such as imprisonment, fines, orders of restitution, probation, and community service.
In criminal law, fraud usually takes very specific forms, such as bankruptcy fraud, credit card fraud, or healthcare fraud. California law, for example, also recognizes distinct crimes for check fraud, access card fraud, insurance fraud, and making false financial statements. Some criminal fraud statutesmight be classified under laws forbidding larceny,others under forgery, and others as a crime covered by laws regarding a specific industry, like insurance or baking laws
Opinion 2
In this week’s topic one we will be covering laws behind fraud investigations and the similarities and differences between civil and criminal laws in regards to fraud. A fraud investigation will only occur if one suspects an act of unlawful behavior (Insight CPAs & Financial PLLC., 2022). In the accounting world, the types of fraud will vary. In some cases, the fraudsters would act on their own or encourage others to assist in the act whether they think it may be fraud or not, and in turn, they are compensated for their assistance. The act of fraud is mostly for financial gain. Most fraudsters are charged under either civil or criminal laws.According to Find Law’s Team 2019, “ The most obvious difference has to do with who files the legal case.” (Find Law., 2019). The government can charge under criminal offenses and the victim of the crime can file under civil. In some cases the fraudster can be affected by both civil and criminal; they can be prosecuted criminally and sued by civil actions (Find Law., 2019).
For the criminal offenses, the fraud needs to be beyond a reasonable doubt, and if the victim of the crime is convicted they can be sent to jail or have penalties such as probation and fines (Find Law., 2019). For the civil lawsuits, according to Find Law’s Team 2019, “The standard of proof is lower and punishment is often restitution.” (Find Law., 2019). From personal experiences, at the company where I am working, we conducted an interview with a potential individual who had a shining resume and nailed every question asked, upon results of the background check she was in the process of paying restitution for fraud at an insurance company. Some individuals may think that when they commit the act and they are convicted where restitution is in place it would not follow them, but sure enough, these things do follow you around and create future problems when it comes to looking for other jobs.
One of the main differences between the civil and criminal fraud cases is the amount of proof needed in order to come to a conclusion of conviction. Both civil and criminal frauds are based on fraudulent misrepresentation or inducement(Coolidge Law Firm., 2021).While civil and criminal frauds have their similarities do note that under civil, the plaintiff pursues the case on their own, and with criminal, it is mostly brought to the level of the state or federal
Opinion 3
During the financial crisis in 2008, Wells Fargo acquired Wachovia to become the third-largest bank by assets in the United States. A few years later, its growing revenue and soaring stock brought the company’s value to nearly $300 billion. But behind this success was a company culture that drove employees to open fraudulent accounts in an attempt to reach lofty sales goals. Between 2011 and 2015, company employees opened more than 1.5 million bank accounts and applied for over 565,000 credit cards in customers’ names that may not have been authorized (McCombs School of Business, 2022).
Many former employees reported that company sales goals were impossible to meet, and incentives for compensation and ongoing employment encouraged gaming the system. Wells Fargo pressured employees to cross-sell, offering customers with one type of product, such as checking or savings accounts, to also buy other types of products, such as credit cards and loans (McCombs School of Business, 2022).
In mid-2014, Well Fargo attempted to curb fraudulent activity with an ethics workshop that warned employees not to create fake accounts in customers’ names. Wells Fargo also modified its compensation structure to place less emphasis on sales goals. But in the following years, these efforts were not enough. The company continued to fire employees over fraudulent accounts (McCombs School of Business, 2022).
In 2016, Well Fargo was fined a combined total of $185 million for fraudulent activity, and CEO John Stumpf resigned. Between 2011 and 2016, approximately 5,300 employees were fired for fraudulent sales practices.
The ethical insight of this case is that Wells Fargo has a fiduciary duty to treat its customers fairly. The bank offered many different services to its customers. But the bank’s management set unrealistically high sales goals for its employees, encouraging many employees to game the system. If a customer bought one service, employees were urged to “cross-sell” several more. “Eight is great” was the company mantra. The only way that Wells Fargo employees could meet their unrealistic sales targets, and thereby keep their jobs, was to make up accounts that customers had not requested and often didn’t even know they were being charged for. Employees fabricated millions of fraudulent accounts in order to keep their bosses happy and remain employed. It was a classic conflict of interest. Incorrect decision-making issues chosen and followed through by employees and not the customers lead to lowered reputation and moral of Wells Fargo (McCombs School of Business, 2022).
The most evident ethical issue in this scandal was the loss or misuse of trust, which resulted in the loss of integrity of Wells Fargo employees. The loss of honesty for a personal incentive had an effect on the corporation as a whole.
In the simplest form, ethics are the moral standards we rely on when we make a decision. They define what’s right and wrong, and they outline the kind of behavior that individuals and businesses should and should not engage in. Ethics are not only a guide to making decisions but also the criteria the public uses to judge individual conduct. For responsible decision-making in a business environment, ethics are the key to success. In business, this is critical because how people see a company and its colleagues is the basis of building trust. If the individual or company is taking unethical actions, credibility will be lost and the business will suffer (ACFE, 2017).
Organizations should take steps to prevent conflicts of interest. They should establish policies clearly defining what constitutes a conflict of interest and prohibiting any such entanglements by officers, directors, employees, or other agents of the organization. A policy requiring employees to complete an annual disclosure statement is an excellent proactive approach to dealing with potential conflicts. Furthermore, such policies will reinforce the idea that engaging in conflicts of interest is unacceptable for employees and will result in severe consequences. Also, managers must establish an ethical tone for the companies they lead. The tone management sets will have a trickle-down effect on the employees of the company. Moreover, organizations must educate their employees about conflicts of interest. In fact, there is no greater tool in the prevention and detection of fraud than a network of employees who are knowledgeable about fraud and look for indicators of their organization’s vulnerabilities. Additionally, organizations should implement monitoring activities to identify red flags of conflicts (ACFE, 2020).
Opinion 4
You chose one of the most popular and massive cases that actually struck the attention of many. The actions that occurred with this firm were unreal. Trying to portray a financially stable entity to users of the financial statements is beyond unethical. Enron’s dishonesty went on for a number of years without getting caught which is quite scary. Until I got involved in accounting and learned about the Enron case, I found out what market-to-market accounting was. Even though I am sure Enron had a well-put-together code of ethics, it did not shed light in regards to effectiveness. They took advantage of this type of accounting which allowed companies to report assets at their fair value (Corporate Finance Institute., 2015). According to Corporate Finance, “The numbers provided by Enron to analysts were black box numbers that were difficult to pin down due to the wholesale nature of Enron.” (2015).
To me, their code of ethics was the wall they needed to blind those not involved in the white-collar crime because they fell short of everything mentioned in their handbook. In their handbook, they mentioned the word honesty quite a few times in the foreword, which did not apply to the fraudsters at Enron.What is truly eye-opening is in this handbook they also mentioned that anyone directly or indirectly related to Enron should not trade in the securities. Even though this is written, employees were still involved with trades and Kenneth Lay who was the Chairman and Chief Executive Officer held a lot of stocks with Enron (CFA Institute., 2013). This goes to show the code of ethics was just for the show, and maybe it was used as a tactic to bring in more investors because sometimes when a company portrays a level of honesty, integrity, and transparency it can hold the trust of many, but those investors truly did not know what was happening behind closed doors.
Their ethics were not the only thing at fault, Enron also utilized the same firm for external and internal auditing services. I am not sure how Enron said that they fell within the SEC guidelines to have the same firm for the internal and external services. We know that this can pose huge risks and affect independence when it comes to reviewing financial statements. How can one review their own work, this does not make any sense (Washington Post., 2001). This only makes me question so much more about the Enron case. I think this case, shed light on the SEC to enhance regulations which have proven themselves to be quite effective and efficient for many companies.

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