Fraud = Punishment

And another weekend comes to an end...

In a new era of corporate and financial accountability, witch hunts for investment bankers and portfolio managers whose greed purportedly brought about the end of civilization as we knew it (from 2002 to 2008, anyway) and figuring out how to regain some of the easier living many of us enjoyed just a few years ago, the word "fraud" has made a new resurgence in my business.

The term is used a lot - an awful lot.  It's use as a legal tool is relatively rare, though, largely because it is tough to prove and other legal claims are better suited to redress a particular situation that a client thinks may be fraud.  That said, the last two years seems to have given new fuel to the fraud fire and many clients and lawyers seem happy to stoke it.

The renewed interest and popularity seems to have a lot to do with, not so much the fact that there has been or is more fraud around (although it's certainly a possibility), but with the potential for greater gain. You see, most causes of action are intended to recover the losses you sustained.  The law is designed, largely, to put you in the position you would have been in but for the events that brought you to litigation.

Fraud and a handful of other claims, however, can get you something else- punitive damages (which I have also addressed in an earlier blog posting).  In other words, a jury can award money can just as punishment - a message to the defendant and the world at large that the defendant's conduct is not sanctioned and deterred.

This is, in part, what seems to make fraud so attractive to plaintiffs now.  Not only can they recover what they lost, but they can try to gain something extra if they package their claims correctly.  Now, unlike what most people seem to think and what t.v. portrays, we lawyers can't just weave a fraud claim out of thin air because we feel like it or because we have some special manipulation skills.  You actually have to have the facts and circumstances that support fraud.  I do find, however, that the courts seem to be a little more lenient on what can stand as a fraud claim versus what was allowed to stand just a few years ago.

By and large, the law is not intended to be a profit-making vehicle, but that doesn't mean clever plaintiffs haven't and won't continue to try to use it just for that.  Of course, those really defrauded will simply continue to use it as a means to vindicate their rights.

Happy Monday, everyone.