Can Companies Face Charges for Employee Fraud?

Many white-collar crimes are committed by employees of large companies. Unfortunately, while many of these individuals are acting on their own, it is not uncommon for the companies that hire them to be unfairly accused of participating in the scheme. This can have devastating financial and personal repercussions for a company, making it especially important for businesses that have been accused of being involved in a fraud-based crime, to speak with an experienced Houston white collar crimes lawyer who can help them mount a strong defense. 

Federal Law

Under federal law, a company can be held criminally liable, or found guilty of, an offense that was committed by an employee if prosecutors can prove that:

• The employee was acting within the scope of his or her duties and on behalf of the corporation; and
• The company knew that the activity in which the employee was engaging was criminal. 

Ultimately, determining whether to prosecute a company for the criminal acts of an employee is up to the Justice Department, which is directed to weigh a number of factors in making their decision, including:

• The strength of the case against the company;
• Whether the company has a history of misconduct;
• Whether the company has a compliance program in place;
• Whether the crime carries a substantial risk of great public harm;
• How cooperative the company is with the federal investigation;
• Whether the company has taken any remedial measures or made restitution to the victims; and
• The alternatives to federal prosecution. 

If prosecuted and then convicted, a company faces severe penalties, such as fines, probation, mandatory restitution orders, and the confiscation of company property. A company can even be barred from engaging in future commercial activity. With so much at stake, it is critical for business owners who have been accused of fraud, to speak with an attorney about their options as soon as possible. 

Texas Law

Although it is also possible to be held criminally liable for the acts of an employee under Texas law, the rules are a bit different. When these types of allegations are raised in state court, a company can only be convicted of employee fraud if:

• The employee was acting with the scope of his or her duties; and
• The employee was acting on behalf of the company. 

In addition to these elements, which are the same under federal law, prosecutors will also need to demonstrate that either:

• The specific crime being alleged is defined as a strict liability offense or a crime that applies to corporations; or 
• The employee’s actions were authorized or requested by the CEO or another managerial agent, or by a majority of the company’s Board of directors. 

Generally, there is a greater possibility that a company will be held criminally responsible for an employee’s actions under federal law. State allegations should not, however, be taken lightly. 

Has Your Company Been Accused of Fraud?

For help defending your own company against allegations of fraud, please reach out to the experienced Houston white collar crime lawyers at The Law Offices of Tad Nelson & Associates by calling (281) 280-0100 today.