When Are Executives Personally Liable for Corporate Fraud?

 Posted on October 10, 2024 in Criminal Defense

Executives are responsible for the management of a company. Some are in charge of the company’s operations, while others are tasked with bringing in revenue, overseeing personnel, or establishing strategic partnerships.

So when corporate fraud is committed, who is responsible? A corporation is considered a person in the eyes of the law and can be indicted. Does that mean that if the company is charged, its officers and managers are not liable?

Corporate fraud encompasses a wide range of state and federal misdemeanors and felonies that are generally referred to as white-collar crimes. This article will discuss what corporate fraud is, when executives are liable for corporate fraud, and how to consult a Texas criminal defense attorney to protect you against corporate fraud charges.

What Is Corporate Fraud?

Corporate fraud is an umbrella term for different types of fraud that can be carried out through a corporation. These include:

• Bribery: Offering money to a public official to influence his or her judgment is called bribery and is a federal crime.
• Corruption: Corruption is the willful abuse of authority and includes bribery, embezzlement, nepotism, and more.
• Money laundering: Some companies are used to launder money from an illicit source to make it legally "clean" in the eyes of authorities.
• Insider trading: Insider trading is when someone uses non-public information to profit from public trading, which is exploiting an unfair advantage. 
• Corporate espionage: Corporate spying means illegally stealing trade secrets or intellectual property from a competitor to gain a financial advantage.
• Anti-trust violations: The US government has enacted anti-trust laws to ensure fair competition and prevent monopolies. Violating these laws is a serious federal crime.

These actions and others can fall under the category of corporate fraud and carry heavy penalties.

Are Corporate Officers Personally Liable for Corporate Fraud?

Many corporations are set up as entities that are separate from their managers. The president of an LLC, for instance, is usually not held personally liable for debts incurred by the company. When it comes to corporate fraud, however, an executive may be held accountable depending on his or her involvement in the fraud. For example:

• A corporate officer may be personally charged for company fraud if he or she was directly involved in the act.
• An executive may be held personally liable if he or she was aware of corporate fraud and knowingly did nothing.
• A corporate officer may be held personally liable for corporate fraud if he or she is found to have breached a fiduciary duty, which is a responsibility to act in the best interests of the company’s shareholders.

Contact a Cooke County, TX Corporate Fraud Defense Attorney

Corporate fraud can not only lead to a company’s destruction but can also result in heavy fines and lengthy jail sentences for its executives. At Magaña & Van Dyke, we are committed to giving our clients the best possible legal defense against corporate fraud or other criminal charges. With their extensive experience working within the criminal justice system, our attorneys understand how to create an effective legal strategy to protect your rights. Schedule a free consultation with a Denton County, TX criminal defense lawyer by calling 940-382-1976 today. Se habla Español.