Corporate/Commercial Fraud Essay

1172 Words 5 Pages
Corporate/Commercial Fraud

The Royal Canadian Mounted Police [RCMP] classifies corporate fraud into two different categories: fraud by a company and fraud against a company (para. 5). The RCMP explains fraud against a company can happen through “misappropriation of corporate assets by a company senior officer or by staff” (para. 5). Employees defraud companies with methods such as “fictitious revenues, concealed liabilities and expenses, and asset or revenue understatements or overstatements” where as fraud by a company happens by “providing incorrect or misleading information to shareholders or regulators, including financial reporting fraud – where incorrect or misleading information is provided for individual financial gain” (RCMP,
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This comes with no surprise as the FBI states in their Financial Crimes Report that the majority of the cases they pursue “involve accounting schemes designed to deceive investors, auditors and analysts about the true financial condition of a corporation” (para. 11). These financial crimes a particularly important because they do not only impact the people who have been defrauded personally but they also “[have] the potential to cause immeasurable damage to the U.S. economy an investor confidence” (FBI, para. 11).

With the fall of the economy over the recent years as consumers and employees, we have watched companies’ profits drop forcing layoffs and bankruptcy filings. In tough times such as these, executives and management can feel pressure to report positive results to their shareholders. This pressure can result in a company falsifying their financial statements in order to present the performance their shareholders want to see. In the last couple of years the Lehman Brothers Holdings [Lehman Brothers], Goldman Sachs Group, Inc [Goldman Sachs] and Satyam Computer Services Ltd. [Satyam] have been accused of doing so.

After the Lehman Brothers filed for bankruptcy in 2008, complaints about fraudulent transactions called “Repo 105” surfaced. According to the Wall Street Journal, these transactions involve a form of short-term borrowing called repurchase agreements (para. 7).