California’s Criminal “Fraud” Laws, Penalties & Defenses

1. commit an act that results in an unfair or undeserved benefit for yourself, and/or
2. cause harm or loss to another person.

Often referred to as white-collar crimes, fraud offenses can subject you to high fines, significant jail/prison sentences, and asset forfeiture. Many of these crimes carry specific penalties, while others are prosecuted as:

• theft,
• forgery (PC 470), and/or
• perjury (PC 118).

Many California fraud crimes are wobblers, which means that prosecutors may charge them as misdemeanors or felonies, depending on

1. the facts of the case, and
2. your criminal history.

Some fraud offenses are also federal crimes, which means that you could be prosecuted in both state court and federal court.

In addition to having criminal penalties such as fines and incarceration, a fraud conviction could cause your professional license(s) to be suspended or revoked. Plus if you are a non-citizen, you risk deportation since fraud is a crime involving moral turpitude.

Three common legal defenses that can get fraud charges dismissed include:

1. you did not have fraudulent intent,
2. you were the victim of mistaken identity, and/or
3. the police committed misconduct, such as entrapment or an illegal search.

Our California criminal defense attorneys¹ have a long track record of getting fraud charges reduced or dismissed completely. Below we explain the most common types of fraud offenses:

• 1. Insurance Fraud
  • 1.1. Automobile insurance fraud laws
  • 1.2. Health care insurance fraud laws
  • 1.3. Medi-Cal insurance fraud laws
  • 1.4. Unemployment insurance fraud laws
  • 1.5. Welfare fraud laws
  • 1.6. Workers’ compensation laws
• 2. Real Estate Fraud
  • 2.1. Foreclosure fraud
  • 2.2. Laws against forging deeds
  • 2.3. Predatory lending schemes
  • 2.4. Illegal property flipping
  • 2.5. Rent skimming laws
  • 2.6. Straw buyer schemes
  • 2.7. Phantom help schemes
• 3. Financial Fraud
  • 3.1. Check fraud
  • 3.2. Credit card fraud
  • 3.3. Securities fraud
• 4. Forgery & Identity Theft
  • 4.1. Law against forging, counterfeiting or possessing a fraudulent public seal
  • 4.2. Law against forging or counterfeiting a driver’s license or ID card
  • 4.3. False impersonation
  • 4.4. Internet fraud
• 5. Elder Abuse Fraud
  • 5.1. Senior fraud
  • 5.2. Nursing home fraud
• 6. Other Fraud Types
  • 6.1. Mail fraud
  • 6.2. Handicapped parking fraud
  • 6.3. Law against fraudulent vehicle registration stickers
  • 6.4. Gambling fraud
  • 6.5. Telemarketing fraud
  • 6.6. Chargeback fraud
• Additional Resources

If, after reading this article, you would like more information, we invite you to contact us at Shouse Law Group.

Generally speaking, you commit fraud anytime you commit an act that results in an unfair or undeserved benefit for yourself, and/or cause harm or loss to another person.

1. Insurance Fraud

You commit insurance fraud when you attempt to obtain insurance payments or benefits to which you are not otherwise entitled.

1.1. Automobile insurance fraud laws

You violate California’s automobile insurance fraud laws (PC 548-551) when you attempt to obtain money fraudulently from an auto insurance carrier by engaging in acts such as:

• “staging” an accident,
• inflating the price of a claim, or
• setting fire to your vehicle and reporting it stolen.

1.2. Health care insurance fraud laws

Doctors, pharmacists, medical equipment suppliers and hospital employees are just some of the players that may be involved in violating California’s health care insurance fraud laws. Examples of these types of violations include (but are not limited to):

• charging for medical services that were not provided,
• receiving “kickbacks” for prescribing certain drugs,
• altering medical records,
• engaging in doctor shopping or prescription fraud by securing multiple prescriptions for the same drug, and/or
• double billing or over-billing for services rendered (“upcoding”).

1.3. Medi-Cal insurance fraud laws

Most acts that violate California’s Medi-Cal insurance fraud laws are simultaneously violations of health care fraud.

For example, a doctor who bills Medi-Cal (the state health insurance program for low-income individuals) for services they did not perform commits both Medi-Cal fraud and the more general crime of healthcare fraud.

It is also Medi-Cal fraud to understate your income in attempt to qualify for Medi-Cal benefits you are not entitled to.

1.4. Unemployment insurance fraud laws

California’s unemployment insurance fraud laws (WIC 10980) prohibit intentional attempts to increase, reduce or deny an unemployment insurance benefit. Examples include (but are not limited to):

• lying about being unemployed,
• inflating your income and expenses in order to increase your benefits,
• falsifying your work-search efforts,
• collecting benefits in two or more states,
• intentionally providing false information about why your employee was terminated – or about their wages – to avoid contributing to the unemployment insurance program.

1.5. Welfare fraud laws

You violate California’s welfare fraud laws (10980 WIC) when you try to obtain or increase welfare benefits to which you are not legally entitled. There are two types of welfare fraud:

1. recipient fraud (which includes trying to secure fraudulent benefits), and
2. internal fraud (where an employee of a government agency that distributes welfare benefits attempts to collect or distribute unlawful benefits from that agency, such as to a friend or family member).

1.6. Workers’ compensation laws

You violate California’s workers’ compensation laws (CIC 1871.4) when you try to make a fraudulent claim against this state’s workers’ compensation insurance program. Examples of this type of fraud include (but are not limited to):

• faking an injury (or exaggerating the extent of the injury),
• falsifying claim forms,
• claiming that a non-work injury is work-related, and
• failing to disclose a prior injury that would be relevant to your current claim.¹

Real estate and mortgage fraud laws punish any deliberate false representation that is made in connection with any portion of a real estate transaction.

2. Real Estate Fraud

California’s real estate and mortgage fraud laws punish any deliberate false representation that is made in connection with any portion of a real estate transaction.

2.1. Foreclosure fraud

California foreclosure fraud (CC 2945.4) is one of the most frequently prosecuted types of real estate fraud. In simple terms, foreclosure fraud takes place when a person – often a self-proclaimed foreclosure “consultant” – represents that they can postpone or prevent a pending foreclosure.

More generally, you commit this type of fraud anytime you engage in a fraudulent activity that has to do with:

• a foreclosed home or
• a home that is involved in the foreclosure process.

2.2. Laws against forging deeds

Forgery is defined as knowingly altering, creating or using a written document with the intent to commit fraud. As a result, California’s laws against forging deeds (PC 115) prohibit:

1. attempting to file, register or record a forged deed,
2. filing a forged deed, and/or
3. filing, registering, or recording any other false or forged document in any public office within the state

with the intent to fraudulently transfer title or obtain funds.

Forging a deed is a felony, carrying a prison term of 16 months to 3 years and fines of up to $10,000.

2.3. Predatory lending schemes

Predatory lending refers to unlawful practices by banks and other lending institutions that take advantage of unsuspecting borrowers.

Simply put, you violate California’s laws against predatory lending when you – as a lender – manage a loan transaction to extract the maximum value for yourself without regard for the borrower’s ability to repay the loan.

2.4. Illegal property flipping

Property flipping is generally a legal practice. It typically involves a buyer who:

• purchases a property below market value,
• upgrades it and then
• quickly sells it for a profit.

Illegal property flipping in California – a violation of real estate and mortgage fraud laws – occurs when you create fraudulent appraisals and/or loan documents to justify an inflated asking price.

2.5. Rent skimming laws

You violate California’s rent skimming laws (CIV 890) when you:

1. use rent proceeds from your residential rental property at any time during the first year after acquiring the property without first applying that amount to your mortgage, or
2. rent a property that you do not own or have the authority to rent and collect the rent for your own use.

Generally, rent skimming is a civil offense, subjecting you only to fines. However, if you engage in rent skimming with five or more properties within in any two-year period, the acts will be prosecuted criminally as well.

2.6. Straw buyer schemes

California straw buyer schemes wreak havoc on”straws,” individuals who are recruited by real estate agents or brokers because of their good credit. The professional convinces the straw to use their information to secure a loan for another buyer – or even a fictitious buyer – who allegedly cannot acquire the loan because of poor credit.

Once the loan is processed, the agents – and any other players such as a mortgage broker – collect the loan money and run. The straw is then left responsible for the mortgage, which ultimately causes them to declare bankruptcy and face possible criminal charges.

2.7. Phantom help schemes

California phantom help schemes (CIV 2945.4) are specifically prohibited under foreclosure fraud law. There are three types of phantom help schemes:

1. A so-called “foreclosure consultant” or “mortgage modification specialist” charges a homeowner who is facing foreclosure a fee to delay or prevent the foreclosure process when they in fact do little or no work towards this goal,
2. A seller markets a home that is pending foreclosure to an unsuspecting buyer who is unaware of the foreclosure. The “seller” collects a down payment and delivers a fake or unrecorded deed that does not convey any title to the property.
3. A “consultant” convinces the homeowner to make their mortgage payments directly to the consultant who claims that they will serve as a liaison between the homeowner and the bank in an effort to slow or stop the foreclosure process.²

3. Financial Fraud

3.1. Check fraud

You commit California check fraud (PC 476) by making, using or possessing – or attempting to make or use – a check when you:

1. intend to defraud the payee, and
2. reveal that intent by representing the check to be genuine.

Check fraud also comprises:

• trying to pass a check knowing that there are insufficient funds to cover the full amount of the check,
• cashing counterfeit checks, or
• using another person’s checking account with permission to make withdrawals, fund transfers, etc.

3.2. Credit card fraud

California credit card fraud (PC 484e – 484j), not surprisingly, involves any fraudulent transaction that is made or attempted with respect to a credit or debit card or with the account information that is linked to a credit or debit card.

Typical examples of this offense involve:

• using someone else’s credit card without their authorization,
• selling counterfeit credit cards, and/or
• using your own credit/debit card knowing that the card is expired or has been revoked.

3.3. Securities fraud

California securities fraud – also known as stock fraud or investment fraud – involves practices that encourage investors to make decisions based on false information. This type of fraud can include:

• stealing from investors or a company,
• misstating a company’s value, or
• counterfeiting or altering a company’s financial statements.

Stock traders, promoters, accountants, and traders are the typical players that are involved in these types of schemes.³

4. Forgery & Identity Theft

Forging any type of document is a fraudulent offense. Because many forged documents have to do with one’s identification, these types of offenses not only violate state fraud laws but also forgery laws and identity theft laws as well.

4.1. Laws against forging, counterfeiting or possessing a fraudulent public seal

California’s laws against forging, counterfeiting or possessing a fraudulent public seal (PC 472) prohibit just that.

What is interesting is that this crime is not limited to California seals: You can be convicted of this offense for engaging in any of the above activities with respect to any public seal, whether it is the seal of any:

• government,
• government agency or
• corporation.

If you violate this law by forging a public seal on a document that lends you someone else’s identity, you violate identity theft law as well.

4.2. Laws against forging or counterfeiting a driver’s license or ID card

Similarly, if you violate California’s laws against forging or counterfeiting a driver’s license or ID card (PC 470) – and you assign yourself a different name – you would also be guilty of identity theft. However, it is not necessary that you commit identity theft in order to violate this law.

All that is required under this fraud offense is that you alter any government-issued driver’s license or ID card or make a counterfeit one.

Note that merely possessing a fake or counterfeit driver’s license or ID card (PC 470b) is also fraud.

4.3. False impersonation law

You violate California’s false impersonation law (PC 529) when you pose as another person in order to secure a benefit for yourself and/or to harm the other individual. This is clear identity theft.

Common examples include:

• signing someone else’s name to a check and trying to cash it as if you’re that individual, which is also check fraud, or
• using someone else’s name to obtain welfare benefits, which is also a violation of welfare laws.

Oftentimes, this type of offense takes place over the Internet. Common examples include:

• using someone else’s credit card to make an online purchase, or
• posing as someone in an online “chatroom” or by hacking into someone else’s social networking profile.

Both of these examples are also examples of Internet fraud, discussed below.

4.4. Internet fraud

California’s Internet fraud laws prohibit any fraudulent activity that takes place on a computer, such as in a chat-room, e-mail, or online store. Examples include:

• making fraudulent online purchases,
• creating or forwarding a computer virus, and/or
• violating cyberstalking laws.⁴

Many state fraud offenses that specifically deal with seniors.

5. Elder Abuse Fraud

5.1. Senior fraud

You violate California’s elder abuse laws (PC 368) when you emotionally, physically or financially abuse an elder (a person 65 years or older). When this type of abuse is financial, it typically qualifies as senior fraud.

Examples of the types of schemes that frequently qualify as financial elder abuse include (but are not limited to):

• telemarketing schemes,
• credit repair schemes,
• home repair schemes,
• funeral and cemetery senior fraud, and
• real estate predatory lending elder abuse.

5.2. Nursing home fraud

Like elder abuse, nursing home abuse can be physical, emotional or financial. Instances of financial abuse are considered acts of California nursing home fraud. This type of fraud can include acts such as:

• being an employee of the facility and convincing one of the elderly residents to sign over their property to the employee,
• overbilling for care/meds, and/or
• forging the elder’s name on a check.

6. Other Fraud Types

6.1. Mail fraud

Mail fraud is actually a federal offense. It includes any fraudulent activity that utilizes the postal system during the commission of the offense. This means that if, for example, you:

• use the mail to advertise fraudulent services,
• send a forged check through the mail, or
• intentionally fail to deliver a product that was ordered through the mail,

you may be convicted of mail fraud.

6.2. Handicapped parking fraud

You commit California handicapped parking fraud when you illegally use, misuse or lend to another person a disabled parking placard. There are a variety of ways you can commit this offense, including (but not limited to):

• using someone else’s placard to park when you are not disabled, and the true owner of the placard is not with you,
• lending your placard to someone who is not entitled to use such a placard, or
• displaying a fake, forged or expired handicapped placard.

6.3. Law against fraudulent vehicle registration stickers

If in an effort to secure a financial gain and/or to avoid paying DMV taxes or fees, you intentionally interfere with:

• a license plate,
• registration stickers, or
• a registration card,

you are guilty of violating California’s law against fraudulent registration stickers (VC 4463). Depending on how you interfere with these items, you could face additional charges for violating state law against forging, counterfeiting or possessing a fraudulent public seal.

6.4. Gambling fraud

Penal Code 332 PC prohibits fraudulently obtaining someone else’s money or property through card games, scams, sleight-of-hand or tricks, such as:

• three card monte or other “confidence games”;
• cheating at card games or other gambling activities; and
• fraudulent fortune-telling.

California gaming fraud (PC 332) is punished based on the amount of money you are alleged to have fraudulently obtained through such activities. This offense carries misdemeanor penalties for amounts of $950 or less–but becomes a wobbler for amounts over $950.

6.5. Telemarketing Fraud

Business & Professions Code 17511.9 makes it a crime to engage in so-called “telemarketing fraud.” This means to use the phone in attempt to defraud others out of their money through a deceitful or fraudulent business scheme.

Telemarketing fraud is a wobbler punishable by up to one year in jail as a misdemeanor, and up to 3 years in custody and up to $10,000 in fines as a felony.

6.6. Chargeback Fraud

This scheme (also called “double dipping“) typically involves:

• purchasing a good with a credit or debit card,
• lying about never receiving it (or claiming it was damaged, etc.),
• demanding a refund, and
• keeping the good (and sometimes reselling it).

Additional Resources

For more in-depth information, refer to these scholarly articles:

• California’s Dedicated Mortgage Fraud Statute – McGeorge Law Review.
• Preventing Predatory Lending in the California Subprime Mortgage Market – Loyola of Los Angeles Law Review.
• Securities Fraud Prosecutions: Still Viable under California Securities Law after Simon – San Diego Law Review.
• Life Insurance Agent Fraud in California: Rebating and Related Misconduct– Loyola of Los Angeles Law Review.
• California Escrow Agents: A Duty to Disclose Known Fraud – Pacific Law Journal.

Legal References