Legal Definitions - intentional fraud

Intentional fraud refers to a deliberate act of deception where an individual or entity knowingly makes a false statement or misrepresentation of a significant fact, with the specific purpose of misleading another party. The deceiver intends for the other party to rely on this false information and, as a result, take an action (or refrain from acting) that causes them harm or loss, while often benefiting the deceiver.

This type of fraud is characterized by the clear mental state of the perpetrator: they are aware their statement is false and actively intend for it to mislead and cause detriment.

• Example 1: Misrepresenting Investment Opportunities

  A financial advisor, knowing that a particular investment fund is performing poorly and is at high risk of collapse, intentionally tells a client that the fund is "guaranteed to double your money within a year" and presents fabricated performance charts to support this claim. The advisor does this to earn a large commission from the client's investment.

  This illustrates intentional fraud because the advisor *knowingly* made false statements and presented fake documents about the fund's performance. Their *intent* was to deceive the client into investing, causing the client financial loss and benefiting the advisor through commissions.

• Example 2: Falsifying Product Safety Information

  A toy manufacturer discovers a design flaw that makes a new line of children's toys a choking hazard. To avoid a costly recall and protect sales, the company's CEO orders employees to falsify safety test reports and intentionally omits any mention of the hazard in product warnings, allowing the dangerous toys to be sold to the public.

  Here, the CEO and the company engaged in intentional fraud by *deliberately* creating false safety reports and withholding critical information about a known hazard. Their *purpose* was to mislead consumers and regulatory bodies about the product's safety, prioritizing profit over public well-being.

• Example 3: Deceptive Insurance Claim

  After a minor fender bender, an individual intentionally exaggerates their injuries to their insurance company, claiming severe whiplash and inability to work for several months, despite feeling only minor stiffness. They submit forged doctor's notes and inflated medical bills to support their claim, hoping to receive a much larger settlement than their actual injuries would warrant.

  This demonstrates intentional fraud because the individual *knowingly* misrepresented the extent of their injuries and submitted fabricated documents. Their *intent* was to deceive the insurance company into paying out a higher amount, causing financial loss to the insurer.