The Criminal Liability of Superiors in Fraud Cases

The Criminal Liability of Executives, Managers, and Other Superiors in Fraud Cases

When it comes to business—and indeed, numerous other aspects of life—being in charge of other people also usually means being responsible for the actions of those people.

Parents are regularly held responsible for the actions of their minor children. Coaches and teachers can be responsible for students while they are in their charge. And business executives and managers can be held responsible for the actions of the employees working under them.

White collar crime is a severe charge, but many employers are under the mistaken notion that they may only be in danger of civil liability if an employee commits fraud. In fact, not only may superiors face civil liability for the actions of those beneath them, they could also face criminal penalties including fines and even jail time.

The US Supreme Court has ruled that there are three situations where a manager may be criminally charged for the fraudulent acts of employees working under them:

Authorized the employee’s conduct

If you, as the manager, authorized an employee to commit a fraudulent act, or if you in some way forced them to commit the act, you could face criminal charges yourself. This does not mean the employee would not bear any criminal liability, as the courts have also ruled that “following orders” is not a reasonable defense for committing a crime, but as the manager who authorized or requested the fraudulent act, you will also likely find yourself facing white collar criminal charges.

Turning a blind eye

If the government is able to prove that, as a superior in your company, you knew that fraud was being committed and did nothing, then you may be criminally culpable for the the actions of the employee who actually committed the crime. When you turn a blind eye toward potential fraud or other criminal activity occurring within your company, this is known as willful blindness, and it can absolutely subject managers and executives to criminal liability.

Failed to act reasonably

You could also face criminal liability for ignorance. If the government determines that within your supervisory capacity you failed to act reasonably in a manner which would have uncovered or prevented the fraudulent acts, then you may share in the liability. As a manager, you are supposed to keep a watchful eye over your employees, and if you fail to fulfill your duties, and in so doing allow your employees to commit fraud, you could also be held responsible for the fraud.

If you are facing white collar charges, or any other criminal charges, please contact the Whalen Law Office and let us fight to defend your rights and protect your future. 

Author Bio

James P. Whalen

James P. Whalen is the managing attorney and founder of Whalen Law Office, a Texas criminal defense firm offering personalized legal representation for various federal criminal charges. With a commitment to providing comfort and guidance during challenging times, Mr. Whalen serves as both an attorney and counselor to his clients, helping them navigate their cases while striving to restore normalcy to their lives.

In an inherently unbalanced criminal justice system, Mr. Whalen takes on cases with unwavering dedication. With decades of legal experience, he offers representation across various criminal charges, including white-collar crimes, violent crimes, drug charges, and more. Mr. Whalen’s numerous accolades, including Super Lawyer recognition and board certification in Criminal Appellate Law and Criminal Law, reflect his unwavering commitment to ethical and high-quality legal representation.

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