USA Law and Practice Contributed by: Steven Molo, Robert Kry, Megan Cunniff Church and Walter Hawes, MoloLamken LLP
Fraudulent misrepresentation/false statements Fraudulent misrepresentation – fraud arising from a false statement – is the offence commonly understood to be a claim for fraud. To state a claim for fraudu - lent misrepresentation, and using New York law as an example, a plaintiff must allege that: • the defendant made a false statement of material fact; • the defendant knew the statement was false; • the false statement was made for the purpose of inducing the plaintiff to rely on it; • the plaintiff was reasonable in relying on the false statement; and • the plaintiff was injured as a result of relying on the false statement. A plaintiff must also have taken reasonable steps to protect itself against reliance on false statements. In other words, a plaintiff must exercise due diligence in discovering the fraud. Only where the plaintiff is justi - fied in relying on the false statement can it succeed in such a claim. False claims Another form of fraud arises under the False Claims Act (31 USC Sections 3729–3733) (FCA), which is a federal statute that is often invoked in the context of government contractor fraud. The FCA provides that any person who knowingly submits a false claim for payment to the government is liable for triple the gov - ernment’s actual loss plus a penalty for each false claim. While the FCA allows the US government to institute actions alleging such claims, it also allows private whistle-blowers to bring lawsuits on the gov - ernment’s behalf against those who have defrauded the government. These are called “qui tam” suits. The whistle-blower may receive a percentage of any funds recovered. Corrupt payments The Foreign Corrupt Practices Act of 1977 (15 USC Sections 78dd-1, et seq) (FCPA) makes it unlawful for certain people and entities to make payments to foreign officials in order to obtain or retain business. While the FCPA is widely known for its criminal provi - sions, it also provides for civil enforcement actions.
Only the DOJ has authority to pursue criminal actions under the FCPA, but both the DOJ and the US Secu - rities and Exchange Commission (SEC) have civil enforcement authority. The DOJ and SEC have histori - cally co-operated in parallel criminal and civil inves - tigations of FCPA violations. The DOJ and SEC also bring civil lawsuits for violations of the FCPA against companies and individuals who aided and abetted or recklessly provided substantial assistance to an FCPA violator. In 2025, the DOJ temporarily paused FCPA enforce - ment, voluntarily dismissed certain ongoing cases, and issued new guidelines for future prosecutions. The revised guidance focuses FCPA enforcement on foreign bribery that relates to cartels or transna - tional criminal organisations, impedes US corporate interests, or impacts US national security interests. The guidance also instructs prosecutors to “prioritize serious misconduct” and avoid focusing on conduct involving generally accepted “business courtesies”. While the guidance narrows the historically broad focus of FCPA enforcement, the DOJ has continued to enforce the statute under the new guidelines. Unlike the DOJ, the SEC did not announce an official “pause” in enforcement or issue any revised guide - lines in 2025. However, SEC officials indicated that the SEC will “follow the DOJ’s lead” with respect to FCPA enforcement. To that end, the SEC dismissed numerous FCPA actions in 2025, including where par - allel proceedings were dismissed by the DOJ. In a departure from its historically robust enforcement, the SEC also initiated no new FCPA actions throughout 2025. It is uncertain whether that marks a permanent shift or merely a temporary adjustment to the SEC’s enforcement. In most US jurisdictions, there is no express private cause of action for giving or receiving corrupt pay - ments. Nonetheless, allegations that an individual or entity received or provided corrupt payments may help to establish fraudulent intent in a civil lawsuit. Conspiracy to commit fraud Under both federal and state law, a conspiracy is an agreement between two or more people to commit an illegal act. To prove a conspiracy to commit fraud
380 CHAMBERS.COM
Powered by FlippingBook