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False Financial Statements

False Financial Statements - California Penal Code 532a(1) PC

The crime of false financial statements, also known as defrauding by presenting false statements, is defined under California Penal Code 532a(1) PC. Put simply, presenting false statements in writing that appear to be accurate, with the intent to defraud a person or entity, is a crime.

Business transactions, including loans or offers of credit, require a certain level of trust. This includes providing accurate and truthful information about your financial situation.

False Financial Statements - Penal Code 532a(1) PC
PC 532a(1) makes it a crime to present a false financial statement with the intent to defraud.

When you falsify that information to convince the other party to give you money or credit, it's a form of fraud. It violates PC 532a(1) making false financial statements. If convicted of this crime, you could be facing up to 3 years in prison.

The white-collar crime of Penal Code 532a(1) false financial statements is legally defined as “Any person who knowingly makes or causes to be made, directly or indirectly, any false statement in writing, with the intent that it shall be relied upon, to procure personal property, cash, a loan or credit, the execution of a contract for their benefit, or a firm or corporation, is guilty of making false financial statements.”

A typical example of PC 532a(1) includes a scenario where somebody submits a false financial statement to a bank of another financial institution to receive a loan. Our Los Angeles criminal defense lawyers will review this law in more detail below in this article.

What Constitutes a False Financial Statement?

For the prosecution to prove that you committed the crime of making false financial statements, they must show that you knowingly made a false statement of material fact to convince the other party to give you money or credit or make a binding contractual agreement with you.

This could include lying about your income, assets, or liabilities. It's important to note that simply being mistaken or inaccurate is not enough to constitute a false financial statement. Under PC 532a(1), false financial information meets the following criteria, known as the "elements of the crime:"

  • It is in writing. In other words, verbally lying about your income doesn't constitute a false financial statement;
  • It contains false information about your financial situation;
  • You provide the statement on your behalf or as a representative of another person or firm;
  • The other party is relying on the information as accurate in consideration of whether to give you money, a loan, credit, or enter into a contract with you;
  • You provide the false statement willfully.

It is also worth noting that the other party does not have to give you the loan, the money, or a contract for you to be guilty of fraud through false financial statements.

All the prosecution needs to do is demonstrate that you made the false statement to defraud the other party whether or not your loan went through or you signed a contract, etc. However, if the defendant successfully defrauded a person with financial statements, they could be charged with additional theft crimes.

What Are Some Examples?

Making false financial statements may seem like a relatively narrow type of crime, but fraudulent financial statements can take many forms. Some examples include:

  • Lying on a written loan or credit application about your income and expenses, then affixing your name certifying that the information is accurate;
  • Providing doctored bank statements or business financial statements to prove your income to a loan officer, landlord, etc.
  • Using a fake name, fake business name, or phony Social Security Number on a loan application;
  • Filling out a business loan application while falsely posing as an authorized representative of the company;
  • Providing false information regarding your business income and expenses when applying for a business loan, grant, or venture capital;
  • Providing false financial information as the guarantor of someone else's loan application.

What Are the Penalties for Penal Code 532(a)1 PC?

Making a false financial statement is a "wobbler" offense in California, meaning it may be prosecuted either as a misdemeanor or a felony. The type of charge will depend on the circumstances and nature of the offense discussed below.

If you present false financial information about yourself or your company, you'll likely face misdemeanor charges, resulting in up to 6 months in jail and fines up to $1000 if convicted.

Penalties for False Financial Statements
A conviction for false financial statements can lead to fines, restitution, probation, and jail time.

If you did the above while using a fake name, fake business name, or social security number, you'd be charged with a felony, resulting in up to $5000 in fines and up to 3 years in prison if convicted. Any felony conviction in California will generally lose your right to own or possess a firearm.

If the judge grants you probation, there is usually a period of supervision instead of jail. Probation sentences are typically available to defendants who don't have a criminal record, or the severity of the crime is considered minor.

The terms and conditions of probation typically include community service hours, electronic monitoring, work release, house arrest, restitution, and others. Felony probation sentences are monitored by a probation officer with monthly meetings, whereas the court periodically monitors misdemeanor probation sentences.

The crime of PC 532(a)1 presenting false financial statements is considered a crime involving moral turpitude, meaning it requires deceit and carries special consequences for non-citizens of United States citizens and anyone who holds a professional license, such as a doctor, dentist, lawyer, teacher, etc.

What Are the Defenses Against Making False Financial Statements?

For the prosecution, proving you committed a crime with false financial statements boils down to demonstrating two facts: that you intentionally made the false statements and that you did so to convince the other party to give you something for it (e.g., money, loan, credit line, contractual agreement).

Thus, most defense attorneys will rely on refuting one of those two variables in formulating a defense. They are specifically listed below.

You did not present false information on purpose. Simply providing inaccurate financial statements is not a crime; you must have intentionally provided the news to deceive the other party.

Defenses Against Making False Financial Statements
There are some common defense strategies we can use to fight false financial statements charges.

Your attorney may argue that you believed the statements were accurate when presented. Or, if you applied for a loan as a company representative, you were unaware that the statements you provided were false. This is known as a mistake of fact defense.

You did not intend to deceive the other party. If your financial statements were simply inaccurate and not fabricated, your attorney can argue that there was no intent to deceive. In some cases, it might also be argued that you were pressed by the other party to provide "something" in writing and that you assumed they already knew it might be inaccurate.

Negotiation with the prosecution for reduced charges might be possible depending on the circumstances of the case. Further, if we get involved early in the case, we might be able to persuade law enforcement detectives and the prosecuting agency from filing formal charges in the first place. We specialize in this process which is called prefiling intervention.

Eisner Gorin LLP is based in Los Angeles County and serves people across Southern California. You can reach our law firm for an initial case review by calling (310) 328-3776 or filling out our contact form.

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