The distinction between an honest mistake and the commitment of fraud is one of intent. Whether one intends to mislead another individual or group of people is the difference under the laws of the United States. Title 31, Section 3729(b) of the United States Code, known as “The False Claims Act,” which was passed in 1863, defines the issue of intent as follows:
(a) Liability for Certain Act –
(1) In general. – Subject to paragraph (2), any person who –
(A) Knowingly presents, or causes to be presented, a false or fraudulent claim for payment of approval;
(B) Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false statement or fraudulent claim;
(C) Conspires to commit a violation of subparagraph (A), (B) . . .” [Emphasis added]
The issue of intent as expressed in the above law is at the core of the issue of distinguishing between a document or presentation that is the product of a mistake honestly derived, versus a deliberate misrepresentation advanced for the purpose of misleading another party. Note the key words, italicized in the above text, from The False Claims Act: “knowingly” and “conspires.” Both of these words are used in the definition of “fraud” to emphasize the issue of intent. The practice of law recognizes the eminent fallibility of human beings. We make mistakes. A mistake, however, is not the same as deliberately providing misleading information for the purpose of attaining advantage or monetary gain. The False Claims Act was passed during the height of the United States Civil War to protect the Union Army from malicious contractors seeking to defraud the government and the army.
Similarly, the Internal Revenue Service, when reviewing tax filings, looks for instances of fraud, but understands the distinction between deliberately misleading the government and bookkeeping mistakes that occur without criminal intent. Towards that end, the IRS defines “fraud” as follows:
“Fraud is deception by misrepresentation of material facts, or silence when good faith requires expression, resulting in material damage to one who relies on it and the right to rely on it. Simply states, it is obtaining something of value from someone else through deceit.” [www.irs.gov/irm/part25/irm_25-001-001.html#d0e122]
As noted, those drafting, debating and voting on legislation pertaining to fraud understand and incorporate into the laws of the nation the vital distinction between a mistake and an intent to defraud.