Fraud = Felony When?

[ugimports]

So I have an issue where a customer used their previous corp credit card for a few purchases. At what amount will local LEO care to pursue and at what point is it a felony of some type vs just civil / small claims court? I just received chargebacks in about 3k for the mix of firearms/ammo/accessories this person purchased.

I am giving them 1 chance to make it right, but if they don't by Sunday I want to understand what if any my options are from a criminal standpoint.

The customer lives in Fremont also where our business is.

I'm hoping since firearms were involved that would illicit some type of response, but I realize according to the law it may just be considered "property".

Also, when / if I go to report this what type of report would I be filing? Fraud? Grand Theft? etc..?

Thanks for any feedback.

ETA: This is just an exercise now. The customer gave me a new CC to charge everything to including the chargeback fees. His story is suspect, but he's making me whole. I am curious though how I would address if this ended up going bad.

[CinnamonBear723]

Generally the monetary amount making it a felony is $950 or more. That being said, there are several types of fraud that are felonies without a value attached to it. 3k is well within felony territory assuming they did commit the crime as alleged by you. Obviously I am not familiar with each detail of your case so I'm taking your word for it.

[Ocguy31]

As someone who owns a corporation, and is a registered Chief Compliance Officer with FinCEN, business account transactions are monitored heavily by the banks under the AML/KYC/BSA laws.

When opening any sort of business account, they ask what type of business you intend to engage in. This is mainly to screen out "risky" businesses, including pay-day lenders and firearms dealers.

That amount of money spent on Firearms would have flagged the transactions for review, in which case a compliance specialist would have investigated and interviewed the client for a few reasons, two of them being:

1. If the transactions appeared to have no legitimate business purpose based on his general profile, there are certain steps that would have to be taken by law to inform those who need to know

2. To make sure that he is not engaging in the business of dealing in firearms, if his account application listed "consulting" as his main course of business.


It sounds to be like he got called out by his business account compliance department, did what he had to do to reverse those charges, and then made it right. I could be wrong, which wouldn't be a first, but in this specific situation, there would not have been an attempt to defraud you, unless he didn't make you whole. Now, if there were other potential laws or regulations broken by charging them back, that is above my pay-grade.

[ugimports]

As someone who owns a corporation, and is a registered Chief Compliance Officer with FinCEN, business account transactions are monitored heavily by the banks under the AML/KYC/BSA laws.

When opening any sort of business account, they ask what type of business you intend to engage in. This is mainly to screen out "risky" businesses, including pay-day lenders and firearms dealers.

That amount of money spent on Firearms would have flagged the transactions for review, in which case a compliance specialist would have investigated and interviewed the client for a few reasons, two of them being:

1. If the transactions appeared to have no legitimate business purpose based on his general profile, there are certain steps that would have to be taken by law to inform those who need to know

2. To make sure that he is not engaging in the business of dealing in firearms, if his account application listed "consulting" as his main course of business.


It sounds to be like he got called out by his business account compliance department, did what he had to do to reverse those charges, and then made it right. I could be wrong, which wouldn't be a first, but in this specific situation, there would not have been an attempt to defraud you, unless he didn't make you whole. Now, if there were other potential laws or regulations broken by charging them back, that is above my pay-grade.

His previous employer had contacted us about the transactions, but as I noted in the OP it turns out he is fixing the issue. I was getting prepared if he fell of the radar and stopped being responsive.

[ugimports]

Generally the monetary amount making it a felony is $950 or more. That being said, there are several types of fraud that are felonies without a value attached to it. 3k is well within felony territory assuming they did commit the crime as alleged by you. Obviously I am not familiar with each detail of your case so I'm taking your word for it.

Understood and thanks for the info. Since they are making me whole there is no reason for me to pursue any legal action. Their previous employer may choose to if they feel it's worth their time since they are getting their funds back as well (chargeback on CC).

[Cokebottle]

It sounds to be like he got called out by his business account compliance department, did what he had to do to reverse those charges, and then made it right. I could be wrong, which wouldn't be a first, but in this specific situation, there would not have been an attempt to defraud you, unless he didn't make you whole. Now, if there were other potential laws or regulations broken by charging them back, that is above my pay-grade.

Agreed.
My last job, I was issued an AMEX in my name. The account and payments went on my credit report. It was basically the company's way to ensure that we had available funds for business travel. We'd submit our expense reports, get paid, and then pay the AMEX.
At my current city job, it is very specific... online purchases must ship to the office, and all transactions must be accompanied by a city business expense justification letter from the card holder.

[Fizz]

No direct input on the specific scenario, but even as a Shareholder/Exec/Employee of an S Corp using a company card, an account I guarantee against my personal assets, for personal transactions is problematic.

If I treat company assets as my personal bank account, it exposes me to personal liability if the company is sued
A good attorney will be able to argue that the company is a farce; I'm effectively running the company like a sole proprietorship or general partnership. This may even bypass any indemnity provided by insurance. They'd be right. It would also be a breach of fiduciary duty as I would be misappropriating funds. Even though the reason corporations exist is to increase shareholder wealth and my job is basically to ensure my own interests, I effectively have to behave in ways that benefit the corporation first with the benefit to shareholders secondary.

The only legitimate way would be for me to make some sort of benefit plan, for example, every employee can get $1k in firearms charged to the company account per year. It should be documented as a resolution. The company would get the tax deduction, but as an employee I'd need to claim the benefit for tax purposes.

That said, I'm not sure if I were the company in charge of an employee inappropriate spending if I would do a chargeback on a retailer or if that's technically permissible/appropriate action. By issuing an employee a card, you effectively give them the right to obligate the company to liabilities. That they depart from policy or err negligently or maliciously doesn't mean the charges were fraudulent like a stolen credit card. It would be up to the company as the employer to seek remedy directly with the employee, even at its peril.

I would have told the employee they have some options, obviously depending on he circumstances. A mistake or wrong card by accident/one time, who cares. A short term loan or effective theft, not OK:

- Return whatever purchases
- Pay the retailer and have them refund the company card (Preferred if items not returnable).
- Reimburse the company for the charges.

The chargeback is the wrong way to handle this IMO:

- It could enrich the employee at the expense of company's reputation. Technically, the employee is still in possession of the goods. Terminating the employee doesn't fix this. The company is taking back money from an innocent party.

- It masks perhaps a larger issue of controlling who gets cards, the financial controls on categories/amounts, regular review of statements, etc. This kind of thing represents a policy problem, the chargeback is the easy way out.

- It sets some precedence that the company will cover for misappropriation. Putting the onus on the employee to make it right vs employer taking the initiative is a much stronger statement.

[Fizz]

Actually, reread the OP.

Did the guy use a card of a company he no longer works for? Yikes! That organization has some serious procedural issues if that's the case, but I'd still argue not a fraud that warrants a chargeback.

The card should have been closed before he left the door on the last day or required to be returned.

[ugimports]

Actually, reread the OP.

Did the guy use a card of a company he no longer works for? Yikes! That organization has some serious procedural issues if that's the case, but I'd still argue not a fraud that warrants a chargeback.

The card should have been closed before he left the door on the last day or required to be returned.

I'm not sure at what point he didn't work for them. E.g., he may have been employed at the time of charges and recently was a "previous employee".. When I was contacted by his former company they mentioned a "previous employee of ours named X Z".

[sbo80]

when they found out about the charges, could have been the time he became the ex-employee. You never know, it might not have been his first incident with it, some people just make terrible judgments with money. It's not clear from the details, and you may not know, whether it was the buyer that initiated the chargebacks when he got caught, hoping it would help his situation, or if it was the company that did it. Nobody has directly answered the op question though, even if there's a $ amount tied to a felony, would this be considered fraud or theft? If theft, I'd assume if there's a firearm involved LE would definitely want to know, and get involved. You didn't specify if any of the goods he purchased required a DROS/4473, which I would guess significantly changes the response.

[ugimports]

when they found out about the charges, could have been the time he became the ex-employee. You never know, it might not have been his first incident with it, some people just make terrible judgments with money. It's not clear from the details, and you may not know, whether it was the buyer that initiated the chargebacks when he got caught, hoping it would help his situation, or if it was the company that did it. Nobody has directly answered the op question though, even if there's a $ amount tied to a felony, would this be considered fraud or theft? If theft, I'd assume if there's a firearm involved LE would definitely want to know, and get involved. You didn't specify if any of the goods he purchased required a DROS/4473, which I would guess significantly changes the response.

Yes the firearms part of "firearms/ammo/accessories" required a 4473/DROS.