Business Fraud With a Forged Payment Order

“Were there fewer fools in the world, there would be fewer of those called tricksters and swindlers.”
Jean de La Bruyère

Entrepreneurship, by its very nature, is an activity aimed at generating profit using either personal or borrowed funds. It usually consists of carrying out operations — permitted under the law of the relevant country — on the market for goods, works or services, performed by a person officially registered as an entrepreneur. Market participants are, for the most part, legal entities, and any relationship between them or with individuals must be documented in the form of a contract.

It is possible for a businessperson who has signed a contract to fail, for whatever reason, to fulfill its terms and thereby cause direct or in-kind harm to their partner or customer. In such situations, the matter may be examined through the lens of the Criminal Code and treated as business fraud. It must be acknowledged that fraud is a sophisticated and hard-to-prove crime that has existed in various forms since ancient times — after all, the victim typically hands over property rights or funds to the fraudsters themselves. To prove the theft, the victim must also have sufficient evidence conclusively implicating the fraudsters. From a criminal-law perspective, fraud is the taking of property through deception or abuse of trust. Unfortunately, business fraud continues to flourish today just as it always has.

What tricks do fraudsters use to exploit the trust, inattention or negligence of business owners?

Fraudsters use forged documents to deceptively obtain goods and inventory from companies that, as a rule, are struggling to sell their finished products. Their main goal in such cases is to conclude a contract on terms allowing goods to be received with deferred payment. Increasingly, various forged documents are used in this scheme to mislead the victim about the actual terms on which payment for the goods will be received — forged copies of payment orders, bank guarantees, sureties, letters of credit, and promissory notes are all deployed for this purpose. In every case of deception using forged documents, the fraudsters skillfully exploit subjective factors such as the lack of interest among staff at commercial and public-sector companies in thoroughly vetting a business partner, excessive trust, careless handling of company letterhead, and weak security on the company’s server and corporate email. For instance, if a company doesn’t have its own mail server and relies on free services, or has its own server that isn’t adequately secured, criminals can hack it and “intercept” important correspondence. The same criminals can then create the appearance that the company is entering into certain contractual obligations. As a result, an unlucky business owner who takes the bait may end up in a situation where they never receive the promised goods after having already made prepayment for them — or, conversely, ship out goods without ever receiving the payment promised under the fake contract.

In such a case, the primary task of the defrauded entrepreneur is to stay calm and take timely steps to protect their violated rights and legitimate interests. It is important to understand here that even if a company’s manager did not directly participate in the fraudulent scheme but failed to take sufficient measures to ensure the company met the necessary security requirements, that alone can be sufficient grounds to hold them liable. One example from our firm’s varied legal practice is a case involving a client who managed a company producing agricultural pesticides approved for use in Germany — let’s call him Dmitry. The story Dmitry told our lawyer isn’t particularly unusual, yet it required the immediate intervention of an experienced lawyer specializing in criminal law.

Client Story: An Order From a New Partner and a Forged Payment Order

As Dmitry told us, his company has been on the market for quite some time, working continuously with a number of farms across Germany. At one point, the company received a request for a large delivery of goods. Dmitry himself corresponded about the terms of the upcoming delivery with a certain Felix (name changed), who introduced himself as the director of the buyer’s company. By email, Felix sent a signed order for a one-time delivery of goods. Not fully confident in the reliability of this new partner, our future client asked for prepayment for the ordered goods. Felix agreed, and at the end of the working day on Friday, sent a copy of a payment order confirming that full prepayment for the goods had been made. The new partner assured Dmitry that the company’s head office was located in Austria, and that the delivery needed to go to one of the farms in Germany. According to the scanned copy of the payment order, the funds had been sent to Dmitry’s company account on the Friday and were due to arrive within three business days.

It all seemed convincing enough — the correspondence had come from a corporate email address, Felix had responded promptly to emails and calls, and had met Dmitry’s reasonable request for 100% prepayment. Unfortunately, the well-known saying that “all that glitters is not gold” proved true. Satisfied with nothing more than a copy of the payment order received by email, and without waiting for the funds to actually clear into the bank account, the deceived businessman authorized the shipment of a large consignment of goods to the address given by the fraudster in the order he had sent. That marked the end of this so promisingly begun new partnership. Felix “vanished into thin air,” no longer responding to the numerous emails and phone calls. Needless to say, our client is still, unfortunately, waiting for the money that never arrived in his account.

The Lawyer’s Work: A Formal Demand and Identifying the Fraudster

On the advice of his business partners, Dmitry came to our law firm for the qualified help of an experienced lawyer. Naturally, this involved a loss the company could not simply write off — the harm to the business was substantial. Our client understood that he was very likely not the only victim of these fraudsters, and letting the matter drop was certainly not part of the company manager’s plans.

The lawyer got to work without delay. As is standard in such cases, he carefully reviewed the documents signed in connection with the matter, as well as the email correspondence. He then drafted a formal demand letter and sent it to the non-performing partner’s address. It should be noted that, in a number of cases, such steps alone are enough to restore our clients’ violated rights and legitimate interests. That did not happen here — the response came from the company genuinely registered and operating in Austria, stating that no negotiations had ever taken place with our client, that no signed delivery order had been sent, and that an employee named Felix had not worked there for about six months.

It thus became clear that this was fraud committed by a former employee of the company, using the corporate email address and official company letterhead. On the one hand, the company on whose behalf its former employee had acted — using a fraudulent scheme to obtain goods without making the corresponding payment — had nothing to do with this criminal scheme and had itself become a victim of a third party’s unlawful actions. On the other hand, the company had failed to observe the necessary security measures, which allowed its former employee to gain unauthorized access to the corporate email account and letterhead.

Defense Strategy: Two Parallel Claims

We are currently actively preparing our client’s defense, and once we have a sufficient body of evidence, we plan to file two claims:

a criminal complaint against the person who carried out the fraudulent scheme and received goods without fulfilling the corresponding payment obligations;
a civil claim against the company whose failure to observe security requirements resulted in significant harm to our client.

We are confident that the right, timely action from an experienced lawyer gives strong chances of success in this case, as in other similar ones.

Conclusion

At various points in time — and especially during periods of crisis — the number of people using fraudulent schemes for self-serving personal gain rises sharply. What is the basic principle behind fraud as a type of crime, and what makes it distinctive? Above all, the perpetrator deceives the victim and, exploiting that deception, gets the victim to act voluntarily: signing a contract, transferring money, handing over property or rights to it, or something else. And it is precisely this “voluntariness” that makes fraud such a dangerous and painful type of crime. Very often, once a person realizes they have simply been deceived and taken advantage of, they don’t even go to a lawyer or the police — they’re often simply ashamed of their own “naivety,” or they believe that nothing can be done or proven anymore. We hope our readers’ own business experience will protect them from making such mistakes and falling victim to fraud. But if it has already happened to you, we invite you to reach out to our law firm, where, drawing on our extensive professional experience, we will give you a thorough consultation and help you choose the best defense strategy for your case.

Criminal Law in Berlin