The term invoice refers to a document sent to a person who has purchased goods and/or services from the seller. This document contains details regarding the transaction, such as:
- The type and number of items sold;
- The price of the items sold;
- Contact information for the seller or the business;
- Date and time of purchase; and/or
- Various other items of information, such as return policies, warranties arbitration clauses, etc.
Invoices are used as a way to keep track of store inventory, as well as assist the business operator in gaining an understanding of what has been sold. They can also act as a sort of receipt in some cases, in order to provide the buyer with proof of what they have purchased. Invoice documents may also contain the contractual terms between the buyer and the seller. Sales invoices may also be known as sales confirmations.
Should the invoice contain any incorrect information, the invoice could serve as grounds for an invoice fraud lawsuit. Invoice fraud occurs when an invoice is provided that contains false, fake, or fraudulent information for services or goods not rendered. Invoice fraud can take many different forms other than a falsified invoice document. Two examples include:
- Duplicate Invoice: A duplicate invoice is an invoice sent to the buyer more than once with the intention to defraud the buyer. An example of this would be construction fraud, or when a subcontractor sends duplicate bills to a general contractor. This results in the contractor paying more money than is actually required; and
- Inflated Invoice: An inflated invoice is just that; an invoice with higher prices than the cost of the service or goods listed. An example of this would be if a seller lists the cost of goods as $100, but the actual cost was $50. As a result, the buyer pays the higher price without knowing the true cost of what they have purchased.
Other types of invoice fraud may attempt to alter other pieces of information contained in the invoice. An example of this would be an attempt to change the date or timestamp on the invoice, in order to void a warranty or avoid giving the buyer a refund or exchange item. Another example includes fraud or misrepresentation of the number or type of item sold.
Are There Any Consequences for Invoice Fraud?
In general, a seller can only commit invoice fraud if they intentionally submit a fake, duplicated, or inflated invoice with the intent to defraud the buyer. The intent to defraud may occur by one company who is acting alone, or in collusion with multiple different companies. If a person knowingly acted in a fraudulent manner, they acted while:
- Having actual knowledge of the false information;
- Showing a reckless disregard for the false information, or the truth; and/or
- Deliberately acting with ignorance of the falsity or truth.
As such, if a seller did not deliberately intend to deceive the buyer or present them with false information in the invoice, it could serve as a defense to the fraud charges. If the seller knowingly altered the invoice, whether to deceive the buyer or to alter their own records, they may be found guilty of fraud.
Invoice fraud is not always committed for the purpose of confusing the buyer. It can also occur to change the records for the seller’s personal accounts, such as if they wanted to hide missing inventory or inflate their sales numbers. Most commonly, sellers will change invoices to avoid tax issues or deceive their partners.
The consequences for invoice fraud are as serious as the consequences for any other sort of fraud. Should a company or individual be found liable for invoice fraud, they could face both civil and criminal penalties, including:
- Civil Penalties for Invoice Fraud: A damages award that allows the injured party to recover any losses resulting from the fraudulent invoice. If the buyer experienced additional business losses due to fraudulent invoice, they may receive additional compensation for these losses; and
- Criminal Consequences for Invoice Fraud: Could range from fines, to jail time. Depending on the amount of money in question, in addition to other factors, the fines may be severe. It is important to note that state laws may vary in regards to the actual jail sentence and amount of fines involved.
If the defendant committed the fraud in order to avoid tax penalties, they may also face serious fines and consequences from the IRS in addition to any civil and/or criminal consequences. If the fraud was committed in order to cash in on an insurance policy, the defendant may face a lawsuit from their insurance company.
Do I Need an Attorney for Invoice Fraud?
If you are being accused of committing invoice fraud, you should consult with a skilled and knowledgeable business attorney. An experienced business attorney can help defend your company against the allegations if applicable, and help you understand your state’s specific laws regarding fraud. Finally, an attorney can represent you in a court of law as needed.