Corporate Fraud in Germany

If you suspect or have been made aware that criminal offences may be committed within your company, it is essential to remain calm and seek legal advice immediately. Once the investigating authorities have become aware of the alleged criminal offence, it is no longer in your power to decide whether or not to pursue criminal proceedings. The public prosecutor’s office decides whether or not to proceed with the criminal prosecution. The German law firm Schlun & Elseven offers comprehensive legal advice in criminal law. Our lawyers will show you how you should proceed in a fraud case to ensure that the evidence is collected without errors and, thus, to enable a speedy prosecution. We advise you on how to file a criminal complaint. We will represent you in so-called adhesion proceedings to enforce your compensation claims quickly and effectively. In cases where a public criminal trial is to be avoided because of the threat of damage to your image, our lawyers will arrange for an out-of-court settlement.

In addition, as a full-service law firm, we offer expert advice on fraud prevention so that your company is armed against fraud attempts in the future.

Clients facing such an allegation are equally well advised to contact an attorney immediately. It is advisable use of one’s right to remain silent in the first few days after the criminally relevant acts have become known. In the case of dismissal, it is generally advisable to act quickly, as an action for protection against dismissal can only be filed within three weeks. Our experienced criminal defence lawyers are at your side to obtain exoneration as quickly as possible and to prevent an investigation.

Company employees who become aware of criminal offences committed by their superiors are also in a delicate position. In such a case, it must be weighed up how and whether to proceed at all. Here, as in the cases already mentioned, it is advisable to act prudently, as wrongly made accusations can have consequences under employment law, such as dismissal or a warning. New protection mechanisms for whistleblowers (due to an EU Whistleblower Directive) are currently being planned in this area. We will be happy to advise you concerning the currently applicable legal situation.

According to Section 263 of the German Criminal Code (StGB), the offence of fraud is committed by anyone who, intends to obtain an unlawful pecuniary advantage for themself or a third party, damages the assets of another person by creating or maintaining an error by false pretences, distorting or suppressing facts. The penalty is imprisonment for up to five years or a fine.

Examples in the corporate context include commission fraud, deception in expense reporting or working time fraud.

Under Section 299 StGB, anyone who, in the course of business as an employee or agent of a company, accepts (bribes) or offers (bribery) an advantage for themself or a third party in return for unfairly favouring them or another in domestic or foreign competition when purchasing goods or services is liable to prosecution for bribery.

According to Section 299 I no. 2, II no. 2 StGB, employees or agents are also punished that bribe or allow themselves to be bribed without the consent of the company and thus offer or demand, in return for an advantage, to perform or refrain from performing acts in the procurement of goods and services by which they violate duties towards the company. This also includes corruption, which is not regulated as a separate offence in the German Criminal Code. Offenders are punished with imprisonment of up to three years or a fine.

Such benefits include gifts, money, loans, discounts, trips, bonuses, and deferrals, and intangible benefits such as sexual favours, career advancement, and support in private matters. Smaller gifts, such as advertising gifts or tips, do not fall under the definition of benefits.

Embezzlement under Section 266 StGB occurs when a person abuses the authority granted to them by law, official order, or legal transaction to dispose of another’s property or to bind another or violates the duty incumbent on them by law, official order, legal transaction or fiduciary relationship to look after another’s property interests and thereby causes disadvantage to the person whose property interests, they are responsible for. The penalty here is imprisonment for up to five years or a fine.

Corporate embezzlement can occur, for example, if an authorised signatory acts improperly or a managing director does not comply with a limit in the internal relationship.

Misappropriation is defined in Section 246 StGB. Another person’s movable property is deemed misappropriated if someone unlawfully appropriates it for themself or a third party.

The penalty is imprisonment for up to three years or a fine if the offence is not punishable by a more severe penalty under other provisions. Imprisonment for up to five years or a fine are provided if the matter was entrusted to the offender.

In the corporate context, misappropriation may occur if bookkeeping, accounting or inventory are not carried out correctly.

Crimes are often committed within companies by third parties. One example of this is “CEO fraud“.

According to the FBI, worldwide damages caused by so-called “CEO Frauds” amount to 2.8 billion euros. The phenomenon also occurs frequently in the German economic area. However, companies often refrain from reporting it for image reasons.

The perpetrator’s goal is to get employees with decision-making authority, mostly accountants, to transfer large amounts abroad. In doing so, they pretend to be managing directors (CEO). Here, the emails are often deceptively realistic falsified, or even an executive’s the email account is hacked. The perpetrators exert psychological pressure on the employee through calls, emails and urgent reminders of secrecy and urgency. The perpetrators are often very well informed about the company and thus particularly persuasive.

If your company has become a victim of such a CEO fraud, do not hesitate to contact us. Our lawyers will carefully analyse your case and show you the legal options. If, as an employee of a company, you have made unauthorised use of its money, there is a possibility that you will be liable under civil law and may also have committed a criminal offence of breach of trust. In an emergency, we will advise you and develop an effective and individual defence strategy.