An analysis of federal mail and wire fraud cases related to marketing

Authors: William Neese (Bloomsburg University), Linda Ferrell (University of Wyoming), O.C. Ferrell (Colorado State University, Fort Collins)

Publication: Journal of Business Research

Year: 2002

Focus Area(s): Marketing fraud, mail fraud, wire fraud, law

Relevance: This article presents an overview of marketing fraud cases that were prosecuted in the U.S. The central purpose of the research article is to determine what types of marketing cases create a violation of federal mail and wire fraud statutes. This study focuses only on federal criminal fraud cases.

Summary: The authors present a literature review of legal cases involving mail fraud, wire fraud, or marketing/advertising fraud that resulted in criminal action. A LEXIS search yielded 42 district court cases and 21 appellate court cases from across the United States that involve prosecuting marketing practices that violate federal statutes.

Most of the fraud cases described in the article involved deceptive product promotions that were distributed through the mail.  The products ranged from counterfeit works of art to diet pills to bogus stocks.  The companies were charged with crimes such as false representation of being associated with a charitable organization, inflation of the company’s financial portfolio to attract investors, rolling back the odometer to sell used cars at higher value, and evading taxes.

The authors conclude that federal mail and wire fraud statutes can be an effective regulatory mechanism. In many cases, the leaders of the organizations were not aware that their employees were committing fraud. Thus, company marketing managers need to develop an awareness and competence to prevent fraud within their organizations.

Author Abstract: As marketers increase their communication through both print and electronic channels, the opportunity for fraud is growing rapidly. Consequently, criminal prosecution of marketers for mail and wire fraud in federal courts has increased during recent years, resulting in greater emphasis on the elimination of fraudulent activities. This research provides a review of marketing-related fraud cases found in federal courts through a LEXIS search to determine the nature of the prosecution and judgments. This study provides a foundation for understanding federal cases that can influence all marketing fraud decisions.

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