CFE Evidence and Legal Systems 5 — Questions and Answers
Question 1: Which federal statute specifically protects employees of publicly traded companies from retaliation for reporting fraud to supervisors, law enforcement, or regulatory agencies?
- False Claims Act
- Sarbanes-Oxley Act Section 806 (Correct answer)
- Dodd-Frank Act Section 922
- Foreign Corrupt Practices Act
Correct answer: Sarbanes-Oxley Act Section 806
SOX Section 806 prohibits retaliation against employees of publicly traded companies who report fraud or violations of securities laws to supervisors, federal agencies, or Congress.
Question 2: Under the False Claims Act's qui tam provisions, who is entitled to file a lawsuit on behalf of the U.S. government and potentially receive a portion of any recovery?
- Only federal prosecutors
- A private individual (relator) who has inside knowledge of fraud (Correct answer)
- The Inspector General of the affected agency
- Any U.S. citizen who suspects government contractor fraud
Correct answer: A private individual (relator) who has inside knowledge of fraud
The False Claims Act's qui tam provisions allow private whistleblowers (relators) with inside knowledge to sue on the government's behalf and collect 15–30% of any recovery.
Question 3: What is the statute of limitations for wire fraud under federal law (18 U.S.C. § 1343)?
- 3 years from the date of the last fraudulent act
- 5 years from the date of the last fraudulent act (Correct answer)
- 7 years from the date of the last fraudulent act
- 10 years if financial institutions are involved
Correct answer: 5 years from the date of the last fraudulent act
The general federal statute of limitations for wire fraud is 5 years from the date of the offense, extended to 10 years if the fraud affected a financial institution.
Question 4: In a civil fraud case, the doctrine of 'fraudulent concealment' is legally significant because it:
- Automatically doubles the damages available to the plaintiff
- Can toll (pause) the statute of limitations until the fraud is discovered (Correct answer)
- Shifts the burden of proof from plaintiff to defendant
- Allows the case to be heard by a magistrate judge rather than a district judge
Correct answer: Can toll (pause) the statute of limitations until the fraud is discovered
Fraudulent concealment tolls the statute of limitations, preventing the clock from running while the fraud remains hidden, so the limitations period begins when the victim discovers or should have discovered the fraud.
Question 5: A search warrant in a fraud investigation must be supported by which legal standard before a judge will issue it?
- Preponderance of the evidence
- Clear and convincing evidence
- Probable cause (Correct answer)
- Beyond a reasonable doubt
Correct answer: Probable cause
The Fourth Amendment requires that search warrants be issued only upon a showing of probable cause — a reasonable belief, based on specific facts, that evidence of a crime will be found.
Question 6: The 'attorney-client privilege' in a fraud investigation protects which type of communication from compelled disclosure?
- All communications between a company and its outside auditors
- Confidential communications between a client and attorney made for the purpose of seeking legal advice (Correct answer)
- Conversations between fraud examiners and corporate management
- Any document labeled 'confidential' by the legal department
Correct answer: Confidential communications between a client and attorney made for the purpose of seeking legal advice
Attorney-client privilege protects confidential communications between a client and their attorney made for the purpose of seeking or providing legal advice, but does not protect documents prepared for business purposes.
Question 7: Which legal concept holds that an employer can be held liable for fraudulent acts committed by an employee acting within the scope of their employment?
- Piercing the corporate veil
- Respondeat superior (Correct answer)
- Vicarious criminal liability
- Constructive fraud
Correct answer: Respondeat superior
Respondeat superior (Latin: 'let the master answer') makes employers vicariously liable for torts committed by employees during the course and scope of their employment.
CFE Evidence and Legal Systems 5
Which federal statute specifically protects employees of publicly traded companies from retaliation for reporting fraud to supervisors, law enforcement, or regulatory agencies?