What should I know if I am accused of business fraud in Texas?
Three things. The accusation usually arrives as an audit, a demand letter or an investigator's call long before any charge, and that window is when cases are won. The statutes range from deceptive business practices under Tex. Penal Code §32.42, a misdemeanor, to value-graded felonies and federal mail and wire fraud carrying up to 20 years. And every one of them requires proof of intent to deceive, which is exactly where a real business dispute differs from a crime.
- Business fraud is not one statute. The charge chosen decides the exposure, from Class A misdemeanor to first degree felony.
- A failed deal, a billing dispute or a broken contract is civil until the State can prove intent to deceive.
- One email or invoice sent across state lines is enough for federal wire fraud jurisdiction.
- Never alter or delete records after you learn of an inquiry. That creates a second, worse case.
- Owners answer for companies. Get separate advice on whether you and the business need separate lawyers.
Business fraud accusations occupy the strange ground between commercial disagreement and crime, and which side of the line a case lands on is often decided by what the accused does in the first weeks. Peter M. Barrett has defended business owners and professionals in state and federal court since 1994, with more than 150 jury trials. He is a Past President of the Dallas Criminal Defense Lawyers Association (2005). See our Dallas white collar crime defense page.
The statutes that show up in business cases
- Deceptive business practices, §32.42. The retail-level offense: false weights, misrepresented goods or services, deceptive sales conduct. A Class A misdemeanor when done intentionally, knowingly or recklessly, a Class C when done with criminal negligence.
- False statement to obtain property or credit, §32.32. The loan application and vendor credit statute, graded by value from a Class C misdemeanor under $100 to a first degree felony at $300,000 or more. Financial statements given to lenders live here.
- Theft and misapplication. Where money entrusted to the business allegedly went elsewhere, the State reaches for theft and misapplication of fiduciary property, covered in how prosecutors prove embezzlement.
- Insurance fraud, §35.02, for claims, graded on the claim value.
- Federal mail and wire fraud, 18 U.S.C. §§1341 and 1343. Any scheme to defraud that uses a mailing or an interstate wire. Up to 20 years per count, 30 where a financial institution is affected. Modern commerce runs on wires, so almost any business dispute can be framed federally if a prosecutor wants it. The full map of these statutes is in the types of fraud.
The line between a bad deal and a crime
Every fraud statute requires a culpable mental state: intent to deceive, knowledge of falsity, or at minimum recklessness. The State must prove what you believed at the time of the statement, not what became true later. A projection that missed, an invoice disputed in good faith, a product that disappointed, a company that failed owing vendors: these are civil matters, and Texas courts see criminal fraud filings used as debt collection often enough that pointing this out, early and formally, sometimes ends the matter.
What moves a dispute across the line: statements provably known false when made, documents created after the fact, money moved through personal accounts in ways hard to explain, and witnesses saying you told them to hide things. Which is why the next section matters most.
The early moves that decide these cases
- Preserve everything, change nothing. The moment you know of an audit, demand or investigation, freeze the records as they are. Editing a spreadsheet or deleting an email thread converts a defensible intent case into obstruction.
- Stop the explanations. No recorded statements to investigators, adjusters or the other side's lawyers. Explanations given without the documents in front of you become the inconsistencies used against you. See your right to remain silent.
- Separate the hats. You, the company, and business partners can have diverging interests. A lawyer who represents the company does not automatically protect you personally.
- Mind parallel proceedings. Civil suits, licensing boards and criminal investigators share paper. What is said in a deposition arrives on the prosecutor's desk.
- Consider the pre-charge presentation. Where the evidence genuinely shows a commercial dispute, a documented presentation to the investigating agency or prosecutor, made by counsel, can stop charges from being filed. That option expires at indictment.
What happens procedurally once a charge does land, from grading to plea strategy, is covered in facing fraud charges in Texas.
Common questions
Can I go to jail over a business dispute in Texas?
Only if the State proves intent to deceive beyond a reasonable doubt. Failed deals and unpaid debts are civil. The risk zone is where documents or witnesses suggest statements were known false when made, which is why records and early counsel matter more than arguments.
Is deceptive business practices a felony in Texas?
No. Section 32.42 is a Class A misdemeanor at worst. The felonies arrive through other statutes: value-graded false statement and theft offenses, insurance fraud, or federal mail and wire fraud, depending on how the conduct is charged.
The police called and asked me to come explain my side. Should I?
Not without a lawyer. By the time an investigator invites your side, a file already exists that you have not seen. A voluntary recorded statement is the single most common way business people convert weak cases against them into strong ones.
My business partner is accusing me of fraud. Is that criminal?
Partner disputes are usually civil, fought over accounting and fiduciary duties. They become criminal when one side takes their file to a district attorney and it shows more than a disagreement. Treat any partner accusation as if that referral will happen: preserve records and get individual counsel.
Do I need a separate lawyer from my company?
Often, yes. The company's lawyer owes duties to the company, and in an investigation your interests can diverge from the entity's and from other officers'. Whether one lawyer can wear both hats is itself a legal question worth asking early.
The law this article describes, at the source.
This article is general legal information about Texas and federal law, not legal advice about your case. Reading it does not create an attorney-client relationship. Laws change, so confirm the current rule with a licensed criminal defense attorney about your specific facts. Request a free, confidential case review.