Civil Conspiracy to Commit Fraud

On behalf of John McDuff, Attorney at Law

The FBI recently arrested Jerome O’Hara and George Perez on criminal conspiracy charges. The computer programmers had worked for Bernard Madoff and, according to the FBI, “the computer codes and random algorithms they allegedly designed served to deceive investors and regulators and concealed Madoff’s crimes.”

While most people are familiar with the concept of criminal conspiracy to commit fraud, many do not realize that some states, including Texas, allow injured parties to bring civil claims for similar actions.

The necessary elements of civil conspiracy under Texas law are: 1) two or more persons; 2) an objective to be accomplished; 3) a meeting of the minds on the objective or course of action; 4) one or more unlawful, overt acts; 5) damages as a proximate result. As in the case against Madoff, the objective of conspirators is often to defraud victims out of their money.

A civil conspiracy claim allows plaintiffs to bring their claim against multiple individuals and, if successful, all parties to the conspiracy are held jointly and severally liable damages. In a civil conspiracy claim, each defendant is liable not only for his or her own actions, but also for the actions of his or her co-conspirators committed in furtherance of the conspiracy. This rule increases a plaintiff’s chances of recovering compensation, particularly when one or more of the defendants is insolvent.

Of course, proving a civil conspiracy claim is not without unique challenges, particularly with respect to intent. It is not enough to prove that the defendants merely agreed to act together, but rather a plaintiff must prove that the defendants agreed either to accomplish an unlawful purpose or to accomplish a lawful purpose through unlawful means.