Lies, Deception and Fraud: What is the Difference?

We all know that people lie. But not all lies are deception, and not all deceptions amount to fraud under criminal law.

The case of Belle Gibson

Belle Gibson is a social media entrepreneur and developer of The Whole Pantry app, a resource for healthier living which was featured on the new Apple Watch. Gibson launched her business on the back of a successful blog in which she discussed her survival of cancer.

But everything started to come apart when media reports alleged that Gibson never in fact had terminal cancer as she had claimed.

Later reports further alleged that donations she had solicited and those she had promised from the sale of her app had not been paid to the nominated charities.

The line between acceptable and unacceptable

Some lies are harmless, or relatively harmless.

Little white lies told to spare the feelings of others or out of politeness are probably necessary and acceptable for the smooth functioning of peoples’ lives.

Brutal honesty can be disruptive. Other lies are tolerated because they are common and are even expected, exaggerating personal attributes and downplaying weaknesses. Think back to your last job interview for example.

Some lies though are never acceptable. When people heard reports that Belle Gibson had lied about having cancer they expressed a strong sense of betrayal; their emotions had been engaged and manipulated.

Is it against the law to deceive people in this way?

People may feel outraged when they are deceived, but that doesn’t necessarily mean that the deception is unlawful. The law is often more concerned with money and property than with injured feelings.

Belle Gibson reaped considerable financial rewards due at least in part to her account of her successful battle with cancer. And if her account were proved to be false, there would be at least economic ramifications.

Deception about material facts means contracts entered into as a result of the deception can be cancelled. Belle Gibson’s publishers are reportedly withdrawing her books from circulation and her app no longer features on the Apple Watch.

Some people who bought her app or her book are demanding refunds. Consumer Affairs Victoria is said to be investigating.

Deception may be a breach of Australian Consumer Law. It is unlawful for a business to make statements in trade or commerce that are misleading or deceptive. But there is always the question of whether a deception is material or relevant.

It is interesting to compare a situation where someone lies about their background, with one where a book is written by a ghost writer. In both instances the buyer is deceived as to the nature of the writer.

Yet it is not considered an unlawful deception for a well-known person to have a book published under their name which has in fact been written by someone quite different.

The alleged deception concerning the money Belle Gibson promised to donate to charity from the sales of her app, and the money donated by others at fundraising events she is said to have organised, are of perhaps even greater concern.

Media reports claim that very little of this money appears to have been passed on to the charities she nominated.

It is also alleged that money intended to be given to charities was not paid into separate accounts, and that Belle Gibson has said there are currently insufficient funds in her accounts to make the promised payments, although she intends to do so in the future.

Belle Gibson is not registered as a fundraiser in Victoria. Fundraising for charities is strictly regulated under the Victorian Fundraising Act. Deception or breach of trust on the part of those involved in fundraising can have widespread consequences, discouraging people from making charitable donations in the future. So all fundraisers are required to be registered and must comply strictly with all relevant procedures.

If Consumer Affairs Victoria has reason to believe someone is raising money for charity who is not a registered fundraiser, or is in breach of any of the procedures, they can initiate action under the Act.

What about criminal proceedings? Can fraud charges be laid?

It is reported that the police have ruled out any criminal investigation into Belle Gibson’s affairs.

Some lies and deception may be sufficiently serious to warrant the police laying fraud charges, but in many cases, action is taken pursuant to Australian Consumer law.

It is usually far easier to prove a breach of this than to prove criminal fraud.

With criminal fraud, there are a number of elements that all must be proved in order to obtain a conviction, in addition to the lie or deception. A good criminal lawyer can often cast doubt on one or more of these, and if they do, the prosecution will fail.

One essential element the prosecution must prove in a fraud case is that the accused person acted dishonestly according to the standards of ordinary people, and that they knew they were acting dishonestly.

In other words, there must be an intention to deceive. It is not necessary to prove dishonest intent with breaches of consumer law.

Whether fraud or not, lies and deception often have consequences, both for the liar and the person they lie to. The consequences may not even involve legal penalties.

Often the damage to someone’s reputation when they are caught in a lie can be devastating. And of course the risk of a lie being exposed increases with success.

Those with ambitions should perhaps be cautious in the lies they tell.