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What Are “Cooked Books”? What Charges Could It Lead to?

By Los Angeles Criminal Defense Attorney on October 10, 2022

“Cooked books” is a slang term for accounting records in which facts or figures have been altered illegally or dishonestly. Some companies use various tactics to manipulate their financial records and improve their results. Sophisticated accounting techniques can be used to overstate a company’s profitability.

What Are Some Examples of Cooking the Books?

Companies can get creative with accounting tricks. Cooking the books typically involves manipulating data to inflate revenue and deflate expenses to show higher earnings or profit, for example:

  • Not recording all expenses that occurred during a quarter until the next quarter
  • Manipulating accounts receivable records for purposes of obtaining loans
  • Using credit sales to exaggerate revenue
  • Buying back stock to disguise a decline in earnings per share

Accounting fraud can also occur in a number of other ways, such as:

  • Creating payroll records for nonexistent personnel
  • Forging signatures to authorize payments
  • Conspiring to commit fraud involving tendering irregularities in procurement of services or goods
  • Illegally diverting payments, for example, by creating false bank accounts and financial records

What Charges Are Associated with Cooked Books?

In 2002, Congress passed the Sarbanes-Oxley Act. This federal legislation requires written certification from senior officers of corporations that their companies’ financial statements comply with SEC disclosure requirements, among other things. Officers who sign off on false financial statements may face stiff criminal penalties.

Cooking the books is also known as corporate fraud or accounting fraud. Elements of this white collar crime involve manipulation of financial records or accounting for some benefit or gain. Prosecuted by the federal government, accounting fraud may fall under different offenses. When prosecuted on a state level, it may be charged as embezzlement or grand theft.

What Are the Penalties for Crimes Involving “Cooking the Books?”

Upon conviction of a white collar crime involving cooking the books, you could be facing substantial penalties. Under the California Penal Code, sentencing and other penalties for white collar crimes are detailed at PC Section 186.11. If the fraud involved more than $500,000, you could get a prison sentence of up to five years. In addition, you could be sentenced to consecutive prison terms of up to five years if the accounting fraud involved more than two felony offenses.

What Are the Legal Defenses Against Charges Involving Cooking the Books?

Legal defenses our Los Angeles criminal defense attorneys will raise will depend on the specific facts of your case. Depending on the circumstances, potential defenses may include:

  • You acted under duress: For this defense, you must admit you committed the crime and provide evidence that there were threats of harm if you refused, or that violence was involved.
  • Your intentions were not criminal: The prosecution must prove criminal intent beyond a reasonable doubt before you can be convicted of the crime.
  • Your purpose for your actions was legitimate: It is possible to commit fraud while believing your actions are for a legitimate purpose. Your criminal defense attorney can present evidence that you were acting in good faith and had a reasonable belief that your actions were not fraudulent.
  • Lack of evidence: The burden is on the prosecution to present sufficient evidence to prove the charges against you. Without enough evidence to prove every element of the crime for which you are being tried, you have no case to answer, and your charges should be dismissed or reduced.

If you are facing criminal charges that involve cooked books, contact Werksman Jackson & Quinn LLP at (213) 688-0460. We specialize in handling matters of great personal consequence with the utmost discretion. Our firm has a proven track record of resolving matters quickly and quietly, representing top executives of some of the nation’s largest corporations.

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Posted in: Financial Crimes