Perjury and Conspiracy

Why Perjury and Conspiracy Matter to a Fraud Examiner

Fraud almost never happens in a vacuum. Schemes are frequently carried out by two or more people acting in concert, and when those schemes are investigated, the people involved often lie to protect themselves. For this reason, conspiracy and perjury (together with the closely related offense of making false statements) are among the most commonly charged crimes in fraud prosecutions. They give prosecutors a way to reach every participant in a scheme, even those who never personally touched the money, and to punish those who obstruct the search for truth.

For you as a CFE candidate, this topic appears in the Law section of the exam under the criminal law and criminal statutes material. It is also personally relevant: fraud examiners routinely take sworn statements, give depositions, and testify at trial. Understanding exactly what makes a statement perjurious protects you as a witness, helps you evaluate the credibility of others, and helps you recognize when a subject may be exposed to additional criminal liability. Understanding conspiracy helps you structure an investigation so that you identify every participant, document the agreement, and capture the overt acts that tie the group together.

Part One: Perjury

What perjury is
Perjury is the act of willfully making a false statement, under oath or affirmation, about a material matter, in a proceeding where an oath is legally authorized. In the United States the principal federal statutes are 18 U.S.C. § 1621 (the general perjury statute) and 18 U.S.C. § 1623 (false declarations before a grand jury or court). Most states and most common-law jurisdictions around the world have comparable offenses, and the elements are broadly similar wherever you practice.

The elements of perjury
To secure a conviction, the prosecution must generally prove each of the following:
1. The defendant made a statement (oral or written, including affidavits, declarations, and sworn interrogatory answers).
2. The statement was made under oath or affirmation, before a tribunal, officer, or person authorized to administer oaths (court, grand jury, deposition, sworn affidavit, congressional hearing, etc.).
3. The statement was false.
4. The defendant knew it was false when made (willfulness). An honest mistake, faulty memory, or sincerely held belief is not perjury.
5. The false statement was material to the proceeding.

Materiality explained
A statement is material if it has a natural tendency to influence, or is capable of influencing, the decision of the tribunal or the course of the proceeding. It does not have to actually influence the outcome, and it does not matter whether the fact-finder believed the lie. Lies about trivial collateral matters (for example, misstating one's age when age is irrelevant) are generally not material.

Key doctrines you must know

The literal truth defense (Bronston v. United States). A statement that is literally true, even if misleading, evasive, or unresponsive, is not perjury. The classic example: asked whether he ever had a Swiss bank account, the witness answered that his company had one. He personally had held one too, but his answer was literally true. The Supreme Court held the remedy for evasive answers is sharper questioning by the examiner, not a perjury prosecution. Exam takeaway: perjury requires an actual false statement, not merely a misleading one.

The two-witness rule (§ 1621). Under the traditional general perjury statute, the falsity of the statement must be proven by the testimony of two independent witnesses, or by one witness plus independent corroborating evidence. The defendant cannot be convicted on the uncorroborated word of a single witness contradicting the testimony.

Section 1623 relaxes the proof requirements. For false declarations before a court or grand jury, Congress eliminated the two-witness rule. In addition, § 1623 allows conviction based on two irreconcilably contradictory sworn statements: the government does not need to prove which statement was the false one, only that both were made under oath and both cannot be true.

Recantation. Under § 1623 a witness who admits the falsity of a statement in the same continuous proceeding may avoid prosecution, but only if the recantation occurs before the false statement has substantially affected the proceeding and before it has become manifest that the falsity has been or will be exposed. There is no comparable statutory recantation defense under § 1621.

Opinions and predictions. Statements of opinion, belief, or prediction are generally not perjury unless the witness did not actually hold the opinion stated.

Subornation of perjury (18 U.S.C. § 1622). Procuring, persuading, or inducing another person to commit perjury is itself a crime. The suborner is liable only if the other person actually commits perjury. Fraud examiners should be alert to this when a subject coaches witnesses or pressures employees about what to say under oath.

Perjury versus false statements (18 U.S.C. § 1001)
This distinction is heavily tested. The federal false statements statute makes it a crime to knowingly and willfully make a materially false statement, or conceal a material fact, in any matter within the jurisdiction of a federal agency or department. The critical differences:
- Section 1001 does not require an oath. Lying to an FBI agent in an informal interview can violate § 1001 but is not perjury.
- Section 1001 covers oral and written statements, including statements on government forms and even false exculpatory denials.
- Perjury requires a formal oath or affirmation in an authorized proceeding.
If an exam question describes a lie told to an investigator with no oath, the answer is false statements, not perjury.

Part Two: Conspiracy

What conspiracy is
Conspiracy is an agreement between two or more persons to commit an unlawful act (or to accomplish a lawful objective by unlawful means), followed in most jurisdictions by at least one overt act by any conspirator in furtherance of the agreement. The core of the crime is the agreement itself. Under the main federal statute, 18 U.S.C. § 371, it is a crime for two or more persons to conspire either to commit any offense against the United States or to defraud the United States or any of its agencies in any manner or for any purpose.

The elements of conspiracy
1. An agreement between two or more persons. The agreement need not be formal, written, or even spoken; it may be inferred from conduct, a tacit understanding, or coordinated behavior.
2. The agreement must have an unlawful objective.
3. The defendant must have knowingly and voluntarily joined the agreement with the intent to further its unlawful purpose. Mere presence at the scene or mere knowledge that a crime is being committed is not enough.
4. At least one conspirator must have committed an overt act in furtherance of the conspiracy (required under § 371 and most state statutes; note that some conspiracy provisions, such as certain drug and RICO conspiracies, do not require an overt act).

Critical rules about the overt act
- The overt act does not have to be criminal in itself. Renting a mailbox, opening a bank account, making a phone call, or attending a meeting can all qualify.
- It need only be performed by one conspirator, and it then satisfies the element for all members.
- The overt act is what moves the plan from mere talk into a prosecutable crime.

The object crime does not have to succeed
Conspiracy is an inchoate offense. The conspirators can be convicted even if the fraud was never completed, never produced a dollar of loss, or was impossible to complete. Furthermore, there is no merger: a defendant can be convicted and sentenced for both the conspiracy and the completed substantive offense (for example, conspiracy to commit wire fraud and wire fraud).

Liability for the acts of co-conspirators (Pinkerton liability)
Once a person joins a conspiracy, he or she is criminally liable for every act committed by any co-conspirator that is (a) in furtherance of the conspiracy and (b) reasonably foreseeable, even if the defendant did not know about or participate in that specific act. This is why conspiracy is such a powerful prosecution tool in fraud cases: the bookkeeper who agreed to falsify records can be held responsible for the mail fraud committed by the sales manager.

The co-conspirator hearsay exception
Statements made by one conspirator during the course of and in furtherance of the conspiracy are admissible as evidence against all co-conspirators and are not excluded as hearsay. Statements made after the conspiracy ended, or statements that merely narrate past events, generally do not qualify.

Withdrawal from a conspiracy
Withdrawal is a frequently tested area. To withdraw, a conspirator must take affirmative action to disavow or defeat the purpose of the conspiracy, which ordinarily means either (a) communicating the withdrawal to all co-conspirators in a manner reasonably calculated to reach them, or (b) disclosing the scheme to law enforcement. Simply ceasing to participate or going silent is not enough. Important consequences:
- Withdrawal does not erase liability for the conspiracy already formed if an overt act has already occurred.
- Withdrawal does cut off liability for subsequent acts of the remaining conspirators.
- Withdrawal starts the statute of limitations running as to the withdrawing party. For the others, the limitations period generally runs from the last overt act in furtherance of the conspiracy.

Other points worth knowing
- Two-person minimum. A person cannot conspire alone. Under the traditional (bilateral) approach, if the only other party is an undercover agent or someone feigning agreement, some jurisdictions hold there is no conspiracy; the Model Penal Code and many statutes take a unilateral approach allowing conviction. Know that the exam generally emphasizes the two-or-more-persons requirement.
- Wharton's Rule. Where a crime by definition requires two participants (such as bribery, which requires a giver and a receiver), the two necessary participants alone generally cannot also be charged with conspiracy to commit that crime unless additional persons are involved.
- Chain and wheel conspiracies. Investigators describe multi-level schemes as chains (each link deals with the next, like a distribution network) or wheels (a central hub dealing with multiple spokes). In a wheel, the spokes are part of one single conspiracy only if they knew of and depended on each other (a rim connecting them).
- Penalties. Under § 371, conspiracy is punishable by up to five years imprisonment and a fine; if the object offense is only a misdemeanor, the conspiracy punishment cannot exceed the maximum for that misdemeanor.
- Conspiracy to defraud the United States. This clause of § 371 is extremely broad; it covers agreements to impair, obstruct, or defeat the lawful functions of government by deceit or dishonest means, even where no money or property is obtained and even where no other specific statute is violated.

Why conspiracy is so central in fraud cases
Fraud examiners should remember that occupational fraud involving collusion produces far larger losses than fraud by a single actor, and collusion by its nature defeats internal controls built on segregation of duties. From a prosecution standpoint, conspiracy charges allow the government to (1) charge everyone who agreed to the scheme, (2) introduce co-conspirator statements against all defendants, (3) try all participants together, and (4) extend the statute of limitations to the last overt act. From an investigation standpoint, your documentation should therefore capture evidence of the agreement (communications, meetings, shared benefits), each participant's knowing participation, and specific overt acts with dates.

International perspective
The CFE exam is international, and the Fraud Examiners Manual notes that most legal systems recognize these offenses in some form. Common-law jurisdictions such as the United Kingdom, Canada, and Australia criminalize both perjury and conspiracy (for example, the UK Criminal Law Act 1977 and Perjury Act 1911), while civil-law jurisdictions often address false testimony and criminal association or joint participation under their penal codes. Specific element details and oath requirements vary, so apply the general principles unless a question specifies a jurisdiction.

Exam Tips: Answering Questions on Perjury and Conspiracy

Tip 1: Hunt for the oath. The single most reliable discriminator in perjury questions is whether the statement was made under oath or affirmation in an authorized proceeding. No oath means no perjury. A lie to a government agent without an oath points to the false statements statute (§ 1001). A lie to a private employer or a fraud examiner during an internal interview is neither perjury nor a federal false statement, although it may support other claims.

Tip 2: Check all five perjury elements. Statement, oath, falsity, knowledge, materiality. If the fact pattern describes an honest mistake, a lapse of memory, or a genuinely held opinion, the knowledge element fails and the answer is not perjury. If the lie concerns an irrelevant detail, materiality fails.

Tip 3: Remember that misleading is not the same as false. If the question describes a literally true but evasive or unresponsive answer, think Bronston and conclude it is not perjury. The burden is on the questioner to ask precise follow-up questions.

Tip 4: Know the proof shortcuts. Under the general statute, expect a reference to the two-witness rule (two witnesses, or one witness plus corroboration). Under the court and grand jury statute, remember that two irreconcilable sworn statements are enough without proving which one was false, and that a timely recantation can be a defense.

Tip 5: For conspiracy, look for the agreement plus an overt act. If two or more people agreed to commit fraud and anyone took any step toward it, a conspiracy exists, even if the step was perfectly legal and even if the fraud never happened. Questions that say the scheme failed, was abandoned after the first step, or never produced a loss are testing your knowledge that conspiracy is complete upon agreement plus overt act.

Tip 6: Mere presence or knowledge is not agreement. A clerk who notices suspicious activity but never agrees to participate is not a conspirator. Look for evidence of knowing and voluntary participation with intent to further the scheme.

Tip 7: Apply vicarious liability correctly. When a question asks whether one conspirator is liable for a crime committed by another, ask whether the act was in furtherance of the conspiracy and reasonably foreseeable. If yes, the answer is that all conspirators are liable, regardless of their personal involvement in that act.

Tip 8: Withdrawal requires affirmative action. Answer choices that describe a conspirator who merely stopped participating or quietly walked away are wrong. Correct withdrawal requires communicating to co-conspirators or reporting to authorities. Remember that withdrawal does not undo the original conspiracy charge but stops liability for later acts and starts the limitations clock for that individual.

Tip 9: Statute of limitations runs from the last overt act. If a question asks when the limitations period begins for a conspiracy, the answer is the date of the final overt act in furtherance of the agreement, not the date of the original agreement.

Tip 10: Watch for the no-merger rule. A defendant can be convicted of both conspiracy to commit fraud and the completed fraud. An answer choice claiming that the conspiracy charge merges into the completed offense is incorrect.

Tip 11: Distinguish subornation from perjury. The person who lies under oath commits perjury; the person who induces that lie commits subornation of perjury. Both are crimes, but subornation requires that perjury actually be committed.

Tip 12: Read for the best answer, not just a correct one. CFE questions often include partially accurate distractors. Eliminate choices that misstate an element (for example, requiring the overt act to be criminal, requiring the conspiracy to succeed, or requiring actual influence on the tribunal for materiality), then pick the choice that most completely matches the legal standard.

Practice Questions

Question 1. During a deposition, a witness testifies that he never received any payment from a vendor. Bank records later show he received three payments totaling $40,000, and the vendor confirms the payments under oath. Which crime is most directly indicated?
Answer: Perjury. The statement was false, made under oath in an authorized proceeding, concerned a material matter, and the witness knew of the payments. The vendor's testimony plus the bank records satisfies even the traditional two-witness rule.

Question 2. An employee tells an FBI agent during a voluntary interview at her home that she never approved any invoices from a particular vendor. This is false. Has she committed perjury?
Answer: No. She was not under oath. The conduct is better described as a false statement to a federal agency under § 1001.

Question 3. Three employees agree to submit inflated expense reports and split the proceeds. One of them buys a receipt printer to create fake receipts. Before any report is filed, the scheme is discovered. Can they be charged with conspiracy?
Answer: Yes. There was an agreement among two or more persons to commit an unlawful act, and purchasing the printer was an overt act in furtherance of the agreement. The object offense did not need to be completed, and the overt act did not need to be illegal.

Question 4. A conspirator decides he wants out of a kickback scheme and simply stops attending meetings but tells no one. Two months later a co-conspirator wires bribe money. Is the first conspirator liable for the wire transfer?
Answer: Yes. He did not effectively withdraw because he took no affirmative act to communicate his withdrawal to co-conspirators or to report the scheme to authorities. He remains liable for reasonably foreseeable acts in furtherance of the conspiracy.

Question 5. Asked under oath whether she personally owns any offshore accounts, a witness responds that her husband handles all the family finances. In fact she owns an offshore account. Is this perjury?
Answer: Not on these facts. The answer, though evasive and unresponsive, is not itself a false statement. Under the literal truth principle, the questioner should have pressed for a direct answer.

Quick Review Summary
- Perjury = willful + false + material + under oath in an authorized proceeding.
- Materiality = capable of influencing; actual influence not required.
- Literal truth, honest mistake, and genuine opinion are defenses.
- Two-witness rule applies under the general statute; § 1623 removes it and permits conviction on irreconcilable statements, with a recantation defense.
- False statements (§ 1001) require no oath; perjury does.
- Subornation = inducing another to commit perjury.
- Conspiracy = agreement of two or more + overt act (usually required); object need not succeed; overt act need not be criminal.
- Conspirators are liable for foreseeable acts of co-conspirators in furtherance of the scheme.
- Co-conspirator statements during and in furtherance are admissible against all.
- Withdrawal requires affirmative communication or reporting; it limits future liability and starts the limitations clock for that person.
- Limitations period runs from the last overt act; no merger with the completed offense.

Master these elements and distinctions, and you will be well prepared for any perjury or conspiracy question the CFE exam presents.