"Fraud and Aiding and Abetting Claims Against Lender Fail" By Kevin Schlosser

An unfortunate yet all too frequent dilemma for victims of fraud is how to obtain adequate compensation when the actual fraudsters over which claims of fraud are entirely provable are judgment-proof and have no identifiable assets from which to recover any money. The law does provide certain remedies to address this predicament, including, principally, the cause of action known as “aiding and abetting fraud.” Deeper pockets may be found in others who may not have directly perpetrated the fraud, but who knew about it and contributed substantial assistance to accomplish it. Establishing such claims, however, requires careful pleading and proof, lest they fail as well.

Aiding and Abetting Fraud

Although the cause of action for aiding and abetting fraud has three simple elements, establishing such a claim is not always easy. The three elements recognized by the courts have been stated succinctly as follows: “In order to plead properly a claim for aiding and abetting fraud, the complaint must allege: ‘(1) the existence of an underlying fraud; (2) knowledge of this fraud on the part of the aider and abettor; and (3) substantial assistance by the aider and abettor in achievement of the fraud’.” Stanfield Offshore Leveraged Assets, Ltd. v Metro. Life Ins. Co., 64 AD3d 472, 476 (1st Dep’t 2009)(citation omitted). As I have explained in “Claims of Aiding and Abetting Fraud Require Proximate Cause”:

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