Note! In this case, a dishonest debtor is also a fraudster
[5] Case Review
In September 2012, Luo Xiaobing met Li Xingmei. From December 2012 to January 2013, Luo Xiaobing fabricated a need for funds for a project in Chongqing, repeatedly verbally requesting loans from Li Xingmei under the guise of high interest. Li Xingmei successively misappropriated 2.3191 million yuan of poverty alleviation mutual funds under her management to Luo Xiaobing. Before the case was uncovered, Luo Xiaobing repaid Li Xingmei 276,000 yuan, while the remaining 2.0431 million yuan was all used to repay debts and for gambling.
[1] Court Opinion
The People's Court of Pengshui Miao and Tujia Autonomous County, after trial, held that Luo Xiaobing, with the intent of illegal possession, used fabricated facts and concealed truths to defraud others of property, involving an especially huge amount, constituting the crime of fraud. He was sentenced to 11 years in prison and fined 500,000 yuan according to law.
Luo Xiaobing appealed the first-instance verdict, arguing that the relationship with Li Xingmei was a loan agreement and did not constitute a crime.
The Fourth Intermediate People's Court of Chongqing, after trial, held that Luo Xiaobing, already heavily in debt and without a stable income, concealed his inability to repay, fabricated a need for funds for a project in Chongqing, and used high interest as bait, causing Li Xingmei to mistakenly believe Luo Xiaobing had a reliable investment project and repayment ability, leading her to misappropriate 2.3191 million yuan of public funds for Luo Xiaobing's use. After obtaining the funds, Luo Xiaobing used almost all of them for debt repayment, gambling, and daily expenses, except for a minimal repayment to the victim, without proper preservation or reasonable investment, resulting in inability to repay. Although nominally a loan relationship, in essence, Luo Xiaobing, lacking repayment ability, repeatedly used borrowing as a pretext to defraud others of huge amounts of property, which should be convicted as fraud. The appeal was dismissed, and the original verdict was upheld.
[1] The author's perspective
First, the difference between loan-type fraud and private lending.
The crime of fraud refers to "an act of using fabricated facts or concealed truths to deceive, causing the victim to fall into a mistaken belief and 'voluntarily' dispose of property, thereby defrauding a relatively large amount of public or private property with the intent of illegal possession." Loan-type fraud and civil debt disputes share many similarities in form, such as transferring property under the guise of borrowing and being unable to repay debts when due. In this case, Luo Xiaobing argued that there was a verbal loan agreement with the victim and that he made interest payments, and although he could not repay, his actions constituted private lending, not fraud. So what are the differences in form between loan-type fraud and private lending? How do we judge in specific cases? The author believes the main points are as follows:
(1) The subjective intent of the actor differs.
(2) The fraudster has the subjective intent of illegal possession, meaning the actor intends not to repay when borrowing money. Fraud requires the actor to have illegal possession as a subjective element, so the fraudster's "borrowing" is merely a fabricated pretext, with no genuine intention to repay. In contrast, a normal borrower has the intention to repay at the time of borrowing, and any failure to repay on time is usually due to objective reasons.
(3) The method adopted by the actor differs.
(4) When borrowing money, the fraudster always uses means of fabricating facts and concealing the truth, causing the victim to form a mistaken belief, such as falsely claiming the loan is for investment or profit-making activities, or misrepresenting their financial situation to make the victim believe they have the ability to repay. In normal lending, the borrower typically truthfully informs the purpose of the loan and rarely uses deceptive methods.
(5) The actor's attitude toward the loan differs.
(6) After obtaining the property, the fraudster does not consider repaying it, thus using the property without restraint or caution, directly causing its loss, such as using the loan for gambling, drug use, or personal squandering. In private lending, the borrower generally has the ability to repay the loan or uses the loan for legitimate income-generating activities to ensure repayment.
Second, how to determine the perpetrator's subjective intent of illegal possession
In judicial practice, many loan-type fraud offenders, after being brought to justice, often claim that their relationship with the victim was a normal loan, even providing evidence such as IOUs to support this, making it difficult to determine the nature of such cases. For example, in this case, the key to determining the nature of Luo Xiaobing's actions lies in his true intent at the time. Subjective intent exists within the human mind as a form of consciousness and cannot be directly extracted from thought for verification. It often relies solely on the perpetrator's own account, but its authenticity is questionable, and judgment must be based more on their specific behavioral manifestations, because "actions are carried out based on human consciousness, or are external expressions of consciousness." When handling such cases, one should not merely rely on the defendant's statements and defenses but should conduct a comprehensive analysis based on the defendant's objective actions and other objective factors. The perpetrator's behavioral manifestations during the crime often better reveal their subjective intent. In determining whether the perpetrator has the intent of illegal possession, the following aspects should be considered:
(1) The reason for borrowing money and its actual use
In normal private lending, the borrower informs the creditor of the true purpose of the loan, allowing the creditor to understand the use and risk of the lent funds and make a decision. In fraud cases, the perpetrator typically fabricates false loan purposes, such as investments, construction projects, or other legitimate and highly profitable ventures, leading the victim to mistakenly believe that the lent funds are safe and can be recovered in a timely manner. In reality, after obtaining the loan, the perpetrator uses the money for high-risk or irrecoverable activities, such as gambling or personal squandering, resulting in the victim's funds being unrecoverable. The actual use of the funds by the perpetrator reflects whether they had the intent of illegal possession in borrowing, and the discrepancy between the stated reason and actual use can also indicate whether the perpetrator engaged in objective acts of fabricating facts or concealing the truth at the time of borrowing, serving as an important basis for examining the perpetrator's subjective mindset.
(2) The perpetrator's financial condition at the time of borrowing
The perpetrator's financial condition at the time of borrowing is a key factor in determining whether they intended to repay the loan. Combining the perpetrator's financial condition with the use of the loan allows for an accurate grasp of their true mindset. In many fraud cases, when the perpetrator is heavily in debt or lacks any repayment ability, they fabricate facts to portray themselves as wealthy or capable of repayment, such as falsely claiming ownership of houses, land, luxury cars, etc. After obtaining the loan, they squander it, making repayment impossible. Such situations should be deemed as the perpetrator having no intent to repay at the time of borrowing. Conversely, if the perpetrator has good financial resources and, despite obtaining the loan through fabricated reasons and using it for activities like gambling, causing delayed repayment, but their other assets—such as real estate, cars, or stocks—can ensure the creditor's interests are not harmed, it should be determined that the perpetrator had the intent to repay at the time of borrowing and should not be considered fraud.
(3) Whether the perpetrator has engaged in concealing their true identity or hiding their whereabouts.
In loan-type fraud, criminals often use false names, addresses, or documents to conceal their true identity before committing the crime, and then disappear without a trace after succeeding. Some perpetrators, even when using their real identity, may change their phone numbers or relocate to hide their whereabouts after obtaining the loan or during the victim's recovery process. These behaviors can reflect the perpetrator's subjective intent of unwillingness to repay the loan and serve as an important basis for determining the nature of the perpetrator's actions.
In assessing the perpetrator's subjective intent, the above three points should be comprehensively analyzed and judged to accurately determine whether the perpetrator has the intent of illegal possession.
