Check kiting is a type of check fraud that is perpetrated under many different circumstances in Texas. At the most basic level, check kiting occurs when a person takes advantage of the time delay between depositing a check and the time when the check clears.
For some people, check kiting may be a way to cover a bill payment when times are tough. However, others may engage in a more serious criminal operation by using check kiting to illegally obtain money and goods. No matter the reason, check kiting is a serious type of fraud that can be punished with jail time and steep fines.
How Check Kiting Works
Essentially, check kiting is a type of fraud that involves a person who writes a bad check to cover another bad check. This may sound confusing but it is a relatively simple system.
A bad check is written against an account that has insufficient funds to cover the amount of the check. A basic form of check kiting can occur when a person writes a check for an amount that is greater than the balance of their account and then tries to deposit funds into their account before the check clears.
More elaborate forms of check kiting involve using two or more banks to cover bad checks. For example, suppose that Alan has an account at Bank One and another account at Bank Two. Alan writes a check from his Bank One account even though he doesn’t have the balance to cover it. Alan knows that it will take two days for the Bank One check to clear. On the second day, Alan writes a check from Bank Two and deposits it into his Bank One account. The Bank Two check is also bad but it will also take two days to clear.
In this way, Alan will avoid the cancellation of the bad Bank One check because his balance will include the deposit from the bad Bank Two check. Alan has bought himself some time to make a deposit into his Bank Two account to cover the second bad check.
Who Check Kiting Affects
Check kiting affects many people. The list of people affected by check kiting includes:
- Retail stores
- Car dealers
- Unsuspecting victims
A person who engages in a check kiting scheme is tricking the system to get an illegal loan from an unsuspecting source. The money from this loan can then be used to purchase cars, clothes, property or any number of items. By the time the check clears and the payment is revealed to be fraudulent, the victims find out that they sold valuable goods for bad money.
For example, a recent news story in The Woodlands Villager revealed that a check-kiting operation in Montgomery County, TX victimized 65 people for over $450,000. A 32-year-old man was charged with two first degree felonies for organizing the scheme.
How Check Kiting Is Detected
Banks use several methods to detect cases of check kiting. They range from simple observation to complex computer programs. Banks watch for tell-tale signs of check kiting, which can include:
- Covering overdrafts with checks
- Frequent deposits of checks
- Multiple deposits and withdrawals within the same day
- Checks that are written for exact amounts
- A person who avoids face-to-face bank transactions by using different branches or ATMs to make deposits
Although these signs do not necessarily prove that someone is kiting checks, a person who engages in many of these activities may draw suspicion from a bank or law enforcement.
Texas punishes fraud with tough penalties. If a person is accused of check kiting, they may be convicted on fraud charges. If this occurs, the defendant could face:
- Conviction on a state jail felony charge
- Incarceration in jail for 180 days or up to two years
- A fine of up to $10,000
A person who engages in multiple cases of check kiting may be brought up on felony organized crime charges. In this case, a defendant could face:
- Conviction on a first degree felony charge
- Five to 99 years or life in prison
- A fine of up to $10,000
Whenever a person is charged with any type of fraud, including check kiting, it’s important to hire an attorney. A defense attorney may be able to explain the charges so that the defendant has a better understanding of the case. An attorney may also be able to use evidence from the case to negotiate a plea bargain for a lighter sentence. Hiring an attorney is the best choice that a person charged with check kiting can make.
If you have been arrested for check kiting, it’s crucial to contact an experienced attorney. Brett A. Podolsky will fight to protect your rights. Call 713-227-0087 or email for a confidential consultation today!