(1776), the TREATY OF PARIS (1783), and the U.S. Constitution (1787)—Benjamin Franklin holds a revered place in the history of U.S. law. Through his great success as a newspaper publisher, journalist, writer, civic leader, scien- tist, politician, and diplomat, and as an inven- tor, Franklin became an international celebrity in his day and an icon of the American character to later generations. Franklin’s varied career had a lasting effect on U.S. law and politics. As a leading local figure, he established and shaped many of the fundamental institutions of Philadelphia and colonial Pennsylvania. Before the Revolutionary War (1775–83), Franklin served as envoy to Great Britain for several colonies. Though he first advocated reconciliation with Britain, he eventually supported the cause of American INDEPENDENCE. He was assigned the task of securing an alliance with France during the war, and his political skill and prestige helped gain vital support for his young country as it fought the world’s greatest military power. After the war, Franklin used his diplomatic ingenuity to negotiate a successful peace treaty with Britain. Franklin also helped persuade the CONSTITUTIONAL Convention of 1787 to reach important compromises on the particulars of the Constitution, and his support of that DOCUMENT greatly improved its chances of RATIFICATION. Franklin was born January 17, 1706, in Boston, into a devout Puritan household. His only formal education consisted of two years of grammar school, after which he began work for his father, who was a tallow chandler, or candle maker. At age 12 he was apprenticed to his half- brother, James Franklin, a printer and the founder of the New England Courant, the fourth newspaper established in the British colonies. In his teenage years, Franklin began to improve himself by reading on his own, including the works of such authors as John Bunyan, Plutarch, Daniel Defoe, Cotton Mather, Joseph Addison, and JOHN LOCKE. Franklin employed his literary talents early, and wrote for the Courant articles satirizing Boston life and politics. He became a manager of the newspaper, but then abruptly moved to Philadelphia in 1723 after disagreements with his brother. Franklin arrived in Philadelphia at age 17 with only one Dutch dollar and a copper shilling in his pocket. He found work in a print shop and prospered enough to start his own Benjamin Franklin. LIBRARY OF CONGRESS ▼▼ ▼▼ Benjamin Franklin 1706–1790 17001700 17501750 17751775 18001800 17251725 ❖ ❖ 1706 Born, Boston, Mass. ◆ ◆ 1718 Apprenticed to his older brother James, a printer 1723 Moved to Philadelphia ◆ ◆ 1728 Started his own printing business 1730 Became sole owner of the Pennsylvania Gazette 1732–57 Poor Richard's Almanack published ◆ 1748 Retired from business to concentrate on natural philosophy, writing, politics, and diplomacy 1751–64 Served in Pennsylvania Assembly 1757–75 Served as Pennsylvania Assembly's agent in England (except for 1762–64) ◆ 1776 Signed the Declaration of Independence ◆ 1775–83 American Revolution 1790 Died, Philadelphia, Pennsylvania 1787 Signed U.S. Constitution 1783 Signed Treaty of Paris, which gave the U.S. complete independence from Britain ◆ 1778–85 Served as first U.S. minister to France GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FRANKLIN, BENJAMIN 529 printing business in 1728. In 1730 Franklin became sole owner of the Pennsylvania Gazette, which he transformed from a failing enterprise into a very influential newspaper. He also had success in other publishing ventures, including Poor Richard’s Almanack (1732–57), an annual that presented practical information, satire, proverbs, and aphorisms. In 1730 Franklin married Deborah Read, with whom he had two children. He also had two illegitimate children, one of whom, William Franklin, later became governor of New Jersey. In 1727, still a rising young businessman, Franklin formed a club of tradesmen called the Junto, which met each week for discussion. This group became highly influential in the life of Philadelphia and Pennsylvania. Under his leadership, it founded a circulating library, the first of its kind in the colonies, in Philadelphia in 1731; the American Philosophical Society in 1743; a city hospital in 1751; and an academy that developed into the University of Pennsyl- vania. Franklin led the group in making many other civic IMPROVEMENTS as well. In 1748, now wealthy from his printing and publishing interests, Franklin retired from business. He devoted the rest of his life to natural philosophy, writing, politics, and diplo- macy. In the area of natural philosophy, or science, Franklin’s ingenuity and curiosity gained him world renown as both an inventor and a theoretician. He designed an improved stove, later dubbed the Franklin stove, that was widely used, as well as bifocal glasses and a new type of clock. He began to study ELECTRICITY in 1746. His ideas and experiments on this subject—including the famous experiment that involved a kite with a metal key attached to it— identified the electrical nature of lightning. His work with electricity gained him many honor- ary degrees, including membership in the Royal Society in 1756 and in the French Academy of Sciences in 1772. He also developed a theory of heat absorption and was among the first to describe the Gulf Stream ocean current. Franklin’s study of natural philosophy was interrupted by an involvement in politics and diplomacy that ultimately dominated the last part of his life. In Pennsylvania, he was a member of the Quaker party, which sought to democratize the colony’s politics and wrest power from its original founders, the Penn family. He served as a representative to the Pennsylvania ASSEMBLY from 1751 to 1764. In 1754, he represented Pennsylvania at the Albany Congress, which had been called to unite the colonies in a war against the French and Indians. There, he unsuccessfully presented the Plan of Union, which would have estab- lished partial self-government for the colonies. The British did not approve of Franklin’s plan because they felt it gave too much power to the colonies, and the colonial assemblies rejected it because they felt it gave the British monarch too much power. Franklin also shared with another person the office of deputy postmaster for the colonies, from 1753 to 1774. In this office, he did a great deal to increase the frequency and efficiency of mail delivery. Franklin began a long and successful diplomatic career when he went to England in 1757 as the agent of the Pennsylvania Assembly. He remained in Britain through 1762 and met many leading figures of British society, includ- ing the philosopher DAVID HUME and the author Dr. Samuel Johnson. After spending two more years in Pennsylvania, he returned to England in 1764 to serve again as the Pennsylvania Assembly’s agent, and remained in Britain as an agent for various colonies in turn, until 1775. During his years abroad, he witnessed firsthand the growing rift between Britain and the colonies. In the controversy over the 1765 STAMP ACT, Franklin emerged as the American colonies’ chief spokesperson and defender. The act imposed a tax on publications and papers and provoked an outrage in the colonies. As the first of a series of major disputes between the colonies and Britain, the Stamp Act catalyzed the American colonies’ desire for independence and united them in opposition to Britain. Franklin opposed the Stamp Act before Britain’s House of Commons. His articulate answers before Parliament were published widely and earned him much admiration in America and abroad. Franklin also opposed such co ntrover- sial acts of Parliament as the TOWNSHEND ACTS (1767) and the Tea Act (1773). Although he originally worked for reconciliation with Brit- ain, Franklin left for America in March 1775 convinced of the need for American indepen- dence. Immediately upon his return to Philadelphia, Franklin was chosen to be a member of the Second CONTINENTAL CONGRESS. He again sketched THOSE WHO WOULD GIVE UP ESSENTIAL LIBERTY, TO PURCHASE A LITTLE TEMPORARY SAFETY, DESERVE NEITHER LIBERTY OR SAFETY. —BENJAMIN FRANKLIN GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 530 FRANKLIN, BENJAMIN a plan of union for the colonies. He also was one of a committee of five, including JOHN ADAMS and THOMAS JEFFERSON, appointed in 1776 to draft the Declaration of Independence, the document that formally announced the colonies’ break from Britain. Franklin signed the document, thereby becoming a revolutionary at age seventy. Soon after, the Continental Congress sent Franklin and two others to negotiate a critical treaty with France. Before he left, the wealthy Franklin also loaned the struggling Congress several thousand pounds. Franklin was greeted as a hero in France, where translations of his scientific and literary works had gained him much admiration. He was treated by all classes of society as a great oracle, and his image was reproduced widely in prints, medallions, jewelry, and snuffboxes. “His reputation in Europe,” Adams commented, “was more universal than that of Leibnitz or Newton, Frederick or Voltaire, and his character more beloved and esteemed than any or all of them.” During the first years of the Revolutionary War, Franklin worked in France to secure war supplies and build credibility with the French, who were reluctant at first to cast their lot with an untested new country. France and the United States finally signed an alliance in 1778, after which Franklin became the first U.S. minister to France. Fulfilling the myriad duties of that office with great dipl omatic skill, he continued to gain crucial supplies and money for the U.S. cause. In 1781, after defeat at the Battle of Yorktown had persuaded the British to give up the war, Franklin participated in delicate peace talks with Britain. He had much to do with the favorable terms of peace set forth in the Treaty of Paris, which finally gave the United States complete independence from Britain. Franklin returned to the United States in 1785. After serving three years as president of the Executive Council of Pennsylvania, he was chosen as a member of the Constitutional Convention, which met in Philadelphia in 1787. Now 81, he attended the convention regularly for more than four months and served as unofficial host to the delegates. Although Franklin’s calls for a single national legislative chamber and for an executive board (as opposed to a president) were not honored, his arguments helped the convention reach the important compromises that were necessary to secure agreement on the document. In particu- lar, Franklin called for mutual compromise on the sticky issue of the number of representatives to be allotted to each state in the national legislature. Of this disagreement, which pitted small states against large states, Franklin commented, If a property representation takes place, the small states contend that their liberties will be in danger. If an equality of votes is to be put in its place, the large states say their money will be in danger. When a broad table is to be made, and the edges of the planks do not fit, the artist takes a little from both, and makes a good joint. Later, Franklin urged other members of the convention to approve the final version of the Constitution. “I CONSENT, Sir, to this Constitu- tion,” he declared to the convention, “because I expect no better, and because I am not sure that it is not the be st. The Opinions I have had of its Errors, I sacrifice to the Public Good.” In the following battle for ratification of the Constitu- tion, Franklin used his considerable reputation to promote its success. For the last few years of his life, Franklin retired to Philadelphia. In his last public act, he signed a memorial to Congress for the ABOLITION of SLAVERY. He died in Philadelphia on April 17, 1790, at the age of 84. Among his many lasting literary works is his autobiography. FURTHER READINGS Brands, H.W. 2002. The First American: The Life and Times of Benjamin Franklin. New York: Random House. Franklin, Benjamin. 2003. The Autobiography of Benjamin Franklin: with Related Documents. Ed. Louis P. Masur. New York: St. Martin’s. ———. 1999. Benjamin Franklin: Autobiography and Other Writings. Edited by Ormond Seavey. New York: Oxford Univ. Press. Isaacson, Walter. 2004. Benjamin Franklin: An American Life. New York: Simon & Schuster. Lemay, J.A. Leo. 1993. Reappraising Benjamin Franklin: A Bicentennial Perspective. Cranbury, NJ: Associated Univ. Murrey, Christopher J., ed. 2002. Benjamin Franklin: Biographical Overview and Bibliography. New York: Nova Science. CROSS REFERENCE Constitution of the United States. FRAUD A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FRAUD 531 have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury. FRAUD is commonly understood as dishonesty calculated for advantage. A person who is dishon- est may be called a fraud. In the U.S. legal system, fraud is a specific offense with certain features. Fraud ismost common in thebuying or selling of property, including real estate, personal prop- erty, and intangible property, such as stocks, BONDS, and copyrights. State and FEDERAL statutes criminalize fraud, but not all cases rise to the level of criminality. Prosecutors have discretion in determining which cases to pursue. Victims may also seek REDRESS in civil court. Fraud must be proved by showing that the defendant’s actions involved five separate ele- ments: (1) a false statement of a material fact, (2) knowledge on the part of the DEFENDANT that the statement is untrue, (3) INTENT on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) INJURY to the alleged victim as a result. These elements contain nuances that are not all easily proved. First, not all false statements are FRAUDULENT. To be fraudulent, a false statement must relate to a material fact. It should also substantially affect a person’s decision to enter into a contract or pursue a certain course of action. A false statement of fact that does not bear on the disputed transaction will not be considered fraudulent. Second, the defendant must know that the statement is untrue. A statement of fact that is simply mistaken is not fraudulent. To be fraudu- lent, afalse statement must be madewith intent to deceive the victim. This is perhaps the easiest element to prove, once falsity and materiality are proved, because most material false statements are designed to mislead. Third, the false statement must be made with the intent to deprive the victim of some LEGAL RIGHT. Fourth, the victim’s reliance on the false statement must be reasonable. Reliance on a patently absurd false state ment generally will not give rise to fraud; howev er, people who are especially gullible, superstitious, or ignorant or who are illiterate may recover DAMAGES for fraud if the defendant knew and took advantage of their condition. Finally, the false statemen t must cause the victim some injury that leaves her or him in a worse position than she or he was in before the fraud. A statement of belief is not a statement of fact and thus is not fraudulent. Puffing, or the expression of a glowing opinion by a seller, is likewise not fraudulent. For example, a car dealer may represent that a particular vehicle is “the finest in the lot.” Although the statement may not be true, it is not a statement of fact, and a reasonable buyer would not be justified in relying on it. The relationship between parties can make a difference in determining whether a statement The SEC provides for civil and criminal penalties in corporate fraud. In December 2008 Bernard Madoff was arrested on a count of securities fraud and later admitted that the asset management division of his investment firm was a Ponzi scheme. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION 532 FRAUD is fraudulent. A misleading statement is more likely to be fraudulent when one party has superior knowledge in a transaction, and knows that the other is relying on that knowledge, than when the two parties possess equal knowledge. For example, if the seller of a car with a bad engine tells the buyer the car is in excellent running condition, a court is more likely to find fraud if the seller is an auto mechan ic as opposed to a sales trainee. Misleading state- ments are most likely to be fraudulent where one party exploits a position of trust and confidence, or a FIDUCIARY relationship. Fiducia- ry relationships include those between attorneys and clients, physicians and patients, stock- brokers and clients, and the officers and partners of a corporation and its stockholders. A statemen t need not be affirmative to be fraudulent. When a person has a duty to speak, silence may be treated as a false statement. This can arise if a party who has knowledge of a fact fails to disclose it to another party who is justified in assuming its nonexistenc e. For example, if a real estate agent fails to disclose that a home is built on a toxic waste dump, the omission may be regarded as a fraudulent statement. Even if the agent does not know of the dump, the omission may be considered fraudulent. This is construc- tive fraud, and it is usually inferred when a party is a fiduciary and has a duty to know of, and disclose, particular facts. Fraud is an independent criminal offense, but it also appears in different contexts as the means used to gain a lega l advantage or accomplish a specific crime. For example, it is fraud for a person to make a false statement on a license application in order to engage in the regulated activity. A person who did so would not be convicted of fraud. Rather, fraud would simply describe the method used to break the law or regulatio n requiring the license. Fraud resembles theft in that both involve some form of illegal taking, but the two should not be confused. Fraud requires an additional element of FALSE PRETENSES created to induce a victim to turn over property, services, or money. Theft, by contrast, requires only the unautho- rized taking of another’s property with the intent to permanently deprive the other of the property. Because fraud involves more planning than does theft, it is punished more severely. Federal and state criminal statutes provide for the punishment of persons co nvicted of fraudulent activity. Interstate fraud and fraud on the federal government are singled out for federal prosecution. The most common federal fraud charges are for mail and wire fraud. Mail and wire fraud statutes criminalize the use of the mails or interstate wires to create or further a scheme to DEFRAUD (18 U.S.C.A. §§ 1341, 1342). Tax fraud against the federal government consists of the willful attempt to evade or defeat the payment of taxes due and owing (I.R.C. § 7201). Depending on the defendant’s intent, tax fraud results in either civil penalties or criminal punishment. Civil penalties can reach an amount equal to 75 percent of the underpayment. Criminal punishment includes FINES and IMPRISONMENT. The degree of intent necessary to maintain criminal charges for tax fraud is determined on a case-by-case basis by the INTERNAL REVENUE SERVICE and federal prosecutors. There are other federal fraud laws. For example, the fraudulent registration of ALIENS is punishable as a misdemeanor under federal law (8 U.S.C.A. § 1306). The “victim” in such a fraud is the U.S. government. Fraud violations of banking laws are also subject to federal prosecution (18 U.S.C.A. §§ 104 et seq.). The Federal Sentencing Guidelines recom- mend consideration of the intended victims of fraud in the sentencing of fraud defendants. The guidelines urge an upward departure from standard sentences if the intended victims are especially vulnerable. For example, if a defendant markets an ineffective cancer cure, that scheme, if found to be fraudulent, would warrant more punishment than a scheme that targets persons generally, and coincidentally happens to INJURE a vulnerable person. federal courts may require persons convicted of fraud to give notice and an explanation of the CONVICTION to the victims of the fraud (18 U.S.C.A. § 3555). All states maintain a general criminal STATUTE designed to punish fraud. In Arizona the statute is called the fraudulent scheme and artifice statute. It reads, in pertinent part, that “[a]ny person who, PURSUANT to a scheme or artifice to defraud, knowingly obtains any benefit by means of false or fraudulent pre- tenses, represen tations, promises or material omissions” is GUILTY of a FELONY (Ariz. Rev. Stat. Ann. § 13-2310(A)). States further criminalize fraud in a variety of settings, including trade and COMMERCE, GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FRAUD 533 SECURITIES, taxes, real estate, gambling, INSURANCE, government benefits, and credit. In Hawaii, for example, fraud on a state tax return is a felony warranting a fine of up to $100,000 or three years of imprisonment, or both, and a fraudulent corporate tax return is punished with a fine of $500,000 (Haw. Rev. Stat. § 231-36). Other fraud felonies include fraud in the manufacture or distribution of a controlled substance (§ 329-42) and fraud in government ELECTIONS (§ 19-4). Fraud in the application for and receipt of public assistance benefits is punished according to the illegal gain: fraud in obtaining over $20,000 in food coupons is a class B felony; fraud in obtaining over $300 in food coupons is a class C felony; and all other public assistance fraud is a misdemeanor (§ 346-34). Alteration of a mea- surement device is fraud and is punished as a misdemeanor (§ 486-136). In civil court, the remedy for fraud can vary. In most states, a plaintiff may recover “the benefit of the bargain.” This is a measure of the difference between the represented value and the actual value of the transaction. In some states, a plaintiff may recover as actual damages only the value of the property lost in the fraudulent transaction. All states allow a plaintiff to seek PUNITIVE DAMAGES in addition to actual damages. This right is exercised most commonly in cases where the fraud is extremely dangerous or costly. Where the fraud is contractual, a plaintiff may choose to cancel, or RESCIND,the contract. A court order of RESCISSION returns all property and restores the parties to their precontract status. Fraud is also penalized by administrative agencies and professional organizations that seek to regulate certain activities. Under state statutes, a professional may lose a license to work if the license was obtained with a false statement. One particularly well publicized area of fraud is CORPORATE FRAUD. Corporate fraud cases are largely governed by the Securities Exchange Act of 1934 (15 USCA §§ 78a et seq.), al ong with other rules and regulations propagated by the SECURITIES AND EXCHANGE COMMISSION. These laws were a response to the market turmoil during the 1930s and well-publicized corporate fraud cases. The Securities Exchange Act and the SEC regulate anything having to do with the trad- ing or selling of securities and stocks. They govern fraudulent behavior ranging from stock manipulation to INSIDER TRADING. They also provide for civil and criminal penalties for corporate fraud. Despite the act and the SEC, in the early part of the twenty-first century, corporate fraud began to seem endemic. Such well-known companies as energy trader Enron, TELECOMMU- NICATIONS company WorldCom, cable provider Adelphia, and other lesser-known firms went into BANKRUPTCY as a result of corporate fraud. In light of these events, Congress decided to tighten up corporate fraud requirements with the passages of the Sarbanes-Oxley Act of 2002 (U.S. PL 107-204). Among other features, Sarbanes-Oxley re- quired expanded and more frequent disclosure by public companies of their finances to prevent fraud. It created a Public Company ACCOUNTING Oversight Board to register and regulate account- ing firms and accounting practices. It also enhanced the SEC’s power to monitor and investigate compliancewith securities laws, adding stiff penalties for fraudulent behavior by corpora- tions, their officers, and their accountants. FURTHER READINGS Clemency, John. 2002. “Corporate Fraud: Where Should the Buck Really Stop? Corporate Fraud Perspective.” On the Edge—American Bankruptcy Institute Journal 21 (November). Podgor, Ellen S. 1999. “Criminal Fraud.” American Univ. Law Review 48 (April). Available online at http://www. wcl.american.edu/journal/lawrev/48/pdf/podgor.pdf? rd=1; website home page: http://www.wcl.american.edu (accessed September 3, 2009). Ribstein, Larry. 2002. “Market vs. Regulatory Responses to Corporate Fraud: A Critique of the Sarbanes-Oxley Act of 2002.” Journal of Corporation Law 28, no. 1 (fall). Available online at http://papers.ssrn.com/sol3/papers. cfm?abstract_id=332681; website home page: http:// papers.ssrn.com (accessed July 25, 2009). CROSS REFERENCE Internet Fraud. FRAUDULENT The description of a willful act commenced with the specific intent to deceive or cheat, in order to cause some financial detriment to another and to engender personal financial gain. FRAUDULENT CONVEYANCE A transfer of property that is made to swindle, hinder, or delay a creditor, or to put such property beyond his or her reach. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 534 FRAUDULENT For example, a man transfers his bank account to a relative by putting the account in the relative’s name. He informs the relative that he has not relinquished ownership of the funds, but merely wants to isolate the money from the reach of his creditors. This is a FRAUDULENT CONVEYANCE that can be set aside by the court at the request of the defrauded creditor. A creditor who seeks to set aside a FRAUDULENT conveyance must comply with state statutes. Most states have adopted some version of either the Uniform Fraudulent Transfer Act (UFTA) or the older Uniform Fraudulent Conveyance Act (UFCA). Generally, the indi- vidual must acquire a lien (a right or claim) or a judgment (a court decision) against a debtor’s property. A judgment is usually required to show with certainty the existence of a valid and enforceable debt, but it can be dispensed with, depending upon the particular circumstances of the case. In many jurisdictions, a court will not set aside the conveyance if the debtor owns property, other than that which has been fraudulently conveyed, that is sufficient to pay the debt. Fraudulent Intent Just because an individual in debt makes a conveyance of his or her property does not mean that it is a fraudulent conveyance. Whether a transaction constitutes a fraudulent conveyance depends upon the existence of the INTENT to DEFRAUD at the time that the challenged transfer was made. Because it may be difficult for the courts to determine an individual’s intent, rules have been established to help in the process. Such rules are called “badges of fraud.” For example, if the TRANSFER OF ASSETS was concealed, an INFERENCE of FRAUD can be made. The failure to record a conveyance, such as a DEED to land, might indicate the existence of fraud. Another example is if the transfer included virtually all of the debtor’s assets. If a voluntary conveyance renders a debtor insolvent or leaves the debtor without the means of paying the debts existing at the time of the conveyance, it is fraudulent and without any legal effect, regardle ss of the intent of the parties. Family Relationships A conveyance by one spouse to the other based upon a FICTITIOUS or nominal consideration is generally treated as fraudulent if it is made to defeat the spouse’s creditor’s claims. However, if one spouse pays the other the MARKET VALUE of the property, the transfer is valid and will not be set aside as a fraudu lent conveyance. Where a conveyance between spouses is made in consid- eration of love and affection, it is voluntary and fraudulent if it renders the debtor spouse unable to pay existing personal debts. Property purchased in the name of one spouse (e.g., the wife), but paid for with the funds of the other (e.g., the husband), can be challenged by the husband’s existing creditors. A BONA FIDE debt due by one spouse to the other, which can be established by showing that the spouses dealt with each other as debtor and creditor, is sufficient consideration to support a conveyance of property in payment of a debt as long as the debt bears a r easonable proportion to the value of the property conveyed. Creditors will lose their attack upon a conveyance between family members unless the transfer is for a grossly inadequate consid- eration and is surrounded by other circum- stances that establish fraud. Preferences A debtor, although insolvent or in failing financial circumstances, can prefer one or more of his creditors by paying these persons first, provided no fraudulent intent exists to cheat the other creditors. The debtor’s motives for a preference among the creditors are IMMATERIAL unless they establish fraudulent intent. The property transferred must not unreasonably exceed the amount of the claim, and the transaction must not provide for special benefits to the creditor. A debtor can give a preference to his creditors because as ABSOLUTE owner of his personal property, the debtor can do with it as he pleases, as long as the law is not violated. By law, however, certain debts—such as those owed to the United State s, or debts created by secured transactions—must be satisfied before any others. The existence of a family relationship between the debtor and preferred creditor does not, in itself, affect the validity of a preference. The relationship between the parties is just one factor to be considered, and is given commen- surate weight, along with other factors, in determining the GOOD FAITH of the transaction. A transaction involving a family relationship, however, will be more closely examined than if it had taken place between strangers. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FRAUDULENT CONVEYANCE 535 Remedies Once a conveyance is declared void because of fraud, the court can do full justice by ordering a sale of property under its direction. Every kind of property that can be used for the payment of debts can be reclaimed by creditors in a proper case. By statute many states exempt personal items—such as clothing, kitchen appliances, and household furniture—from being reached by creditors to satisfy debts. The proceeds are used to pay off the costs of the lawsuit and to provide RESTITUTION to the creditors who brought the claims before the court. A debtor who has fraudulently trans- ferred property to cheat his or her creditors might also be subject to statutory penalties and criminal prosecution, depending upon the law in the debtor’s home state. Bankruptcy In the context of BANKRUPTCY law, a fraudulent conveyance can be the basis for an objection to DISCHARGE (the legal elimination of debt). FEDERAL law denies a discharge to a debtor who transfers property with intent to hinder, delay, or defraud within the 12 months immediately prior to the filing of the bankruptcy petition or after the filing of bankruptcy petition. FURTHER READINGS Alces, Peter A. 2002. The Law of Fraudulent Transactions. Eagan, MN: Thomson/West. Coulson, Richard E. 1996. “Fraudulent Transfers: History, Overview, and Developments—State Law.” Consumer Finance Law Quarterly Report 50 (summer). Glenn, Garrard. 2001. Fraudulent Conveyances and Prefer- ences. rev. ed. Buffalo, NY: Hein. Suess, Erin. 2002. “Fraudulent Conveyance Not Discharged When Debtor Files a Bankruptcy Action.” Daily Record (St. Louis, MO/St. Louis Countian) (May 8). Wait, Frederick S. 2008. A Treatise on Fraudulent Conveyances and Creditors’ Bills. Charleston, SC: BiblioBazaar. FREE AGENCY A legal status that allows a professional athlete to negotiate an employment contract with the team of his or her choosing instead of being confined to one team. Athletes may become free agents after they have served a specific amount of time under contract with a team. FREE AGENCY allows athletes who are at the peak of their careers to shop themselves out to teams that are willing to pay top dollar and offer the most comprehensive benefits and perks. In 1975 professional BASEBALL was the first major sport to adopt a formal free agency policy; football, basketball, and hockey followed. Before free agency existed, sports franchises generally held complete control over individual players. Their contracts contained reserve clauses, which specifically bound them to one team. Players who grew unhappy with their team had little leverage; sometimes they might be released from a contract, but their only real hope was that they might be traded to another team. Star athletes can benefit significantly from free agency. When their contract is up, they may get lucrative offers from rival teams (often multiyear contracts worth millions of dollars). For athletes who are less successful, free agency means that if their contract is not renewed, they may be unable to f ind a spot on another team. Still, the free agent system has helped athletes across the board because it forced teams to raise salaries for all players, not just free agents. From a team’s point of view, free agency can be problematic because it makes it easier to lose star players; those same players also can demand higher salaries. Teams bid for free agents, who usually sign with the highest bidder. In “restricted” free agency, a player is allowed to become a free agent subject to certain require- ments. For example, a team might retain the right of first refusal, meaning that it can retain the player if it chooses to match a rival team’s offer. Free agents can be restricted on the basis of years served, or age. In professional hockey, for example, a player may become a free agent after completing four seasons, but they hold restricted status if they are under 31 years of age. In recent years, the term free agent has been used to describe individuals who work for themselves in a variety of situations—indepen- dent contractors, home office workers, and temporary employees, for example. Even in- house employees whose skills are so specialized that they are especially attractive to other companies have been called free agents. Strictly speaking, these people are not true free agents. Independent contractors, like free agents, are allowed to sign on with any client or customer of their choo sing. Usually, however, they are not contractually bound to any one client the way professional athletes are. A freelance writer, for example, may contract with several clients at the GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 536 FREE AGENCY same time. Whereas some clients might ask the writer to sign a promise not to divulge proprietary information, in most cases the writer is not actually prohibited from working with specific companies. Temporary workers have slightly more IN COMMON with free agents. They contract with an employment agency, and they are restricted from accepting job offers from the agency’s client companies. Usually, however, temporary workers are allowed to sign up with more than one agency. FURTHER READINGS Abrams, Robert I. 2000. The Money Pitch: Baseball Free Agency and Salary Arbitration. Philadelphia: Temple Univ. Press. Berry, Robert C., and Glenn M. Wong. 1993. Law and Business of the Sports Industry. Santa Barbara, CA: Praeger. Bodley, Hal. “Free Agency Brought Big Changes.” USA Today (December 22, 2000). Available online at http:// www.usatoday.com/sports/comment/colbod.htm; web- site home page: http://www.usatoday.com (accessed July 25, 2009). CROSS REFERENCES Employment Law; Independent Contractor; Sports Law. FREE EXERCISE CLAUSE See RELIGION. FREE SOIL PARTY The FREE SOIL PARTY evolved in the 1840s in response to the growing split between pro- and anti-slavery movements in the United States. National politics was controlled primarily by two parties, Democratic and Whig. Within both parties there were supporters and opponents of SLAVERY, and the issue became more heated as the U.S. added territory. Proponents of slavery wanted to extend it into the newly acquired territories, while opponents wanted the territo- ries to remain free. The issue grew especially heated among members of the state DEMOCRATIC PARTY in New York. Two groups emerged: the “Barnburners,” who oppose d slavery, and the “Hunkers,” who supported slavery or were neutral on the question. In 1844, the Barnburners pushed for the nomination of former president and fellow New Yorker MARTIN VAN BUREN . Southern Democrats supported JAMES K. POLK, who was more sympathetic to their views, and although the New York Democrats were well organized they could not defeat a strong Southern bloc. Polk won the Democratic nomination and beat the Whig candidate, HENRY CLAY, in the general election. The Mexican War, which began in 1846, further exacerbated the slavery question. DAVID WILMOT , a Democratic congressman from Penn- sylvania, introduced what became known as the WILMOT PROVISO. It called for a PROHIBITION of slavery in any territory acquired by the United States in the war with Mexico. The Wilmot PROVISO came up for a vote several times; it was routinely passed by the House and defeated by the Senate. Democrats and Whigs wanted to avoid party division in the election of 1848, so they virtually ignored the slavery question. The Democrats nominated Lewis Cass, who was sympathetic to Southern slaveholders. In defiance, anti-slavery Democrats joined with the Barnburners in New York to create the Free Soil party. The party held its convention in Buffalo, New York, in August 1848 and adopted the slogan, “Free soil, free speech, free labor, and free men.” The Free Soilers nominated Van Buren for president and Charles Francis Adams of Massachusetts for VICE PRESIDENT. The Free Soilers had a mixed reception. Many people saw them as a cynical group of Van Buren loyalists who had no real desire to abolish slavery but merely to take votes away Martin Van Buren and C.F. Adams were the Free Soil Party’s candidates for president and vice president in the 1848 election. Van Buren received 291,616 votes. CORBIS. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION FREE SOIL PARTY 537 from the major parties. Senator DANIEL WEBSTER, the statesman from Massachusetts (and himself a Whig), derisively called the party the “Free Spoilers.” Yet the party drew a surprising amount of support from abolitionists, including FREDERICK DOUGLASS. Hostilities even among different state Free Soil organizations kept the party from building enough strength to win the presidency, al- though the Free Soilers did make their presence known. Van Buren received 291,616 votes, not enough to regain the White House—but enough to take votes away from Cass and ultimately ensure a Whig victory for ZACHARY TAYLOR . The Free Soil party did respectably in Congress, electing 13 representatives and two senators. The slavery question continued to divide the country, although the COMPROMISE OF 1850 attempted to provide a framework that every- one could accept by legislating which states and territories would be free and which would be slave. To those who had strong feelings about slavery, the Compromise of 1850 solved no problems, and the Free Soilers nominated John Parker Hale, an abolitionist from New Hamp- shire, as their candidate for president in 1852. By then, however, interest in the Free Soil party had dwindled. Hale received only about five percent of the popular vote. By 1854 the Free Soil party had disappeared, but many of its supporters and former members still held sway in national politics. Well-known figures formerly tied to the Free Soilers included politicians such as Schuyler Colfax, CHARLES SUMNER , and Salmon P. Chase, as well as newspaper editor Horace Greeley. These influ- ential men became key figures in the creation of the REPUBLICAN PARTY, whose 1860 candidate for president was ABRAHAM LINCOLN. FURTHER READINGS Blue, Frederick J. 1973. The Free Soilers: Third Party Politics. Urbana: Univ. of Illinois Press. Foner, Eric. 1970. Free Soil, Free Labor, Free Men: The Ideology of the Republican Party before the Civil War. New York: Oxford Univ. Press. “Free Soil Party.” 2005. Ohio History Central. Available online at http://www.ohiohistorycentral.org/entry. php?rec=893; website home page: http://www .ohiohistorycentral.org (accessed September 3, 2009). CROSS REFERENCES Independent Parties; Republican Party; Slavery. FREEDOM OF ASSOCIATION AND ASSEMBLY The right to associate with others for the purpose of engaging in constitutionally protected activities. The right to associate is not an independent CONSTITUTIONAL right but i s derived from and dependent on the FIRST AMENDMENT guarantees of FREEDOM OF SPEECH and expression. It is protected only to the extent that it is asserted in conjunction with a First Amendment right. However, some legal scholars maintain that freedom of associa- tion is more fundamental than the rights ENUMERATED in the Constitution because without it those other rights have little meaning. One early case to recognize freedo m of association was NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 78 S. Ct. 1163, 2 L. Ed. 2d 1488 (1958). In Patterson, the Supreme Court held that a lower court’s order compel- ling the NAACP to disclose records containing the names and addresses of its Alabama members violated the group’s right to associate freely. The Court recognized freedom of association as an adjunct to the NAACP’s free speech rights and held that the freedom to associate for the advancement of beliefs and ideas is inseparable from the freedom of speech. General types of association unrelated to First Amendment rights are not protected by the Constitution. For instance, in City of Dallas v. Stanglin, 490 U.S. 19, 109 S. Ct. 1591, 104 L. Ed. 2d 18 (1989), the Court held that a city ordinance limiting adult entrance into teenage dance halls did not violate the associational rights of either the adults or the minors. The association of adults and minors in a social setting does not fall within the PURVIEW of any rights protected by the First Amendment and therefore is not a constitutionally protected activity. The activities of groups organized to pursue economic activity are sometimes protected if the individuals have come together to advance beliefs or ideas. Generally, the Court’s decisions in this area depend on whether the economic activities are found to be sufficiently expressive to invoke First Amendment protection. In NAACP v. Claiborne Hardware Co., 458 U.S. 886, 102 S. Ct. 3409, 73 L. Ed. 2d 1215 (1982), the NAACP was held not liable for economic damage suffered by merchants in a BOYCOTT it had sponsored. The boycott was a lega l, GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 538 FREEDOM OF ASSOCIATION AND ASSEMBLY . SAFETY. —BENJAMIN FRANKLIN GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 530 FRANKLIN, BENJAMIN a plan of union for the colonies. He also was one of a committee of five, including JOHN ADAMS. Madoff was arrested on a count of securities fraud and later admitted that the asset management division of his investment firm was a Ponzi scheme. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, . CONVEYANCE A transfer of property that is made to swindle, hinder, or delay a creditor, or to put such property beyond his or her reach. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 5 34 FRAUDULENT For