It's not actually fraud if there is some ostensible service they're performing. Business units within businesses 'pay' each other for 'services' all the time. Ditto for subsidiaries. Whether something is fraud might come down to intent alone.

The line between legal and illegal business transactions can be murky as hell.

For it to not be fraud you'd have to actually exchange services proportional to the line items. That isn't what was described. Falsifying line items to juice your numbers is fraud plain and simple.