President Viktor Yanukovych’s initiative to make criminal responsibility for economic crimes more humane (draft law No. 9221) is one of the “most creative” measures his administration has recently taken, even though the idea is not new. Back in 2007, Yanukovych, prime minister at the time, submitted a draft law in the same vein to parliament and it eventually became law. However, the current proposal is brimming over with creativity that can be used in dubious operations.
PORTNOV'S SHADOW
The ideas of humanism and a search for new sources of budget receipts, especially at the expense of investigators and judges who will receive fewer bribes, are a sacred cow. But, mildly speaking, this is a very narrow understanding of the objectives being pursued by the president-sponsored bill. It has a much wider scope in that it lays a legal foundation for the redistribution of government, communal and personal property in Ukraine. Its redistribution involves very specific actions aimed at illegitimately replacing owners: purposeful bankruptcy, fictitious bankruptcy, non-competitive privatization, corporate raids, and so on. The list of suchlike crimes can go on and on. As long as they are punished with imprisonment or limitation of freedom, there are at least some means of containment available. However, the amendments to the Criminal Procedure Code, Criminal Code, Code of Administrative Offences and other acts proposed in draft law No. 9221 remove even these barriers. One gets the impression that the draft law was drafted by very knowledgeable people.
The explanatory note attached to the draft law suggests that it was drafted under the guidance of Andriy Portnov, aide to the president. Today he is remembered as the former head of Yulia Tymoshenko’s legal service. He eventually betrayed his patroness, but before joining her camp, he and companies associated with him were often mentioned by the mass media in connection with corporate raids.
WE WANT IT ALL
If you happen to be a thief or raider or serve their interests, your life will be even better soon. For example, Article 233 of the Criminal Code punishes the illegal privatization of government or communal property with 3-5 years in prison. But the “humanistic” draft law sets much more lenient punishments for these wrongdoings – a fine to the tune of 5,000-10,000 tax-exempt minimum personal incomes, i.e., UAH 85,000-170,000. So now one can embezzle government and communal property worth multiple times more than the proposed fines with abandon. If you succeed, good for you; if not, you won’t lose much, a mere USD 10,000-20,000. For those who steal millions, this is peanuts.
A common way to take over property is purposeful or fictitious bankruptcy. Bankruptcy manipulations are usually part of privatization schemes: an enterprise is first run into the ground and then bought for a song. At present, this carries a fine of UAH 8,500-13,500 or prison for up to three years. Now the fine has been increased to a UAH 51,000 maximum, while the limitation of freedom has been dropped. Again, what is a USD 6,400 fine to a person who is driving a company worth USD 10 million to bankruptcy?
A cursory overview of court rulings in the past several years shows a significant increase in the number of fictitious bankruptcies. At present, this leads to a fine or limitation of freedom up to three years. The draft law proposes to impose a fine of UAH 12,750-34,000 for causing severe material damage to creditors or the state. Severe damages start at UAH 8,500. No comments. If you steal, you can just pay up and get back to stealing.
The valid Criminal Code has Article 222 entitled “Fraud involving financial resources” defines responsibility for providing untruthful information to obtain money transfers from the budget. For example, say a multimillion transfer is earmarked in the state budget to support agricultural producers. If someone provides untruthful information to prove they are eligible for it, they will have to pay UAH 8,500-17,000 or face prison for up to three years under Article 222. Of course, paying a USD 1,000-2,000 fine and having your freedom limited for three years are two drastically different punishments. If the offender repeats the crime (or causes severe material damage), they will face 2-5 years in prison. Now the president has decided to be more lenient toward people embezzling the budget and his draft law sets a fine, UAH 17,000-51,000, for the unlawful procurement of a government subsidy or subvention and UAH 51,000-170,000 for a repeat crime (or causing severe damages). No prison terms.
Naturally, no redistribution of property is possible without control over the flow of money in the smuggling business. A person smuggling goods worth over UAH 17,000 or “strategically important raw materials whose export is regulated by special legislation” now faces 3-7 years in prison and confiscation of their contraband. Under the presidential bill, part 1 of Article 201 will no longer mention large-scale contraband (over UAH 17,000) or smuggling strategically important raw materials. With the exception of smuggling items of cultural value, weapons, ammunition, and so on, contraband runners will face no prison terms.
STOP ANTI-CORRUPTION
The legal framework for taking control over financial flows and carving up property in the country would be incomplete without securing those who legitimize such operations against prison terms. Draft law No. 9221 takes care of this, too: it relaxes punishment for people who perform public functions. Under the current laws, abuse of the position of an independent intermediary, labor arbitrage member, arbitrator, etc. is punished with up to two years of correctional labor, up to six months behind bars or limitation of freedom for up to thee years. The presidential draft law envisages only fines, UAH 17,000-51,000, while bribes in this area are rarely less than USD 1,000.
Similarly, the list of sanctions for bribing an auditor or notary no longer includes “limitation of freedom for up to two years.” The Presidential Administration proposes to replace this with fines. It should be noted that criminal responsibility for offences committed by persons performing public functions was introduced in anti-corruption laws submitted by Yanukovych himself and approved by parliament on April 7, 2011. Less than six months later, the president wants to kill his own anti-corruption song.
