Cover Story (#03 March 2019)

Legal Methods

The transparency of the public sector is an attribute of developed countries. It ensures public trust in the state and its representatives. The launch of electronic declarations for all Ukrainian public servants, which envisages disclosure of assets and income, is a breakthrough step in fighting corruption.

The exposure of wealth resulted in a new wave of suspects and prosecutions. Just as expected we are seeing more proceedings opened by law-enforcement bodies on the eve of the coming presidential elections.

We talked to Olha Prosyanyuk and Artem Drozdov, partners at AVER LEX Attorneys at Law, to learn the latest practice in these cases and implications of the recently adopted decision of the Constitutional Court.

The defense counsel always reveals a broader picture and explains how important it is to control the use of legal methods at all stages of proceedings.

UJBL: After Ukrainian officials were required to report their income and assets in mandatory electronic declarations, there were many complaints around the system as such. What are the most typical cases of violation of e-declaration requirements?

Olha Prosyanyuk: After the initiation of obligatory income tax declaration for persons authorized to carry out the functions of the state, new tools of artificial criminal prosecution have appeared and the number of criminal proceedings has significantly increased.

In the process of providing legal assistance to clients in cases related to income tax declaration, two main areas of investigation can be outlined: intentional failure to submit an annual income tax declaration (particularly widespread cases of failure to submit the declaration by individuals after their dismissal from positions); and charges of declaring false information (failure to include family members, their property status, automobiles, luxury items, movable and real property, corporate rights, legal entities non-residents).

UJBL: What is the interrelation between the subsumptions receiving unlawful benefit, unlawful enrichment, declarations containing false information, legalization (laundering) of money obtained through criminal means?

Artem Drozdov: The main distinction and qualifying characteristic of receiving unlawful benefit is that the individual abuses his position and authority and commits certain illegal actions in the interests of those who provide unlawful benefit, contrary to the interests of the service. In the case of unlawful enrichment, the individual does not abuse his position or the fact of accepting unlawful benefit cannot be proven or documented. This means that in the case of unlawful enrichment, the individual gains possession of assets on a large scale, the lawfulness of origin of which is not confirmed by evidence.

The legislation envisages liability for unlawful enrichment in Article 368-2 of the Criminal Code of Ukraine, while the liability for accepting unlawful benefit is envisaged in Article 368 of the Criminal Code. Large or particularly large scale of enrichment serves as the qualifying characteristic. Obtaining unlawful benefit or unlawful enrichment can take place in a disguised manner, which makes it more difficult to uncover and qualify such crimes, that is why the laws clearly determine the minimum size of the amount of money and material items, which constitute the subject of unlawful enrichment (over 1,000 tax-free minimum incomes, which at this moment comes to around UAH 960,000). At the same time, the minimum size of the unlawful benefit is not set.

With the aim of avoiding liability for unlawful enrichment, the individual may also submit declarations containing false information, i.e. fail to include assets obtained in an illegal manner in the declaration.

Legalization (laundering) of criminally obtained money or other property is a predicative offense. That is, criminal liability under Part 1 of Article 209 of the Criminal Code of Ukraine arises in the event of commission of at least one of the following actions that preceded legalization (laundering) of money or other property:

1) a financial transaction or other deals involving other property obtained as a result of commission of the predicative action or conclusion of an agreement regarding it;

2) actions aimed at hiding or masking: the illegal origin of such money or other property; their ownership; rights to such money or other property; sources of their origin; location; movement;

3) obtaining, owning or using such money or other property.

The liability for the aforementioned actions arises only in case the money or other property, which is the subject of legalization, were obtained as a result of commission of a predicative action (envisaged by Paragraph 1 of the Note to Article 209, which preceded legalization (laundering) of money or other property obtained illegally), and these actions were committed willfully with the objective of making it seem as if ownership, use and disposal of such money or other property, their receipt was lawful or concealing the sources of their origin.

UJBL: Long time unlawful enrichment has been considered a dead provision of the Criminal Code, and not actually applied in practice. To what extent has this situation changed recently?

A. D.: In the Criminal Code of Ukraine (as revised in 2001), prior to 21 December 2010, criminal liability for unlawful enrichment was established by Article 368-1 of CCU (Criminal Code of Ukraine) receipt by a public official of unlawful benefit or transfer of such benefit by him to close relatives (unlawful enrichment), after which it became invalid.

Subsequently, on 7 April 2011, Article 368-2 of CCU was introduced receipt by a public official of unlawful benefit in a large amount, or transfer of such benefit to his/her close relatives in absence of bribery characteristics (unlawful enrichment), the changes to which were introduced by adoption of the Law of Ukraine On Preventing Corruption of 11 April 2014. However, in practice, this qualification was used rarely and quite selectively due to the complexity of documentation of evidence of the aforementioned criminal offenses.

At the same time, taking into account the decision of the Constitutional Court of Ukraine on recognizing provisions of Article 368-2 of CCU as such that do not comply with the Constitution of Ukraine, which hasnt actually been published yet, the aforementioned article did actually turn out to be dead due to the violation of the principle of presumption of innocence, as lawmakers wanted to impose on suspects the obligation to prove their innocence, which is a grave violation of the standards of the national and international law and fundamental principles of justice.

However, according to the latest information, the reanimation of such corpus delicti has been initiated by the way of amending the Criminal Code of Ukraine with formulations that would not contradict the presumption of innocence.

UJBL: What are the arguments for the legality, or vie versa, illegality of buying property? What evidence is required for this?

O. P.: With the objective of proving corpus delicti, law-enforcement agencies first of all carry out analysis of the electronic income tax declaration of the public official and compare the information with his real income and expenses. With the aim of performing the above actions, a corresponding notification is then sent to the National Agency on Corruption Prevention (NACP), which can, according to the law, carry out monitoring of lifestyles.

A request is also submitted to a court for obtaining temporary access to telephone communications, information about the bank accounts, registers of real estate, securities, registering of power of attorney, national border crossing, etc. Furthermore, within the framework of investigation of the aforementioned criminal proceedings, the practice of unofficial investigative search actions is usually applied in the form of retrieval of information from communication changes, transport communication networks, audio and video surveillance of the individual, searches, which substantially narrows the rights and violates the interests of the individual with regard to the right to secrecy of private communication.

The defense, in its turn, takes every possible measure to register violations committed by the body of pre-trial investigation, dismissal of evidence received as a result of violation of criminal procedure laws. In addition, the defense collects evidence confirming the legality of the origin of assets (purchase/sale agreements, deeds of gift, wills, loans, keeping, etc.).

The task of the legal counsel is to monitor the lawfulness of all actions carried out by the body of pre-trial investigation, and exclude any abuse on the part of investigation bodies. The legal counsel oversees that only legal methods of collection of information are applied and the procedure is clearly observed. Otherwise, he contests actions of the prosecution or contests the lawfulness of the obtained evidence.

Legal regulation of Article 368-2 of CCU in the part of the obligation to prove lawfulness of possession of assets contradicts Article 62 of the Constitution of Ukraine. Under the constitutional principle of presumption of innocence, a person is presumed innocent of committing a crime until his or her guilt is proven through a legal procedure and established by a guilty court verdict. The constitutional right to the presumption of innocence is absolute, since the Constitution of Ukraine does not provide for any exceptions to this right. The presumption of innocence is a fundamental principle of international law.

UJBL: What is the action plan of a person suspected of unlawful enrichment? What should be done and not done?

A. D.: One of the peculiarities of this category of cases is that the prosecution in them very often transitions into the public area, which is accompanied by negative social attention, groundless accusations, negative media and political pressure. That is why its very important to seek legal assistance in a timely way from legal counsels who have practical experience of working with cases of this category. Furthermore, the client must refrain from discussing the defense tactic using means of communication, from giving any testimony or provide any documents to the body of pre-trial investigation without the prior approval of his legal counsel. The client who holds a high position, must fairly assess his or her position and not rely on personal experience, but also on the advice and support of highly-qualified lawyers, who can foresee all the steps of an investigation, adequately react to any challenges, including, in the form of pressure and provocations.

UJBL: Your firm represents Mr. Myroslav Prodan, who is suspected of unlawful enrichment running into UAH millions. An important detail of the case is the hacking of a messaging service to obtain information and subsequent dissemination of screen shots in the media. How admissible is evidence received in this way?

O. P.: Overall, current criminal procedure law has clearly established requirements for the proper nature and admissibility of evidence. If the investigator or the prosecutor, during the pre-trial investigation, having failed to obtain, in accordance with the procedure established by the law, a court order for interfering in private communication, carried out such interference using unidentified specialists and illegal software and fabricated communication of the client with the participants of the criminal proceeding, and then disseminated the fake in the mass media, a clear question must be raised not only about dismissing such evidence as improper and inadmissible, but also about bringing to criminal accountability those who ordered and carried out falsification of evidence in a pre-trial investigation.

UJBL: Do you believe that an accusation of unlawful enrichment can be used as a form of pressure by law-enforcement agencies?

O. P.: In our practice, in nearly all cases, when unsubstantiated public accusations of unlawful enrichment were voiced, the victims of such accusations turned out to be high ranking and rather well-known people, persecution of whom often has only one goal to force the person to take certain actions or refrain from taking such actions under pressure from law-enforcement agencies and negative public opinion.

In its turn, timely development of the line of defense and its thorough performance has resulted in not guilty verdicts for every such client.

UJBL: How does disclosure of notices of suspicion of public persons relate to the presumption of innocence?

A. D.: Disclosure (publication) of notices of suspicion in the mass media is driven by two factors. Firstly, the high demand of society for the necessity of a real fight against corruption and, as a result, low living standards. Secondly, in the majority of cases, these are controlled leaks and sponsored materials of law-enforcement agencies or higher management with the objective of removing their opponents. As we have already said, without a guilty verdict, which entered into force, we cannot assume that a person committed a crime and then call this person corrupt, accepting bribes or anything else, regardless of the names there.

UJBL: Some high-ranking officials accused of corruption countersue for losses of honor, dignity and business reputation. How substantial are the losses emanating from such accusations? Is it possible to refund them later?

O. P.: In judicial practice in the area of protection of honor and dignity, the practice exists of satisfying the claims of public officials who are accused of corrupt actions.

Often, courts accept the arguments of defendants and recognize that the dissemination of information about the corrupt actions of a public official as value judgments. It is noteworthy that these kinds of statements by senior figures of the law-enforcement system are also recognized by the courts as value judgments.

Under Paragraph 2 of Part 2 of Article 30 of the Law of Ukraine On Information, if a person believes that value judgments or opinions humiliate his or her dignity, honor or good name, as well as other personal non-property rights, the person has the right to exercise the right to respond provided by the law, and also to his or her own interpretation of the case in the same mass media to justify the groundlessness of the disseminated value judgments and underpin them with a different assessment.

The publicity of a person is also taken into account, as such a person must be prepared for critical coverage of his/her words and actions. The boundaries of admissible criticism with regard to such a person are much wider.

That is why, in the majority of cases, a court does not undertake to satisfy the claims for protection of honor and dignity in this category of cases, but leaves it to the investigation to settle the issue of confirming or denying information about the commission of corrupt actions by a public official.

UJBL: The National Agency on Corruption Prevention has been repeatedly accused of cooperating with a certain official. How does it affect the functioning of anti-corruption agencies?

A. D.: Anti-corruption agencies NACP, NABU or others must be guided exclusively by the laws of Ukraine in their work.

At the same time, any government is tempted to use law-enforcement agencies as a lever of influence over opponents. Violation of the principle of independence of anti-corruption agencies leads to groundless persecution of people, illegal prosecution, undermining of the authority of such agencies, the judicial and law-enforcement system and, in particular, to factual increase in the level of corruption and public discontent.

UJBL: On 26 February 2019 the Constitutional Court adopted a decision on recognizing the provisions of Article 368-2 of Criminal Code as such that do not comply with the Constitution of Ukraine. What does it mean for investigated cases and cases that have already been considered?

O. P.: Taking into consideration the recent decision of the Constitutional Court, the criminal proceedings that are being investigated by anti-corruption agencies or tried in court, must be closed and the suspects released from criminal liability. However, one should not forget about the administrative responsibility on commission of corrupt actions and also criminal liability under Article 366-1 of the Criminal Code of Ukraine (declaration of false information).

In addition, as practice shows, after cancellation of Article 368-2 of CCU, there will be attempts made to prosecute individuals under other articles of the Criminal Code abuse of authority, receipt of unlawful benefit, embezzlement or misappropriation of property, etc.

In the event that a revised article on unlawful enrichment is introduced and approved by the Verkhovna Rada, this provision of law will not have any retroactive effect, which means that it will be impossible to prosecute persons who, according to the investigation, have unlawfully enriched themselves prior to the entry into force of the revised article.

Key Facts


AVER LEX

Year of establishment: 2012

Number of partners/lawyers: 5/35

Core practice areas

  • Criminal Law/White-Collar Crime
  • Litigation
  • Tax
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