Comments made by Vladimir Alyoshin to an article titled “Bailiffs: our “clients” don't take a taxi to the bakery!”

13 May 2010

Fraudulent defaulters on credits and other debts, including directors of insolvent companies, can forfeit not only their property, but their liberty as well. The Federal Bailiff Service gave explanations as to how they will dissociate the real “victims of crisis” from unscrupulous debtors unwilling to return money they hold. Even the fact of using cellular communication, purchasing travel packages, taking saunas, going to fitness centers, night clubs etc., can be interpreted as a sign of unscrupulousness.

Responsibility of citizens and directors of organisations for fraudulent default on credits is stipulated by article 177 of the Criminal Code of the Russian Federation. Should the debts remain outstanding after the entry into force of the applicable judgement and should the said debts exceed 1.5 million roubles, this offence shall be penalised including imprisonment for up to 2 years.

Application of such measure to unscrupulous directors of companies should stimulate them to repay debts, including wage arrears. Actually, according to the data from Petrostat, the total wage arrears in big and medium-sized business has increased by a factor of 1.9 for the first 3 months of this year. Thousands of Petersburgers are already hit by such deliberate behaviour of private business directors.

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However, as a rule, directors are unshaken and unhurt, as in reality this article of the Criminal code of the Russian Federation is very rarely applied: according to the press-service of the St.-Petersburg Federal Bailiff Service (UFSSP), about twenty criminal cases of this sort were opened this year. Actually, by no means all of defaulters can be qualified as fraudulent ones. Natalia Sibgatulina, the director of the law firm АСВ pointed out that “Due to obscure wording of this article, the statutory provision is as good as “dormant”, and almost no judgement of guilt is delivered under this article”

The new procedural interpretations approved by Arthur Parfenchikov, the head of the FSSP are meant to make this statutory provision work, even if not to its full potential. This document is of entirely practical nature: each conclusion is substantiated by a judgement that has entered into legal force. These interpretations were published in early May, however, as remarked by Yevgenia Stanislavskaya, a lawyer of business practice of Rightmark group, they are already a little out of touch: “Curiously enough, the authors of this document do not keep an eye on legislative changes and refer to an old edition of the Criminal Code where “major debt” begins from the sum of 250 thousand roubles, while according to amendments adopted as early as on April 7, only debts of no less than 1.5 million roubles can be considered as major ones.”

Any criminal prosecutions can be taken against a debtor only if the latter is a fraudulent debtor. “Fraudulent evasion is a judgemental and, definitely, a biased concept. It is assumed that debt evasion is fraudulent if a debtor was in a position to pay, but deliberately avoided paying the debt”, – explained Yevgenia Stanislavskaya.

According to Vladimir Alyoshin, chief adviser on penal matters in the law firm S&K Vertical, practically, “fraudulent evasion” means the proof of citizen’s awareness of debts, and of necessity to repay them, it also means the proof of his evading debt payment “for some time”: Everyone may interpret this “for some time” in their own fashion. For instance, someone evaded payment of debts for a month. If the law enforcement officer is “fixed” then this month can be imputed with, and here you are - elements of crime are found. Another person evaded payment of debts for two months, however, this circumstance may be regarded as “not fraudulent”. One way or another, there is a reasonable time, which, in my opinion, depend on the amount outstanding”.

Unemployed people can avoid payment?

Bailiffs do not intend to punish people unable to pay off debts due to difficult financial situation: “There is no premeditation on the part of persons unable to fulfill obligations because they just cannot do so (due to sickness, incapacity to work because of disability, pregnancy and tender years child care, etc.), in committing this crime. Thus, no criminal proceedings can be instituted against such persons”, – concludes Arthur Parfenchikov. Moreover, this list of reasons for insolvency is an open one, and one cannot determine bona fide citizen’s lack of funds as a crime.

However, if a debtor lacks the whole sum for a full repayment of credit, for instance, this is not to say that such debtor is innocent, since he can make progress payment of debt in the presence of occupational earnings or property.

According to FSSP, one may decide whether a debtor has sufficient funds which he spends not on debts repayment, but for personal needs, by information pertaining to payment of cellular communication, railway and air tickets, health resort services and other services (sport and other club subscriptions, foreign language courses etc.)

However, the interviewed lawyers consider that when estimating such expenses one should allow for proportionality of amounts: “If a debtor’s telephone expenses amount to 50-100 thousand roubles per month, then it may be regarded as fraudulent debtor behaviour, – believes Yevgenia Stanislavskaya. – If a debtor’s telephone expenses amount, say, to 500 roubles – it may not be interpreted this way. It is the judges’ prerogative to establish presence or absence of this criterion, and the court will do it based on their belief and cumulative evidence.”

Не путай свою шерсть с ...

The term of “premeditated acts” implies furnishing the bailiff inaccurate information pertaining to sources of income and material position, understatement (concealment) of income and property, relocation, change of employment, change of personal data, departure from the country while concealing place of stay, settlement of transactions aimed at fraudulent conveyance, property transfer to a third party, etc. In this case, criminal proceedings may be instituted against a debtor even if the latter really has no funds available.

To establish guilt of a director of an insolvent company may prove to be a more challenging task: “One should dissociate debts of individuals (including directors) from debts of organisations, – explained Yevgenia Stanislavskaya. – Even if a company has a past-due debt, it does not prevent its director from owning a yacht, or some other property, unless, of course, the latter is purchased for the company's funds.”

To make analysis of financial soundness of organizations, the heads of FSSP order their subordinates to execute searches and seizures, as well as to schedule financial and economic examinations. Experts should establish where a company has funds, and whether its expenditures were overestimated, etc. Perhaps, realisation of these measures will allow to hold fraudulent directors criminally liable or, at least, to compel them to pay off the debts of their firms.

Anton Odynets,

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