Amnesty of businessmen
There are three circles of problems that need to be solved to restore business-community’s credence to the state: 1. General humanization of criminal policy and modernization of criminal legislation; 2. Fundamental transformation of approaches to law enforcement practice; 3. Economic amnesty.
Amnesty of businessmen shall be the first step on the route of criminal legislation in economic sphere humanization.
Unlike the first two items, work of which demands time and resources, amnesty can be conducted fast and without any budget expenses. Along with that the amnesty can be the first real step that can allow not only to free businessmen from prisons, but can give society the signal that the state is ready for liberal changes of criminal policy in economic sphere.
Criminal prosecution of businessmen (in numbers)
Evgeny Yasin, Academic Supervisor of Higher School of Economics, does not get tired with repeating: the state machine is based on belief that every businessmen if thief by his nature. The motto of state’s relation to businessmen could be the well-known saying: “If you are not in prison yet, that is not your merit, which is our fault”. Businessmen undergo court prosecution 10 times more often than representatives of other professions.
According to the Center’s data presented to the President of Russian Federation Dmitry Medvedev in April, 2012, every sixth businessmen underwent the criminal prosecution for the last decade, it were registered over 3 Million economic crimes in the country (those that reached the court). Today about One Hundred Thousand businessmen serve sentence, up to 130 Thousand files of economic direction are suited per annum; about 75 Thousand arrests of businessmen take place. Two third of companies with their heads “fall under the article” were closed (which his 60-70 Thousand ruins per annum), about 2 Million people became unemployed.
47 per cent of businessmen who underwent prosecution have over 10 years’ experience of business activity, and 32 per cent – over 20 years. According to Center’s data criminal prosecution affected over 44 Thousand businessmen per annum from 2000 to 2009. There was sharp slump of exposed economic crimes in 2010: possibly the reason here is reform of police or ban on pretrial incarceration of businessmen. However criminal prosecution of business started with new power in 2011.
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Criminal prosecution of business
Those what happen in the sphere of criminal prosecution of business may be described with three words: arbitrariness, un-publicity and irresponsibility. The investigation interpret the law so wide, that the criminal case sometimes lacks not just the corpus delicti, but the crime event itself.
1. Inconsistence of civil and criminal legislation. Present edition of the Criminal code is not balanced with the other laws and in first hand with the Code of administrative offenses. One can be made responsible for some deeds both to administrative and criminal responsibility and for the choice of the law enforcement officer. Here very wide possibilities for corruption open.
Any businessmen could be imprisoned for almost any business transaction today. If the Civil code admits that getting profit is an aim or an enterprise creation, the Criminal code sees punishable lucrative interest in getting profit.
Sometimes happens that deeds that are considered legal by either court in civil law procedures or by the Arbitration court, than become the subject of criminal investigation. First Deputy Chairman of the Russian Federal Court (retired), professor, Honorable Jurist of Russian Federation Mr. Vladimir Radchenko makes an example when in Tatarstan a person was convicted for 9 years in prison for the deed that was proved legal by the Higher Arbitration Court.
2. Institution of proceedings lacking the real damage and injured person. Economic crimes relate to the category of “elicit” ones, meaning that application from the injured person is needed for institution of such proceedings against the entrepreneur. The amount of damage in that case is determined by those state structures that fight with such economic crimes. The damage may be equalized to the profit possessed, or may be determined voluntarily.
The possibility to institute the criminal case lacking the injured person and real damage (it was revealed 90 492 of such crimes in 2010) leads to the big number of designed cases. The aim of such cases is the properties deprive pressure on businessmen and getting “administrative rent” by the law enforcement officers.
As the result a lot of businessmen serve sentences not making real damage neither to the society, nor to the state, nor to separate persons. Only 2 per cent of those accused on economic crimes are sentences against applications of injured persons. The rest are instituted against the reports of members of police task forces.
For example, one farmer from Stavropol region started to process the waist and collect litter from people. When the farmer got 1,5 million rubles from that waist processing, local department of internal affairs instituted a criminal case for illegal entrepreneurship.
3. Indistinctness of wordings. The wordings of many corpus delicti in laws a so blurred that these create possibilities for lawlessness and corruption. The bases for criminal responsibilities of business are not formulated in the law and this uncertainty gives possibility “to drag” this or that corpus delicti to any businessmen’s deeds, including non-criminal by nature.
Interpretation of uncertain corpus delicti always goes against the person attracted to criminal responsibility. This leads to so called “accusatory inclination” in law enforcement.
Mr. Vladimir Radchenko made and example: “Here is article 171, famous article on illegal entrepreneurial activity. It consist of deeds that did not make any damage to anyone for 90 per cent or even more. The only quilt of the person convicted under this article may be the fact that he conducted business without registration or with incorrectly made registration, or he produced certain products or provided certain services and obtained more then 1,5 million rubles. From the economic point of view increase of national income occurs. From the point of view of social consequences the people work for this businessmen, get jobs, the unemployment decreases. The keep themselves, keep their families. But instead of making the administrative punishment for breaking formal rules and help man to legalize his business the criminal case in instituted against him here”.
Mr. Radchenko made an example. Business of one provincial pharmacist went poor; the turnover of his pharmacy was not significant. At his initiative the pharmacist started to sell some industrial goods not having license. As soon as he sold for more then 1,5 million rubles he was brought to criminal responsibility because law enforcement practice equals the profit obtained (over 1,5 million rubles) to making damage.
The other example. Owner of a big store in Sankt-Petersburg bought the premises of the nearby small shop that went bankrupt and transferred there his liquor trade. And the question arose to make the owner responsible fro crime because his trade license has the postal address on the big store but not the new “filial”.
4. Endless inspections as pressure on business. Businessman from Krasnoyarsk Eduard Zaitsev told that tax inspectors’ pressure on business happens: “Officers of Department of tax crimes come to the enterprise after the submission registered in “The book of crime’s registration”. And under the guise of conducting the criminal investigation make a search – take out documents, computers, and put all that somewhere in their place… About one hundred of such drives took place for the last year. But not a single case instituted”.
As per data of transparency International any business in Russia is subject for 30 to 40 types of inspections today. As General Director of LECS-Center, Senior Researcher of the Institute of world economy and international relations of Russian Academy of Science, PHD (economics) Mr. Mikhail Subbotin stated “it is not even necessary to jail person to give the business. It’s enough to make search, start inspections, arrest the accounts and assure the termination of supplies and that’s it, the business is closed”.
But institution of cases against the businessmen does not get to the court as a rule. So out of ten criminal cases under the article 159 (“Fraud”) only 2-3 out or 10 get to the court (25%). In other cases businessmen either pay off – what is in most cases the target of law enforcement officers – or the charges go to pieces.
5. The fraud. Today on of the most “popular” articles of criminal crimes is article 159 of Russian Criminal code (“The fraud”). Under which about 40 thousand persons are tried per annum. From 2000 to 2010 the share of cases on “fraud” in total number of “economic crimes” grown from 33,6 per cent to 56,8 percent. Also those businessmen are considered “fraudsters” who failed in business and were not able to pay out the debts.
6. Participation in organized criminal group. Businessmen made responsible for criminal responsibility also as members of organized criminal groups – and as experts of Lecs-Center explain any business having the wish could be qualified as “organized criminal group” since business is heavily made alone. As a rule the general director and chief accountant are included in OCG, but there are precedents when, as per courts’ and investigation meaning all partners were members of the OCG and even their relatives. Any legal entity having office and account could be placed under the term OCG.
Chairman of non-profit partnership “Business-Solidarity” Mrs. Yana Yakovleva told: “I myself read the sentence where it is written that the accountant got a job and agreed to commit the crime together with the general director for what she completed the training courses and became the chief accountant, after what she together with the general director formed the organized group”.
7. Double responsibility for the same deed. The Criminal code still keeps the principle of artificial increase of the sentence’s severity: thus, the Criminal code include articles that state the recurring criminal responsibility for crimes provided in other articles of the Criminal code. That means that we have the possibility of double responsibility for one and the same deed.
8. Interest of law enforcement officers. The law enforcement system is interested today on criminal persecution of business: the career growth of the officers is directly connected to the number of cleared crimes and instituted criminal cases. And it’s much more difficult to find the real perpetrators then to just imaging them for the report.
Furthermore what we call standards of probacy in adjective law is almost absent today: “any documentation on any commercial organizations could be presented as evidence, sometimes the bumf not having any useful information, enclosed to the criminal cases and providing their demonstrative multy-volumeness.” (Mrs. Tamara Morshchakova, Deputy Chairman of Constitutional Court of Russian Federation, retired).
Criminal-legal economic management and its’ consequences
Today in Russia criminal-legal economic management is establishing and that is very dangerous. The State’s criminal policy in economic sphere turned from the mean of social relations protection into threat for business development and economy in general. Criminal policy makes no difference between socially dangerous and socially useful in the sphere of entrepreneurial activity. And that means it does not perform its’ protective role and even could not compensate the losses from the economic crime, since do not differ it from the social useful activity. As Mrs. Tamara Morshchakova stated on the parliament hearing in September, 2010, “the acting criminal legislation is socially dangerous, meaning threatening the security, threatening the personal security, threatening the social security, including the security of our economic development”.
Criminal repressions of businessmen have the most severe consequences for the country. According to surveys 17 per cent of the businessmen have intention to leave the country, and they call legal unproductiveness the main reason for doing this. Half of the questioned businessmen do not exclude emigration for the same reasons.
First time the number of inpidual entrepreneurs and farmers who terminated their activity was bigger then the number of registered bodies conducting the same activity in 2010.Adn the year 2010 was the absolute leader in number of liquidated commercial organizations.
Among the other reasons why people do not want to conduct business in Russia is lack of property protection, corruption and unexampled pressure on businessmen. As Mr. Andrey Fedotov, Lecs-Center’s expert, defense lawyer, PhD (jurisprudence), member of Moscow region bar and Odintsovo city bar mentioned, such pressure on a social class may ne compared only with collectivization in Russian history.
Disrespect of property right and possibility to find oneself jailed in any moment make businessmen to export abroad part of their assets by anticipation that influences both on effectiveness on the business in Russia and the general investment climate. Excess of capital export over the capital import was 38 billion US dollars in 2010.
Today we can talk about the serious social damage of conducted criminal policy towards business: many people, not only the businessmen, have feeling on instability and bleakness, and these form the monstrous statistics of educated young people escaping the country.
But those young people who decide to stay in country do not want to show business self-dependence preferring to dream of the state positions that bring both official income and additional corruption rent.
Decrease of businessmen number leads to decrease of workplaces, reduces the tax income to budget and that in its’ place influences the pension and wages of state employers reduction.
Investment climate in the country decline every year and approaches according to the expert’s pictural expression “to the eternal winter”. For now only business that is protected by the administrative resources and is coalesced with the state representatives feel comfortable.
Amnesty as the needed first step
Lecs-Center’s experts conducted article-by-article analysis of the Criminal code and came to a conclusion that composition of 106 corpus delicti may be decriminalized and taken to the Code of administrative crimes.
Lecs-Center proposes a range of concrete steps on amending the criminal legislation in economic sphere, please see the details in part “Humanization of criminal legislation in economic sphere”. But all experts agree that the amnesty of businessmen shall be the first step on that way.
For 20 years of reforms, when the market rules were only emerging, tens of thousands of businessmen were jailed – both right and guilty ones – bot not a single amnesty had been conducted. The most active parts of population, who could serve the economic and society development are deprived of such opportunity and disqualified. The amnesty could be the signal for society about the positive intentions of the state towards business class.
Awareness of two moments shall lie in the base of decision of amnesty. The first – obsolete repressive legislation in economic sphere is in Russia today, which set the criminal responsibility for deeds that are not socially dangerous. And second – the law enforcement agencies do not arouse trust of most of population, people do not trust in justice and disinterestedness of their actions today.
According to the data of poll conducted by Russian legal academy of Ministry of justice, over one third of questioned judges and 75 per cent of legal scientists supported the idea of wide economic amnesty. As per apt expression of Mrs. T. Morshchakova, the criminal-legal ruin of business is not to profit by none of two subjects: “first to those, who take off the corruption cream from all business in any form. If they lost the possibility to pursue business in this form they will end to eat out in the way they used to do”. And the second subject interested in instituting the biggest possible number of criminal cases is ineffective law enforcement system that imitate the vigorous activity in this way.
Appeal to President D. Medvedev
Experts and public figures appealed to President Dmitry Medvedev in April 2011with the petition to propose Duma to adopt a decision on economic amnesty: to free from penalty and criminal responsibility the businessmen who are imprisoned or are charged for criminal cases in economic sphere. As per experts’ data 10 thousand people who a imprisoned and 120 thousand people with outstanding convictions who already served their sentences or are condemned to sentence not related to imprisonment could fall under the amnesty for economic crimes.
Member of parliament Mrs. Kira Lukianova told journalists in June 2011 that there is a ready draft law on businessmen amnesty. It was supposed that it will be dedicated to 20th anniversary of Russian independence. However the draft was not discussed in Duma in 2011.
On field meeting of the Presidential council of civil society development and human rights Mr. D. Medvedev stated support for the possible economic amnesty in July 2011.
Meeting of the Open Government took place in Moscow on April 10, 2012, where President Dmitry Medvedev answering the question of special representative of President of Bashkiria and vice-president of “Delovaya Rossiya” Andrey Nazarov did not exclude the possibility of wide amnesty for economic crimes, particularly in relation to those businessmen who are jailed for already decriminalized articles.
President was informed on the numbers prepared by Lecs-Center’s experts saying on the criminal prosecution of businessmen in Russia, D. Medvedev doubted the correctness of the numbers, however he admitted that if they correspond with the reality that this is a “catastrophe”. One of the authors of Lecs-Center’s report on criminal prosecution of businessmen, lawyer, PhD (jurisprudence) and senior expert of Lecs-Center Andrey Fedotov reply to the President in the article published by Forbes magazine. Expert clearly explained from where the number occurred: the calculation made based on the open data of official Rosstat and Federal tax service statistics.
D. Medvedev proposed members of the Open Government to discuss the question of economic amnesty with parliament parties. However the presidential administration did not confirm the fact of work on the amnesty project. The answer from Parliament is that there is not such project in Duma.
Draft decision of the State Duma of Federal Council of Russian Federation “On the way of application of decision of the State Duma of Federal Council of Russian Federation “On announcement of amnesty I relation with…”
Experts and public appeal to the President of RF. On amnesty for businessmen prosecuted to the criminal responsibility.
Presentation “Proposed amendments to the Criminal code of RF"
Amnesty of businessmen (analytical justification)
Amnesty: pro at contra
Executive summary to the draft federal law “On amending the Criminal code of RF”.
Draft federal law “On amending the Criminal code of RF”
Appeal of Center’s experts to the Vice-Premier Mr. I Shuvalov.
Analytical note on draft Federal law “On amendment to the Criminal code of Russian Federation and some separate legislative acts of Russian Federation” , September, 2011.
Novellas of Criminal code of Russian Federation (Analytical note on Draft federal law “On amending the Criminal code of RF”).
Verbatim report of roundtable on state’s criminal policy modernization, May, 2011. Main question – amnesty of businessmen.
- Roundtable "Ecomonic and legal aspects of subsoil use"
- Presentation of monograph "Rule of Law as the Economic Factor", February 12, 2013
- Roundtable "Criminal policy's Impact on the Economics", April 4. 2012
- Roundtable, January 31, 2012
- Symposium "Criminal Policy and Business", December 8, 2011
- International seminar, November 2011, McGill University
- Parliament hearings on October 17, 2011
- Scientific seminar of Mr. E.G. Yassin, June 29, 2011
- Meeting of the expert group, June 14, 2011
- Press conference in "RIA Novosti", June 02, 2011
- International Seminar, May 31, 2011
- Roundtable, May 25, 2011
- Roundtable, April 18, 2011
- Roundtable in State Duma, February 9, 2011
- Parliament hearings on September 16, 2010
- Book presentation in LSE, 19-20 March, 2010