Director refuses to sign confessions under pressure of law enforcers….

Tax issues: Criminal proceedings against business initiated by State Fiscal Service Kyiv

Subject of complaint: Investigative Department for Financial Investigations of the State Fiscal Service (Tax Police) 
Complaint in brief: On August 10, 2018 a plumbing manufacturer, turned to the Council. The company complained of pressure from the Tax Police. 
At the end of 2013, the company had to launch a bankruptcy procedure. There were government agencies among the manufacturer’s creditors, particularly the SFS and the the Pension Fund. The Complainant owed to the latter  about UAH, 1 mn of a Unified Social Contribution (USC), including fines and penalties. Under the law, the creditors’ meeting has the right to negotiate with the company-debtor on installments or delay in debts payment. So, the Complainant and his creditors signed a settlement agreement, under which the company had to repay the debt amount within the agreed term. For  the USC debt, which belonged to second-priority creditors’ claims, the agreed term was 4 – 4.5 years. The settlement agreement was approved by the court. Due to such restructuring the Complainant managed to pay off all the creditors and save his business. The Complainant even early repaid the USC debt in full – in less than three years. A new company director, was appointed, the company continued to operate. 
However, in June 2018, at the request of the SFS, the Complaint was unexpectedly accused of evasion from USC payment. According to the company’s representatives, they began being strongly pressed by the Tax Police. 20 employees were summoned for questioning. And a new director, who had nothing to do with the debts of 2012-2013, since he began working in the company only in 2015, was “taken in hand” by law enforcers. They forced him to plead guilty of tax evasion.
The investigator even furnished him a draft notice of suspicion and advised to confess everything. The director was reassured he could “ask for exemption from criminal liability in view of damages recovery”. And in fact, it would not have any consequences for the director, except for a lifetime damaged reputation for a crime he did not commit. 
After the director refused to sign confessions, law enforcers became even more active in investigating a case in which the Complainant had already paid everything to the last penny. Tax Police officers appealed to the court twice for a permission to conduct a search in the company. They requested the documents which were not relevant to debts payment of 2012-2013. 
Feeling a violent pressure from law enforcers, the Complainant turned to the Business Ombudsman Council for help.
Actions taken: The Council’s investigator thoroughly studied case materials and started working on the company’s complaint. He informed the District Department of the SFS, the Tax Police and the Prosecutor’s Office in writing thereof and asked to investigate the Tax Police officers’ actions. 
The Prosecutor’s Office and the Tax Police did not acknowledge violations in the actions of their civil servants, however they did not refute these actions either. Taking into account the lack of proper response at the regional level, the investigator resorted to another instrument provided for by the Memorandum of Cooperation between the BOC and the SFS. He brought up the issue at the meeting of an Expert Group with the Tax Police top management. 
Result achieved: Following the meeting, the Council was assured the Complainant’s case had been thoroughly examined, a criminal proceeding was being prepared to be closed. On November 13, the Complainant’s representative informed that no investigative actions had been carried out since the appeal to the Council. It gives grounds to hope for a further positive solution of the company’s issue through closing a criminal proceeding. Since the pressure on the Complainant by law enforcers stopped, the case was closed. 

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