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If not to Overcome – then at Least Harness

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Criminal Law and White Collar Crime

29 July 2020

Is it possible to overcome the massive manifestations of fraud in Ukraine? Spoiler now, no it is not. But you can fight them. Ario Law Firm partner Yevhen Hrushovets talks about this in his article for Ukrainian Law Firms 2020.

From Rhetoric to Reality

The eternal rhetorical questions. Why does such a thing as fraud flourish in Ukraine, why is it becoming more widespread, how can it be overcome, and what is needed for this?

My answer. An intolerant and even aggressive environment against thieves and scammers will be able to halt the spread of such a phenomenon in society. By environment we mean:

  • The legal awareness of citizens;
  • A responsible attitude on the part of society towards its civic responsibilities;
  • The quality of the law-enforcement system;
  • Its technical capabilities to quickly respond to manifestations of fraud;
  • The quality and speed of the judicial system;
  • Effective mechanisms for holding individuals accountable; the preventive function of state bodies aimed at preventing manifestations of fraud, etc.

To avoid any subjectivity, I will not evaluate how each of the above points works in Ukrainian realities. However, I suggest readers use an evaluation scale of 1 to 10 on their own (where 1 is the worst, unacceptable state of things, and a 10 is an ideal indicator) opposite each of these positions. For some reason, I am sure that not one of them will even gain half.

In my opinion, the reasons for this situation are on the surface. These are weak motivation and material support of law enforcement agencies; delay of court cases, including due to the huge workload of Ukrainian courts; poor communication between law-enforcement officials and society; the almost complete absence of interaction between law-enforcement agencies and the public; the low efficiency of prosecution often through the component of corruption; and from this – directly lower rates of punishment for those responsible.

Separately, among other things, turbulence in the work of Ukrainian law-enforcement agencies should be singled out at a time when one Ukrainian composition of the government is replacing another with promises of “changing the law-enforcement and judicial systems for the better.” Thus, Ukraine finds itself in almost a continuous mode of so-called reform of these areas. Recently, this rapid legislative is commonly called “turbo mode.”

As a result of the lack of a unified model of work developed over the years, as well as a result of massive personnel changes in law-enforcement agencies that occur every time a new president is elected in Ukraine or when a “reset” of the government takes place, we are faced with the situation where instead of fighting criminals the law-enforcement system fights against itself, thereby opening up unlimited possibilities for all types of fraudsters.

The Reality of the Absurd

What can we say about it (after the “lesson” of the infamous financial pyramid of the late 1980s and early 1990s with millions of victims under the name MMM), when in civilized European Ukraine of the 21st century, where citizens are in no way limited in access to information, an organization that has every chance of becoming the new MMM or even surpassing it arises? Despite numerous journalistic investigations about the organization’s work, its popularity among the population does not fade, as Ukrainians (mainly of retirement age) continue to carry their savings there and entice friends, colleagues, and relatives.

The essence of the pyramid is that you can get 400% per annum both in hryvnias and in dollars and euros for the purchased certificate supposedly for the purchase of jewelry. At the same time, not even a receipt issued to the buyer, not to mention any other guarantees. People simply invest in a piece of cardboard on which this certificate is printed. Large-scale advertising campaigns and legal ignorance of “investors in cardboard certificates” will make possible a scam running into tens or even hundreds of millions of dollars.

This frankly fraudulent scheme contradicts all the laws of the economy, but it works quietly right in front of the eyes of law-enforcement agencies. They should have been ahead of the schedule because, without high-quality documentation of the circumstances of a possible crime, there will be almost no chance of redress.

In my informal conversations with representatives of the law-enforcement system, some people say that it’s almost impossible to bring the organizers of this scheme to account while there is no corpus delicti, people, due to their legal ignorance and low awareness, part voluntarily with their own money and do not assess all the risks. Simply put, until a disaster strikes, no one will file a complaint with law-enforcers.

Law-enforcement Officers to the Rescue of Criminals

There are frequent cases in our practice when law-enforcement agencies themselves become an instrument for combating competitors if one of the parties to the conflict has access to administrative resources.

So, one of our clients, the former director of state-owned quarry in Vinnytsia Region, where at the beginning of the 2000s minerals were mined, is charged with illegal mining of limestone and misappropriation of funds from the sale of minerals.

I’d like to note that the Ministry of Agrarian Policy and Food of Ukraine appointed our client to the post of director of this quarry after a two year search. None of the candidates was ready to head a dilapidated state-owned enterprise. In 2003, electricity was turned off for this company for debts, which made it impossible to process already mined raw materials, and in 2008, it was deprived of its license to extract limestone altogether. The material and technical base were stolen during this time and the documentation lost. On taking office, our client immediately set about restoring a non-working enterprise.

He cleared the territory, improving the infrastructure and selling limestone screenings used in industry and agriculture. Moreover, he began to pay off the debts owed by the enterprise, which had accumulated over the years. But such activity of our client did not suit the local elites, because previously they had conducted a profitable (however illegal) business, for years plundering the limestone screenings from the quarry for sale. We managed to discover that all of this happened under the auspices of the head of the local authority, and thanks to his ties with representatives in the local prosecutor’s office. By the way, these ties themselves became the basis for opening criminal proceedings against our client, who was the legal director of the quarry.

In court we defended the removal of arrest from the quarry, helped the client to avoid detention and initiated the opening of criminal proceedings for the theft of the quarry by the persons described above. But we should not forget about the time that was spent on the fight in the courts and not on restoring the enterprise and creating new jobs.

Another egregious situation that occurred with our client, a farmer from Luhansk Region. At one time he was a captive of terrorists of the so-called Luhansk people`s republics and, after being released from captivity, fled with his family to create an agribusiness in Zhytomyr Region.

So our client and his son signed lease agreements with shareholders and the local village territorial community in Zhytomyr Region, cleared abandoned land, and, since 2015, have been conducting a rather successful business. Before the 2019 harvesting campaign, criminal proceedings were opened against them, allegedly because land plots that they rented were not registered. Having misled the investigating judges, in September 2019 law-enforcement officers secured the seizure of land and agricultural machinery. We, lawyers of Ario Law Firm, defended the interests of our clients. The arrests of land plots and agricultural equipment were revoked and the seized equipment and documents were returned to the owners.  Furthermore, the decision by the State Fiscal Service of Ukraine to collect and sell the harvest owned by our clients was canceled.

But this is not a story about a fair and logical “happy ending”. When our client’s laborers came to inspect the released land, they saw a completely gone field. A crop worth about 1 million UAH has been stolen.

Now let’s analyze the situation in sequence. Law-enforcement officers open criminal proceedings, for example, not in summer or spring when the sowing campaign is in progress. They do it exactly when it is time to harvest. While blocking the work of farmers, this crop strangely disappears. We assume that in this case, most likely, the actions of law-enforcement officers were carried out in the interests of unscrupulous competitors. The Security Service of Ukraine, a subdivision of the  National Police called KORD, the State Labor Department and other state bodies were involved.

And a Bit About Quality of Law-Enforcement System

Another reason why such a shameful phenomenon as a fraud in Ukraine is developing almost unhindered.

I am sorry to see how the state’s protection of businessmen stops halfway, and does not bring to its logical conclusion the mechanism for bringing criminals to justice.

So, we have a client who sells jewelry. At the beginning of the 2000s, his property – jewelry – worth over 100 thousand US dollars was taken by scammers. These fraudsters were employees, those selling his wares in his jewelry stores. The participants in the crime have been identified, but for more than 5 years the case cannot reach its logical conclusion due to the protracted process taking place in the courts. Due to the constant replacement of prosecutors, changes in the panel of judges (several times in 5 years) and the systematic failure of prosecutors to appear at court hearings. In addition, the work of the pre-trial investigation body was of poor quality, in particular the examination. So, the features of the stolen jewelry were incorrectly submitted – name, weight, and fineness. So now the perpetrators are being charged to an extent that less than they actually stole. In this regard, the qualification of the crime is a softer article (of law) than it actually is. This, of course, makes it impossible to bring the persons responsible to real responsibility and get redress.

Also, one should not miss such a detail that from the moment a crime is committed to the moment a person is sentenced, years, sometimes decades, pass. At this time, the chances of receiving compensation for a crime that was committed are reduced, and the devaluation of the national currency depreciates even whatever is possible to receive.

The absence of punishment is the door to new crimes.


By carefully analyzing and realizing current Ukrainian realities, I would recommend:
A) for individuals – to increase the level of their legal awareness and understanding of Ukrainian legislation;
B) for businesses – to enlist the support of a competent and experienced legal consultant who understands the trends in law-enforcement at a specific period of time.

Today, unfortunately, only under such conditions is it possible to protect oneself and one’s business from all types of fraud and scams.