Lawyers of the Lidings’ Criminal Defense Practice have successfully defended client charged with tax evasion (for 60 million rubles) and large-scale fraud (for 10 million rubles). The project lasted more than two and a half years led by the firm’s partner and attorney Stepan Guzey. Despite intense opposition from the Prosecutor’s Office of Novgorod Region and introduction of restrictions to combat the spread of COVID-19 the criminal case was terminated during pre-trial investigation.
In August-November 2017, the Investigative Department for the City of Velikiy Novgorod commenced criminal proceedings against the CEO of the client, a major regional supplier of agricultural machinery, the company OOO Avtoprommash. Legal grounds for the commencement were Part 2 of Article 199 of the Criminal Code of the Russian Federation (large-scale tax evasion) and under Part 4 of Article 159 of the Criminal Code (large-scale fraud).
The client was charged with tax evasion amounting more than 60 million rubles and fraud amounting more than 10 million rubles. Reason for the commencement was the data and materials of field tax inspection carried out by the Novgorod Region Department of the Federal Security Service for and the Novgorod Region Office of Economic Security and Corruption Prevention Office. Nonetheless, the case was commenced before the field tax inspection was finished.
Lidings’ partner, head of the criminal defense practice, Stepan Guzey, and senior associate Elizaveta Fursova represented the client from the moment of commencement of the criminal proceedings.
At the very beginning of the case, the firm’s lawyers successfully obtained for the defendant the most lenient preventive measure — travel restrictions. This was done despite the extremely tough preliminary investigation, which was accompanied by searches and detentions in various regions of Russia (Moscow, Moscow Region, Smolensk Region) and investigative actions in the Republic of Belarus.
Within the case both the investigating authorities and the tax authorities made gross mistakes in calculation of the tax arrears on payment of VAT. In addition, the investigation groundlessly accused the company of illegal VAT refund from the budget (more than 10 million rubles), which served as the basis for commencement of a criminal case on «fraud». The lawyers discovered these mistakes during audition of the company’s accounting documents when preparing statement of claim to the Commercial Court of the Novgorod region and complaints against the illegal initiation of criminal proceedings. Lidings’ lawyers partially challenged the tax offices` decision during the hearing in the Commercial Court of the Novgorod Region.
Due to its complex nature of the criminal case, it was not enough to just prove the wrongfulness of the accrued arrears and the legality of VAT refund. The lawyers managed to commission financial and accounting expert studies on the basis of prepared explanations for the investigation and the decision of the Commercial Court of Novgorod region. The lawyers also submitted letters and explanations from the client’s counterparties for a period of five years (including foreign counterparts), answers to attorney`s inquiries from customs authorities of Russia and foreign countries, which confirmed the reality and legality of commercial transactions.
Stepan Guzey Taking into account the complexity of the preliminary investigation of such a category of crimes as non-payment of taxes and fraud (in connection with entrepreneurial activity), we submitted requests for financial, economic and accounting expertise, which were eventually satisfied. A huge amount of work was carried out with the customs authorities of Russia and foreign countries. For more than a year there was communication and reconciliation of payments and deliveries with the client’s counterparties in Russia and abroad. Despite repeated cancellations of the investigator’s orders to terminate the criminal case and return the case for additional investigative actions, there were no grounds to prepare an indictment and sending the case to court. Today we are glad to inform that professional and balanced actions of the defense brought excellent results and, certainly, protected our client from possible serious negative consequences.
It is important to note that the effective protection strategy developed by the Lidings experts allowed:
- first, to convince the investigation that there were no fraudulent acts, which led to the termination of the criminal case due to the lack of corpus delicti immediately after the expert opinion was received;
- secondly, due to excessive incrimination to reduce the amount of claims on VAT arrears by 3 times and in this part to terminate the criminal case under Article 199 of the Criminal Code of the Russian Federation due to lack of corpus delicti;
- third, to protect the rights, interests and freedom of the client at to the fullest by creating tension by extensive media coverage;
- fourthly, to ensure the troubleproof running of the client’s existing business throughout the preliminary investigation.