In the previous article, we considered what are the grounds for filing lawsuits for recognition of assets as unfounded. They also gave answers to the questions under which conditions assets can be recognized as unjustified and charged to state income and how to defend oneself in cases of recognition of assets as unjustified.
📌 Over the past year, the High Anti-Corruption Court has considered many such lawsuits. Although there is no full-fledged judicial practice at the level of the Supreme Court yet, it is already possible to follow trends, what the courts pay attention to, which defense positions are effective and which evidence is used by both the prosecution and the defense. So we decided to analyze several decisions of the High Anti-Corruption Court, appellate and cassation instances in this category of cases.
The main circumstances that courts pay attention to in cases of recognition of assets as unsubstantiated:
- Does the entity, which, according to the claimant, acquired unsubstantiated assets, have the status of a person authorized to perform the functions of the state or local self-government.
- Do the provisions of the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine Regarding the Confiscation of Illegal Assets of Persons Authorized to Perform the Functions of the State or Local Self-Government and Punishment for the Acquisition of Such Assets" apply to the assets, the unfoundedness of which the plaintiff claims.
- Is there a link between the assets, the unfoundedness of which the plaintiff claims, with a person authorized to perform the functions of the state or local self-government.
It is worth considering that the burden of proof in cases of recognition of assets as unfounded rests with the defendant! This means that, in fact, the prosecutor's office can ask to collect anything, and the defendant must prove why the position of the prosecutor's office is wrong.
Case number 1
The SAP prosecutor appealed to the High Anti-corruption Court with a claim for recovery of unjustified assets from the state income, namely funds in the amount of UAH 3,287,497.27.
Reference to the decision of the 1st instance, appeal decision, the case is at the cassation stage – open proceedings in the case
Circumstances of the case: The defendant is a deputy of the Department of Preventive Activities of the National Police of Ukraine. In the case, it was established that since November 28, 2019, the Defendant acquired unsubstantiated assets, namely cash in the amount of 3,287,497.27, which exceeded his income. The defendant declared much less income than his family actually spent.
Arguments of the prosecutor:
- the defendant purchased apartments in the name of his mother-in-law and father-in-law. At the same time, the father-in-law and mother-in-law did not have enough income to purchase these apartments. In particular, they have been living in the territory of Donetsk since 2014 and appeared in the controlled territories of Ukraine for short periods, so they did not have to buy and use apartments in Kyiv;
- availability of funds in the Defendant's bank accounts that exceed his earnings;
- obtaining a loan by the Defendant and his family members of significant sums;
- wages were used by the Defendant for household needs, so no savings could be made from them.
Position of the defense side:
- part of the funds that are the subject of the dispute were acquired by the Defendant before 28.11.2019. Thus, the prosecutor is trying to bring the Defendant to civil liability for acts which at the time of their commission were not recognized by law as an offense;
- the prosecutor did not prove the connection of assets with the Defendant;
- the prosecutor's statement about the property status of the mother-in-law and father-in-law, as well as their need to buy apartments, is only the prosecutor's guess;
- the defendant's wife's parents are engaged in entrepreneurial activities, have sufficient wealth and help the Defendant, in particular, lend funds;
- part of the funds, which are the subject of the dispute, were acquired by the Defendant already after he was dismissed from public service, and therefore cannot belong to unreasonable assets.
The position of the court of the 1st instance:
- the connection of the Defendant with the assets is proven according to the letter of JSC "PUMB", which indicates the opening of bank accounts and information about the funds in these accounts;
- The defendant had to indicate in the declaration all the income and financial obligations received by him, including the funds he received under the loan agreement;
- the parents of the Defendant's wife did not have sufficient funds to provide the Defendant with a loan in the amount of 140,000 thousand dollars;
- the cost of the apartments purchased by the Defendant's father-in-law and mother-in-law exceed their combined income.
- the sums of funds credited to the Defendant's accounts after he was dismissed from service are quite large. Thus, taking into account that after his dismissal he was no longer employed anywhere, the Defendant had to provide evidence confirming the sources of receipt of such funds, as they raise doubts. At the same time, the Defendant did not provide any evidence.
👉 Рішення: the lawsuit was partially satisfied, the assets in the amount of UAH 2,300,800 and USD 35,481.42 were recognized as unsubstantiated and charged to state income.
The amount awarded for recovery is less than the amount declared by the prosecutor due to the fact that the court did not include the funds received by the Defendant before 11/28/2019 as assets.
👉 Позиція суду апеляційної інстанції: the appeal was dismissed, and the decision of the first instance remained unchanged.
Case number 2
The SAP prosecutor appealed to the High Anti-corruption Court with a claim to declare assets worth UAH 1,527,000 as unsubstantiated, namely apartments that are jointly owned by the spouses, as well as levy UAH 1,463,239.66 in state income, which is the difference between the value of the apartment and the actual income of individuals.
Preference to the decision of the 1st instance, the case is at the appeal stage - On July 3, 2023, the case was opened
Circumstances of the case: Defendant - 1 - the chief specialist of recruiting and staffing, Defendant - 2 - the chief of the police station on duty. These persons are spouses.
The prosecutor believes that the specified apartment is an unjustified asset of the spouses, since its value is several times higher than the joint income of the spouses.
Arguments of the prosecutor:
- the price of the purchased apartment is UAH 1,527,000. The total income of the spouses is UAH 63,760.34. Thus, the difference between the price of the apartment and the income amounts to UAH 1,463,239.66 and is subject to collection into state income.
Position of the defense side:
- the wife notes that the apartment was bought with funds given to her by her grandmother - 13,660 euros and 13,700 US dollars, as well as with funds that the wife received as temporary financial assistance from another person - 900,000 hryvnias;
- the husband also supported the wife's position.
The position of the court of the 1st instance:
- to confirm the amount of money for the apartment, which was presented to the wife by her grandmother, evidence was provided in the amount of 8,660 euros. This is the amount that the grandmother received from the sale of her house, and later transferred to her granddaughter. The sale of the house is confirmed by case materials and witness statements.
- the amount of the pension that the grandmother received and also gave to her granddaughter was also confirmed by proper evidence. Its amount was UAH 270,668.62.
- adequate evidence was not provided to confirm the receipt of temporary financial assistance by the wife, and the documents that were provided did not indicate the net income of the person who provided financial assistance to the wife.
👉 Therefore, the amount of justified and legal funds with which the apartment was purchased is UAH 540,653.24. At the same time, part of the asset in the amount of UAH 922,565.56 is unreasonable.
A claim for the recognition of unsubstantiated assets can be filed if the difference between the value of the asset and the legitimate income of the authorized person five hundred or more times the subsistence minimum for able-bodied persons (which amounts to UAH 1,003,500).
Thus, since the amount of UAH 922,565.56 is less than UAH 1,003,500, the claim cannot be satisfied.
👉 Рішення: суд відмовив САП у задоволенні позову.
Case number 3
The SAP prosecutor appealed to the High Anti-corruption Court with a claim to declare assets worth UAH 6,746,863 (a vehicle and an apartment) as unsubstantiated and to collect from the state income funds that could not be purchased from legitimate income, in the amount of UAH 5,721,326.00.
Reference to the decision of the 1st instance, reference to the appeal decision, withrights at the cassation stage – 04/03/2023 open proceedings in the case
Circumstances of the case: The defendants are the judge of the district court of the Kyiv region, as well as his mother-in-law. In the case, it was established that the judge has a connection with the property registered for his mother-in-law, namely the apartment, and the vehicle owned by his father.
The prosecutor notes that the judge's mother-in-law and father received their property precisely on the judge's instructions.
Prosecutor's position:
- the purchase and sale agreement of the apartment for the mother-in-law was drawn up by the judge's wife, and therefore the wife acted on the judge's behalf;
- the judge receives Internet access services at the address of the mother-in-law's apartment;
- the judge used bank terminals and ATMs located near the mother-in-law's apartment;
- the judge's car and his father's car (which is the subject of the case) drove past surveillance cameras together on the same street almost every morning, etc.;
- the income of the judge's mother-in-law and father did not allow them to purchase an apartment and a vehicle.
Position of the defense side:
- evidence that the judge's wife drew up the contract of sale of the apartment for the mother-in-law, and therefore the wife acted on the judge's instructions - are unfounded, since she acted in the interests of her mother;
- the prosecutor did not take into account that the judge's father had sufficient income to purchase a vehicle, as he sold the garden house and 2 plots of land;
- recordings from surveillance cameras are inadmissible evidence, as they were not obtained as a result of secret investigative actions;
- the procedure for monitoring the judge's lifestyle was violated, namely, the monitoring was carried out without prior notification of the High Council of Justice;
- the prosecutor did not take into account that the judge's mother-in-law had sufficient security from the sold property (a part of the apartment, her son's apartment, a car, financial assistance from her son from the USA). In addition, she was in 2 marriages, and after their dissolution, she remained financially secure.
The position of the court of the 1st instance:
regarding the apartment: systematic use of ATMs, regular payment of utilities and parking space rental near the address where the apartment is located, provision of Internet services at this address, a small time interval between the acquisition of the asset and its actual transfer to the use of the family of the subject of the declaration, as well as the mother-in-law's lack of sufficient income to purchase the apartment (the income was not confirmed by the proper documents, and those documents provided to the court were issued already after the opening of the proceedings in the case) indicate that the mother-in-law acquired ownership rights to an apartment on behalf of a judge (son-in-law).
regarding the vehicle: the prosecutor did not prove that the car was purchased by the judge's father on behalf of the judge (son), as no evidence was provided that the judge could dispose of his father's car, in particular, no documents were provided on the judge's car insurance, maintenance documents, etc.
👉 Рішення: the lawsuit was partially satisfied, a part of the value of the asset, namely the apartment, was collected from the judge in the amount of UAH 3,621,326.
👉 Позиція суду апеляційної інстанції: the appeal was dismissed, and the decision of the first instance remained unchanged.
Case number 4
The SAP prosecutor appealed to the High Anti-corruption Court with a lawsuit to declare the assets, in particular, the apartment of the people's deputy of Ukraine worth UAH 7,644,381, as unsubstantiated and to collect them from the state income.
Preference to the decision of the 1st instance, Reference to the appeal decision, the cassation appeal of the SAP prosecutor was returned
Circumstances of the case: The defendant is a people's deputy of Ukraine. The total income of the Defendant significantly exceeded the value of the apartment purchased by him earlier, and there was a question regarding the recognition of this apartment as an unsubstantiated asset.
Arguments of the prosecutor: the amount of funds that remained in the Defendant's accounts as of the end of 2020, that is, the year in which the apartment was purchased, were significantly less than the cost of the apartment.
Position of the defense side:
- the contract of sale of the apartment was indeed concluded on 19.06.2020. However, not yet being a deputy, the Defendant concluded a preliminary sales contract in 2017 and paid for the apartment in installments. Therefore, the total number of sums made in periodic payments was equal to the cost of the apartment;
- The defendant is not obliged to substantiate whether his income for 2017-2018 was legal, since the institution of recognition as unsubstantiated appeared only in 2019;
- The defendant had a lot of savings even before he became a people's deputy;
- the Defendant's son supported his father and provided him with significant sums of money.
The position of the court of the 1st instance:
👉Рішення: The claim was rejected. Only those funds acquired by the Defendant as a People's Deputy should be subject to inspection by the court. Yes, the Defendant made most of the funds for the purchase of the apartment even before he became a deputy, and as a deputy, the Defendant made only one payment in the amount of UAH 325 for the purchase of the apartment. Therefore, the Defendant had enough income to confirm the payment of UAH 325.
👉Позиція суду апеляційної інстанції: the appeal was dismissed, and the decision of the first instance remained unchanged.
Case number 5
The SAP prosecutor appealed to the High Anti-Corruption Court with a claim to declare assets unsubstantiated, in particular, funds in the amount of UAH 1,242,236 (acquired on the basis of a lease agreement) and UAH 10,000.00, acquired as commission income from JSC "Ukragazbank" and their collection into state income.
Reference to the decision of the 1st instance, preference to the appeal decision, decision of the cassation instance
Circumstances of the case: The defendant is former People's Deputy Ilya Kiva, who illegally acquired funds in the amount of 1,242,236 on the basis of a lease agreement for a pulp pit and commission income from the specified amount - 10,000.00.
Arguments of the prosecutor:
- sold the rental object back in 2010, and therefore could not be its owner and rent it out;
- at the time of signing the lease agreement, he was abroad, therefore he could not sign the lease agreement and the act of acceptance-handover;
- there are no contracts for the supply of electricity, utility services, security services or making other payments related to the maintenance of the leased object.
regarding the fictitiousness of the contract:
- the rental object was in a neglected state;
- the lease object was not used by the tenant;
- the lessee did not carry out economic activity at the location of the leased object;
- in form 20-OPP, the lessee did not display the leased object.
Defense position was based only on the procedures for obtaining evidence in the case violated by the prosecutor (lack of signatures, seals), however, the representative of the Defendant did not provide any documents that would refute the information provided by the prosecutor.
The position of the court of the 1st instance:
- the court agreed with the arguments of the prosecutor and found that: being a people's deputy of Ukraine, i.e. a person authorized to perform the functions of the state or local self-government, not being the owner of the rental object and not having the authority to own, use and dispose of it, he entered into an agreement with the business entity without the intention of transferring the real estate for rent, but with the aim of receiving funds in the amount of UAH 1,242,236, thereby acquiring ownership of an unsubstantiated asset in the specified amount and income from it in the form of commission income in the amount of UAH 10,000.
👉 Рішення: the claim was satisfied in full.
👉 Позиція суду апеляційної інстанції: the appeal was dismissed, and the decision of the first instance remained unchanged.
👉 Позиція суду касаційної інстанції: the cassation appeal was dismissed.
Conclusion: the legislation does not clearly regulate the criteria for recognizing assets as unreasonable. In this situation, the parties must provide the court with the evidence that, in their opinion, confirms the position regarding the legality of the acquisition of assets, and the judicial practice gives a clearer understanding of what the courts pay attention to when making a decision in the case.
