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Lawsuit against company's CFO and Vice CEO

INTELLECT-S has successfully represented OOO RusElProm Engineering ("REP Engineering"), a bankrupt subsidiary of a big Russian electric engineering concern, RusElProm, in parallel civil and criminal proceedings against its former CFO and Vice CEO who had converted over RUB4,250,000 in undue self-awarded cash bonuses in 2009/11. REP Engineering's receiver discovered the conversions in 2013, after the bankruptcy proceedings were initiated, and filed first a civil suit seeking to hold them both subsidiarily liable, and then had them criminally indicted under Article 159(3) of the Penal Code ("conversion of the property of other persons by breach of trust or abuse of office").

The civil court, however, found for the defence on grounds that the defendants, acting as CFO and a Vice CEO, had had the legitimate authority to award cash bonuses to REP Engineering's staff, including themselves as members of the staff.

The civil judgment became a res judicata which precluded REP Engineering as the aggrieved party from pursuing charges in the subsequent criminal trial. As a result, the court had acquitted both defendants by the time INTELLECT-S stepped in, retained by the REP Engineering to review the validity of the grounds and legality of the acquittal, and appeal it.

A thorough review of the 40 volumes of the criminal case showed that the civil court's judgment and the acquittal based on it were groundless. The civil court had disregarded that REP Engineering's CFO and Vice CEO were not the company's employees, but, in fact, full-time employees of the parent company (i.e. RusElProm) under their respective employment agreements with RusElProm. They acted as REP Engineering's CFO and Vice CEO under their respective powers of attorney issued by RusElProm, and were not, therefore, members of REP Engineering's staff entitled to bonuses payable on behalf of REP Engineering; their PoAs did not authorise them that entitlement, either expressly or implicitly.

Our comment:

This permitted the client, represented by Dmitry Zagainov, INTELLECT-S, to appeal the acquittal. The court of appeals reversed the acquittal and sent the case for retrial before a district court in Yekaterinburg.

It took the new court 12 hearings (which added four new volumes to the case file) to find the ex-Vice CEO guilty on 28 out of 35 charges, and the CFO, on 50 charges out of 64. The court sentenced both to criminal fines (REP Engineering asked the court not to sentence the defendants to imprisonment).

Criminal Law, Employment Disputes, Employment Law, White Collar Crime Cases

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