The difference between fraud and embezzlement and waste
P restupleniya in the sphere of economic activity committed by officials, civil servants, employees of enterprises, to dispose of the property entrusted to them by illegal means. For such actions, the legislator has developed special elements of a criminal offense: "misappropriation" and "waste". These actions can also be qualified as fraud. The specifics of qualifications and the choice of the necessary article by the investigating authorities depend on how the intent was formed, and whether there were signs of deception and abuse of trust in the actions of the criminals.
Penal code and comments
To distinguish between fraud and misappropriation, it is necessary to focus on the texts of specific articles of the Criminal Code. Article 159 deals with various cases of fraud, article 160 deals with misappropriation and waste. They are a single type of crime that breaks down into two structures based on the use of a stolen object. The wording of the articles themselves is exhaustive, but clarification of some terms should be sought in the recommendations of the Supreme Court and in individual cases from judicial practice.
An overview of the jurisprudence in these types of cases provides clear criteria for distinction, allowing to identify the key features of fraud, misappropriation and waste. Russian higher courts, based on the study of the statistics of prosecution under Articles 159 and 160 of the Criminal Code, publish generalizations of judicial practice. In the future, when considering similar cases, all judicial bodies are obliged to be guided by these explanations. Only if the composition or features of the act are fundamentally different from those considered in the review, the judges have the right to deviate from the interpretation proposed by the Supreme Court. Among such generalizations it is necessary to mention the Resolution of the Plenum of the RF Armed Forces of December 27, 2007 No. 51 "On judicial practice in cases of fraud, misappropriation and embezzlement." Today, courts in law enforcement practice rely on the formulations and evaluation criteria proposed in it.
Features of the qualification of fraud, misappropriation and waste
To understand the differences between the compositions, it is required to reveal the essence of each term used to describe the act. The difference between crimes lies in the way they are committed. Fraud is quite common in the practice of both government agencies and private companies, but in most cases, fraudsters prefer to consider private individuals as their victims.
Embezzlement or embezzlement is directly related to the existence of either an official or business relationship of the criminal with the organization. Detection of fraud, misappropriation and embezzlement is carried out by operational and investigative bodies either on their own initiative, or on the basis of statements from victims.
Article 159 defines fraud as the theft of someone else's property or the acquisition of the right to it (for example, the conclusion of an agreement on the assignment of rights, committed by deceit or abuse of the victim's confidence). A mandatory qualifying feature of it is deception or abuse of confidence, proven by the circumstances of the case. The forms of deception can be different: written, oral. Often the deception is about the identity of the offender. Is he:
- can impersonate an official and receive bribes (a vivid example is the hero of Russian literature Khlestakov);
- pretends to be a person who is not, and exercises the rights of this person (inheritance);
- uses a legal entity with a name similar to that familiar to the victim or expected, and enjoys its reputation.
Deception can be associated with the property itself, which the criminal encroaches on or with the help of which he obtains the right to other people's money. Such situations arise when selling non-existent goods or goods with impaired consumer characteristics. Selling a complex of real estate objects that cannot be built up due to the fact that the ownership of the pole in the middle of the site belongs to a third party will be the same fraud as selling a panacea for all diseases to old people.
Abuse of trust is the use of a special, trusting personal or professional relationship formed between the fraudster and the victim. Actions under a previously issued power of attorney aimed at the detriment of the principal will not be recognized as an abuse of trust by the court. The following forms of abuse of trust are common:
- mediation in the acquisition of property without the intention to carry it out. A modern option may be to raise money for crowdfunding projects without the intention of their implementation;
- conclusion of a loan or credit agreement without the intention to repay the debt. Now cases with such qualifications are actively initiated at the request of banks against large borrowers, if they withdrew the funds received, and did not use them for their intended purpose;
- receiving an advance payment under contracts of sale. At the same time, such an act may be fraudulent on the part of the seller, but in the case of deliberate transfer of funds under obviously unenforceable contracts, it may bear signs of waste.
To qualify an act as a fraud, it is important to form an intent to commit theft even before the paperwork is issued. If it did not exist, the act will be qualified as another form of a mercenary crime. The presence of preliminary intent may be evidenced by such factors as the deliberate lack of financial ability to fulfill the obligation, the lack of the required license, the use of forged statutory documents or, which is important for participants in government tenders, fake bank guarantees, forgery of seals, the creation of legal entities using lost passports.
Theft of funds from bank accounts, committed by deception and abuse of trust and using computer technology, is simultaneously qualified as fraud under Article 159, and under Article 272 and 273 of the Criminal Code of the Russian Federation as the use of illegal access to computer information with causing damage.
The form of guilt for fraud provides only a selfish intent aimed at obtaining personal gain. The crime will become completed, committed at the moment of obtaining the right to own and dispose of property or other rights.
The article has several parts that talk about qualifying crimes:
- Part 2: the crime is committed by a group in collusion or is characterized by the infliction of significant damage;
- Part 3: an official acts as a criminal, who uses his official opportunities, or he causes major damage to the owner of the stolen valuables;
- Part 4: here the subject is not a group by prior agreement, but an organized community, and the damage should be especially large;
- Part 5: talks about the deliberate non-fulfillment of contractual obligations among entrepreneurs, this composition increases the liability for intentional fraudulent failure to fulfill the obligations provided for by the contract;
- Part 6: the use of computer information arises as a qualifying feature.
Recently, a new category of cases related to fraud in the field of computer technology has appeared, and the article of the Criminal Code has been supplemented with part 6, dedicated to this composition. The act is committed by manipulating information, such as its input, blocking, modification, destruction. Deception or breach of trust are not mandatory qualifying features if this article applies. Deception is most often not a way of carrying out the theft itself, but a way of obtaining information with the help of which a crime is already being committed (passwords, bank card numbers and similar data).
Among the high-profile cases of fraud, one can name the criminal pyramid of Vladimir Fedan , who in the period 2002-2008 raised funds with a proposal to invest in non-existent real estate in Russia and abroad. He managed to get hold of the money of more than 250 thousand people. More than 300 criminal cases were initiated on the fact of fraud, but not all of them managed to bring the culprit to justice. The investigation of such cases is often complicated by the refusal of the victims to file an application, since the money stolen from them did not always themselves have a legal origin.
In the field of public administration, the sphere of public procurement is at the greatest risk; as an example, we can cite the case of prosecution under Part 4 of Art. 159 officials of the health care institution of Ugra who signed invoices for the provision of transport services in excess. The fact of preliminary intent made it possible to qualify the act as fraud, and not as waste. In such situations, qualifications often take into account the moment when the forged documents were produced: before the theft was committed or with the aim of concealing it.
Today's investigative practice is beginning to look for signs of fraudulent actions in the issuance of cryptocurrencies; for some authors of their own crypto projects, investigative actions have already begun to identify signs of fraud. Also in the zone of possible risk of being recognized as fraudulent schemes are proposals for investing in REITF funds specializing in foreign real estate.
Assignment is the gratuitous treatment of valuables entrusted to an official or another person in their own favor or, alternatively, in favor of third parties. The appropriation must be detrimental to the owner of the lost asset. For fraud, misappropriation and embezzlement, elements of the transfer of the owner's powers from the legal owner to the criminal are characteristic. But the peculiarity of the appropriation is that some of these powers have already been transferred free of charge. Signs of a crime that distinguish it from other structures:
- the stolen assets should have been in the possession (access) of the criminal on a legal basis. It is not necessary to conclude an agreement on full material liability, the basis may be the very fact of the right to dispose of them on the basis of the company's charter or a power of attorney;
- the person should have had the rights to dispose or use assets (or to manage, deliver, store) on the basis of a position, by power of attorney or by agreement (commission, agency service, commission, trust management, forwarding and others).
The main difference from fraud is the fact that the property was initially entrusted to the criminal, and only then did he commit acts of theft by means of appropriation. If for the swindler the property is "alien", he has no direct relation to him, then in the case of appropriation he already had those powers that facilitated the commission of the illegal act.
The crime will end the moment lawful possession becomes unlawful and the offender begins to take steps of appropriation. An example would be the sale of a part of the goods transported by a carrier with the intention of further staging its theft.
In judicial practice, ordinary employees are most often brought to responsibility for misappropriation: cashiers, freight forwarders, medical workers. When crimes on an especially large scale (more than 250 million rubles) are committed, the investigating authorities prefer to choose waste as a type of qualification. This is due to the fact that the fact of the outflow of money or valuables can be established and proved with a high degree of certainty, and it is almost unrealistic to trace the path of the same valuables along the chain of accounts to the final recipient in a situation with the use of offshore schemes or foreign payment systems.
The case of the former Minister of Atomic Energy Yevgeny Adamov is interesting. The Americans accused the minister of embezzling $ 9 million, which the US Department of Energy transferred to modernize the security systems of Russian nuclear facilities. The American side used the term appropriation, not having in mind the specific composition of the Russian Criminal Code, but having information about the fate of the stolen funds. After his extradition to Russia, the minister was already charged with fraud committed through the theft of shares in enterprises controlled by the ministry and illegal debt write-off.
This crime is also provided for by Article 160 of the Criminal Code of the Russian Federation. The qualifying features for him are the use of official position and an especially large size, which is typical for both fraud and misappropriation. It becomes completed at the moment when the entrusted property becomes completely expended (spent). From the point of view of legislation, the commission of a crime and its end is the sale of building materials to the outside, and the consumption of food by the director of the boarding school, and the acquisition of goods for personal use at the expense of the company.
The court evaluates intent on the basis of a combination of signs, for example, the presence of an initial intent to return property, committing forgery or forgery of documents in order to hide the traces of a crime, and by other criteria.
This crime, characteristic of the Soviet era and one of the most frequent articles under which directors of shops and shop assistants - novice entrepreneurs - were brought to justice, today is less and less common in the practice of courts. But there are also high-profile processes, one of which was the case of the top manager of the state corporation "Rusnano" Leonid Melamed. A former entrepreneur and a major government official was prosecuted under Part 4 of Art. 160 for the embezzlement of 220 million rubles, which were transferred to the accounts of the company "Alemar", where he was the founder, in payment for some consulting services for the processing of the structure of investment contracts.
The reckless actions of Melamed were easily detected during the audit. Other employees could have noticed him, having reported this to the "hot line" of the security service. “Melamed has created all the conditions for budget funds to be transferred to a firm under his control, thus securing the so-called golden parachute upon dismissal,” commented on the actions of the ex-official Vladimir Markin , an official representative of the TFR. Prosecutor General V. Chaika, who personally approved the accusation, saw it as waste, and not misappropriation or obvious fraud, since even at the conclusion of the contract, the nature of the fictitiousness of the provision of services and their inflated cost could be obvious.
Cases related to fraud and waste, for example, all cases of Oboronservis , are also qualified as fraud, since this composition has more opportunities to prove the existence of a group of individuals or an organized community. In the case of embezzlement and embezzlement, members of an organized group can be considered only as accomplices, in the case of fraud - as direct participants in the crime. These differences are quite important, since the penalties for accomplices are initially significantly lower.
Prevention of crimes in the activities of a commercial organization
In the activities of commercial organizations, there are two ways to prevent the fact of damage caused by fraudulent actions directed against the company, or the misappropriation and embezzlement of officials, the task of implementing which must be entrusted to the bodies expressing the will of shareholders, since managers also become involved. Measures to protect against fraud, misappropriation and waste can be divided into two separate sets.
The first of them will be the regulation of all procedures related to the conclusion of contracts for the provision of services and the purchase of goods. Among the stages of regulation must be:
- development of a procedure for mandatory verification of counterparties;
- introduction of tender procedures for concluding contracts;
- adoption of internal documents providing for the actions of employees in the event of a conflict of interest;
- development of a procedure for accepting the results of contract execution with the participation of representatives of internal control services, who should, according to specially prepared instructions, establish whether the result meets expectations.
The second set of tools includes strengthening the role of services such as internal audit and internal control commission. The activities carried out by them should be regular, carried out both on a continuous and selective basis. The introduction of some software tools that mediate the internal workflow and the process of negotiating contracts should serve as a good help for the implementation of the functions of these departments. It is necessary to carry out timely audits of the company's property, warehouse balances and other valuables, and with the participation of external auditors. The fraudulent write-off of benign objects can become an independent case of theft, and therefore these procedures must be strictly controlled.
There is little difference between fraud and misappropriation. In almost any major or high-profile crime committed by an official or other official, you can find signs of both fraud and waste at the same time. The choice of a specific composition remains at the discretion of the investigating authorities, choosing the criteria by which they can prove to the court the guilt of the criminal. When committing crimes in the sphere of relationships between individuals, when creating financial pyramids or using other schemes of deception, only the qualification of the act as fraud can be selected.