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Searches at The Company: How To Save the Face and Not To Lose the Business? Denys Ovcharov

для пабликаAuthor: Denys Ovcharov, the Partner of Juscutum Attorneys Association, the Head of the largest Ukrainian business security practice, and the coach of the National Police of Ukraine


Being engaged in business security, our lawyers constantly take part in searches and interrogations. Companies from various sectors: IT, agriculture, retail, etc. are pressurized by law enforcement authorities.

Risks. It is obvious that business in Ukraine is far from being perfect: there are fictitious companies, and converting centres, and tax evasion. But even law-abiding companies are given the shakedown, therefore, if law enforcement officers haven’t come to you yet, you’d better prepare for the visit in advance: you should understand what might be expected from searches, how to prepare for them and how to react correctly.

What are the criteria for choosing a “victim”? There are three main factors making the company “attractive” for the authorities:

1. A large amount of cash. Quite often these are financially successful companies that have “the money to take away”. For example, the agricultural sector is remarkable for a large cash turnover. Confiscation is a good way to replenish not only the treasury, but also one’s own pocket.
2. Liquid assets. Confiscated equipment, blocked real estate, arrested products/raw materials – all of them can be resold after the search. Blocking raw materials/transport/finance often stimulates businesses to “settle the deal”.
3. Staff. Effective working groups and teams can be sold to the competitors, and a high-quality farce instilling fear and desperation will make employees “talk” – become a source of information.

Any demonstration of success increases the risks: when you stand out from the crowd, talk about yourself, earn more than the others – you will definitely attract the attention of law enforcement authorities. Of course, popularity (participation in ratings, PR activity) improves your reputation, increases brand recognition and capitalization, facilitates attraction of partners and investors … But security is also very important, that is why you need to find a balance.

In my opinion, the pressure will not decrease in the near future. The taxation system is changing, foreign investments are being involved, business is getting stronger … Not only the state, but also competitors, or even business partners benefit from arranging “a farce”; in addition to that, there are internal corporate wars. In fact, office searches have little to do with official reasons for their realization; they mostly intend to hinder the economic activity in order to seize a business. It seems that there is nothing to take away from IT business – everyone has gone into cloud technology, and ordinary programmers usually work remotely; nevertheless, noisy searches and arrests are still continuing. The situation is even more complicated for agriculture companies: the arrest of granaries, equipment or funds might not only paralyze the work of the staff, but also completely destroy the harvesting. Therefore, as our experience shows, every third company becomes public in Ukraine in order to protect itself.

Threats. Analysing such situations, my colleagues and I try to find out why the company was visited as well as the reason of this visit, and the dynamic development of the situation. There are many reasons for the arrival of law enforcement officers; mostly businesses are incriminated:

1) payment of “envelope” wages;
2) tax evasion;
3) legalization of the money obtained by criminal means;
4) corruption;
5) misappropriation and embezzlement of alien property (opening a criminal case against a debtor is a good instrument for repaying a debt);
6) fraud;
7) raiding (wars of ex-partners, fights for the land of competitors, etc. sooner or later lead to the hostile absorption or destruction of business);
8) financing of terrorism, etc. (this method is widely used by the Security Service of Ukraine; although there are no sentences on such charges, the number of searches doesn’t decrease).

In the conflict of economic entities, law enforcement authorities are always ready to defend one of the parties, or even both. But, judging from the experience, only the people in uniform gain something as a result.

Opening of criminal proceedings involves serious consequences (see the table):

– seizure of property (bank accounts, any assets of the company);
– removal of a director from office on suspicion of committing a crime;
– interrogation of employees;
– confiscation of documents;
– dismissal of key employees, etc.

Of course, companies try to keep the valuable personnel by opening branches in other countries and organizing the relocation of employees. For example, there were cases when people were allowed to take not only their dog and cat, but even their mother-in-law and father-in-law. But you are not able to move everyone out, and it will be extremely difficult to make the rest of intimidated employees work as if nothing happened – it is sometimes easier to recruit the new ones.

Article of the Criminal Code Punishment
Art. 191 Misappropriation, embezzlement or conversion of property by abuse of official post - a fine up to 50 tax-free minimum
– restraint of liberty for a term of 3 to 12 years,
– deprivation of the right to occupy certain positions
Art. 209 Legalizing of the money obtained by criminal means - imprisonment for a term of 3 to 15 years
– forfeiture of property
– deprivation of right to occupy certain positions
Art. 212 Evasion of taxes - a fine of 1000 to 25000 tax-free minimum incomes
– deprivation of right to occupy certain positions

Table. Possible charges against company executives

To tell the truth, we ought to say that the brutal “shakedown” by law enforcers is not always connected with the intention “to grab” or destroy the business. Opening of criminal proceedings gives them the opportunity:

– to spoil the reputation of the company by organizing a “black” PR campaign (through the media and/or the press service of law enforcers);
– to identify the weak and vulnerable points of some individuals/organizations in general;
– to get access to corporate information, experience, know-how, patents, etc.

Anyway, the “black” PR can discourage the recent customers and business partners, and the tax authorities, can use the search outcome as a result.

As a security specialist, I want to point out that legal prospects of such cases look doubtful. In particular, according to the statistical data in Ukraine:

– 95% of such cases do not go as far as court;
– out of 5% of cases coming to court, only 1% ends with a sentence (the hearing of such cases takes a year or more on average);
– in 80% of cases the court chooses a fine when choosing the sanction, (I’d like to remind, this concerns only 1% of those cases which come to the sentence);
– only 0.3% of the accused get a real term.
– the valuables seized during the search (money, equipment, machinery) are returned to the aggrieved party by a court decision.

As the experience shows, the situation isn’t limited only to “raids”. We can call this stage a “start-up”, because we need a “customer” for such an operation, a budget, resources, a manager who will plan and coordinate everything. It means that not every start-up is successful for law enforcement authorities, the same as for business, by the way.

“Human factor”. Even in the most difficult cases – the aggressive “farce”, confiscation of all the property, etc. – it is not so difficult for the lawyer/attorney (the corporate or the one the company works with) “to alter” the situation: to return the property/money/servers, etc. But it’s very difficult to help the employees, who have become accidental participants of the “farce”, overcome their fear, demotivation and loss of faith in the company. It is clear that to completely neutralize the risk of the search is impossible. But you can prepare the workers for it in advance (as a preventative measure). And this largely depends on the executives and HR specialists.

How can HR specialists help the owner/director of the company? Of course, all of them try to develop and motivate the staff, but when it comes to security, we need something else. Unfortunately, a search in the company is also a kind of “a corporate event” during which all human qualities are displayed – the positive qualities as well as the negative ones. For example, if you need a day or two to understand “who’s who” on a hiking holiday (to sail together, to sit around a campfire, etc.), you get to know it much faster during a search… What is more, no one is fired after workmates go rafting together, but you often have to make the so-called difficult administrative decisions after a search.

Therefore, analysing the risks, first of all, you need to study the aspects related to the staff:

– What mistakes do employees make?
– What should we do to save the team (to prevent its destruction) after the law enforcers intruded into the company?
– Shall we prepare the staff for emergencies and if yes, how should it be done?
– How can we minimize the risks?

The most common problems the workers come across during the search:

1. Theft (of personal things, mobile phones, gadgets, money, etc.). Usually, when a search is made, there is one representative of law enforcement authorities/a witness for every five employees (for example, if one hundred people work in a company, there will be twenty officers during a research). And, no one usually knows these people, especially when we speak about witnesses. It is often impossible to return the stolen things or the ones which were not included in the search report (in addition to that, no one will ever compensate the damages of broken doors, furniture, safes, ceilings).
2. Interrogations. Quite often, law enforcement officers begin to question the staff immediately during the search, and those who have not been questioned are later called for questioning and execution of investigative actions. But the company employees are ordinary people, who, probably, meet law enforcement authorities for the first time. As a rule, they know neither the procedural legislation, nor their rights, nor the powers or duties of the inspectors, therefore, they cannot resist the pressure they are exposed to or refuse to give evidence/disclose the confidential information (if it is illegal), etc. They do not understand that the search is a procedural act, the result of which largely depends on how civilized the communication between all its participants will be. It’s clear that the search is very stressful for an unprepared person, that’s why mistakes and even inappropriate behaviour are possible. With all the ensuing consequences…
3. Disinformation. Frequently, people face the aggressive defamation of the company and its executives: for instance, your employer does not pay taxes/commits crimes/finances terrorism, etc.
4. Pressure. Operating officers often do not allow the staff to go to the toilet, they fear lest the staff should spoil or destroy the material evidence. To prevent this, they inspect the workers’ personal belongings and even pockets. Such actions are not only illegal, but also humiliate human dignity.

During the search you must be aware of:

– the right of the investigator to carry out investigative actions, including the seizure of the things he considers to be important;
– the duty of the executive is to keep the team’s presence of mind, honour and dignity at the slightest risk of seizure and theft of personal and corporate things.

“Telling a secret to the whole world …” The search sometimes lasts for many hours, so it is often impossible to avoid communication between employees and law enforcement officers. At the same time, being too talkative, especially in an informal atmosphere (for example, while drinking coffee), can give the investigator a lot of interesting details. The old slogan “A loudmouth is a godsend to a spy!” is never out of date.

By the way, during the search, the employees usually reveal the information themselves: what is hidden/and where it is, what the company actually deals with, etc. And, believe me, the confiscation of office equipment and documentation after the search is not so painful for the executives/owners as the information about “your staff has just said”. Why do employees “give away” their employer?

– There are people who are very credulous by nature. They can share the secrets with the operating officers simply because they are “representatives of the authorities”: tell them where the director cashes the money orders, what gossips are spread in the office, etc. Moreover, they are ready to give both written and oral testimonies.
– the people who tell everything (and even “lead” to the search) are “infiltrated spies” – the people secretly working for the competitors. Of course, this “risk zone” is the competence of the company’s security service, but not every company has it. Anyway, such people should be “figured out” at the stage of recruitment. They can be seen in role-playing games, as they do not share common values. Furthermore, both an unchecked counterparty and a dissatisfied client can become (sometimes accidentally) an inside man.
– the company often has hidden enemies/oppositionists, including the employees who quitted the job because of a conflict with the management, or were fired in an “ugly” way. They not only know the business processes perfectly, but they are also ready to “tell everything” – for free, just to take revenge or “prove something”.
– Intriguers/careerists might not feel any hate to the owner and the collective; they might simply pursue their own goals. For example, the deputy director writes a complaint about the director, expecting that the latter will be fired after the inspection, and he will be appointed for the long-awaited post. Then this information may be revealed – and…

Of course, most people are more or less adequate in reality, so they will not deliberately destroy the company where they work.

What shall we do? It is clear, you should be ready – just in case. But how? Usually the executive/ HR specialist says something like that:

– “And let’s write an instruction! The detailed one. Everyone will read it and know what to do: when they come with a search – you will do number 1, number 2, number 3!”
– “Let’s call the lawyer, let him give us a master class. It won’t last long – about forty minutes. Let him gather everyone and tell: what the workers should do, in case they come to us.”
– “We should scare them (the employees) beforehand! We will gather all of them, and the investigator will be talking all day long about the searches and interrogations. This way the employees will be scared to death. Then the people will be ready – they will become fighters”.

I will give you the answer: all this is ineffective. It’s not bad, when you instruct the workers, but in a stressful situation, everything will slip their mind. And a frightened person is more likely to lose the rest of his self-control.

In some industries (IT, retail) employees are more prepared for active action, in others – less prepared. Besides, a lot depends on:

– the size of the company, its history;
– the philosophy of the owner/director, how he sees the way of communication with law enforcement authorities;
– the level of legal culture, knowledge of the existing legislation;
– training of the employees, their preparation to use the pre-arranged response algorithms in certain situations;
– the motivation of people, their readiness for active action.

In fact, you can and even should teach the people how to organize effective counteraction to illegal searches. But you should do it systemically, and, most importantly – you should practice the desired behaviour, especially in the group. In such a way, for example, kaizen or the quality system are taught. If it is systematic, voluntary, in the situations where nothing threatens the staff, then the desired effect can be achieved.

But to scare – to unexpectedly arrange a “training” raid, with their faces laid on the floor and “tough” interrogation – is not necessary, even if the director is willing to know “what they really think about me”. It does not work as a preventative measure; moreover, the intimidated staff will quit the job sooner – people dislike not being trusted.

What should the training include?

1. Development of the corporate culture. The employee will never “betray” the employer, if he:

– is sure that he works in a wonderful company – which is honest, working “fairly” (first of all, if he is satisfied with the proper labour relations);
– knows that the people who will destroy, break, take away everything, frighten the others might come.

The employees should never have suspicions that law enforcement officers have serious grounds for a search, otherwise they will become the first allies of the investigator.

2. Legal support of employees. A person feels protected when the company signed a contract with him to provide legal assistance, if necessary – as part of a social package. This is especially important for top managers, because the search often starts not in the office, but at home.

3. Organization of an effective security service. Round-the-clock readiness, risk analysis for anticipation, ensuring legal security. Prevention work – information security, prevention of phone-tapping and information leakage through social networks, etc.

4. Training of employees. Two aspects can be included:

– Formation of employees’ legal culture, legal competence.
– Training of the staff (both average employees and top managers) legal security algorithms – how they should behave during a search.

Game. The person is interested in the way he should behave during the search, if he himself conducted searches or, unfortunately, was present during them. As far as a person’s behaviour is concerned, knowledge alone is not enough – you need to develop practical skills and (necessarily) use emotions.

In order to prepare the employees, we worked out a role-playing game – “The Search in the company”. This is training in a new format – infotainment, information and entertainment. In fact, this is extreme team building” that helps:

– “to act” the entire search scenario in a safe environment;
– to work out the desired patterns of behaviour;
– to rid the people of their fear;
– to unite the team.

How does it work? We say to the employees: “We’re going to have team building, but the unusual one. We trust all of you, but the times are hard now, you know. To prepare you for stressful situations, we will have a role-playing game.

In 15 minutes we arrange a search in the company – we are going to show how everything happens. Your task is to get used to the role and behave naturally. After everything is over, we will analyse your behaviour, and you will tell us about your emotions and actions. Then we will explain:

– what should be done (and what shouldn’t be done) at every stage of the search;
– how to communicate with the representatives of law enforcement authorities;
– what are the most common mistakes people make;
– what managerial decisions are taken after the search, etc.

And we will definitely answer all your questions. ”

What are the peculiarities of the game format?

1) everything happens very quickly, people do not have enough time to think it over, so they react naturally;
2) the game takes place in the familiar environment, so people do not have any fear;
3) verisimilitude and the “the effect of immersion” is achieved due to the presence of armed people in masks;
4) summing up the results, we count the scores and listen to the report of the observers, and also tell the staff:

– what signs show that law enforcement authorities are interested in the company;
– how to communicate effectively with the investigation bodies (if the main officer is absent during the search, the investigator will take his place);
– how to behave during the personal examination, the seizure of personal belongings, the questioning (during the search and afterwards);
– what your family members need to know and how they should behave if the search is conducted at home;
– when and how you should start working with the media and whether it’s necessary to invite journalists when the search is already underway, etc.

Why is it important to give the staff the opportunity to experience the search situation? The thing is that the level of aggression depends not on the investigator, but on the behaviour of the employees: on how they meet the workers of the investigative-operation group, whether they understand what is happening, whether they know about the purposes of the investigator, etc. And this all can be acquired only through personal experience.

In addition, different people behave differently in stressful situations, and the game is an effective way to identify people, who are inadequate, who we ought to get rid first of all: during the search they create very unpleasant situations.

In the end, we should concentrate on the positive sides of the situation. Strong emotions (negative at times), that the people experience during the “search”, unite the employees. They become one team sharing common values, which mean “one for all and all for one”. And this is the main task of the executive – to maintain loyalty and motivation of the employees.

As the experience has shown, the search is a crash test of business processes. If the employees know that an illegal search is going to be made in their company, they will defend the interests of their employer – like the team of EX.ua. did it one day. Prepare your staff for a search – today this is the best team building!

If your company was visited:

– Before you sign the search warrant, read it carefully. Find out what exactly the investigating judge permitted the investigator to do: to open the safety deposit box, to seize the server or money, etc.

– Provide physical security to the people.

– Do not hurry or fuss during the search. A few hours of your life will be lost anyway, so simply get ready to wait.

– Convince the employees not to speak. According to Art. 97 of the Criminal Procedure Code, listening to explanations or interrogating during the search is permitted only with the consent of an employee.

– Record all the violations committed during the search in writing, and also make a report in case of personal/corporate property theft. If possible, make a video recording of the search.

– Help the “guests” not only when compiling and checking the search report, but also when packing valuable items (if it’s impossible to keep them).

– Keep a record of the seized items: you are the person most interested in it. The more detailed the search protocol is, the smaller the risks of losing important documents and technology are. Do not write in the search report that you give something voluntarily!

– In case of unexpected difficulties (especially threats to the life and health of the staff), call for the police, lawyers, media representatives, etc. It’s better to do this in a safe place. Wait for the law enforcement authorities to arrive, report all the violations committed and indicate the witnesses who can confirm the facts (the employees may be the witnesses).

– The search is often just the beginning of close communication with law enforcement authorities, so don’t forget to check whether the summonses were handed to you and determine the order of the employees’ interrogation.

– Provide support to your employees. According to Art. 66 of the Criminal Procedure Code, each witness has the right for legal assistance. The correct decision is to go to the interrogation with your lawyer.

– The “farce” damages not only the business reputation of the company, but also the reputation of its clients. Therefore, it is necessary to create not only legal, but also PR protection. If the company keeps silent about the search, the press service of law enforcers will tell about it. The rules of the game are determined by the party which started it. The one who keeps silent will be accused of the most terrible sins.

– Forget about the normal working schedule. You can be visited on your day-off “not to interfere with the work of the company”. But if there is no one in the company, anything might happen to personal things of the employees, and the goods might be confiscated without any resistance.