Mishandled Ponzi scheme calls role of Prosecutor's Office into question - International Law Office

Introduction
Role of prosecutors
Comment

Introduction

Since mid-July 2012, there has been much discussion of the Amber Gold affair, a typical financial pyramid (or Ponzi) scheme, to which several thousand people fell victim. A 20-year-old man set up a company that promised interest of between two-and-a-half and three-and-a-half times higher than that provided by banks. While this case was relatively typical, the opposition is trying to distort the facts so that the situation looks like a governmental crisis. Action has been taken to set up a committee of inquiry.

During the course of the dispute, a number of deficiencies in the judicial system came to light. The Financial Supervision Authority had notified the Prosecutor's Office several times about the fact that Amber Gold was running a banking business without the permits required by law, but the Prosecutor's Office consistently discontinued proceedings. In some cases, the court ordered prosecution authorities to continue the proceedings, but after three months the Prosecutor's Office, having taken no apparent action, discontinued proceedings regardless.

It later turned out that the founder of the pyramid scheme had been punished for petty financial fraud in the past. He had several suspended sentences of deprivation of liberty on his account. However, when issuing subsequent sentencing rulings, the court did not take into account previous convictions, nor did it order the execution of previous suspended sentences.

The attorney general has had to explain the activities of subordinate institutions before Parliament. This has given rise to a discussion on the role of the Prosecutor's Office.

Role of prosecutors

The Polish prosecution model is a direct descendant of the model imposed by the Stalinist system in 1950. The prosecutor conducts or supervises preparatory proceedings and subsequently, acting in the capacity of an auxiliary prosecutor, supports before the court an act of indictment written by himself or herself, or by his or her colleagues.

However, in reality, the Polish prosecution system has largely been found to be governed by statistics, with at least as many cases submitted as must be dealt with. How cases are handled and their relative importance can therefore not be a subject of particular interest. In some cases, the best solution has been to discontinue proceedings or 'push out' an indictment to the courts for them to deal with. It has been argued that the Prosecutor's Office is generally unable to cope with economic cases where swindlers are smart, have knowledge of the law and are siphoning money abroad. A large number of economic cases have resulted in failure for prosecutors, as they were unable to defend their arguments before the court and may have had to rely on low-paid experts who did not always understand complex business transactions.

In an aim to reform the Polish prosecution system, in 2010 the minister of justice ceased to hold the position of attorney general concurrently. An independent Prosecutor's Office detached from politics was to have been established; instead, a new professional corporation was set up, the members of which can be held criminally liable only if consent is given by the disciplinary tribunal (which is composed of other prosecutors).

At present, the attorney general is not subject to the control of Parliament. However, under the reform of the prosecution sector planned by the government, the attorney general will be obliged to submit a report to Parliament; the report will be subject to a parliamentary debate and the government will indicate the criminal prosecution policy to be followed.

The debate on the necessity of change to the prosecution system has accelerated. A recent edition of Polish weekly Politka enumerated the perceived failings of the Polish prosecution system (eg, lack of goodwill, laziness, anarchy, impunity and "blind stubbornness"). The head of the Parliamentary Justice Committee and the head of the State Prosecution Council have submitted proposals for a change in the position of the prosecution in the justice system. It has been proposed that preparatory proceedings should be conducted by the police and other services; the Prosecutor's Office's only task would be bringing and supporting an act of indictment before the court.

According to the head of the State Prosecution Council, Edward Zalewski, a prosecutor "is not, after all, an investigation tracker, but only a lawyer". The above solutions are expected to be favoured by the president.

Comment

The Polish justice system would benefit if these changes were implemented as soon as possible. It is hoped that the Amber Gold affair will not force the government, pressed by populists, to give up the process of purification of the Polish law from penal provisions (which are included in more than 60 statutes and have been found to restrict economic freedom and reduce competitiveness).

For further information on this topic please contact Jarosław Kruk at Kruk & Partners by telephone (+48 22 825 5650), fax (+48 22 825 0980) or email (jaroslawk@legalkw.pl).