Viewpoint... From an effective defense case to talk about the effective defense of criminal offences in the field of private equity funds.

Published:

2023-04-29

Recently, a case involving the crime of illegally absorbing public deposits by private equity funds undertaken by lawyers Li Kun and Cai Benjie of the Criminal Department of Zhongcheng Qingtai (Jinan) Law Firm has achieved good defense results. The parties involved in the case have been released on bail after being tried by the court and have now been released. The investigation organ of the case initially filed the case as the crime of fund-raising fraud, and the defender made a defense of innocence that the crime of fund-raising fraud did not constitute. During the examination and prosecution stage, the public prosecution organ changed the charge to the crime of illegally absorbing public deposits, and the defender continued to insist on the defense of innocence at the trial stage. Under the condition that the amount of more than 1200 million yuan was not refunded, the effective defense effect of "actual reimbursement" was achieved. Summary of 1. merits The defendant in this case is a private equity fund intermediary platform company, because the financing company through the intermediary platform to raise a large scale of funds, after the expiration of the product, the financing company's capital chain broke, resulting in a huge amount of funds can not be paid. In the process of financing, the defendant assisted the investors in adjusting the company involved, but did not identify the false property information and credit enhancement measures issued by the financing company. The intermediary platform charged high intermediary fees in the process of providing services. In view of this, the investigation organ believed that the defendant and the financing company had a conspiracy to illegally occupy the property of the fund-raiser, thus presuming that they were accomplices in fund-raising fraud. 2. defense thinking 1. On the crime of fund-raising fraud In this case, the defendant, as an intermediary, did not engage in traditional illegal fund-raising activities such as direct or indirect collection of funds, or even self-financing or self-financing in disguise, but was dragged into the criminal forbidden zone of illegal fund-raising because of the illegal or even criminal situation of the financing company itself. The key issue in this case may not be whether the intermediary company has an objective act of illegal fund-raising, but whether, as an intermediary agency, there is a subjective intention to jointly raise funds with the financing company to defraud, specifically, whether there is a conspiracy to illegally occupy the fund-raising property with the financing company, or whether the financing company still actively provides fund-raising assistance knowing that there is fund-raising fraud. In view of this, the defender puts forward the following defense point (excerpt): (1) Subjectively there is no complicity between the intermediary and the financing company's fund-raising fraud. First, before participating in the financing company project, the intermediary company has performed due diligence work, such as going to the State Administration of Taxation and other tax departments to investigate and verify the tax payment and related tax issues of the financing company, checking the financial advisory agreement, legal advisory service agreement, audit service agreement, etc. provided by the financing company for financing listing, and conducting due diligence work within its capacity through the above methods, the purpose is to ensure the true legitimacy of the project, which indicates that it does not have the subjective intent to conspire with the financing company to commit the crime of illegal fund-raising. As an ordinary business entity, the intermediary company involved in the case does not have the investigation ability of public authorities such as public security organs, and its relevant due diligence behavior has done its best to investigate its obligations. "the law cannot impose difficulties on others." it cannot be concluded that it is jointly involved in the crime because it has not found any signs that the financing company is suspected of committing a crime, and whether the financing company has committed a crime today, at present, there is no effective judgment to determine, then in the early stages of the intermediary company's participation in the project, it is even more impossible to determine whether there is a problem with the financing company's project. Second, there is no evidence to prove that the intermediary company and the relevant personnel of the financing company have carried out the so-called "communication and collusion" in advance on the illegal fund-raising, and the intermediary service provided by the company is not an act carried out under the control of the common criminal consent. (2) Subjectively, the intermediary company is not aware of the intentional fund-raising fraud of the financing company. The use of fraudulent methods to raise funds illegally for the purpose of illegal possession is an essential feature of the crime of fund-raising fraud. Whether it has the purpose of illegal possession is the key element to distinguish between the crime of illegal absorption of public deposits and the crime of fund-raising fraud. According to the 2015 Supreme Law, "Minutes of the National Court Symposium on the Trial of Financial Crime Cases", regarding the purpose of illegal possession in financial fraud, it mentions that "knowing that there is no ability to return and defraud a large amount of funds" is one of the situations. This point is for direct fund raisers and borrowers. For intermediaries, if the intermediary platform knows that the borrower has no repayment ability, it still provides loan services for them. Although the intermediary platform does not have a capital pool, it does not have the platform The necessary review of the authenticity or repayment ability of the borrower's related projects, or knowing that the project is false, it still provides illegal financing services for them, it can indeed constitute an accomplice in the crime of fund-raising fraud. However, specific to the facts of this case, the intermediary has indeed carried out a considerable degree of due diligence. We should also pay attention to several issues. What is the standard for the project qualification examination of the financing company? To what extent should the examination be carried out specifically? Is it required to provide a full guarantee? What are the specific requirements for the qualification of the intermediary agency for the borrower? After searching, there are no clear laws and regulations on the above-mentioned issues. Starting from the actual situation, the defender believes that if the intermediary agency can conduct the necessary formal authenticity review of the project data (the substantive review cannot be done under the condition of unequal information, which excessively increases the responsibility of the intermediary agency), on-site inspections, media images, etc., it can be determined that it does not constitute an intent to commit an accomplice crime. (3) The level of intermediary fees charged by intermediary companies is not an element of the crime of illegal fund-raising, which is a logical error. First of all, whether it is the crime of illegally absorbing public deposits or the crime of fund-raising fraud, it does not include the determination of the level of illegal income. The law clearly stipulates the constituent elements of the crime of illegal fund-raising, and it should be determined whether the perpetrator constitutes a crime based on these elements stipulated by the law. If the relevant personnel are determined to constitute an illegal fund-raising crime after reviewing these elements, then no matter how much the capital income they obtain It should be recognized as illegal income, and there is no question of how high or low it is at this time. Therefore, the identification logic should first be based on the composition of the crime to determine whether it constitutes a crime, and then determine whether the income of the relevant personnel is legal, and to determine whether it constitutes a crime by the level of income. In terms of illegal fund-raising crimes, there are no relevant laws and regulations as the basis, and it also reverses the logical order of determining such crimes stipulated by the law. Secondly, the so-called high or low commission is a matter of fact judgment, and there is an objective standard for fact judgment. What is low? What is high? Must be based on the relevant basis as a standard, there is no high or low concept, and if there is no relevant standard as a basis for high or low conclusions, can only be a subjective assumption, a relative conclusion, far from reaching the conclusion as a criminal fact, this subjective, relative determination does not meet the standards of the facts of criminal cases. In fact, there are also industry and regional differences in intermediary fees. As a commercial organization, the amount of intermediary fees charged by intermediary agencies is affected by a variety of factors. It is legal and effective without violating the mandatory provisions of laws and regulations, even if there is an agreement. The situation that the proportion is too high is also a problem solved by civil laws and regulations, which is not regulated in criminal laws and regulations. 2. On the crime of illegally absorbing public deposits After successfully changing a felony into a misdemeanor, the defender continues to adhere to the idea of innocent defense, and the crime of illegally absorbing public deposits needs to have four characteristics: illegality, openness, inducement, and sociality [(1) Absorbing funds without the approval of relevant departments in accordance with the law or borrowing the form of legal business;(2) Publicizing to the society through the media, promotion meetings, leaflets, and mobile phone text messages;(3) Commitment to repay principal and interest or pay returns in monetary, in kind, equity, etc. within a certain period of time;(4) Absorbing funds from the public, I .e., unspecified objects of society] Continue to defend, focusing on the discussion from the perspective of the composition of the crime. This article will not repeat, but for the crime, special attention should be paid to the "inducement" characteristics. The Interim Provisions on the operation and management of private equity asset management business of securities and futures operating institutions issued by China Securities Regulatory Commission clearly states that "securities and futures operating institutions and relevant sales institutions shall not sell asset management plans in violation of regulations, and shall not have improper publicity, mislead and cheat investors, or promise to investors in any way without loss of principal or minimum income, Including but not limited to the following situations: there are expressions in asset management contracts and sales materials that contain the connotation of capital preservation and income protection, such as zero risk, guaranteed income, and worry-free principal. The establishment of a structured asset management plan by a securities and futures operating institution shall not violate the principles of benefit-sharing, risk-sharing and matching risk and return, and shall not exist in the following circumstances: (a) directly or indirectly providing capital preservation and income protection arrangements to subscribers of priority shares, including but not limited to the provision of priority share income, early termination penalty interest, inferior or third-party institutions to make up the difference of priority income, provision of risk margin to make up the priority income, etc. agreed in the contract of structured asset management plan; (II) fail to conduct sufficient and appropriate due diligence on the identity and risk bearing capacity of inferior share subscribers of structured asset management plan; the (III) fails to fully disclose and disclose the structured design and corresponding risk situation, income distribution, wind control measures and other information in the asset management contract; The leverage ratio of (IV) stock and hybrid structured asset management plans exceeds 1 times, the leverage ratio of fixed income structured asset management plans exceeds 3 times, and the leverage ratio of other types of structured asset management plans exceeds 2 times. It is (V) to check the investment target of structured asset management plans through penetration, the structured asset management plan nests and invests in the inferior share of other structured financial products; the name of the (VI) structured asset management plan does not contain the words" structured "or" graded "; the total assets of the (VII) structured asset management plan account for more than 140 per cent of net assets, and the total assets of the unstructured collective asset management plan (I. e." one-to-many ") account for more than 200 per cent of net assets." The issue of credit enhancement measures, such as guarantees provided by third parties, should also be of concern. First of all, credit enhancement measures cannot be simply equated with "capital preservation and income protection"; Secondly, from the level of laws and regulations do not prohibit the asset management plan to take relevant credit measures; Finally, in the implementation of third-party credit enhancement measures, it should be legal, true and effective, so as to prevent the emergence of credit enhancement measures as a means of disguised commitment to "protect capital and income. With respect to premium repurchase and gambling agreements, attention should be paid to the design of the trigger clause in the Equity or Fund Share Repurchase Agreement to prevent the occurrence of an agreement on the contingency of the achievement of the condition as inevitable.

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