President Dmitry Medvedev on Friday ordered his administration to re-examine how strict laws against money laundering are tacked on to other economic charges, a practice that has long drawn complaints from the business community.
He also said he would submit to lawmakers a bill on corporate raiding that would make it harder for law enforcement officials to steal a business by jailing its owner.
"We know there are plenty of these cases: First they throw [businessmen] in the zindan after a competitor squeals, then they let him out of there for cash," Medvedev said, likening the country's pretrial detention facilities to traditional, underground prisons in Central Asia.
"It's time to put an end to this chaos. In the coming days, I'll submit a bill on it to the State Duma," he said.
During a meeting at his Barvikha residence with small and midsize business representatives and top law enforcement officials, Medvedev made a series of pledges to ease the burden on business, including facilitating the export of finished goods and the import of high-tech equipment.
But the business leaders present were most interested in planned changes to how economic crimes are investigated and prosecuted.
Medvedev has been pushing to liberalize the handling of economic crimes since the death in November of Hermitage Capital lawyer Sergei Magnitsky, who was repeatedly denied medical attention during his nearly yearlong pretrial detention on politically tainted fraud charges.
Several senior prison officials were later sacked over how Magnitsky's case was handled.
The president said he wanted to see more suspects in economic crimes released on bail or their own recognizance — a nod to a Kremlin-drafted law that United Russia deputies submitted to the State Duma earlier this month. That bill would ban arrests for charges under 33 articles of the Criminal Code labeled as economic crime, though critics have said it still leaves too many loopholes for corrupt investigators to arrest entrepreneurs.
Yevgeny Yuryev, chairman of the business lobby Delovaya Rossia, complained at the meeting that money-laundering charges — which can be punished by up to 15 years in prison — are tacked on to virtually all other economic crimes, most of which carry far milder punishments.
"We need to look at the compatibility of the laws and at how this works in practice," Medvedev said in response to the question. "This isn't the first time I've heard about … an entirely insignificant economic crime being filed in tandem with laundering, with that laundering [charge] covering everything and turning into a club that slams so hard there's simply no way for a person to recover."
He ordered Larisa Brychyova, head of the state legal department, to prepare changes for a bill that is being prepared on the subject.
The practice of combining money-laundering charges with fraud is fiercely criticized by business activists protesting police crackdowns.
Under Article 174 of the Criminal Code, any investment or use of money earned illegally can be classified as money laundering. Unlike in Western countries, it does not matter whether the business that receives such funds is legitimate.
The government is now discussing a bill that would prohibit the combination of money-laundering charges with illegal entrepreneurship, a charge that is filed in roughly every third investigation against the country's entrepreneurs.
Business leaders also complain that provisions in the Criminal Code originally intended to fight organized crime are used to step up charges against executives. Usually, investigators also name accountants or chief financial officers as participants in an economic crime, meaning that the company's head acted as part of an organized group.
The Kremlin-backed amendments already submitted to the Duma would not cover crimes committed as a group, nor would they apply to several other frequently used charges, such as fraud, that fall outside the Criminal Code's section on economic crime.
Medvedev noted Friday that recent changes to tax law had already prevented people from being "taken into detention on a whim" for most tax evasion offenses.
In a case that shocked entrepreneurial-rights activists last month, Moscow businessman Oleg Roshchin was sentenced to 18 years behind bars for not paying customs duties, while an accountant in his company, a 47-year-old mother of two, was sentenced to 15 years in prison.
Last month, the Interior Ministry's Investigative Committee reported that its investigators uncovered economic crimes committed in 2009 amounting to 1 trillion rubles ($33 billion), or almost 8.5 times more than a year earlier.
Some 428,000 investigations into economic crime were opened in 2009, with 106,000 people being sentenced to prison terms, according to the Interior Ministry.
"In practice, if a businessman is charged with contraband and continues his business, he is automatically a money launderer, which is a completely different criminal charge," said Alexei Ivanov, a partner at Nadmitov & Partners, who also teaches law at the Higher School of Economics.
The wording of the money-laundering law allows investigators to use it to boost the seriousness of any financial charges, making it pointless to try to distinguish the relative severity of economic crimes, he said.
Authorities are always interested in juicing up the charges since it lets them extort bigger bribes, said Yana Yakovleva, head of the Business Solidarity group. The money-laundering article has been "the main instrument used to put entrepreneurs in prison for decades," she said.
The law essentially equates entrepreneurship with criminal activity, "a concept that came from the Soviet Union, and evidently not much has changed since then," Yakovleva said.
While Medvedev — a former law professor — appears to give much attention to reforming the justice system, so far the proposed changes are "mostly cosmetic," she added.
Alexei Grachyov, a partner at AGA Management, said that adding on charges to tax crimes was particularly damaging since the state rarely recoups an unpaid sum if the accused entrepreneurs are jailed.
"More than half the people in prison for economic crimes are there because they have not paid taxes under Article 199" of the Criminal Code, which covers tax evasion by legal entities, he said.
"The whole system is repressive, rather than economically reasonable, which feeds corruption, and businesses have to take further risks to pay in corrupt transactions since they do not usually go through legal channels," he said.
To break the vicious circle, small and midsize businesses should be exempted from taxes covered under Article 199, he said.
Also on Friday, Medvedev proposed raising the minimum bail to 100,000 rubles ($3,300) for petty and medium crimes and hiking the sum to 500,000 rubles for serious crimes.
He also warned Prosecutor General Yury Chaika at the meeting to further reduce the number of unannounced checks on business, saying nearly half of the 38,000 requests to inspect companies were rejected as groundless.
"There were 84,500 violations of the law; prosecutors were sued by small and midsize businesses 3,000 times; 8,500 officials were punished administratively; and 64 criminal cases were opened when small and midsize businesses were being squeezed," Chaika said.
Staff writer Nabi Abdullaev contributed to this report.