Denys Shkarovsky has been dedicated to only one law firm for nine years – VB Partners. His career is a great example of how a novice lawyer can move up the career ladder with his own professional abilities. His main practices are White-Collar Crime, compliance, corporate investigations (Investigations), support of complex lawsuits. Focusing on the practice of corporate investigations, Denys Shkarovsky has gained considerable experience and today he is one of the best lawyers in the country in this area. So how to move to a new professional level and get into the “blue ocean”, Denys told the “Ukrainian Lawyer”.
- Denys, you went from an intern to a partner in the same company. How did you manage to achieve such a result? What goals do you set for yourself and VB Partners in your new status?
In 2012, I came to VB Partners as an intern, and in two and a half years I brought my first “clients.”
A few years later I was offered to decide on my further development in the Company in 3-5 years. This required a transition to a new level of profession – to start managing projects and subordinates and take responsibility for the process and results.
Therefore, after “probationary” 2017, I have already started working at VB Partners as an advisor. So I have been doing most of partnership functions (in a somewhat simplified format) for the last two years.
Eight years have passed since I joined the Company before I was accepted as a Partner, although it feels much longer. Work in VB Partners is very dynamic – a young specialist gets an opportunity to work in the most complex and high-profile projects, growing faster than his peers.
As a Partner, my key priority is to develop a new practice – Investigations.
- Why Investigations Practice? What is it in this practice that attracts you and what is most interesting about it?
Corporate investigations practice is new for Ukraine and began to take shape several years ago. The demand for this practice is formed by the companies providing these services. Business is aware of a need to prevent, detect and combat fraud which creates a demand for highly qualified professionals in this field. Now it is the “blue ocean” which provides ample opportunities for development.
The clients of large investigations practice are business owners and head offices of international companies. Also, more and more demands come from top management of Ukrainian business.
Our Company is uniquely experienced and has a deep expertise in dispute resolution and criminal proceedings. Using this knowledge and experience, we ensure investigations aimed at gathering evidence that can be used in court or criminal proceedings against a fraudster (recovery of damages, prosecution). This is how our approaches differ from classic internal investigations, in which a client or manager receives only a report with the facts and assumptions of varying probability, but in most cases it cannot be used in proceedings, for example, in terms of evidence admissibility.
- What are a boutique law firm’s advantages when developing practices, in particular Investigations one?
Boutique format has many competitive advantages. Firstly – exceptional expertise in key practices. In the case of VB Partners, these are Dispute Resolution, White-Collar Crime and Investigations.
Secondly – different niches of the services provided by our firm. Accordingly, from the viewpoint of practice development, brand is associated with profile practices, instead of lawyers in general.
The third advantage is an individual approach to our client and Partner involvement in each project. There is no project in the Company in which Partner is not involved.
- In Ukraine, despite the introduction of new legal institutions, corporate fraud remains a systemic phenomenon. What does the state lack to overcome it: laws, political will, changes in citizens’ mentality?
In fact, corporate fraud is a problem not just in Ukraine. Losses from corporate fraud are very significant all over the world. Unfortunately, in Ukraine for many years the rate of business losses from fraud exceeds the world average.
There are many reasons but among them it is possible to allocate some basic ones. The first is an approach to doing business. Ukrainian business very often “writes off” losses from fraud as operating costs. I keep hearing from shareholders, “I know he steals, but he earns more.” Such actions tolerate internal fraud and it is constantly increasing. After all, fraud of a particular employee or manager (or as a phenomenon in general) reaches a level where it is impossible not to notice it. Therefore, behaviour of business (owner, top managers) creates the conditions for fraud.
Fortunately, this approach is gradually changing, and our clients, when signs of fraud are detected, start internal investigations aimed not only at dismissing, but also at bringing a fraudster to justice. Investments in the fight against fraud will pay off in 5 years.
The second reason is the low level of respect for private property. Employer’s property is perceived as collective, nobody’s, and therefore it can be taken. Motive can be different, both the thirst for quick money, and restoration of justice by an offended manager.
The third but no less important reason is the high level of impunity for corporate fraudsters. Ukraine’s law enforcement system is not in the best condition. Corporate fraud cases are usually handled by district police investigators. They are extremely overburdened with common criminal cases, so business problems are in last place. It is also not uncommon for investigator and prosecutor to work not in victim/business interests, but in those of fraudster. In this case, the work of lawyers turns into a constant appeal of inaction, but does not provide desired result.
Today there is definitely no problem in laws. The current bar legislation, Criminal Procedure Code allow effectively investigating criminal proceedings. But, as is often the case, a good law rests on a bad execution.
- Fraudulent schemes in business are usually extremely ingenious. And what cases can you single out from your own practice? What “innovations” do fraudsters resort to today?
In fact, most fraud schemes are not new and are implemented as standard at least for those who meet them constantly. Regardless of industry, these are “kickbacks”, creation of parallel businesses or intermediaries, misappropriation of assets or funds, forgery of reports, etc. Of course, each area and each case of business has a different way of committing fraud, but the general algorithm is the same.
Corporate fraud schemes have long been systematized. For example, the Association of Certified Fraud Examiners uses a “fraud tree” identifying three main branches: corruption, misappropriation, and financial reporting fraud.
In about 10% of cases, there is a new element in the scheme. For example, recently during investigation we encountered a new form of distortion of tenders for IT procurement. The tender itself was completely honest and transparent but some employees received significant benefits by bribing IT department employees and creating demand in company for specific types of goods.
- Business is associated with many risks. What advice do you have for clients who aim to increase corporate security, take it to the next level and minimize threats at least within the company?
First of all, it is necessary to create a professional service of economic security and audit. It should be subordinated to shareholders (supervisory board) or head office, but not to company’s top management.
Second, do not tolerate fraud. After all, one of the important safeguards is to understand punishment inevitability. At the same time, ordinary dismissal is not a punishment. Fraudster will continue to work for another company very often in the same market.
Third, focus on fraud prevention, not just on punishment for already exposed cases. In case of exposure it is necessary to conduct a full investigation and identify all participants in the scheme, including top managers, not just those who “have been caught by the hand.”
- European experts note that the fight against corruption in Ukraine is only on paper. And what markers do you think will indicate the effectiveness of anti-corruption reform in the country?
The main marker is the Ukrainian business response, when businessmen will say: corruption has decreased, and it has become easier to work in accordance with the law. Unfortunately, we do not hear this today. The fight against corruption has become a slogan and on-going reforms preventing creating a truly effective system.
One of the latest achievements, which will certainly show a real fight against corruption in the future, is the creation of anti-corruption law enforcement and judicial bodies (National Anti-Corruption Bureau of Ukraine (NABU), Specialized Anti-Corruption Prosecutor’s Office (SAPO), and High Anti-Corruption Court (HACC)). Real results from these bodies’ activities, in my opinion, should be expected no earlier than 5 years. Now they as institutions are at the stage of formation.
- Corporate investigations require a response from law enforcement. How do you build relationships with them and how do you involve them in cooperation?
This is one of the most problematic parts of bringing a fraudster to justice. I wrote above that the police are extremely busy. Of course, when one investigator is involved in a case of forceful rape and fraud in a company, he will investigate a more socially dangerous crime. The problems of business, which are to inflict some losses, are secondary.
We try to build such a relationship with each investigator and prosecutor in every case where we represent the victim as if we were an assistant investigator. That is, we collect and provide the maximum amount of evidence, and prepare, if necessary, draft inquiries to the authorities to be determined by the investigator, and so on. In many cases, this allows us to move the case and achieve results.
If law enforcement agency treats the case negligently or does not investigate it, then we file complaints with managers, involve business associations or the Board of Business Ombudsman. It also shifts the investigator’s focus to our case.
But there are also cases when investigation openly works in fraudster’s favour, avoiding gathering evidence or making procedural decisions. Such cases occur when fraudster is a top manager, and losses reach hundreds of thousands of dollars.
In this case, the only way out is to change the group of investigators and prosecutors. This is also possible by filing complaints and involving associations.
- You pay a lot of attention to the protection of lawyers’ rights. And what violations are the most common today? Do lawyers feel protected?
Unfortunately, violations of lawyers’ rights, when rendering legal aid, are not uncommon. Law enforcement agencies mostly consider lawyers as “criminals’ accomplices” who only interfere.
In particular, according to the Ukrainian National Bar Association (UNBA) report for 2020, 53 lawyers’ searches and detentions took place without notifying the regional bar council. That is, at least one illegal investigation of lawyers was carried out every week.
Moreover, lawyers are subject to covert investigative activities varying from surveillance to wiretapping and messengers hacking. The purpose is to obtain the information constituting an attorney-client privilege, which is a gross violation. Investigators will then try to legalize obtained evidence through other investigative actions. In my opinion, this indicates the unprofessionalism and low level of law enforcement.
Lawyers are being prosecuted in connection with their activities as attorneys and such proceedings concern and relate to disclosure of pre-trial investigation secrets, defence without authority, etc. The goal is to intimidate a lawyer and force him to drop case. Although, my guess is that this situation is one of the most indicative assessments of the defender’s high professional level.
Violations during the search (use of violence, attempts to prevent an access to search site) are also not news. This is a common practice of any law enforcement agency: from tax police to NABU, and this list can go on for a very long time.
Therefore, in my opinion, lawyers do not feel protected, but we are used to living and working not in the friendliest environment. Therefore, most colleagues, I think, are not afraid.
But once again, I want to emphasize that lawyers cannot tolerate violations committed against them. I know of dozens of cases where lawyers have not sought protection of their rights, and until each case of violation is properly addressed, advocacy’s guarantees will continue to be violated.
- Discussions around the lawyer’s monopoly do not stop. Are you for or against, and why?
I am inclined to think about the benefits of a lawyer’s monopoly on representation in courts and criminal proceedings. First, the monopoly has raised professional level in the process. Second, lawyer is liable for abusing or violating ethical, professional norms and laws. The fact that a representative without lawyer’s status is lacking such a liability puts the parties in an unequal position.
Another issue is that admission to legal profession should be subject to a simplified procedure. The head of a large company’s legal department does not have to undergo an internship and pass the exam in the same way as a young specialist who has three years of practice and plans to become a lawyer.
Also, extended rights of assistant lawyers need to be enshrined in law, in particular, regarding acquaintance with case materials or presence during investigative actions.
