Dott.ssa Alessandra Stofella
Dr. Pietro Suchan
In a recent investigation by the Nucleo di Polizia Economico-Finanziaria of the Guardia di Finanzia of Ravenna, coordinated by the Bologna Branch of the European Public Prosecutor’s Office, concerning the importation and counterfeiting of personal protective equipment (PPE), the European Public Prosecutor’s Office acted competently and swiftly by enforcing, if not the first, one of the first preventive seizures for equivalent in Italy of considerable value.
In particular, the investigation activities started in 2020 against an Italian company importing paramedical products from China, which was investigated for having imported non-standard or dangerous personal protective equipment worth tens of millions of euro through the ‘direct release’ procedure. The regulatory framework of European source foreseen for this procedure allows an exemption from customs duties and VAT, provided that the goods are delivered directly to the recipient public health facilities, while the company marketed the goods at increased prices to a private parent company and traceable to the same legal representative, enclosing untrue or forged documents in order to take advantage of the tax exemption anyway.
2. Lack of certification on the PPE
The investigation activities, during which the case was brought by the Deputy European Public Prosecutor (DPP) of the European Public Prosecutor’s Office in Bologna, allowed to ascertain that more than 1.4 million PPE without proper certification were sold to the Azienda Ospedaliero-Universitaria di Parma and to seize more than 3.5 million PPE accompanied by counterfeit documents as well as not complying with legal parameters. The legal representative of the two companies was therefore investigated for aggravated smuggling and, together with a director of the Board of Directors, for aggravated fraud to the detriment of a public body and to the detriment of the European Union and ideological and material falsity committed by a private individual in a public deed. The two companies were also reported for related administrative liability for criminal offences, as they were found not to have organisational models capable of preventing any unlawful conduct. On the basis of these investigative activities, in September 2021, the Judge for Preliminary Investigations (GIP) of the Court of Bologna issued, at the request of the European Public Prosecutor’s Office, a first preventive seizure order for a total amount of EUR 11 million, of which EUR 4,2 million as proceeds of the offence of smuggling consisting of evaded customs duties and import VAT, and EUR 7 million as proceeds of the offence of aggravated fraud against a public body of the European Union, equal to the price collected for the goods marketed without proper certification.
3. The extension of investigation
Subsequently, the investigations were extended to all the healthcare facilities supplied by the same companies, which were also accused of aggravated fraud for having supplied several healthcare facilities and hospitals located in Val d’Aosta, Piedmont and Sicily with more than 100 thousand PPE accompanied by forged certifications or issued by unauthorised bodies. On 5 August 2022, the Guardia di Finanzia then executed a second preventive seizure order against the two companies and their legal representative, issued by the GIP of the Court of Bologna at the request of the Bologna Branch of the European Public Prosecutor’s Office, for a total value of more than EUR 1.1 million.
Both seizures concerned the liquid assets of the investigated directors and of the two companies and, in the form of equivalent assets, their real estate assets to the extent that the liquid assets proved insufficient.
The case just described appears to be particularly significant and interesting, as it highlights several crucial profiles of the legal framework relating to the activities of the European Public Prosecutor.
4. Competence of the EPPO in the PPE case
First of all, from the point of view of the material jurisdiction of this body, it should be noted that in this case its jurisdiction is partly direct and partly determined by connection, pursuant to Regulation (EU) 2017/1939 and the implementing rules of the Regulation and Directive (EU) 2017/1371 adopted by the Italian legislator and contained in Legislative Decrees (D. lgs.) 75/2020 and 9/2021. In fact, on the basis of the provisions contained therein, the offences alleged in the present case, i.e. the offences of smuggling, aggravated fraud also to the detriment of the financial interests of the European Union (Article 3, paragraph 2 of EU Directive 1371 / 2017 transposed by our Legislative Decree no. 75 / 2000 in Article 1 letter e) with reference to Article 640, paragraph 2 no. 1 of the Italian Criminal Code) and cross-border VAT fraud fall within the jurisdiction of the European Public Prosecutor’s Office. With reference to the last of these offences, the aforementioned Regulation limits the jurisdiction of the European Public Prosecutor’s Office to offences involving a total damage of at least €10 million, but although this requirement does not appear to have been met in this case, the European Public Prosecutor’s Office appears to have jurisdiction because the VAT fraud offence is inextricably linked to the other two offences, which, involving damage to the financial interests of the European Union of more than €100,000, are not subject to the further limitations on jurisdiction provided for.
5. One of the first prior seizure application from the EPPO
Secondly, the legal institution of preventive seizure for equivalent is of considerable relevance in this case, receiving one of the first applications by the European Public Prosecutor’s Office. In this regard, Articles 28 and 42 of the Regulation provide that the DPP in charge of the case may adopt or, as in the specific case under consideration, request the competent Judge (GIP) to adopt investigative and/or precautionary measures in accordance with the Regulation and national law, and with reference to the type of measures provide that he must be able to order or request a series of investigativeor otherwise procedural or procedural measures, at least for cases where the offence under investigation is punishable by a maximum sentence of at least four years’ imprisonment, but also any other measure ‘which national law makes available to prosecutors in similar national cases’.
As regards the seizure measure at issue in the present case, it must first be emphasised that there are three types of seizure in the Italian legal system: the evidentiary seizure as a means of searching for evidence, the real precautionary measures of conservative seizure and preventive seizure.
The latter was formally introduced into the Italian legal system by Delegated Law No 81 of 1997, which regulated the previous practice and is aimed at ensuring the practical effectiveness of the conviction following the related confiscation and specifically at preventing the continuation or aggravation of the harmful or dangerous consequences of the offence and, above all, at attributing to the State the unlawful profits deriving from the offence or in any case connected with it that are found to be without lawful causal derivation. With regard to the legislation currently in force, it is applicable in proceedings relating to any offence under the current Articles 321 and 240 bis of the Criminal Code – in the latter case only for certain serious offences – and can be requested by the public prosecutor (or, in the case of European Public Prosecutor proceedings, by the DPE in charge of the case, as in the interesting concrete case under consideration) to the judge competent to rule on the merits or, during the preliminary investigation, to the GIP. In case of urgency, however, the preventive seizure may also be ordered by reasoned decree of the public prosecutor or be executed on the initiative of the judicial police, although it then requires the validation of the judge and the issuance by the latter of the reasoned seizure decree. In the present case, however, both seizures carried out by the Guardia di Finanzia were ordered by decree by the GIP at the request of the DPE in charge of the case, i.e. the DPE of the Bologna office.
6. Preventive seizure in the context of customs fraud
As regards the conditions, on the other hand, pursuant to paragraph 1 of the same Article, preventive seizure may be ordered in the presence of a precautionary need given by the danger that “the free availability of an item pertaining to the offence may aggravate or prolong the consequences thereof or facilitate the commission of other offences”, although paragraph 2 provides that the judge may also order “the seizure of the items for which confiscation is allowed”. In this last regard, in relation to the facts of this case, it should be noted that in the hypothesis of the offence of aggravated fraud to the detriment of the State and/or the European Union provided for in Article 640, paragraph 2 no. 1 of the Criminal Code Article 640-quater of the Criminal Code allows the application of Article 322-ter of the Criminal Code.
The latter, which directly concerns the different matter of offences committed by public officials against the public administration, provides for the confiscation of assets constituting the profit or the price of the offence or, when this is not possible, the confiscation of assets of which the offender has the availability for a value equivalent to such price or profit. The difference between Article 322 ter of the Criminal Code and Article 240 of the Criminal Code, which constitutes the general model of confiscation, lies in the provision of mandatory confiscation not only of the price but also of the profit, both in the case of conviction and in the case of application of the penalty at the request of the parties pursuant to Article 444 of the Criminal Code. On the other hand, as regards the offence of smuggling, Presidential Decree (DPR) No. 43 of 1973 (the so-called Consolidated Text of Customs Laws) in Article 301 orders the confiscation of the objects used or intended for the commission of the offences provided for therein, as well as those that constitute the object, product or profit thereof.
As to the offence of cross-border VAT fraud, similarly to Article 322 ter of the Criminal Code Article 12-ter of Legislative Decree 74/2000 concerning income tax and value added tax offences provides for the mandatory confiscation of assets constituting the price or profit of the offences provided for therein or, where this is not possible, the confiscation of assets for a value corresponding to such offences, although Article 12-ter provides for special cases of confiscation for some of such offences, in relation to which the general rules set out in Article 240 bis of the criminal code apply. With regard to this type of offence, however, it should be noted that the offence of evasion of VAT on importation is considered in case law to be an autonomous offence with respect to the offence of smuggling; however, Article 70 of Presidential Decree No. 633 of 1972 containing rules on the establishment and discipline of value added tax provides that the provisions of the customs laws relating to border duties apply to disputes and penalties.
7. Administrative liability of legal entities
A further aspect worth highlighting in connection with this case is that of the liability of legal persons, since the preventive seizure order was also executed against them. Article 2(2) of Regulation (EU) 2017/1939 lumps under the generic category of ‘persons’ both natural and legal persons. In the Italian legal system, the administrative liability of legal persons was introduced by Legislative Decree. 231/2001, Article 5 of which provides that legal persons shall be liable for offences committed in their interest or to their advantage by persons who hold apical positions within them, unless they have acted exclusively in their own interest or in the interest of third parties and unless the entity can prove that it has previously adopted and effectively implemented organisation and management models capable of preventing the commission of offences of the kind committed; however, such proof has not been provided in the present case.
With regard to the offences under EPPO’s jurisdiction, Legislative Decree 231/2001 was supplemented by Legislative Decree 75/2020 -art. 5- implementing Directive (EU) 2017/1371, in order to expressly provide for the administrative liability of legal persons for offences detrimental to the financial interests of the European Union.
Finally, with reference to the applicability of precautionary measures, the preventive seizure ordered in the present case was carried out in accordance with Articles 45 et seq. of Legislative Decree 231/2001. Article 53, in fact, provides that the preventive seizure may be ordered on the items for which confiscation is allowed pursuant to Article 19, which also provides for the possibility of confiscation for equivalent value of the price or profit of the offence committed.
In the light of the above considerations, this case appears emblematic of the practical implications of several aspects of the regulation of the activities of the European Public Prosecutor’s Office and in particular of the investigative activities carried out by it, the regulation of which is largely based on the regulation provided for at national level by the legal system of the DPE in charge of the case. In particular, the case is noteworthy for the innovative application by this body of the institution of preventive seizure for equivalent provided for by the Italian legal system, which due to its great potential in terms of rapidity and effectiveness of intervention even at the preliminary investigation stage, as in this case, it is hoped that it may constitute a virtuous example of reference for its future widespread application by Italian DPEs, as well as a useful starting point for the initiation of a fruitful mechanism of interaction between legal systems, given the diversity of the domestic disciplines on investigative measures of the various Member States participating in enhanced cooperation.