City of Rovaniemi – Former employees ordered to pay damages in an investment decision matter

City of Rovaniemi – Former employees ordered to pay damages in an investment decision matter

We are Finland’s leading criminal law team with a focus on corporate crime. We have many years of experience in successfully handling extensive criminal procedures and internal investigations, and we assist our clients in managing corporate crime risks.

Criminal procedures

Companies may face situations in which they or their employees become the subjects of a criminal procedure. We assist companies and their management and other personnel throughout the entire process from preliminary investigations to trials. Being suspected of an offence can also affect the company’s profitability and reputation, particularly if the process drags on. Handling the process in a professional manner helps minimise its negative impacts. We build a strong defence for your case and handle the entire procedure on your behalf efficiently and reliably.

The types of criminal procedures in business we handle include:

  • Financial offences, white-collar crimes
  • Trade secret offences
  • Security markets offences, insider trading
  • Corruption, bribery
  • Environmental offences
  • Work safety and employment offences
  • Data and communications offences, data breaches
  • Offences in public office
  • Offences relating to freedom of speech and protection of privacy
  • Tax offences
  • Money laundering offences

Internal investigations and assisting the injured party

When a suspicion of possible irregularity arises, the company’s management must take sufficient and prompt action to sort out the situation. Irregularity typically relates to corruption or misappropriation of company funds or trade secrets. We assist clients in every step of an internal investigation, and we can conduct the entire investigation on our client’s behalf.

During an internal investigation, we, among other things, systematically collect data of irregularities by screening documents and interviewing employees and management. It is crucial for a potential further process to secure and compile relevant evidence. Based on our findings, we will instruct you on what steps to take. Our investigation builds up an extensive database of facts and evidence that is ready for use if the suspected abuse moves on to a preliminary investigation.

It is important to investigate potential damages and draft a claim for damages as early as possible during the process. Issues relating to confiscation for security will also need to be dealt with at this stage. Damages issues are often complex and may require the involvement of independent expert witnesses.

After the initial stages, we assist the injured party in making a request for investigation and claiming damages as well as act as counsel for the client in the preliminary investigation and the subsequent trial. It is also common that the perpetrator will seek to hide assets that have been obtained through crime. In such a case, we help in tracing and recovering the assets at home and abroad.

Latest references

We successfully acted for the City of Rovaniemi in a matter concerning offence in public office and damages claims in relation to a significant investment decision made by the city. The defendants were the city’s former municipal corporate officer, who was in an employment relationship, and a city treasurer, who was in a public-service employment relationship and acted as the supervisor of the municipal corporate officer. The criminal matter related to the City Board’s decision to invest EUR 2 million of the city’s funds in bonds offered by a newly established investment company in accordance with a decision prepared by the defendants. A significant part of the company’s operations involved quick loan business. The main legal question in the matter was whether the investment of public funds constitutes an exercise of public authority and whether regulation on offences in public office therefore becomes applicable even to a person in an employment relationship. The municipal corporate officer in an employment relationship was charged with aggravated abuse of public office based on her negligence in the preparation and presentation of the investment decision as well as based on a conflict of interest due to the fact that she had invested her own money in a company that received funding from the investment target presented to the City Board. The charges of an offence in public office against the city treasurer concerned his position as the supervisor and reporter of the city’s investment activities. He was also involved in the preparation and presentation of the City Board’s decision. The processing of the matter started in the District Court of Lapland in June 2022. In its judgment given in August 2022, the District Court stated, based among other things on our argumentation, that the investment of public funds constitutes an exercise of public authority and that regulation on offences in public office can therefore be applied to the municipal corporate officer. The District Court deemed that the conduct of the former municipal corporate officer fulfils the characteristics of abuse of public office and that the conduct of the former city treasurer fulfils the characteristics of violation of official duty with respect to the preparation of the investment decision, but the right to bring charges had become time-barred. Punishments could therefore not be imposed on the defendants, but the defendants were ordered to jointly and severally pay the city approximately EUR 114,000 in damages plus interest for late payment. The city treasurer’s share of the amount was 10%. The prosecutor accepted the judgment but the other parties appealed it to the Court of Appeal. Acting for the city, we pursued claims for both punishment and damages in the Court of Appeal. The Rovaniemi Court of Appeal processed the matter in November and December 2023. In its judgment given in June 2024, the Court of Appeal upheld the District Court’s judgment with respect to the abuse of public office and violation of official duty. The Court of Appeal deemed that the municipal corporate officer had failed in her duty to declare the conflict of interest. In addition, she had failed in her duty to ensure that the prepared decision was in compliance with the city’s investment guidelines and that it had been properly put out to tender. The Court of Appeal also found that the text of the investment proposal was insufficient and misleading and that the municipal corporate officer’s conduct was intentional. As regards the city treasurer, the Court of Appeal held that he had failed in his duty to ensure that the investment proposal to the City Board complied with the investment guidelines, that the presentation was not misleading and that risks were taken into account as required by the investment guidelines. With the judgement, the Court of Appeal took a clear position that abuse in public offices and when exercising public authority is not acceptable. The judgment is also significant as it declares that investing public funds constitutes an exercise of public authority and that the liability for acts in office therefore becomes applicable even to persons in employment relationships. In addition, a key question for the Court of Appeal to assess was defining the amount of economic damage in a matter related to investment activities. The Court of Appeal held based on our arguments that the conduct of the municipal corporate officer and the city treasurer had caused damage to the city. The Court of Appeal increased the amount of damages to EUR 210,000 with the city treasurer’s share limited to 10%. The amount was increased because the Court of Appeal deemed that the city had suffered damage not only in terms of the loss of capital but also in terms of the loss of estimated return on investment. The judgement is not final.
Case published 21.8.2024
We successfully advised a Finnish professor in a wide investigation of an offence in public office concerning direct procurement in the social services and healthcare sector. Upon the proposal of the head investigator, the prosecutor decided to discontinue the criminal investigation with respect to our client.
Case published 17.11.2023
We successfully advised the Finnish State/the Ministry of Justice in a declaratory action in which the Helsinki Court of Appeal dismissed the claims of businessman Peter Fryckman and confirmed the non-existence of an arbitration agreement. Fryckman had filed for arbitration before The Hague’s Permanent Court of Arbitration (PCA) in February 2018. The request was based on a claim that the Finnish Minister of Justice had signed a consent to arbitration between Fryckman and the Finnish State in the PCA. The State denied the existence of an arbitration agreement in its response to the request for arbitration and refused to appoint its own arbitrator. The Secretary-General of the PCA deemed that the document titled ‘Declaration of Consent’ was too ambiguous and general in nature, and therefore he could not appoint an arbitrator for the State to an arbitration conducted under the PCA Arbitration Rules 2012. After this, Fryckman requested that the District Court confirm the existence of an arbitration agreement between him and the Finnish State, under which disputes between the parties concerning tax and debt collection actions against Fryckman and his companies, as well as the resulting damages, would be settled before the Permanent Court of Arbitration in The Hague.  However, the District Court dismissed this action because the consent signed by the Minister of Justice was general in nature, its content was unspecified, and it was unclear whether the consent was even a matter that could be arbitrated. Furthermore, the District Court deemed that the consent signed by the Minister of Justice and the plaintiff’s application for commencement of arbitration were not identical and reciprocal, and there was no evidence of an agreement between the parties as to the commitment to and content of the agreement. Fryckman appealed the District Court’s decision to the Court of Appeal, but in its judgement of December 2022, the Court of Appeal deemed that there was no cause to amend the District Court’s decision. The Court of Appeal found that the expression of will in the document titled ‘Declaration of Consent’ had not been made in accordance with the Ministry of Justice’s procedure for presentation and decision-making. According to the Court of Appeal, due to this key fault in the Ministry’s procedure, the free-form expression of will by the Minister did not have a binding effect on the parties. The Court of Appeal remarked that the plaintiff’s actions bore characteristics of an intent to bypass the Ministry’s customary procedure for decision-making. The Court of Appeal also noted that the Minister’s expression of will was encumbered by deficiencies in arbitrability and the subject matter of the consent as stated by the District Court, and referred to the grounds stated by the District Court in other respects as well. On 5 May 2023, the Supreme Court ruled that no leave to appeal would be granted, and the judgment of the Court of Appeal is therefore final.
Case published 27.6.2023
We assisted Finnish Customs in its tender for an automatic number plate recognition system (ANPR) and related video analytics. The multi-year contract is worth EUR 2,9 million and will be supplied by Finnish Loihde Plc, an expert in digital development and security solutions. The new system will utili s e machine-based optical character recognition , which will significantly improve the recognition of number plates and containers. The Finnish Police and the Finnish Border Guard may also elect to use the new system under separate contracts.
Case published 26.4.2022