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| |  |  ENFORCEMENT OF CIVIL JUDGMENTS IN UKRAINE, Peter L. Kahn Legislative Development » Publications » ENFORCEMENT OF CIVIL JUDGMENTS IN UKRAINE, Peter L. Kahn
The enforcement of civil judgments appears to function poorly in Ukraine. Only a small percentage of the funds awarded in judgments are actually collected and paid to judgment creditors, and it appears that the judgments that are collected are predominantly very small cases involving very small sums of money. The evidence also seems to suggest that the largest numbers of cases collected by the State Enforcement Service are those in which the state itself is the judgment creditor, and most large cases flow into the bankruptcy system because inadequate assets can be found to pay judgments.
The reasons for these weak results cannot be laid entirely at the door of the State Enforcement Service (SES), the agency formally responsible for the execution of judgments. Instead, the factors that create obstacles to enforcement are endemic throughout society. A pervasive hostility to compliance with law infects major institutions of society, from banks to government agencies to the national legislature itself, which avoids payments on judgments against the state, among other ways, by routinely underappropriating funds for that purpose. Penalties for noncompliance with the enforcement process are either too small to be meaningful, are implemented by an uncooperative state prosecutor staff, or are obstructed by excessive procedural protections. Institutions on which the enforcement process normally depends, such as land registries and other official means of locating and attaching debtors’ assets, either do not exist, function inadequately, or are rendered irrelevant by moratoria on asset seizures. A procedural code that as a practical matter is extremely preferential to debtors places numerous obstacles in the path of the judgment creditor and the SES agent handling his case, offers little in the way of pre-judgment security measures, and renders it effectively impossible to seize assets of the debtor that might otherwise be available.
The State Enforcement Service, however, represents an inadequate response to this difficult environment. Though these numerous obstacles theoretically could be overcome, in many cases, by sufficiently energetic efforts by the state enforcement officer (SEO), the agency has eliminated almost all incentive for SEO’s to make the significant efforts required in this environment underpaying staff and by making it all but impossible for the officer to earn performance payment. Furthermore, the agency has greatly underinvested in resources that would assist the agent in completing collections, such as computers, training, and clerical staff. Perhaps because the agency loses money on the enforcement process and requires a subsidy from the state budget, the agency has been unwilling or unable to make investments to upgrade its capabilities. Underinvestment, low pay, minimal incentives, and poor training of enforcement officers have resulted in high rates of turnover and poor performance. Allegations of political interference in enforcement actions are rampant, with officers allegedly careful not to offend superiors in the agency by energetic enforcement against politically well-connected individuals or organizations or against the state itself.
As a result, Ukraine must make a political choice whether to move in the direction of a law-based society in which the judgments of courts matter, or instead to preserve an environment that protects some members of society from the law. If Ukraine chooses the first of these options, it should consider adopting the following reforms:
I. Performance of the Enforcement System in Ukraine
It is clear from the State Enforcement Service’s own statistics that quite a small percentage of the funds enforceable through the SES actually end up being collected on behalf of creditors. The SES reports that during the first seven months of 2006, some UAH 40.3 billion in awards were under enforcement; of that amount, some UAH 2.75 billion were actually collected, for a collection rate of 6.8%[1]
Table 1 Ukraine State Enforcement Service January – July, 2006
Source: SES Website.
The Kyiv City SES provided similar statistics.[2] Other local or regional SES statistics could not be obtained. These data suggest a roughly comparable collections rate to the national average.
Table 2 Kyiv City SES, January - June
Source: Kyiv City SES Operations Analysis
These collection rates are quite low, and are much lower than the collection rate of 53.2% that the SES itself has claimed. The SES rate is calculated by comparing the number of cases on which any collection occurs to the number of “completed” cases, where completion of a case is a legal designation that includes a variety of reasons for terminating a case in addition to actual collection. This exaggerates the collection rate in two ways. First, the SES-calculated rate looks at numbers of cases, rather than monetary amounts collected, though the amount collected in an “actually enforced” case may be far less than 100% of the judgment; and second, using “completed” cases rather than all submitted cases as the denominator obviously excludes cases in which enforcement is continuing, which implies that the case is not yet fully collected, since fully-collected cases are regarded as “completed.”[3] Yet cases in which enforcement is continuing and the judgment uncollected clearly constitute at best a success not yet achieved, and perhaps a failure. Thus the SES-calculated collection rate seems unambiguously exaggerated.
Furthermore, the collections reported in Tables 1 and 2 are hard to square with the fees collected by the SES. The SES website reports that UAH 62.8 million were collected in executive fees in the first seven months of 2006 – about 2.7% of reported actual collections, or just over one-quarter of the 10% mandated executive fee rate under Article 46 of the law “On Judicial Enforcement.” The main significant exception to the obligation to assess fees under Article 46 on cases that have been submitted for execution is for cases that have been paid voluntarily under Article 24; collections generated under the voluntary payment provision require only a letter to the debtor notifying him of the opening of the enforcement action.[4] Adding back the approximately 12% of cases that are in categories exempt from fees, that would suggest that well under half of collected sums are the result of forced collections by the SES; this suggests forced collections are somewhere between 3% and 6% of judgment awards. However, this analysis attributes uncollected fees to cases with voluntary payments; several observers with whom I spoke in Ukraine asserted that voluntary payment of claims is rare. The low collection of fees is a matter that requires further explanation.
At least part of the explanation for the low rate of collections is clearly outside the control of the enforcement system generally. Of cases under enforcement by the Kyiv City SES as of July 1, 2006 (and thus on which enforcement had not been completed as of that date), some 11% of judgment award amounts could not be collected because the assets of the debtor were under a state-declared moratorium against seizure. The two major moratoria on asset seizures were (1) against seizure of agricultural land, and (2) against seizure of the equipment and structures of state agencies and state-owned enterprises. In other words, collections theoretically could have reached an additional 11% of judgment amounts in Kyiv City, had the state not declared the available assets (perhaps in large part the state’s own assets) off-limits. This suggests a larger point: that the collection rates constitute a measure of performance for the enforcement system as a whole, and not specifically of the SES, which is only one part of the overall enforcement environment and which must accept the limitations of the overall system.
The Kyiv City data provides some insight into this low rate of collections. Its seems clear that by far the bulk of non-collected amounts occurs in a relatively tiny number of cases of unusually large size in terms of the money at stake.
Table 3 Reasons for Non-Execution of Judgments in Pending Cases, Rayon SES Subdivisions of Kyiv City, July 1, 2006
Source: Kyiv City SES Operations Analysis, 2006.
Together, moratorium cases and cases entering bankruptcy constituted about 3% of all cases but involved over 91% of monetary amounts in awards in active cases in the Kyiv City SES caseload. Because cases entering bankruptcy are routed out of the judgment enforcement system and into the bankruptcy system, and because moratorium cases simply cannot be collected as a matter of law, it appears that almost all large cases are resolved in ways other than through the judgment enforcement process, and that the judgment enforcement system deals almost exclusively with cases of small to modest size. This presumes, of course, that the Kyiv City data are representative of national trends.
As to moratorium cases, it seems clear that the moratoria on asset seizures in Ukraine have the effect of shielding from collection a small number of cases of quite large economic size. Because of the nature of the seizure moratoria, it seems plausible that all or most of these cases involve state agencies or state-owned enterprises as defendants/debtors. Agricultural land remains owned largely by either the national government or by local governmental bodies. State-owned equipment and structures of course could only be an issue in cases against the state.
Bankruptcy cases initiated in the judgment enforcement process in all likelihood represent a failure of judgment enforcement to collect assets. Approximately 80% of all judgment award amounts could not be collected because bankruptcy proceedings had been instituted against the debtor,[5] and thus enforcement of a specific creditor’s judgment is suspended in favor of a bankruptcy proceeding to provide partial satisfaction to additional creditors. Of what significance is the initiation of bankruptcy proceedings? While we have little information at this time about bankruptcy performance in Ukraine, by far the most typical reason that parties involuntarily enter bankruptcy after a judgment in favor of an individual creditor in most countries is that the debtor has been found to have insufficient eligible assets with which to pay a judgment. Indeed, if there had not been an unfulfilled judgment against the debtor, the bankruptcy case could not have found its way into the enforcement statistics of the SES. The cases not enforced by reason of bankruptcy are typically cases in which the debtor’s recoverable eligible assets are insufficient to pay the judgment. Obviously, this might occur simply because the debtor has insufficient assets. However, it may also occur because the debtor has been able to hide its assets or transfer them to another party to avoid the judgment; or because the creditor has for a multitude of reasons been unable to find the debtor’s assets; or because claims of higher priority (such as alimony obligations, labor claims, or unpaid taxes)[6] exhaust or deplete the available assets. We know little at this point about the reasons parties enter bankruptcy in Ukraine, or about the success of bankruptcy administrators in gathering assets or satisfying claimants. It is clear, however, that the importance of bankruptcy in resolving claims and distributing assets for such a dominant share of prior-to-bankruptcy judgment awards is one measure of the difficulties facing enforcement. It is also clear that more information about the success and operations of Ukraine’s bankruptcy system is of critical importance for understanding and addressing enforcement issues in Ukraine.
Despite the large share of judgment awards accounted for by moratorium and bankruptcy cases, it is clear that smaller cases do not do well in this system. Extrapolating from the Kyiv City data, some 96.8% of enforcement cases represent just 8.7% of the value of judgment awards. The large moratorium and bankruptcy cases are just a tiny number of cases. Yet in the national statistics presented on the SES website, the SES states that “actual enforcement reaches 1,448,996 enforcement documents” (in other words, at least something is collected on those documents) out of a total of 5,243,207 documents – in other words, less than 28% of judgments nationally have anything at all collected on them. Because moratorium and bankruptcy cases are just 3% of cases (if the Kyiv numbers are representative), the great majority of cases on which no enforcement at all occurs must be among the much smaller cases. Thus, even though the non-moratorium, non-bankruptcy cases represent just a small share of economic value in the system, nearly three-fourths of them go entirely uncollected, and of course many of the remaining smaller cases may be only partially collected.[7]
Table 4 Types of Enforcement Documents Under Enforcement Kyiv City SES July 1, 2006
Source: Kyiv City SES Operations Analysis, 2006
A few other points are worth making. First, it seems that the state is the dominant collector of claims in this system. Again relying on the Kyiv City data, cases categorized as “seizure to the benefit of the State” (including customs duties, penalties, financial sanctions, etc.) constituted some 42% of the total caseload. When collections on behalf of the Pension Fund of Ukraine and collection of utility bills are included, the percentage of cases in which some agency or enterprise of the state is the creditor comes to around 52% of all cases. However, if one takes the same group of cases on a value basis, these cases constitute less than 1% of the value of judgments. The state is the dominant user of the services of the SES, yet its cases are of relatively minor economic value. Indeed, taking all cases together, it appears that nearly all of the time and effort expended by the SES on collection is devoted to the collection of a small part of the economic value of cases involved – about 90% of the cases (and thus about that share of time and effort) are devoted to about 15% of the economic value.
On the other hand, “Other” cases that neither involve a public creditor (such as the Ukrainian state) nor a “social” claim (such as alimony payments, wage arrears, crime reimbursement) represent a modest portion of the total number of claims (9.5%), yet a clearly dominant share of the value of awards (84%). While the meaning of these numbers is not completely clear, one interpretation is that the private sector uses just a small portion of the resources devoted to the SES, but loses very significantly from any inadequacy of performance of the agency.
Recommendations
The appropriateness of the existing moratoria on asset seizures should be examined carefully. It is clear that the moratoria are a major obstacle to completion of a sizable number of judgments, many of them of considerable magnitude. If the state wishes to insulate itself against lawsuit, it is free to do so. By permitting lawsuits to proceed, however, while protecting a large share of the state’s assets from seizure, the state is implicitly rejecting the relevance of law for its own operations. Furthermore, because the state continues to play a large role in the economy of Ukraine, the moratoria constitute a significant impediment to the economic development of the country, since a significant share of the economy is rendered unsafe for private parties to do business with, since recovery will be rendered impossible and thus contracts become essentially unenforceable. Finally, because state-owned enterprises are made less attractive as contract partners, the moratorium reduces the competitive position and value of those enterprises.
Similarly, the behavior of the bankruptcy system should be investigated, to ensure that it is capable of handling effectively the immensely important role it apparently has in the economy and in the resolution of enforcement cases. It appears that an extremely large portion of the value of awards issued by Ukrainian courts are ultimately dealt with, not by the State Enforcement Service, but by the bankruptcy administration system. Once a case has entered bankruptcy, it is out of the hands of the SES and the usual mechanisms of income and asset seizure and attachment. If crisis interim managers are able to gather a significant amount of assets and distribute those assets effectively to creditors, then this is not a problem; however, if the system does not adequately collect the assets from debtors in bankruptcy or distributes assets inappropriately, then the bankruptcy system is a major source of distortion in the economy and may represent the means by which debtors evade the entire judgment enforcement system.
In this regard, it is of interest that the appointment of crisis interim manager is handled quite differently for cases in which the debtor legal entity is owned to a significant degree by the state. When the debtor is not significantly owned by the state, the interim manager is appointed by the court; however, for enterprises with significant state ownership, the interim manager is effectively appointed by the Minister of Economy. The state has devised a number of methods for evading the impact of judgments – for example, by the moratorium on asset seizure of most of the working assets of state enterprises, and the consistent refusal to provide sufficient funds to handle the annual total judgment awards against the state. It is possible that the special treatment of state enterprises in bankruptcy (and it seems likely that a very large portion of bankruptcy assets may be embodied in debtors that are in some way a part of the state, such as a state-owned enterprise) is another mechanism by which the state avoids its legal liabilities. If so, it is one with very significant magnitude and is nearly beyond the scrutiny of outsiders. This system should be changed, in two ways. First, the special treatment of the state in bankruptcy should be eliminated. Second, the bankruptcy law itself should be re-examined to determine, first, the adequacy of the legislation, including the powers and independence given to crisis interim managers; and second, the performance of the bankruptcy system.
III. The State Enforcement Service
The State Enforcement Service (SES) is a government agency with a legal monopoly on the enforcement of judgments and other decisions in Ukraine.[8] It is formally a part of the Ministry of Justice, but has a moderate degree of administrative autonomy. Its budget is funded from the state budget of Ukraine,[9] and fees collected by the SES are forwarded to the state budget.[10]
(a) Employment and Incentives
The principal employees of the SES are State Enforcement Officers (SEO’s), whose responsibility it is to perform forced enforcement of decisions of courts and of other agencies of the Ukrainian government.[11] There are approximately 7000 SEO’s throughout the country, organized and supervised through the administrative hierarchy of the SES.
The prerequisites for employment as an SEO include a “higher legal education” and at least three years of legal work experience.[12] The law assigns to SEO’s an extensive and detailed list of responsibilities and powers. Nevertheless, the position has some of the characteristics of a clerk. A highly formal set of procedures requires that every action of the SEO be accomplished through issuing numerous, often repetitive, notices and documents at each step of the enforcement process. According to one expert study cited to us in our interviews, the average small enforcement case involves the issuance of at least 40 separate notices and orders, each of which constitutes a separate legal document that must be individually drafted for the case, is separately subject to appeal, and may result in disciplinary action against the SEO. Simply the burden of issuing these documents and responding to complaints and appeals constitutes the major activity of the SEO. This should be seen in the context of typical caseloads for each SEO of between 100 and 150 cases per month for which the SEO is responsible, which suggests that the average SEO must issue several thousand notices, orders and other documents in the course of an ordinary month, most of which could be appealed and which frequently are appealed. The procedural complexity, opportunity for delay by debtors, and demands on the time of the SEO is very significant.
All of this work must be performed by SEO’s in an environment with a low level of resources or capital investment. SEO’s operate largely without computer equipment, filing space, or clerical assistance. One observer told us that SEO’s have on average one computer for every 7 officers. Additionally, they also lack tools that might assist them in their work, such as vehicles, cell phones, laptops, and similar equipment. SEO’s receive little on-the-job training.
Furthermore, SEO’s perform this work with very low total pay, and with almost no incentive pay. A starting SEO will earn about UAH 500 (about $100) monthly, rising to about 1200 UAH ($240) per month for an experienced officer in a supervisory position. It is also possible to receive a bonus of up to $40 per month; so far as I was able to tell, there are no precise criteria for the payment of the bonus other than the approval of one’s supervisor. However, at least in theory, it is possible to earn an incentive fee for collection of a specific case: Article 47 of the Judicial Enforcement Law allows a payment to the SEO of two percent of the amount of property value collected by the officer, up to a maximum of “thirty non-taxable minimum incomes of citizens,” or about 510 UAH (about $100). The conditions for achieving this payment, however, are extremely demanding: the payment is made to the SEO only if (1) the SEO collects 100% of the award; (2) it is collected within the allowed six-month period from the commencement of the enforcement case; (3) the SEO also collects the 10% executive fee that is due to the SES; and (4) if all papers are appropriately filed to the SES department. To give some perspective on how difficult it is to earn the commission, I spoke to one experienced enforcement officer, who had served in the enforcement service for 17 years; in the previous year, she told me, she had handled nearly 3,000 enforcement cases but only earned the commission in 4 cases – and the commission amount in all of them was around 10 UAH (about $2). Officials of the SES have acknowledged the difficulty of earning the commission.
Why is it so difficult to earn the SEO’s commission? Few judgment awards are collected in full, a consequence in part of poor information sources for locating the debtor and its assets, inadequate attachment mechanisms, and a variety of other issues. Furthermore, the full award must be collected within a six month time period, but there are numerous sources of delay. Unresponsive and slow registries, resistant debtors and garnishees, and numerous appeals make it difficult to meet this deadline. In addition, it is often quite difficult to collect the 10% SES fee even if the entire judgment award is collected, in part because banks are not required to pay the SES fee and many collections involve seizure of bank funds. Banks seem to view it as their duty to their customers to assist in the evasion of court judgments, and are required by the Law on Banking Activity only to pay over the monetary amount mandated in the original judgment award, and cannot be asked for any additional sum, including the monetary amount of the executive fee. Indeed, banks will disregard bailiff payment orders if they state the executive fee, whether or not it is separately stated in the order. Since there is in most cases no other good option for collection, the executive fee is uncollectible, and as a result it is impossible for the bailiff to qualify for the commission. SEO’s qualify for the commission in almost no cases, and is therefore all but irrelevant to their behavior. The low salaries paid by the SES constitute essentially their entire income.
The virtual absence of incentive pay must be understood in the context of the difficulty of completing cases in Ukraine. Obstructive behavior by banks, employers, and other potential garnishees; slow responses and non-cooperation from the Tax Authorities, registries that are the source of critical information in the collections process, and other agencies; an apparently high degree of resistance by debtors to collection, including transfer or other efforts to hide assets, repeated appeals of minor procedural questions, and efforts to evade notification of the commencement of enforcement – all of this requires a high degree of effort by enforcement officers to complete the enforcement process. The virtual absence of meaningful incentive pay directly sabotages these efforts. For example, it is apparently possible for bank customers to open new accounts in the same bank and shift assets between them to evade payment orders, and dealing with this effectively would require efforts by enforcement officers to trace assets as they are shifted between accounts. Yet as one bank officer with whom we spoke noted, “Enforcement officers are too badly paid to care,” and virtually never make any effort to trace the transfers between accounts.
Low pay and an institutional hostility to incentives, combined with a low level of capital investment in enforcement officers and a highly pressured, extremely routine workload, results in a high level of turnover among enforcement officers. According to one senior official in the SES, employee turnover in the agency is around 30% per month. Other sources have suggested that this is an overstatement, but that nevertheless employee turnover is extremely high. This clearly undercuts employee experience in dealing with resistance and evasion by debtors and garnishees. It also raises issues of training. Any benefit to the agency from providing training is quickly undercut by the tendency of SEO’s to leave the agency within a short time. Perhaps that is one reason that the agency provides so little training; a regional SES manager told us that officers in his area receive about four days of training every three years. On the other hand, it may equally well be true that the low level of training in a complex procedural area of law leads to poor results, low pay, and high turnover. High turnover rates normally suggest a high level of employee dissatisfaction.
In short, the agency with exclusive responsibility for enforcing civil judgments and other legal decisions in Ukraine apparently suffers from severe problems. Central to these issues is a low level of employee motivation, resulting from a mixture of very low pay, high workloads that are highly routinized, poor incentives, limited possibility of advancement within the agency, and an unsupportive working environment rooted in both agency mismanagement and the intrinsic difficulties of collection in Ukraine. Very limited training combined with a highly formalistic procedural code, and multiple opportunities for appeal against bailiff actions (including against the SEO directly) for non-compliance with procedural requirements, lead to behavior by SEO’s that is hostile to innovation and unresponsive to the requirements of collecting. This is a system that is quite inadequate for dealing with the problems of enforcing judgments in the Ukrainian environment.
b) Agency Unbiasedness and the Independence of the Courts The design of the SES presents two nearly unavoidable problems with agency independence. First, because of the dominance of the state in the enforcement process, there is a risk that the agency will come to serve the interests of the state that pays its bills and has administrative responsibility for it. Second, because the judgments of courts are effectively meaningless unless this executive branch agency actually enforces its orders, there is an intrinsic threat to the independence of the courts. Both of these appear, in fact, to be quite real.
The state is clearly the dominant client of the agency. As pointed out earlier, something around 50% of the caseload of the agency involves collection on behalf of state agencies against other parties; this consists principally of customs duties, penalties, and minor financial sanctions, involving many thousands of cases of relatively small monetary value. Work on behalf of the state thus constitutes a major share of the agency’s workload, and – particularly with the subsidy from the state that is channeled through the Ministry of Justice – its major source of income as well. The entire SES budget comes from the state budget, and all SES earnings are returned to the state.
Though the state thus is the principal beneficiary of SES activity, it has gone to considerable lengths to protect itself against collections by others. This arises in at least three ways: first, the moratorium on seizure of state assets consisting of equipment and immovable structures; second, the refusal of the state to pay judgments against it in excess of the funds appropriated in advance for payment of judgments in the state budget; and third, the unwillingness of the SES actually to pursue enforcement actions against the state, and particularly against the Ministry of Justice. This reluctance of the SES even to make efforts to collect against the state was reported to us by several interviewees, including both current and former employees of the SES. The reason for this reluctance was not clear. One must presume that the political dominance of the Ministry of Justice over the agency, as well as the dominance of workload and income from state cases, has resulted in a reluctance on the part of the agency to confront the state or to seize its assets.
This informal reluctance of the SES to collect funds from the state, even beyond the formal limitations on collections, limits the power of courts even when the courts have formal legal authority to place liability on the state, and thus constitutes a rejection of the principle of law. The problem, however, goes beyond the collection of funds. If the state is willing to use its political power to prevent law being applied against it with respect to the collection of funds, the same may well be true concerning legal or constitutional limitations on the actions of the state, or of political powerful individuals within the state structure. The political influence of the state over the collections activity of the SES thus suggests fundamental limits on the willingness of the state to abide by law generally.
The bottom line is that enforcement against the state (as well as against politically powerful individuals within the state structure) should not be dependent on a state-controlled and state-funded agency.
c) Corruption in the SES
The work of the State Executive Service intrinsically presents many opportunities for corruption. First, creditors anxious for their awards might offer SEO’s the incentives privately that the agency itself declines to provide formally; or debtors may make bribes to the SEO to interfere with the collection. The low incomes of SEO’s make payments of this type quite plausible. Second, SEO’s are generally poorly paid workers who on occasion collect very large cases; the temptation to skim a bit from the collected funds for their own benefit must be strong. Funds collected from debtors or garnishees may be transferred to the benefit, not of creditors, but of the SEO’s themselves. Finally, rather than offering side payments to the SEO, the debtor or creditor may use connections or political influence to modify the SEO’s performance, perhaps with a payment going to a higher-level official within the SES or the Ministry (or the courts).
Concern by outside observers seems to focus principally on the second of these options: that is, SEO’s skimming off for their own benefit a portion of the collected funds. This appears to be the concern that has motivated proposals for the development of a monitoring system that would keep track of each order issued by an enforcement officer. Each order would then be posted to an internet site where both creditors and debtors could check on the order in the knowledge that the information was publicly available. The public availability of this information would then deter enforcement officers from taking the funds, since there would be public knowledge of their formal orders.
There are a number of problems with this proposal. First, several managers within the SES with whom we spoke deny that it is possible for enforcement officers to skim any significant amount of funds from seizures, since the funds are in almost all cases directly transferred electronically to the SES account for holding clients’ funds, and it is impossible for the individual SEO to gain possession of the seized funds. Most enforcement cases seem to be resolved, when actual enforcement occurs, by garnishment of either the debtor’s bank accounts or the debtor’s labor earnings through the employer. These payments are normally made by electronic transfer. Indeed, the agency itself has a strong interest in avoiding losses of this type, because it reduces not only the take of the creditor but also the fees earned by the SES. The agency has therefore developed funds transfer mechanisms to prevent this, and a senior inspector within the SES told us the agency is satisfied that there is simply no way individual officers could steal funds. Thus, before an elaborate system is developed to deal with this problem, it would be worthwhile undertaking a more thorough investigation to determine if the specific problem exists.
Second, assuming for the sake of argument that the problem of skimming of seized funds does exist, it is not clear how the proposed solution would address it. Enforcement orders may not result in any actual transfer, or it may result in a transfer for less than the face amount of the order. Publication of the order itself would not be informative of the amount of funds seized, or if any funds were seized or collected. To do this, the notice would have to state the amount of the funds seized; it is possible that publishing this information to a publicly-available site would violate privacy laws, and might be undesirable to the recovering party, since it would expose part of their asset position to public scrutiny. Issuance of identical receipts to debtor and creditor, signed by the transferor or garnishee, should suffice.
The greater corruption problem probably involves payments to SEO’s intended to alter their behavior in the enforcement process – either speeding it up, slowing it down, increasing the intensity of the effort or reducing it. Such payments may lead enforcement officers to disregard procedural rules or pay less attention to other cases, and thus is presumably in conflict with the policy goals of a public enforcement system. The low salaries of enforcement agents, particularly when compared to the value of many of the cases they enforce, creates ideal circumstances for such payments to occur.
One source has claimed that bribery of enforcement agents has led to known instance of abuses in the enforcement process, including termination of judicial enforcement; non-attachment of non-seizure of debtor’s funds or property; untimely attachment when the property has already been concealed; deliberate underestimation of the value of the property; organization of auctions in which participation is limited to certain persons; and similar abuses that either protect the debtor, the creditor, or other parties. These examples, if true, suggest enforcement officers may receive payments from a variety of participants or bystanders in the enforcement process (debtors, parties hoping to acquire seized property at reduced prices).
The conventional way to address corruption of this nature is to increase penalties to both briber and bribee, and increase efforts to monitor and detect such payments. The problem with this approach is that the behavior is quite difficult to detect, enforcement officers may not be capable of pa | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
