Not only since the COVID-19 pandemic has subsidy fraud been on everyone’s lips. False information in subsidy applications leads to the state wrongly paying out subsidies and, once discovered, initiating criminal proceedings. However, even those who make incorrect statements merely negligently can be accused of such an offence.
Subsidy fraud can have far-reaching consequences—not only under criminal law. For defendants, their professional livelihood is often at stake. Anyone who appears to be defrauding the state is generally dealt with to the fullest extent of the law. But what penalty applies to subsidy fraud? And what is the best way to defend yourself against this allegation? You can find out more in this article.
Have you been accused? If you need legal assistance, it is best to rely on criminal-law support from an attorney or defence counsel. As experienced criminal law attorneys and defence counsel, we have already achieved early discontinuation of proceedings, reduced sentences, or acquittals for many clients. We will be pleased to represent you and provide comprehensive advice on a possible defence strategy. You are welcome to arrange an initial consultation with us at any time.
What constitutes a criminally punishable subsidy fraud?
Anyone who unjustifiably obtains subsidies, or at least attempts to do so, is criminally liable for subsidy fraud. Under Section 264(1) of the German Criminal Code (StGB), anyone is liable who
- makes incorrect or incomplete statements about facts relevant to the subsidy to an authority responsible for granting a subsidy or to another body or person involved in the subsidy procedure (granting authority), for themselves or another, which are advantageous to them or the other person,
- uses earmarked subsidies for other purposes,
- conceals facts relevant to the subsidy,
- uses a subsidy certificate that is based on incorrect/incomplete information.
More about the particularly serious case of subsidy fraud and additional information on the criminal offense of subsidy fraud can be found in a dedicated article. This article will primarily focus on the potential penalties for subsidy fraud.
What penalty applies to subsidy fraud?
Anyone convicted of criminal subsidy fraud must expect a prison sentence of up to 5 years or a fine. If the subsidy was paid out, it must of course be repaid, and items related to the offence may also be confiscated (Section 264(7) sentence 2 StGB).
In cases involving use of the subsidy contrary to the restriction on use (Section 264(1) no. 2 StGB), an attempt is also punishable (para. 4). In addition, the offence under Section 264(1) nos. 1–3 may be committed recklessly. This carries a prison sentence of up to 3 years or a fine.
In cases of attempt, a reduction of sentence is also possible (Section 23(2) StGB).
In a particularly serious case of subsidy fraud (Section 264(2) StGB), a prison sentence of between 6 months and 10 years may be imposed. A fine is generally already excluded in such cases.
Consequences under corporate law
In addition to a criminal sanction, other serious consequences may also arise, in particular under corporate law. For example, convicted persons may be prohibited from carrying out certain activities for a period of 5 years if they were sentenced to at least one year of imprisonment.
Anyone convicted of subsidy fraud may, for example, no longer serve as a managing director of a GmbH. Existing positions in a GmbH must be relinquished. No separate order is required; the conviction alone is sufficient (Section 6(2) no. 3e GmbHG).
Likewise, serving as a member of the management board of a stock corporation is prohibited for 5 years from the date such a judgment becomes final (Section 76(3) no. 3e AktG).
Trade and professional ban
A conviction for subsidy fraud may also be accompanied by a ban on carrying on a trade or profession. This follows not only from Section 70 StGB, but also from the individual professional codes. Those particularly at risk include doctors, other healthcare professionals, lawyers, and tax advisers.
In particularly serious cases, a professional ban may also be imposed for life.
A ban on carrying on a trade may be triggered by a conviction under Section 264 StGB (Section 35 GewO).
Furthermore, the court may deprive the accused of the ability to hold public office (Section 45(2) StGB). This particularly affects defendants who work in the public sector (e.g., teachers, judges, public prosecutors, police officers, and other civil servants). The right to stand for election may also be withdrawn (Section 264(7) StGB).
For which subsidies is a penalty possible?
Not all subsidies are covered by Section 264 StGB. As a rule, they must be direct subsidies from public funds, meaning tax relief is not covered (this falls under the offence of tax evasion). The funds must be public funds from federal or state sources, or public funds of the European Union.
Subsidies under federal or state law must also promote the economy and may not serve other purposes (e.g., social welfare).
In addition, there must be no market-based consideration. This includes anything that is “cheaper” than the market price, such as an interest-free loan, grants, or the COVID-19 emergency aid.
Due to the amendment of Section 264(9) no. 2 StGB, so-called pure contractual subsidies, which are particularly common in the EU and where there is no statutory provision and this is replaced by a contractual arrangement, are now also covered.
Important: Particularities apply here, especially under EU law. If EU public funds are involved, please speak separately with a lawyer to obtain binding advice. We will be pleased to assist you.
How can a criminal defence lawyer help with an allegation of subsidy fraud?
Anyone accused of subsidy fraud should not take it lightly. Serious consequences may follow, which, in addition to a fine or imprisonment, may also include a professional ban and the threat to one’s livelihood. Anyone accused of such an offence should therefore take action early to avert a conviction.
Subsidy applications are very complex, so even without intent it is easy to provide incorrect information and thus create the appearance of deception. However, this can also provide a strong defence strategy for a specialised lawyer.
It is therefore all the more important to seek an experienced criminal defence lawyer at an early stage. Together, we will review the documents and the allegation, apply for access to the case file, and discuss the next steps. This is how we develop an effective defence strategy for your specific case.
In the best-case scenario, this may already make discontinuation of the proceedings possible; however, an acquittal or a sentence of less than one year can also be good and realistic defence objectives—depending on the circumstances of the individual case.
For defendants, the following applies in all cases: Do not speak to the police. Make no statement to the investigating authorities and remain silent regarding all allegations. If you have received a summons, do not comply with it; instead, contact an experienced criminal law firm to take on your case.
If a house search takes place, you should behave cooperatively and ask to see the search warrant. Never actively assist with the search or hand over items or documents of your own accord. In such a case, please feel free to call our firm, as you have the right to defence counsel at all times.
Do you need legal assistance? We are here for you and will be pleased to support you at any time in your case. Please note our numbers so you can reach us as quickly as possible—even in an emergency:
