Unfair management: Managerial capacity, compensatory claim, reduction and discretionary power, confiscation, direct restitution to the injured party in the event of reinvestment

Federal Supreme Court, 03.03.2026, 7B_109/2023, 7B_110/2023

Facts

A., an economist and financial analyst, set up a complex investment scheme between 2008 and 2013 through a British Virgin Islands investment fund, B. Ltd, and several Swiss companies he controlled. He raised approximately 70 million francs from numerous investors by promising high returns and guaranteed capital, while the investments were in reality made without guarantees, without adequate monitoring, and based on blind trust in local partners. A portion of the funds was used for personal expenses and to repay earlier investors. Numerous investors, including the company B.________ (hereinafter, the appellant), suffered losses amounting to tens of millions.

In August 2009, A., acting as a "financial advisor" for the E. Foundation, had the latter invest more than 7 million francs in one of his own financial products, in violation of the instructions received.

Following criminal proceedings, the Fribourg Cantonal Court sentenced A.________ to 7 years in prison for qualified criminal mismanagement, qualified breach of trust, and forgery of documents. It also ordered various confiscation and restitution measures and set a compensatory claim against A.________ in the amount of 206,000 francs, a sum corresponding to his expected inheritance.

Two appeals were filed against this judgment with the Federal Supreme Court:

1. That of A.________ (7B_109/2023), who contests his conviction for qualified criminal mismanagement to the detriment of the E.________ Foundation, arguing that he did not hold the status of a manager.
2. That of B.________ (7B_110/2023), one of the main injured parties, who contests the amount of the compensatory claim (which it wishes to see increased to over 8 million francs) and the manner in which the seized assets were distributed, in particular the direct restitution of 150,000 francs to other injured parties (D.C.________ and C.C.________).

Law

The Federal Supreme Court examines several distinct legal questions raised by the two appeals.

1. Criminal mismanagement (Art. 158 SCC) and the status of manager: The offense of criminal mismanagement requires the perpetrator to hold a managerial position. According to case law, a manager is a person who, formally or de facto, has the responsibility of administering significant assets in the interest of others. This status requires a sufficient degree of independence and autonomous power of disposition over the managed assets. A person acting as a mere advisor, subject to instructions and without final decision-making power, does not hold the status of a manager within the meaning of this provision. The mere duty to "look after" the pecuniary interests of others is not sufficient if the managerial position is lacking.
2. Compensatory claim (Art. 71 SCC) : When it is impossible to confiscate assets derived from an offense (because they have been spent, concealed, etc.), the court orders a compensatory claim of an equivalent amount. However, Art. 71 para. 2 SCC allows the court to waive this claim in whole or in part if it is foreseeable that it will not be recoverable or that it would seriously hinder the social reintegration of the convicted person. The use of this discretion must be exercised with restraint and requires a comprehensive assessment of the convicted person's financial and personal situation (income, assets, debts, family obligations). The court has broad discretion in this matter.
3. Confiscation and restitution to the injured party (Art. 70 para. 1 SCC) : The judge shall confiscate assets derived from an offense, unless they must be returned to the victim. This direct restitution takes precedence over confiscation. The central question is in which cases such restitution is possible, particularly when illicit funds have been reinvested (replacement). Case law distinguishes between two situations:
   1. Improper replacement (unechtes Surrogat): funds are reinvested in assets of the same nature (e.g., cash deposited into an account). Case law allows for direct restitution to the victim if the paper trail of the funds is clearly established.
   2. Proper replacement (echtes Surrogat): funds are used to acquire an asset of a different nature (e.g., stolen money used to purchase a chalet). The issue of direct restitution in this case is controversial.

Application to the specific case

The Federal Supreme Court applies these principles to both appeals.

1. Appeal by A.________ (criminal mismanagement): The Federal Supreme Court finds in favor of A.. It notes that his role with the E. Foundation was that of a "financial advisor." He did not have autonomous power of disposal over the foundation's funds. The final investment decision was made by the foundation's director, even if it was based on A.'s advice. In the absence of independent management authority, the status of manager within the meaning ofArt. 158 of the Swiss Criminal Code is not met. Consequently, A. must be acquitted of this charge.
2. Appeal by B.________ (compensatory claim and confiscation):
   1. Regarding the amount of the compensatory claim: The Federal Supreme Court rejects the appellant's grievance. It finds that the cantonal court did not abuse its broad discretion in reducing the compensatory claim to 206,000 francs. It correctly took into account A.________'s burdened financial situation (low income, salary garnishments, family expenses, absence of other assets) and concluded that a higher claim would not be recoverable and would jeopardize his social situation. Setting the claim at the amount of his only realizable asset (his inheritance share) is in accordance with Art. 71 para. 2 of the Swiss Criminal Code.
   2. Regarding the restitution of 150,000 francs: The Federal Supreme Court grants the appeal on this point. The 150,000 francs, originating from funds embezzled to the detriment of D.C.________ and C.C., were used to pay for renovation work on a chalet belonging to A.. This is a case of proper replacement. The Federal Supreme Court conducts an in-depth analysis and decides not to extend the possibility of direct restitution to this type of replacement. It believes that such restitution, in a context where numerous creditors and victims are competing for insufficient assets, would create an unfair and arbitrary privilege in favor of the only victim capable of proving a paper trail to a replacement asset. This would contravene the principle of equal treatment among creditors. The cantonal court therefore violated Art. 70 para. 1 of the Swiss Criminal Code by ordering the direct restitution of this sum.

Outcome

The Federal Supreme Court:

1. Grants the appeal of A.________ (7B_109/2023). It overturns his conviction for aggravated criminal mismanagement to the detriment of the E.________ Foundation.
2. Partially grants the appeal of B.________ (7B_110/2023). It overturns the decision to directly restitute 150,000 francs to D.C.________ and C.C.________. The appeal is rejected for the remainder, particularly regarding the increase of the compensatory claim.
3. Overturns the cantonal judgment and remands the case to the Criminal Court of Appeal of the Cantonal Court of Fribourg. The cantonal authority must:
   1. Set a new sentence for A.________, taking into account his partial acquittal.
   2. Rule again on the fate of the 150,000 francs (by examining potential confiscation and subsequent allocation to the victims according to Art. 73 of the Swiss Criminal Code).
   3. Reapportion the costs and legal fees of the cantonal proceedings.

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