Scrutiny around Snoras continues

With the London-based Westminster Magistrates Court hearing on Lithuania’s extradition request for Russian businessman Vladimir Antonov and his Lithuanian partner Raimondas Baranauskas, charged with defrauding Snoras bank, set for Jan. 21 and an intermediary hearing scheduled for Oct. 10, the committee of Snoras’ creditors has announced the possibility of a potential buyer of Snoras’ affiliate companies Finasta, Finasta Holding and Snoras Leasing.

Unofficially, the buyer is a UK-based merchant bank Omada Capital, which supposedly has offered some 10 million euros for Finasta Group. If so, the buyer needs to pass an assessment by the Bank of Lithuania.
“One of four potential investors, which has come out with the biggest bid, has been chosen and we’re looking forward to sealing the deal. However, we cannot yet reveal any details about the bidder, or the sale price, until the Bank of Lithuania endorses the deal and we sign an agreement with the investor,” Aurelija Mazintiene, head of the state-owned Deposit Insurance Fund and chairwoman of the creditors’ committee, said in a statement.

Meanwhile, the Bank of Lithuania stated on Tuesday that it has not yet been asked officially to assess the acquisition of Finasta. “The potential buyer is supposed to provide Lithuania’s Central bank with a notification, proper documentation, and other data in order to make an assessment of the deal and the potential buyer. But this has not been done yet; we are [still] looking forward to [doing] it,” Mindaugas Mileska, spokesman for the Bank of Lithuania, told The Baltic Times.
The media’s earlier reports named several potential buyers, including Tallinn-based Redgate Capital and the Alvydas Zabolis-owned private equity and investment banking group Zabolis Partners, which were possibly interested in acquiring Finasta.

But Mart Altvee, senior partner at Redgate Capital, declined to comment on the speculation. He did not deny the unofficial information either.
“We do not comment on this,” Altvee told BNS.
The Russian business paper Kommersant reported in early April that two Russian banks, Investtorgbank and M2M Private Bank, were also interested in Finasta. Meanwhile, Zabolis told BNS last week that the reports about his intentions were untrue.

Analysts estimate that Finasta Group could be sold for 26 million to 30 million litas, and Snoro Lizingas for 10 to 15 million litas. “I would not go that far with the price. I’ve heard half that amount being mentioned. In any case, compared to the losses, a deal will be hardly enough to cover part of the debts to Snoras bank’s workers at least. Next in the line of creditors is the Deposit Insurance Fund which owes nearly three billion litas to the state which allocated cash to the Fund to repay the insured deposits. If the investigation turned up some other of Snoras owners’ hidden funds, they would serve to cover other debts. Ordinary Snoras clients are on the last perch to recover their money, and I have few hopes this will ever happen,” Danas Arlauskas, chairman of the Snoras Bank Creditor Association, told The Baltic Times.

Prior to the talks on the Snoras’ affiliate company acquisition, Vilnius Regional Court ruled that Snoras, which was nationalized last November, is bankrupt. Snoras’ creditors filed a total of 6.52 billion litas (1.89 billion euros) in undisputed claims. Meanwhile, the Deposit Insurance Fund claims a total of 4.05 billion litas; however, the court has only approved 3.8 billion litas.

The court disclosed how Snoras Bank ex-owners Vladimir Antonov and Raimondas Baranauskas embezzled funds. The former owners allegedly siphoned away money through transfers to personal accounts, collateral for loans, and fake real estate deals using offshore companies.

Vladimir Antonov and Baranauskas used the Swiss banks HSBC Private Bank and Julius Baer & Co to transfer Snoras assets as collateral for loans to companies owned by or associated with Antonov, Snoras said in a late June filing made public in August. Some of the loans were not repaid and the securities were forfeited, it said.

Antonov allegedly used Snoras’ assets to make a mortgage payment on a property in France. The two former owners had off-shore companies as far away as the Dominican Republic, Cayman Islands, Cyprus, Belize, and the Bahamas, according to the claim. Snoras claims that Antonov instructed the bank to pay an “excessive and commercially unjustifiable price” for properties in Riga from companies owned by or connected to him.

The bank estimates that it lost at least 17 million euros as a result of this. In one such deal, Cyprus-based and Antonov-linked Bandiron Corporation Limited bought the headquarters of Latvijas Krajbanka from Red Projects for 5.9 million lats ( 8.4 million euros) and sold it three days later to Snoras for 23.2 million lats, according to the report.
Neil Cooper, bankruptcy administrator of the bankrupted Snoras, has confirmed earlier that as of July 31, over 1.1 billion litas in cash has been recovered and paid out for the benefit of creditors.

But Arlauskas says he has “some serious doubts” about the prospects of recovering all the money. “I am afraid that what could be recovered already has been recovered. I do not believe extradition of the two Snoras owners would expedite the process. If they had hidden some funds, no extradition will force them to reveal where they are. Creditors could only hope that extradition would bring some clarity as to what led to the demise of the bank,” Arlauskas emphasized to The Baltic Times.

Government report faults Latvian regulators
Latvia’s Saeima released its report on Aug. 29 of the parliamentary investigatory committee on Latvijas Krajbanka’s collapse last fall. The report, the result of a commission began Dec. 1, 2011, provides recommendations to the republic’s financial system.

Though Latvian banking officials have tended to place the blame for the bank’s collapse on a lack of warning from colleagues at the Lithuanian central bank, the Saeima committee’s report addresses the failure of Latvian authorities to foresee the bank’s collapse. Committee chairman Janis Lacplesis expressed disappointment that the committee often lacked quorum for important decisions. “I would have expected more active work from the members, who led to the formation of the inquiry committee themselves,” Lacplesis said, commenting on the official Saeima release.

The committee’s analysis concluded that the Financial and Capital Market Commission (FCMC), Latvia’s banking watchdog, failed in its long-term surveillance of Latvijas Krajbanka. The committee concluded that refusing to consider the character of Vladimir Antonov, the London-based Russian oligarch who had held 83 percent of the shares in Latvijas Krajbanka since 2005, relying on the assesments of Lithuania’s central bank, and not assessing the potential consequences of letting Antonov own such a large share of the bank, had serious implications in the bank’s future. The committee’s report states that the shortcomings of the FCMC and failure to cooperate with the Lithuanian central bank and its supervisors  caused significant damage to Latvijas Krajbanka and the national financial system in general.

The committee also concluded, however, that lacking clear information from Lithuanian banking authorities, the FCMC was not able to sufficiently prepare for the bank’s collapse. The Latvian officials received only hints to look into the bank’s finances from their Lithuanian colleagues in October 2011, while the Bank of Lithuania had known about 290 millon euros missing from Snoras Bank’s Swiss accounts since the summer.

The FCMC had already found deficiencies in the capital of Latvijas Krajbanka in 2009 and 2010. The committee concluded that more drastic measures could have been taken by the FCMC in 2010. The current system of checking bank operations once a year is insufficient, the report continued. The commission called for improvements to controls over banks and increased supervision of transactions over a certain amount. Nearly all of the bank’s transfers of deposits did not follow the norms of public procurement law, the report noted. The committee has asked for verification of whether this constitutes a breech of official policy.

The committee blamed the FCMC for permitting Antonov to own as much of the bank as he did, as Antonov had long been suspected of ties to organized crime and had been denied the opportunity in the UK to open branches of Snoras Bankas and the purchase of a Glasgow football club over these suspicions. Currently Antonov remains under house arrest in London, awaiting extradition to Lithuania.

Ieva Krumane, the former head of FCMC who resigned following the collapse of Krajbanka and Snoras, had previously shown her disappointment in Latvian media blaming the FCMC’s failure rather than the Lithuanian central bank’s; however, the Saeima committee’s report reflects agreement with the media reports.
The report also suggested the government find a way to compensate for losses due to Latvijas Krajbanka’s bankruptcy in five municipalities – Jaunpiebalga, Karsava, Dagda, Mazsalacas and Rucava – where Latvijas Krajbanka was the only bank available.