KNAB seeks prosecution of Valmiera mayor and 4 other persons for misuse of EU funds

RIGA - The Corruption Prevention Bureau (KNAB) has initiated criminal prosecution against five persons employed by the Valmiera municipality, including Mayor Janis Baiks (For Valmiera and Vidzeme), for alleged criminal offenses involving misappropriation of European Union (EU) funds, LETA learned.

KNAB informed LETA that on Wednesday, the anti-corruption bureau requested the European Public Prosecutor's Office to initiate criminal proceedings against three Valmiera municipality officials and two other persons employed by the municipality for suspected large-scale fraud and other criminal offenses. These activities were reportedly carried out during the construction of a production building, illegally raising more funds from the European Regional Development Fund (ERDF) and the Latvian state budget than provided by law.

Local authorities may use ERDF funds to construct production facilities on land they own, which are then offered for rent to businesses after the project is completed. If the potential tenant of a particular facility is unknown and it is selected in an open tender, the municipality is entitled to raise up to 85 percent of ERDF funding. However, if the facility is to be built for a specific purpose and the potential operator is known, ERDF co-funding is available at a lower rate of between 45 percent and 55 percent, with a higher share of the funds provided by the company concerned.

The information obtained in the investigation shows that during the construction of the industrial building, the officials of the Valmiera municipality did not inform the responsible authorities about the tenant chosen for the future production plant and fraudulently raised more funding than is provided for by existing regulations.

Acting in a group of persons by prior agreement, the officials allegedly defrauded the ERDF and the Latvian state budget of EUR 671,299.69, KNAB was informed.

Valmiera municipality also submitted payment claims for EUR 2,372,713 to the responsible authorities, which were not paid for reasons beyond the municipality's control. Given that the five persons involved in the implementation of the project may have deliberately violated the conditions on the amount of funding to be raised, the payment requests are considered to be an attempt to commit fraud, according to KNAB.

During the implementation of the project, changes were also made to the construction project to adapt the production building to the needs of the specific company, investigators found.

Evidence obtained by KNAB shows that the chairman of the Valmiera municipal council, with the support of four other persons, misled the responsible authorities about the real reasons for the need for changes to the construction project and cost increases. This may have caused losses of EUR 73,485 to the ERDF, the Latvian state budget and the budget of Valmiera municipality.

Information obtained in the KNAB investigation shows that the company operating in the production building in question was not informed about the alleged illegal conduct of municipal officials.

Accordingly, KNAB has requested the European Public Prosecutor's Office to initiate criminal proceedings against three officials and two employees of Valmiera municipality for alleged large-scale fraud and attempted fraud.

Furthermore, Baiks is accused of abuse of office for personal gain, and the other four with aiding and abetting abuse of office for personal gain.

On November 26, KNAB sent the case file to the European Public Prosecutor's Office, which now has to decide on the further course of the criminal proceedings.

As reported, on September 12, 2023, KNAB carried out searches at the Project Management Unit of Valmiera Regional Development Authority as part of a criminal probe that had been initiated earlier.

On June 9, 2023, the European Public Prosecutor's Office opened criminal proceedings and referred them to KNAB as the competent authority for the pre-trial investigation.

The project featured in the probe is related to the construction of infrastructure for a building in Valmiera. In this way, the individuals reportedly caused serious damage to the European Union.

According to unconfirmed information, the alleged irregularities were detected in the second stage of the project "Development of Industrial Territories in Valmiera", implemented from December 2020 to November 2022, with a total eligible cost of EUR 5.75 million.

Earlier, Baiks confirmed to LETA that he was being investigated by KNAB but was not restricted from holding the office of Valmiera mayor.

Baiks resigned as a member of the New Unity board.

Meanwhile, the Central Finance and Contracting Agency suspended the disbursement of funds for Valmiera municipality's industrial territory development project due to a criminal probe opened by the European Public Prosecutor's Office.