RIGA - The State Auditor's Office uncovered a forgotten, $4 million loan dispersed by airBaltic to the government that for several years has gone unserviced and even unnoticed in accounting reports.
State Auditor Inguna Sudraba told journalists last week that as a result of the loan the state has run up a $2.3 million bill just on unpaid interest.
As she explained, the loan was put together in 1996. The Latvian Privatization Agency borrowed the funds in order to allow the state to participate in airBaltic's privatization. Sudraba said that the state's liabilities exceed the value of its stake in the airline, as a result of which the government no longer had control over the company.
What's more, she went so far as to say that the loan to airBaltic might indicate that there were other forgotten loans out there that have not been properly reflected on the government's balance sheet.
Auditors discovered the loan when looking into the 2004 state budget - in particular, they stumbled upon it from audits of airBaltic accounts by Ernst & Young, a Big Four accounting firm. Sudraba said at the time of the loan there had not been a reliable system for keeping accounts on behalf of the state, particularly on loans signed by an entity other than the Finance Ministry.
Arnis Muiznieks, director of the aviation department at the Transport Ministry, told the Baltic News Service that the ministry started managing airBaltic only after the loan was signed. Questions about the failure to record the loan should be addressed to the Latvian Privatization Agency, he said.
The ministry's press department said that the ministry came in control of airBaltic shares in 2000 by government resolution; however, it did not have legal grounds for taking over the loan, which was signed Dec. 13, 1996.
Airline officials were calm about the news. Airbaltic spokeswoman Vija Dzerve was quoted as saying, "There is a claim for this debt on the part of airBaltic. The repayment of the loan is governed by an agreement which is being followed."
She said that the debt has no effect on ownership or distribution of shares in the company.
Transport Ministry Ainars Slesers also said the state would not suffer as a result of the loan. As he explained, the state did not provide a warranty for the loan, nor did not pledge its shares as collateral. He said the loan remained unpaid as, pursuant to the contract, it must be paid through dividends, which have not been paid so far.
Slesers said his ministry had informed the Finance Ministry about the loan in order to determine how to book it.