CPB grabs money laundering executives

RIGA - The shock waves reverberating through Latvia’s electric utility Latvenergo due to criminal charges against top executives has the new acting board chairman, Uldis Bariss, recommending that professionals from outside the Latvenergo Group be appointed as board members, reports Nozare.lv. The appointment of Latvenergo’s board is done by the Economy Ministry, which represents the largest company shareholder, the Latvian state.

Latvenergo deputy chief Bariss was appointed as acting chairman of the company’s board at the extraordinary shareholders meeting on June 22, after group head Karlis Mikelsons was removed from his post. Mikelsons, along with four other executives, was arrested on June 15 by the Corruption Prevention Bureau (CPB), suspected of abuse of office, accepting bribes and money laundering during the period from 2006 to 2010.

The CPB announced that in the case against the corporate executives, 1.1 million euros were laundered. The Bureau says that avarice and material gain prompted the officials to use their positions in bad faith and to operate counter to the company’s and shareholders’ interests. The individuals secured favorable decisions for certain private enterprises in connection with public purchase and reconstruction projects.

Minister of Economy Artis Kampars (New Era) has said that the ministry would start to work on an internal control system at Latvenergo so as to reduce the risk of further corruption. The Economy Ministry has launched its own probe into the ministry’s actions regarding Latvenergo’s procurement tenders from 2006, and it is planned that the investigation would be completed by the end of July.

The four other executives detained in the case, besides Mikelsons, include his deputy Aigars Melko, Sadales tikls board chairman Ivars Liuziniks and his deputy Andrejs Stalazs, as well as Sadales tikls technical director for the eastern region, Edgars Vitkovskis. Also arrested was Buvenergoserviss Ltd. sole owner and CEO Mihails Paladijs, along with Andrejs Livanovics.

This group of seven, and an ‘eighth person,’ conspired to carry out the legalization of dirty money in large amounts, using firms registered in Latvia and abroad. The CPB has pressed charges against all eight. CPB spokesman Andris Vitenbergs said the eighth person, who is an official in a commercial enterprise, has been charged with aiding and abetting the use of an official position in bad faith, as well as supporting large-scale money laundering activities by an organized group.
The Swiss company AF Colenco, which has its office in Latvia registered at a private home in Marupe that belongs to Andrejs Livanovics, has been involved in the Riga 2nd Cogeneration Plant reconstruction project ever since it started six years ago. Swiss national Peter Rock has been the head of the branch since then. Colenco drew up the documents for the cogeneration plant reconstruction tender, and participated in evaluating the bids.

Livanovics’ home in Livani currently officially belongs to his wife, who had the property given to her as a birthday present at the end of 2006. At the same time, the Livanovics signed a prenuptial agreement.
The first round of reconstruction of the Riga 2nd Cogeneration Plant was carried out by the Spanish company Iberdola. It cost 178 million euros altogether, whereas the second reconstruction round is projected to cost almost twice as much - 350 million euros.

“Political backing” cannot be ruled out in the alleged wrongdoing, but “this is up to the court to find out,” said Prime Minister Valdis Dombrovskis (New Era) in an LTV1 interview. Dombrovskis had responded to a question from the moderator about whether such a huge sum laundered through Latvenergo could have happened without political complicity. The prime minister praised the decision of Moody’s Investors Service that there would be no immediate impact on the company’s credit rating, despite the current situation.

Andrejs Livanovics is also owner of Energy Consulting Ltd. Mikelsons’ income declaration shows that Energy Consulting, in 2007, paid Mikelsons over 500,000 euros for the purchase of real estate. Another Livanovics-led firm, AGZ, in 2007 also purchased a two-story townhouse in Riga’s Bergi suburb from Melko’s daughter for 230,000 lats (328,500 euros). She paid 45,000 lats for it in 2005.

In 2007, Energy Consulting reported record profit at 1.8 million lats, thanks to a number of contracts with foreign power companies. Industry experts say that these consultations may be connected to these foreign companies’ business interests in Latvia, including participation in tenders. During the period in question, from 2006 to 2010, Energy Consulting made close to 3 million lats in profit.

Livanovics previously was the Alstom Power concern’s representative in the Baltics. This concern is a long-time partner of Latvenergo through various reconstruction projects.
Another company, Estonian Isengar, paid Mikelsons 571,200 euros for unidentified real estate property, also in 2007. In 2007, Isengar became sole owner of AGZ.