Flick under investigation

  • 2011-08-03
  • From wire reports

RIGA - AirBaltic chief Bertolt Flick, who once proclaimed himself as the guarantor of the airline’s stability, now finds himself the target of a criminal process that has been started by the Corruption Prevention Bureau (CPB), said the Transport Ministry, reports Nozare.lv. The Ministry points out that if an investigation leads to evidence that Flick is guilty in the case against him, this would be enough of a basis to dismiss him from his post at the airline.
According to the CPB, there is a good possibility that Flick has committed a crime. However, no security measure has been imposed on the airline’s president, which means that there is no legal basis to restrict his activities at airBaltic or dismiss him.
The ministry added that if Flick is dismissed at this moment, there is a risk that the state would have to pay him large sums of money in compensation.

Flick’s name has been mentioned in the recent “oligarch” case, with the CPB previously carrying out searches at airBaltic offices and Flick’s home. The airline head’s legal representatives previously reported that their client is not a defendant, nor a witness in the case.
The CPB believes that current Saeima member Ainars Slesers (For a Good Latvia), before the 10th Saeima elections, asked Flick to engage in illegal activity with the airline’s or ‘Live Riga’ finances in order to channel money to popularize Slesers and Latvia’s First Party/Latvia’s Way in the media.

Slesers asked Flick to sign fictitious contracts with several mass media companies on advertising airBaltic services or promoting the image of Riga (through ‘Live Riga’); however, the money was channeled to promote Slesers and Latvia’s First Party/Latvia’s Way.

The CPB believes that Flick abused his power and carried out Slesers’ plot. Flick signed two fictitious agreements with companies owned by mass media owners, and transferred at least 100,000 lats (142,800 euros) to them.
Meanwhile, with Flick staying out of Latvia and running the airline from his base in Germany,  shareholders are left waiting for him to submit information regarding the request to increase the airline’s share capital. Until this is in, the shareholders’ agreement cannot be reviewed, says the Transport Ministry.

The ministry has urged the airline’s private shareholder Baltijas aviacijas sistemas (BAS) to approach this issue with responsibility, as the decision on a share capital increase must be connected with several other issues, such as amendments to the airBaltic shareholder agreement to ensure the airline’s successful development.
Flick previously said that the airline’s share capital must be increased for the further development of the airline, including fleet modernization that is estimated to cost around 100 million lats.

Transport Minister Uldis Augulis (Union of Greens and Farmers) said the decision on increasing the share capital must be made now, as every day that passes without any constructive solution to this issue “may have negative impact on the airline’s development.”
Transport Ministry State Secretary Anrijs Matiss emphasized that the state needs to know the airline’s positions that will require additional funding.

What the Latvian government decides to do with its shares of the airline remains an open question.
The Federation of Latvian Aviation Unions says it would be interested in acquiring airBaltic shares; furthermore, the federation made this proposal already ten years ago, notes the federation’s expert Dmitrijs Nikolajevs.
The Aviation Unions Federation recently reminded Augulis about its offer, and Augulis said he approved of the idea, said Nikolajevs.

At the same time, Nikolajevs emphasizes that the situation remains utterly uncertain. The opinion of the other airBaltic shareholder, BAS, remains unknown; it is also important what the Cabinet of Ministers will say about the idea this month, when the government will consider the airBaltic matter again.

Nikolajevs explains that, for instance, airBaltic employees could be offered to buy airBaltic shares. The airline employs 3,000 people altogether. It would be premature to talk about the conditions of the deal and the funding for it; first the opinion of the government and of BAS must be clarified. The offer concerns a comparatively small stake in the airline - around 6 percent.
Flick’s announcement of his desire to move the airline’s headquarters to Vilnius hasn’t helped the situation.
The talk about moving the airBaltic head office from Riga to Vilnius resembles blackmail, says former Riga International Airport chairman Dzintars Pomers in an interview with the business daily Dienas Bizness.

The state has received an offer from BAS to alter the shareholders agreement and move the head office to Vilnius.
Pomers explains that it is possible to move the airline’s head office elsewhere, since Latvia is a European Union member state and the airline can easily relocate to any other EU country and re-register there. Currently, airBaltic keeps several planes in Vilnius, therefore the airline has experience working with Vilnius Airport. “Besides, it is obvious that airBaltic President Bertolt Flick, who also partially owns BAS, is doing as he pleases,” pointed out Pomers.

Pomers emphasizes that, nevertheless, it is still unclear how airBaltic would benefit from moving to Vilnius.
The proposal to alter the shareholders agreement resembles blackmail, he asserts. It has been known for quite a while that the airline requires significant funding to increase its share capital. The government, however, previously pointed out that the state currently does not have the necessary amount of money and it does not plan to invest additional funds into the airline. Therefore it is possible that BAS wants to provoke complaints about the government that will not allocate the necessary funding for the airline, forcing [a] move to Vilnius; thus Latvia would lose its national airline, explains Pomers.

Despite the airing of the company’s dirty laundry in public, its 2010 annual report is still reportedly being harmonized with the auditors, who have come up with several questions during the audit, reports daily Diena. According to the law, the report was due Aug. 1. The airline has informed the State Revenue Service about the delay.

Matiss explained that the report is delayed because the airline’s board is harmonizing it with Pricewaterhouse Coopers, the auditor. When confirmed, the report and the auditor’s conclusions will be submitted to the airline’s council for approval. The Transport Ministry is informed about the delay, and the airline’s board is currently tackling this issue, claimed Matiss.
AirBaltic council chairwoman Santa Glazniece declined to comment on any information about the airline’s report and contacts with its auditors. According to unofficial information obtained by Diena, this past June Pricewaterhouse Coopers sent a letter to the airBaltic council with several questions regarding the airline’s audit.

The report is also delayed due to the fact that the airline’s council has still not been appointed. The ministry will not accept the report without the council’s confirmation, emphasized Matiss.
On June 21, representatives from BAS decided to step down from airBaltic’s council.