Snoras declared bankrupt

  • 2011-11-30
  • By Rokas M. Tracevskis

UNSAFE BET: Andrius Kubilius says that Snoras is the exception, that Lithuania’s banks are safe.

VILNIUS - On Nov. 24, the Lithuanian government agreed with the recommendation of the Lithuanian Central Bank to announce the bankruptcy of Snoras Bank, which used to be under the ownership of the London-based controversial 36-year old Russian businessman Vladimir Antonov (68.1 percent of Snoras’ shares) and 52-year old Raimondas Baranauskas (25.31 percent). When Snoras was nationalized on Nov. 16, the government was still cherishing plans to keep the bank alive: on Nov. 17, the Lithuanian parliament on the initiative of the government even passed laws allowing for the restructuring of Snoras into a ‘good bank,’ with valuable assets and deposits up to 100,000 euros, and a ‘bad bank,’ holding troublesome loans and securities. However, after investigating the situation more precisely, Vitas Vasiliauskas, Lithuanian Central Bank Board Chairman, said about the bank, “We thought that it was a heavy case of influenza, but we discovered cancer.”

On Nov. 24, Vasiliauskas said that 3.4 billion litas (1 billion euros) out of a total officially declared 8 billion litas of Snoras assets are missing. On Nov. 17, Vasiliauskas spoke about the lack of only some 1 billion litas.
Prime Minister Andrius Kubilius also held a press conference on Nov. 24. “It looks more like a skullduggery office, which was, in a sense, cheatingly alluring money from people. It was a semi-pyramid scheme to satisfy the business interests of Antonov and Baranauskas,” Kubilius said. Indeed, in October, Snoras offered the highest annual interest rate for deposits in litas - 2.7 percent.

Vasiliauskas emphasized that the revival of Snoras is mission impossible. “It would be necessary to expand the bank by 40 percent, which is unrealistic, or to minimize its expenditures by 80 percent, which is unrealistic as well, to keep the bank functioning,” he said.

According to EU laws, all the deposits in the bankrupt bank, up to 100,000 euros, should be compensated by the state. There are 4.1 billion litas on the Snoras accounts insured under this law. The return of money to account holders should be done via other Lithuanian banks and should be finished during the Christmas season “until Epiphany, at the latest,” as Kubilius said. The final count showed that the share of accounts of state institutions (including several municipalities, some hospitals and the Lithuanian Olympic Committee) is not big – just 350 million litas.

Finance Minister Ingrida Simonyte said no state budget money will be used for this compensation: 1.6 billion litas have been collected by Lithuania-based banks in the fund for such emergency cases of bankruptcies, while on Nov. 8, the state government borrowed another 2.5 billion litas which will be used for this compensation. The government hopes to get back that borrowed sum later after the sale of Snoras assets.

Some 90 percent of all account holders in Snoras should be compensated 100 percent because they kept less than 100,000 euros on their accounts. Snoras was mostly a bank for individual accounts, while the share of business accounts was not large. There are 50,000 businesses registered in Lithuania. Only 900 of them had accounts in Snoras. Only 240 of them will not be compensated 100 percent. “Some 30 companies can have liquidity problems,” Economy Minister Rimantas Zylius said on Nov. 25, adding that the capitalization of these 30 companies is 9.3 billion litas, i.e. 0.01 percent of the capitalization of all Lithuanian companies.

On Nov. 24, Antonov, who is known in England as the owner of Portsmouth Football Club, and Baranauskas, both officially suspected of financial wrongdoings in Lithuania, were arrested in London at the request of Lithuanian prosecutors. On Nov. 25, both suspects were released by Westminster Magistrates’ Court on conditional bail – Antonov paid 75,000 pounds (87,000 euros) in bail while Baranauskas looked more precious to Judge Caroline Tubbs and was released for 250,000 British pounds.

“In case they would agree to be extradited, they can be here in 10 days. If they contest it, it can take some 60-90 days or more in case of appeal,” Lithuanian Prosecutor Tomas Krusna said during his briefing on Nov. 25. In fact, the process of transfer of Antonov and Baranauskas to Lithuania can take a year, according to law specialists. Antonov and Baranauskas are defended by the same expensive British law firm Mishcon de Reya, which represented the interests of Princess Diana during her divorce from Prince Charles. Both former owners of Snoras can get up to 10 years in prison in Lithuania for financial wrongdoings. Krusna was skeptical about the chances of Antonov and Baranauskas getting political asylum in the UK. “Lithuania and the UK are members of the EU and there should be no talk about political asylum,” Krusna said.

“The criminal smell of the mafia was coming from each corner of Snoras,” economist Ausra Maldeikiene told LTV on Nov. 22. She pointed out that the small Ukio Bankas, owned by Lithuanian citizen Vladimir Romanov, could be another similar case, according to her, and wondered why Reinoldijus Sarkinas, Lithuanian Central Bank Board Chairman from 1996 to April 2011, did nothing about Snoras.

PM Kubilius stated that the rest of Lithuania’s banks are safe and Snoras is the exception. Prosecutor General Darius Valys did not exclude the possibility that Sarkinas can be questioned by prosecutors about the Snoras case. Vasiliauskas, Central Bank Board Chairman since April of this year, was appointed by the Lithuanian parliament on the proposal of Lithuanian President Dalia Grybauskaite. He was the head of her presidential election campaign headquarters in 2009.

The Snoras story has its comic side as well. Sigita Baranauskiene, wife of Baranauskas, found out about the nationalization of Snoras while sitting in a hairdresser’s shop in Vilnius (she planned to watch a fashion show that evening) and immediately ran, not waiting for the hairdresser to finish. She took Snoras’ Mercedes-Benz, with a driver, and headed for Riga. The car was confiscated by Lithuanian customs officials on the Lithuanian-Latvian border and she waited on a cold night in a field for some hours until her daughter arrived from Vilnius with another car and gave her a lift to Riga. Baranauskiene appeared in Kiev on the same day as Grybauskaite, Nov. 22. While Grybauskaite was passing the EU’s message to Ukrainian President Viktor Yanukovych about the necessity to release opposition leader Yulia Tymoshenko from prison, Baranauskiene kept giving phone interviews to Lithuanian media and comparing Grybauskaite to Stalin.

However, an absolute majority of Internet comments greeted the government’s action against the shady bank and made fun of Baranauskiene. Snoras never had a good name. A majority of those in Vilnius, who last week, due to not having an electronic bank card, were waiting in lines near Snoras to get their daily 500 litas from their accounts, spoke with a Slavic accent and probably did not bother to read all the scandalous Snoras-related stories in Lithuanian newspapers in the past. For example, in 2002, Snoras announced that 1.2 billion litas of new shares had been acquired by Jean Phillip de Grimaldi, a member of the Monaco royal family who sat on the board of the Luxembourg-based Incorion Investment Holding Company.

The Lithuanian central bank aborted the purchase due to the unclear origin of the money and it was found out that this particular de Grimaldi was some crook from Romania, having nothing to do with the Monaco royals.
The planned meeting between PMs of Lithuania and Latvia in Visaginas scheduled for Nov. 25 was postponed for a week because Latvian PM Valdis Dombrovskis needed to deal with the bankruptcy of Krajbanka. Snoras owned two-thirds of Krajbanka and the bankruptcy of Snoras meant the end of Krajbanka as well. There were some calls from Latvian politicians to the Lithuanian government to save Krajbanka, as Latvia saved the Lithuanian branch of Parex Bank a couple of years ago. Such a request was made by Romualds Razuks, a Vilnius-born Lithuanian who moved to Latvia in 1986 and who was chairman of the Latvian Popular Front which led Latvia towards independence 20 years ago, and later was the mayor of Jurmala and now chairs the Latvian Parliament’s Committee on Foreign Affairs.

Kubilius met Razuks in Vilnius on Nov. 24. “The fact that a certain Mr. Antonov bought two banks, in Lithuania and Latvia, should not spoil our mutual relations,” Kubilius said. The Lithuanian government decided that it has no money to save Snoras, the owner of Krajbanka. Later, Kubilius added that the Lithuanian branch of Parex had only 600 million litas on its accounts, while some five-to-six times more money was placed in Krajbanka’s accounts.