New PV board threat to RVR

  • 2012-05-24
  • From wire reports

RIGA - Latvian Transport Minister Aivis Ronis has urged officials to refrain from speaking out on the train supply contract signed by the rail passenger company Pasazieru vilciens (PV) and Spain’s Construcciones y Ayxiliar de Ferrocarriles, S.A. until the meeting of the representatives from the Transport Ministry, PV and the Finance Ministry, with European Commission officials, is complete. Ronis says that any of the officials’ public opinions are assessed not only by Latvia’s society, but also by the European Commission. A negative environment is unacceptable ahead of these important talks, warns Ronis’ representative, Aivis Freidenfelds, reports LETA.

Commenting on the train procurement project, the minister repeatedly emphasizes that the new trains are needed to renew PV rolling stock and restore high quality train manufacturing traditions in Latvia, and thereby to create new jobs.
100 million lats in financing at risk
The meeting with the EC is scheduled for May 25.

The European Commission has warned Latvia that if implementation of the train supply contract continues as is, Latvia may lose, and have to itself pay the 100 million lats (142.8 million euros) that were to be provided from the European Union’s Cohesion Fund as co-financing for the project, according to a letter that the European Commission has sent to the Latvian Finance Ministry.
The letter emphasizes that if the implementation of the contract continues, the authorities of Latvia will be violating EU public procurement regulations. The European Commission urges the Latvian authorities to find an alternative and take the necessary decisions now.

Board shuffle
Nils Freivalds stepped down as chairman of the board at PV on May 18, and was immediately replaced by Artis Birkmanis, previously a board member at the state-owned Latvijas Gaisa satiksme (Latvian Air Traffic).
Freivalds had previously denied Finance Ministry accusations regarding the procurement, which claimed that in organizing the procurement of new trains, PV had not only failed to observe official objections from several ministries and other authorities, but also ignored the government’s own recommendations.
The former chief said that expert opinion considered the draft contract as legally good for signing, and that “no laws have been violated.” Prime Minister Valdis Dombrovskis (Unity) said that there are “shortcomings in the contract on the construction of new trains.”

Pasazieru vilciens’ new board, appointed on May 24, brings with it a new scandal.
Joining new board chairman Birkmanis are board members Anrijs Brencans, Silvija Dreimane and Aigars Stokenbergs.
The problems start here. The Reform Party believes that the way the company’s new board was appointed is “unacceptable,” and the Unity party is demanding an explanation.

Qualified maybe, but insiders nonetheless
Brencens previously worked as CEO and council chairman at VRC Zasulauks. He has a Master’s degree in economics from the BA School of Business and Finance and is currently the head of the Riga City Council’s Development Department bureau. Brencens is associated with All for Latvia!-For Fatherland and Freedom/LNNK.
Dreimane has been working in various jobs at railway company Latvijas dzelzcels since 2003; she is currently advisor to Latvijas dzelzcels’ President Ugis Magonis. Dreimane has a degree in law from the University of Latvia. Dreimane participated in the 2010 elections as a candidate representing the Union of Greens and Farmers.

Stokenbergs has worked as the Justice Minister, Minister of Regional Development and Environmental Protection, and Economy Minister, representing first the People’s Party and later the political association Unity.
Transport Minister Ronis’ representative, Aivis Freidenfelds, said that the new board members were selected based on their professional competences, without taking into consideration their political party membership.
Transparency International-Latvia (Delna), however, believes that the appointment of party-affiliated persons to Pasazieru vilciens’ board contradicts the government’s promises. Therefore, Delna has sent a letter to Dombrovskis and Ronis requesting explanations regarding the board’s make-up and appointment.

The way the board has been replaced was “non-transparent, incomprehensible and cannot be supported,” believes Economy Minister Daniels Pavluts. He says that the principles which the ministers of the rule of law and reform coalition approved a week ago, together with the Reform Party’s ministers - transparency, sound corporate management, openness - were not observed in the move, said Pavluts’ press secretary Daiga Grube.
“Furthermore, no comprehensible reasons were given as to the criteria and procedure used for selecting the new Pasazieru vilciens board members - competences, skills, experience and knowledge candidates had to have,” says the minister.

In Pavluts’ opinion, the way the board was replaced clearly indicates that reform of government-run companies must be urgently implemented, to ensure that such non-transparent practices, like appointing the heads of state-owned companies, are “maximally minimized.”

Eyes turn on Stokenbergs
Ex-minister Stokenbergs says he has been appointed a member of the board to bring order to the new train procurement process. “Transport Minister Aivis Ronis wants me to bring order to the matters that deal with the European Commission’s objections regarding the procurement of new trains. So I will probably have to visit Brussels in the near future already to discuss these issues,” the ex-politician says in an interview with the business daily Dienas Bizness.
Stokenbergs says that, although he has a business in Sweden, “I do not want to pay extraordinary sums for the train as a resident of Latvia.”

Visions of airBaltic privatization
The actual task for Stokenbergs as a new board member at Pasazieru vilciens is to pave the way so that the state can take over Rigas vagonbuves rupnica (Riga Rolling Stock Factory, RVR), a subcontractor in the train procurement agreement with the Spanish, reports the portal

Stokenbergs has been appointed as board member to find a way for Unity to gain control over the new train procurement, which is worth millions of lats and has so far been associated with Ventspils Mayor Aivars Lembergs, the portal writes. The RVR takeover scheme could be similar to one the government used for the national airline airBaltic.
Sources informed that, during the Unity board meeting Monday evening, several Unity members made highly critical remarks about the nonpartisan Transport Minister Ronis’ decision to replace the Pasazieru vilciens board. Unity leader Solvita Aboltina said at the meeting that she and Unity’s Saeima group head Dzintars Zakis had not been informed about the appointment of Stokenbergs and Dreimane (the latter associated with the Union of Greens and Farmers), on the board.

Officially, Stokenbergs’ objective, as board member, is to use his experience and authority he gained in previous posts to carry out negotiations with EU institutions, or to prevent any possible financial sanctions against Latvia, or help EU institutions to formulate a new – smaller scale – train procurement project.
Unofficially, Unity has found a lawyer with business experience - Stokenbergs - who is able to plan the takeover of the procurement project and RVR using a similar scheme as was done with airBaltic. Stokenbergs was chosen to come up with a plan so that Unity could “have a finger in the pie.”

Sources close to the procurement process say that scenarios for the project show a similar ending as with what happened with airBaltic, and result in the takeover of RVR, as all this is indicated by the last week’s talks between the company and the Latvijas Krajbanka administrator.

Ronis’ motivation
Ronis on Tuesday declined to comment if he might have been pressured by Unity regarding the appointment of Stokenbergs. recalls that RVR pledged its entire property as collateral with the now-defunct Latvijas Krajbanka on May 31 last year. The company is in loan transfer talks with Swedbank, and the talks are nearing completion, but these new developments may result in RVR being taken over by the state.

Stokenbergs on front line for Lembergs
Stokenbergs finds himself now suspected of defending Lembergs’ interests. Two years ago the media discussed reasons behind a meeting between the two. This meeting was regarded with suspicion, as a way for Stokenbergs to get the Justice Ministry appointment.

According to the portal, the Justice Ministry has traditionally been important to Lembergs due to its control-bound Enterprise Register, which has long had important influence in the struggle among Ventspils companies. It should as well be added that during the time when Stokenbergs held the post of the Economy Minister, the sale of state-owned Ventspils nafta (VN) shares, which then was attractive for the Ventspils city mayor, was realized, in October 2006. The buyer of 34 percent of VN shares was the international concern Vitol, which was thought to be agreed upon by the Ventspils mayor. Still, Stokenbergs denied that VN shares were sold in favor of Lembergs.

The European Commission has given its warning to Latvia. As is often the case with the Latvians, when presented with a straight-forward competitive bidding process to upgrade and modernize its rolling stock, they have turned the procedure into a thriller, and a potentially costly and wasteful one to the taxpayer, due to narrow and well-connected special interests.