Investor: Subterfuge undermined bank sale

  • 2003-05-29

Storm clouds continued to thicken over the head of Ventspils Mayor Aivars Lembergs last week, as a shareholder in Latvijas Krajbanka claimed that other shareholders had conspired to prevent the May 15 auction for a 25.01 percent stake in the bank from taking place.

The shareholder, Macasyng Holding B.V., issued a statement on May 22 explaining why the Netherlands-registered firm opted not to participate in the auction though initially it had wanted to.

In the statement, a Macasyng official accused minority holders of Latvijas Krajbanka -all of whom are based in Ventspils -of trying to entice Macasyng into a secret deal whereby the company would essentially pay the other shareholders not to participate in the bidding.

According to Vilis Dambins, the Macasyng representative who issued the statement, the company was approached twice by other bank shareholders with two separate deals -one before the government's official announcement of the sale and one after.

Initially, it was thought that the government would accept privatization vouchers for Latvijas Krajbanka shares, but eventually it was decided to stick to a cash-only auction, with the highest bidder taking home the stake.

"Whether other bidders joined the auction or not, Macasyng would have to undertake unlawful liabilities to pay the shareholders from Ventspils from staying out of the bids," said Dambins.

The Ventspils-based shareholders whom Dambins was referring to include Lembergs, Ansis Sormulis and Girts Rungainis.

Three companies registered in Ventspils -Kalija Parks, Ventbunkers and Ventamonjaks -control 26 percent in the bank, while Lembergs owns another 3 percent.

For its part, Macasyng is said to control 29.18 percent of Latvijas Krajbanka, according to bank officials.

All three of the Ventspils-based shareholders tried to have the auction stopped through various court appeals, though each one failed., according Dambins.

Considering that these three companies are also closely linked to Ventspils Nafta, the country's strategic oil export port, and are currently trying to purchase 5 percent of that company in order to gain majority ownership, it is possible that they didn't have enough cash to acquire both assets and so therefore tried to stop the sale of Latvijas Krajbanka, Dambins said.

The 25-percent stake was eventually purchased by Doxa Fund Limited, an unknown entity registered on the British Virgin Islands, at face value -4.1 million lats (6.3 million euros).

Surprisingly, only one bid was made for the stake in Latvijas Krajbanka.

Formerly a state-owned savings bank, Krajbanka is the country's seventh largest boast in terms of assets and boasts a well developed retail chain.

It is still unclear who stands behind Doxa, and it was reported that Prime Minister Einars Repse asked the Finance and Capital Markets Commission to look into the company's origins.

Speaking on national radio, Repse put a positive spin on the sale, saying it will lead to consolidated control over the bank's operations, which have suffered as a result of internal squabbles.

Still, the fact that the sale of such an attractive financial asset only attracted one bidder who offered the minimal price has angered government officials, who may be keen to investigate whether the sale was indeed sabotaged by the bank's current shareholders.

On May 26 it was reported that Dambins had asked the Corruption Prevention and Enforcement Bureau to investigate actions by current Latvijas Krajbanka shareholders, including Lembergs.

"Lembergs tried to influence the auction of the state holdings in the bank for direct or indirect personal gain," said Dambins.

A week ago the anti-corruption bureau announced it was going to investigate claims by another individual that Lembergs is connected to offshore companies that control Ventspils Nafta.

The claims were made by Julijs Krumins, a former associate of Lembergs, in a newspaper interview.

Though it has been rumored for years that Lembergs controls Ventspils Nafta through offshore companies, this was the first time someone so close to the Ventspils mayor openly made the claim.