VILNIUS - As the privatization of the country's alcoholic distilleries falters over yet more stumbling blocks, the government agencies responsible for the process have come under increasing criticism for their alleged mishandling of the deals.
Whereas the sell-off of majority stakes in Lithuania's four major alcohol producers began early this past summer, only one has been seen to completion without a high-level legal battle.
The largest challenge to the credibility of the privatizations occurred on Nov. 12, when Aloyzas Sakalas, chairman of the special commission investigating President Rolandas Paksas and his advisers, announced he had received information implicating interference in the privatization process by presidential advisers.
According to Sakalas, the privatization of the Alita and Stumbras distilleries-the largest of the four-displayed "evidence of the influence of criminal structures" who gained access to the process through the president's office.
The Prosecutor General's Office is currently investigating these claims.
Suspicion over Stumbras, Lithuania's largest vodka distiller, and Alita, producer of sparkling alcoholic beverages, arose earlier this autumn when both companies were sold to bidders not offering the highest price.
The resulting turmoil caused a diplomatic dispute between Lithuania and Latvia over the rejection of Latvijas Balzams' top bid for Stumbras and a minor political crisis due to the government's repeated waffling with Alita.
Unofficial sources report that Alita is now to be sold to a group of the company's current managers who put up only the fourth largest bid in the process.
Stumbras attracted additional attention in late November when reports arose that its new owners, the beverage distribution company Mineraliniai Vandenys, had made a loan worth 70 million litas (20.3 million euros) to an undisclosed beneficiary using company cash. The move caused speculation that Mineraliniai Vandenys, a subsidiary of the massive Kaunas-based MG Baltic conglomerate, had used Stumbras' cash flow to partially finance its purchase.
Yet another blow to the government was dealt in late October when the Lithuanian Artrio-2 beverage group reneged on its 20 million litas contract to purchase a controlling stake in Anyksciu Vynas, a distiller of fruit wines. The privatization will be reopened next year.
After more than half a year of attempts to put Lithuania's distilleries in private hands, only Vilniaus Degtine, a vodka producer and the smallest of the four companies, was sold according to the timetable and along the criteria set by the government at the outset of the process.
An 82 percent stake in Vilniaus Degtine was sold to the Polish beverage distributor Sobieski Dystrybucja, a subsidiary of the French company Belvedere, in early autumn.
In spite of the seeming irregularities in the alcohol privatizations, officials at the State Property Fund, the agency charged with overseeing the sell-off of government-held entities, continue to defend their work.
"I believe the privatizations that have been completed so far have been successful," said Antanas Malikenas, director of privatization at the State Property Fund.
"All of the privatizations attracted a high level of competition, and all of them received very high bids, sometimes four times higher than the initial asking price. This was very favorable to us in terms of revenue side participation," he said.
Analysts who have been following the issue are of a different opinion.
"It would be difficult to call these privatizations successful. Several of them are under investigation by law enforcement. For this reason alone I wouldn't call them successful," said Remigijus Simasius of the Lithuanian Free Market Institute.
Simasius furthermore disputed the claim that the initial prices set for the majority shares in the distilleries were in line with market standards.
"In the case of Anyksciu Vynas the buyer was unable to produce the money necessary to fulfill the contract, which leads one to believe that the initial price was actually too high," he said.
As to Stumbras' controversial loan, which has solicited calls of immoral business practice, both the government and analysts view the company's actions with calm.
"Stumbras' large cash holdings were, of course, reported in the list of assets the State Property Fund supplied to potential buyers. This means that the value of the cash would have automatically inflated the value of the company and, therefore, the bids companies made. We can see this in the high price [152 million litas] paid for Stumbras," explained Simasius.
The State Property Fund hopes to finalize its deal for Alita by Christmas, while the prosecutor's office will continue its investigations into next year.
