RIGA - Controversy surrounding Latvijas Krajbanka, one of Latvia's largest retail banks, returned to the headlines last week as a local court issued a ruling defending several shareholders' rights and a murky foreign shareholder sold part of its significant stake to two unknown companies.
Latvijas Krajbanka was gripped in controversy last year after the government sold 25.01 percent of the bank in an open tender to Doxa Fund Limited, registered on the British Virgin Islands, for the price of 4.1 million lats (6.3 million euros), or slightly over the starting price.
Three minority shareholders in the bank - Ventamonjaks, Kalija Parks and Ventbunkers - which together hold 25.11 percent of Latvijas Krajbanka shares, tried unsuccessfully through the courts to halt the sale on the basis that they had not been given priority rights to buy the state-held stake in May 2003.
Last week the scales tipped in favor of the Ventspils-based shareholders, as the Riga Regional Court upheld their complaint against a decision by Latvia's Finance and Capital Market Commission not to allow them a significant interest in Latvijas Krajbanka and to ban these companies from using their shares for voting at shareholder meetings.
The commission based its decision on the fact that the consistently united efforts of the three shareholders created the perception that they were controlled by the same owner or group of owners.
Lawyers for the plaintiff argued that the commission's stance was based on assumption not fact, which the court agreed with.
The commission said it would appeal the ruling.
Using the newly won momentum, Ventamonjaks last week amended its claim filed last year against the Latvian Privatization Agency and requested that the court nullify last year's auction on the basis that the sale was illegally reclassified from a closed issue to a public issue (which thus prevented the shareholder from exercising its priority right).
Ventamonjaks stated that it still wanted to buy a percentage in Latvijas Krajbanka - one that would be proportionate to its present holding of 1.7 percent.
The court agreed to hear the case, but the actual hearing had to be postponed until Oct. 4 since appropriate materials must be sent to the British Virgin Islands, where Doxa Fund is domiciled.
The turnaround in fortunes for the Ventspils-based shareholders has coincided with the confirmation of Indulis Emsis as Latvia's prime minister. Emsis is a member of the Green Party, which is regarded to be under the wing of Ventspils Mayor Aivars Lembergs, a Latvijas Krajbanka shareholder (he owns a 3 percent stake) and an influential force in the three Ventspils-based companies.
Last year an official from Macasyng Holding B.V., a Netherlands-based company that owns a 9.87 percent stake in the bank and reportedly controls nearly 20 percent more, accused Lembergs and the Ventspils-based companies of trying to derail the privatization.
Meanwhile, the Latvian Central Depository reported that Doxa had sold a large portion of its stake in Latvijas Krajbanka - or 15.4 percent of total bank shares - to two unknown companies - Alkahn Power Company and Carbery Services in two block deals. The two companies now own 7.14 percent and 8.24 percent of the bank respectively.
It is not clear why the stake was sold or who the buyers are, though by law Doxa Fund will no longer have to report to the commission as an owner of a significant stake, or 10 percent.
A legal case between the Finance and Capital Market Commission and Doxa Fund is also pending, as the commission has been seeking to prevent Doxa from using its voting rights at shareholder meetings.
It is widely believed that Doxa Fund is connected with Russia since its chairman, Luxembourg businessman Sylvain Imperiale, has represented Russian interests in the purchase of a prestigious Moscow soccer club and in privatizations in Ukraine.
Last year in Riga Imperiale said that Doxa had bought the Latvijas Krajbanka stake not for the purposes of speculation but in the interests of long-term bank development.
In its claim Ventamonjaks requested that Doxa be present during the hearing.
Latvijas Krajbanka is expected to stage a general shareholders meeting on March 19. Last year it was ranked 10th in terms of assets among Latvian banks.
