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The colour of Russian money part 22: a tale of bribes, buses and banks...

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Stephen KomarnyckyjLatvia, the EU, Russia, Ukraine
The colour of Russian money part 22: a tale of bribes, buses and banks...
How the story of a bus company which has been paying bribes to Riga city council for almost twenty years illustrates Putin's success in exporting a corrupt social model into the EU

The Blue Bus… is calling  us…

The Doors

On 25 January 2006 John Christmas, the former head of Parex’s International Group, received a phone call from a terrified ex colleague. She told him that the Parex people were hunting him down and he should stay out of Latvia. Christmas had been dismissed from the bank in 2004 because he was blowing the whistle on the bank’s corruption.

However, the various authorities he contacted, ranging from Transparency International to Britain’s FSA either ignored his messages or agreed that the situation was serious but failed to act. Senior Latvian politicians, such as former KNAB head and finance minister Andris Vilks, who must have known of the frauds, kept silent.

Christmas received threat after threat from the bank’s mob owners. Parex collapsed in 2008 but the network of shell companies linked to Latvia’s banking sector which provides a mafia and Russian intelligence slush fund survived. Similarly many of the schemes utilised by Parex for providing kickbacks to bent politicians survived. One such scheme involved loans to Riga’s public transport company from the European Investment Bank (EIB) where Vilks now works.

Christmas had realised that Parex was breaking the law by lending too much money to Riga’s public transport company, Rigas satiksme, when he was still at the bank. Banks were prohibited from lending over 25% of its equity to one borrower group. However in 2003-2004 the bank was breaking this law by lending over the 25% limit to Riga city and its subsidiaries, which included Rigas satiksme. The bank’s financial statements for 2003-2004 were falsified to disguise its law breaking. Parex ultimately persuaded the Latvian financial regulator the FKTK to allow Riga city’s subsidiaries to be excluded from the 25% rule. However, it still broke the regulations by lending over 25% of its equity to a single Riga city subsidiary, Rigas satiksme, in 2003-2004.

The bank disguised this by pretending that the loan was split between Rigas satiksme and a Polish bus company, Solaris, in its financial statements. John believed that some of the money was being paid in kickbacks to Riga politicians. “It was made absolutely clear to me when I worked at Parex” he says “that this was a criminal plot.” Christmas tried to persuade his colleagues to stop the fraudulent loans but to no avail. He would ultimately be mauled by a publicity campaign orchestrated by the bank and the Latvian establishment to discredit his whistle blowing and his allegations were ignored. Viktors Zakis issued pres releases and organised media pieces attacking Christmas's credibility and insisting that Parex was solvent prior to its collapse. He subsequently  found a job with Rigas satiksme  

Even after Parex collapsed in 2008 other banks and the EIB continued to pump money into Rigas satiksme. Andris Vilks  took up a position at the EIB, which he still holds, during his period as Latvia’s finance minister in 2010-2014. He must have known about Christmas’s allegations but seemingly did nothing to stop the flow of funds from the EIB into the corrupted Latvian firm via loans to Riga city. However Christmas’s suspicions were confirmed in 2010 by a United States Department of Justice (USDJ) case against the German car manufacturer Daimler. The case related to EvoBus a subsidiary of a Daimler business unit unimaginatively entitled Daimler Busses. EvoBus’s Baltic distributor had paid bribes to Latvia city council officials in 2000, having been informed that a competitor, which was the Polish firm Solaris buses, was also bribing its way to winning a tender.

EvoBus “understood this communication to mean that it too would have to pay bribes…” EvoBus won part of the tender in 2001 and supplied buses worth approximately €30,000,000 over the next six years. However, the bribes totaling €1,800,000 were paid in part by inflating the price of the buses and disguised via bogus consulting contracts with two US registered firms, Oldenburgh Financial Corporation ("Oldenburgh") and United Petrol Group LLP ("UPG"). The kickbacks were paid via these companies in 2002, 2003, 2006 to the different political parties who controlled Riga council in this period. The recipients of Daimler’s largesse included the ex-mayor of Riga Gundars Boyars and the ex-vice mayor. One of political parties involved was Jaunais laiks (New Era) which was eventually renamed Jauna Vienitoba (New Unity). Vilks is a member of that party along with ex PM and current EU commissioner Valdis Dombrovskis and the current Latvian PM Arturs Krisjanis Karins. All of the Latvian politicians whether they were pro or anti-Putin were united by their love of dirty money- and all of them by their actions supported a Kremlin agenda of exporting Russia’s corrupt social model into the EU.

One of the competitors who had paid bribes to council officials in this period was the Polish firm Solaris Busses. The firm was not prosecuted and the kickbacks continued when Nils Usakovs of the pro-Russian party was Mayor of Riga from 2009-2019. The EIB continued to pump money into Rigas satiksme during this period and Solaris continued to pay bribes to council members. Did Vilks know what was going on? It’s hard to believe that he was unaware of the kickbacks from Solaris.

Nils Usakovs’s third term as mayor ended ingloriously. He resigned in 2019, less than a year after KNAB, Latvia’s anti-corruption bureau raided the offices of Rigas satiksme and Riga city council in December 2018. They arrested eight people in connection with corrupt tenders during 2016-2019. The bribes had now been paid by fake consulting contracts with approximately forty people who appear to be personal acquaintances/ friends of the mayor. Viktors Zakis had apparently signed the contracts so it may be he rather than Usakovs who is ultimately prosecuted. 

Why had the KNAB not investigated Christmas’s factually accurate allegations over 10 years earlier? Why didn’t they act when Daimler was prosecuted in the USA and the charges referred to Solaris busses? Why has the EIB continued to pump money into Riga’s transport system despite Rigas satiksme being on the brink of collapse for years due to corruption and mismanagement?

Usakovs tried to hang onto his job and narrowly won the vote of no confidence he called on 13 December 2018 when 32 out of 60 city councilors supported him. However, the opposition party’s abstained. On 30 January 2013 KNAB searched his home and office. His pro-Russian political party organised a 3000 strong demonstration in his support on 9 February 2019. A social media campaign depicted him dressed as a concentration camp inmate being led away by Nazi soldiers with a notice saying “Because He’s Russian” in Latvia. He was suspended from his post in April 2019 and resigned in May but has evaded jail to date and successfully ran in the EU elections.

Usakovs’s presence in the EU parliament places a man with possible historic connections to Russian intelligence dating back to 2008, in effect a Russian agent of influence,  and an admirer of Putin at the heart of European policy making.  If the Latvian authorities had  arrested Usakovs for conspiring with a foreign power over a decade ago the subsequent corruption and ultimately financial ruin of Rigas satiksme, which currently has debts of  €350m might have been avoided. If the KNAB had not dismissed Christmas’s allegations several years earlier the corruption at Riga council might have been addressed much sooner. The EIB could have assisted by withholding funding on the grounds of the uncertain financial health of the firm and, indeed, the corruption which was well known long before the KNAB raided the company’s offices in 2018. Vilks almost certainly knew the history of these corrupt schemes but does not appear to have warned the EIB against sinking money into Riga’s corrupt council.

The corruption at Rigas satiksme transcended political boundaries and reached into both pro and anti-Russian parties. Yet all these politicians were, by their actions if not their words, supporting Russia’s aim of exporting its own corrupt social model into Europe. There is a clear link between corruption, Russian influence and the corrosion of democracy as Putin’s social model moves from east to west. One of its emissaries Usakovs now holds a seat in the EU Parliament while another, Dombrovskis, whose actions helped ensure that the Russian mobsters connected to Parex would not be pursued, was until recently  vice president of the EU commission, and  remains an EU Commissioner.

The EU has yet to address how it is being destroyed from within by Russian sponsored corruption. It is arguable that the European ideal died with the cynical failure to address corruption and fascism in its eastern members and Putin’s wars in Georgia, Syria and Ukraine. The unwillingness of international organisations to listen to Christmas’s allegations from 2004 onwards was a significant step along the path to what Putin calls the death of the liberal idea.

Stephen Komarnyckyj is a PEN award winning literary translator and poet whose work is published by Kalyna Language Press and features on the PEN World Bookshelf. You can e mail him on stevekomoffice(at)zoho.eu

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#Latvia, #Russia, #Putin, #Corruption, #Dombrovskis, #Usakovs, #Solaris

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