Was the Latvian Bailout a Fraud?
Over 56,000 people have viewed a Youtube video titled “Latvian Financial Crisis.” It is one of the most popular videos ever about Latvia. The video explains the implications of a document that was published on dissident website www.kargins.com in April 2010.
The document appears to have been prepared by the Latvian government’s consultant Nomura. The document contains a lot of scandalous information about the sale of Parex Bank stock from the Latvian government to the European Bank for Reconstruction and Development (EBRD) and the subsequent management of Parex Bank.
Most scandalous of all, the document indicates that the EBRD has a put option to sell the Parex Bank stock back to the government, apparently in 2014 at a profit to the EBRD of “22%” (per year?). If this is true, then the transaction was not really a sale, but rather a “repo” agreement. The transaction should have been accounted for by the Latvian government as a loan from the EBRD. The press releases made by the Latvian government and EBRD about the “sale” were propaganda designed to cover-up the true financial situation.
The discovery of the cover-up should have been a huge media event in Latvia. The discovery should have been in the headlines of every newspaper. The Latvian Financial Crisis was caused by the government’s decision to use Latvian taxpayer money to bail out Parex Bank and the bailout was done dishonestly. The nation is being smashed apart economically and demographically by this Crisis.
And yet, this story was not in the headlines. It is completely missing in the Latvian press. And,www.kargins.com has been shut down. I received an email from Delna (Transparency International) indicating that dissident Lato Lapsa was forced by the government to shut down the website.
That sounds like censorship to me. Could it be true that the Latvian government’s Parex Bank bailout was fraudulent and the story is censored from the Latvian media? This is what the evidence suggests.
However, it is hard to get the full story since the EBRD refuses to admit or deny that the put option exists. The EBRD has beautiful language on its website about how it listens to whistleblowers and fights against fraud and corruption. This makes sense, since the EBRD is funded by taxpayers from 61 countries for the purpose of helping the economies of Eastern Europe. However, I am the whistleblower from Parex Bank and I have sent four registered letters and over a hundred emails to the EBRD since 2009 and I am still waiting for a reply.
Lithuanians should be concerned about the possibility of dishonest dealing between the Latvian government and the EBRD. And, all other Europeans should be concerned as well. Government-perpetrated fraud combined with media censorship is an extremely serious issue. Everyone reading this article with influence in Lithuanian and/or European government should join together to demand that the EBRD explains its action.
John Christmas is a former employee of Parex.