President of Latvia Andris Berzins ended up in the centre of public attention this week. Politologists say it was because of his odd and irresponsible behaviour. This time – how Andris Berzins and his ‘financial family’ got their hands on the privatized Lode company.
‘An interesting fact – in many of his interviews our hero often mentions his big salary (without mentioning any specific numbers, of course), working in a Swedish bank and the largest pension in Latvia that he is provided with. However, he never seems to want to mention the very business deal that made him a millionaire: the sale of Lode company in summer of 2007, when four largest shareholders sold their owned shares worth LVL 1.84 million for LVL 8.99 a piece, earning more than LVL 16.66 million as a result. Andris Berzins earned LVL 4.53 million from this. It is no surprise that there are serious reasons behind his reluctance to speak of this business deal.’ As stated in a fragment of a book by L. Lapsa, K. Jancevska and I.Saatciane ‘Latvietis parastais’ published by Pietiek portal.
‘Lode is a company with a long history – it was built in 1958 as a drainage pipe factory. In 1964, Lode launches the production of clay bricks and in 1987 – roof tiles. In 1996 Janis Slesars’ company is privatized and “a person from the outside” even becomes the holder of the controlling package of shares. This outsider is none other than Edvins Samulis, who is known to the readers of this book as one of our main hero’s long-term associates. […]
Where did he come from? By the beginning of the early ’90, Edvins Samulis, born in 1948, had already achieved much and in many different fields. Born in Gulbene and achieved higher education as economist specialising in industrial planning. He was Chairman of the Planning Committee in Cesis, then – Lode. Around 1983, he becomes Deputy Director of Latvia’s office of All-Union Institute of co-operative trade. He works in various institutions after that, until finally gaining the post in the Riga City Executive Committee, where he works under Alfreds Rubiks.
This person then wins Lode’s privatization tender in 1996 – even though there was no tender to begin with, because he was the only candidate. He promised to pay a significant amount of money for the controlling package of shares in Lode – LVL 490,000. He also promised to invest LVL 1 million in production within the following three years. He then immediately paid only LVL 49,000. The remaining amount is then promised to be paid within the next two yars – LVL 8,791 per month and LVL 2,187 in bonds every quarter (with rights to request permission to repay the remaining amount only in the form of bonds). […]
Yes, 36,547 shares bought for bonds did end up in Edvins’ ownership. But the maximum price of these shares was not set at the announced level of LVL 3-5. The price was three times lower – near LVL 1.76′. In addition to that, public date does not show Edvins selling some of his other shares to procure Lode’s controlling package of shares.
So where did he get this amount of money to perform regular privatization payments? According to Dienas Bizness – it is likely that he took a loan. It is also quite logical for him to have taken a loan in a bank in which he was once Vice-President and was responsible for the loan policy of the institution – Unibanka. However, its Governor Andris Berzins declined that his led bank could have issued any loans to the Lode project. (it should be added that this is where Andris Berzins had simply lied or had no idea what was going on in his own bank. March 12, 1996, in his letter addressed to Director of Privatization Agency, Director of Lode Janis Slesars notes: “Because Lode Company is taking a six-month loan of LVL 45,000 from Universal Bank’s Cesis Office in order to procure energy resources, we ask your permission to pledge current assets – ready-made products worth a total of LVL 120,000.”)
This is the real situation, as is Edvins Samilis secrecy in regard to this matter that made Dienas Bizness believe there is a new profession introduced in Latvia’s privatization processs – the Latvian-privatizer, whose only purpose is to officially represent the actual but anonymous investors (at the time, private persone were not usually asked to present any documents regarding the origin of their money).
Are these actual investors super-anonymous or can they be uncovered? In 1997-1998, the list of Lode’s shareholders included Unibanka’s Vice-Governor Ivars Kirsons, Andris Berzins and…Unibanka. Minutes of the company’s September 27, 1997 emergency shareholders meeting shows that Lode’s Director Janis Slesars owns only 17,290 shares, while Andris Berzins is mentioned to own 24,231 shares. According to minutes of this meeting, Unibanka already had 58,021 shares.
Two documents depicting general authorities issued on the same day – April 29, 1998 – add special flavour to this whole situation. One document depicts the authority given to the head of Unibanka’s Legal Affairs Department Armands Grinbergs ‘as shareholder to perform all necessary activities to represent the interests of Latvijas Unibanka on the April 30, 1998 shareholders meeting of Lode, including, but not only, to participate in voting and debates, offer proposals, sign important documents and publicly represent Latvijas Unibanka’. The same authority is provided to Armands Grinbergs, who was given authority to manage Andris Berzins 24,000 shares – the latter signed the necessary documents as Governor of Unibanka. [...]
In July 2003, Edvins Samulis sold Lode’s shares to then an unknown or unnamed buyer (it was would out one year later that the buyers wa Janis Slesars): he sells 9.44% of shares on July 8; 3.63% on July 25 and 5.95% of shares on July 28. Edvins Samulis number of owned shares in the company already exceeds 50% of the total shares. When Berzins left his post at Unibanka in 2004, Edvins Samulis felt a serious urge to sell 9.89% of shares (for an unknown price) and a few months later and additional amount of 12.79% of Lode’s shares. Not a single person interviewed on this matter wanted to speak of the reasons behind this decision. The third largest shareholder – Janis Slesars – is also not very talkative: he knows nothing, does not understand questions, sees no reason to meet and remembers nothing of the shareholders meetings. ‘It would be unethical against other shareholders – to speak of a company in which I do not work. I have nothing to tell you. Ask Berzins how he acquired his shares. I am a whole different person…’
In any case, in 2007, Andris Berzins and other shareholders sold Lode to foreign investors. Berzins received four and a half million for his package of shares (worth LVL 504,000). It cannot be denied that the Russian crisis had, indeed, taught our hero a couple of lessons, at least in the area of performing business operations. ‘Everything is based on trends. For example, if a bank was once in a dangerous situation, we can accurately predict the moment when it might collapse. It was the same with Lode. Such companies cannot survive within the confines of a single country if they are unable to invest further. A similar company was built on the borders of Latvia and Estonia – they would have easily taken us out within two years. So we decided to sell Lode. I was certain we were going down a hill and would soon enter free fall. We sold it in 2007. Everything had collapsed later in September – the global crisis had begun. Now people claim left and right that I had been greedy, because I earned LVL 4.5 million for that,’ – he mentioned in his interview to ‘Neatkarīgajai Rīta Avīze’ four years later.
The surplus from this business deal along with other income is also seen in the State President’s official declaration – SEB Bank bonds for EUR 327,000; EUR 2,14 million in bank; LVL 687,000 and EUR 406,000 in loans and more than 30 different real estate properties in different parts of Latvia. With that, the words of ex-banker Inesis Feiferir: ‘Yes, he took over Lode rather well..’ can be accurately supplemented with: ‘yes, and not only that,’ – as stated in the book.