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Wednesday 22.11.2017 | Name days: Aldis, Alfons, Aldris

Liepājas metalurgs could ask for state support of 57.6 million

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The government plans to discuss the problems of Liepājas metalurgs (LM) on a closed meeting. The enterprise has asked the government to provide financial assistance of 57.6 million LVL. Politicians are worried that this could repeat the Parex Banka scenario. Nevertheless, no one wants 2 000 Liepaja residents to lose their jobs.

The government will need to review the audit results of LM. With that, the government will also receive proposals on how to save the enterprise from bankruptcy. The enterprise asks the state to write off expenses on electricity, provide new guarantees, as well as perform payment to the Italian bank on behalf of the LM. The enterprise has also asked to halt the criminal proceedings initiated following an application from co-owner Kirov Lipmans, Nekā personīga (Nothing personal) programme of TV3.

One week ago, the Finance Ministry had learned of the real situation at LM. As it turns out, the owners of the enterprise have been receiving enormous salaries, irresponsibly taking new credits and have been generally involved in suspicious activities.

The media already had information that the enterprise’s Board members were paid enormous salaries. Given that this information would ruin the chances of receiving financial assistance from the state, the owners kept the information about their salaries hidden.

Now it has been revealed that the Council Chairman of LM Sergei Zakharin had a monthly salary of 14 300 LVL in 2010, his deputy – Alexei Zakharin – was being paid a monthly wage of 13 300 LVL. Board member Ilya Segals had a monthly salary of 14 300 LVL, the head economist – Benita Imbovica – 10 000 LVL. Chairman of the Board – Valery Terentyev – and Executive Director Leon Ptichkin were being paid 6 000 LVL each. These salaries were gradually reduced in 2010 and 2011.

In 2010, the LM began to get involved in suspicious activities. There were mediators attracted in scrap procurement and product sales. Metal Group Ltd. became the largest mediator; it procured scrap from suppliers who once worked with LM. Some Scanalloys Limited Cyprus offshore was also used. Latvian citizen Radiks Nosirevs was its representative. Scrap was being procured from Lithuanian Torlina UAB whose owners were arrested for contraband of metal to Poland. One of the owners of LM – Kirov Lipmans – informed the police of these schemes. According to him, using these mediator firms, the Board of LM bought scrap for higher prices and kept the difference for themselves. The Finance Police initiated criminal proceeding following Lipmans’ application. The Board of LM now asks to conclude these proceedings. According to LM, the British Stemcor UK Ltd., has allegedly promised to provide LM with an advance payment of 20 million LVL. However, it will not cooperate with LM if it is involved in criminal proceedings.

The Finance Police has told the programme that investigations are currently assessing the involvement of mediator firms. Chief of State Police Ints Kuziz says the Criminal Law does not allow law enforcement institutions to stop the criminal proceedings following someone’s order.

LM is also suspected in VAT defrauding schemes involving Polish firms. Poland’s Tax Administration confirms this possibility. One of the enterprise stated in its declaration that it operates in the trading of clothing, not metals.

LM is expected to return 4 million LVL to the Spanish UniCredit Bank this April. The enterprise has asked the bank to postpone the return of the credit, but the bank refused. According to the contract, the bank can request the return of the entire credit (51 million LVL) at any moment if the enterprise has other debts. It is known that the enterprise has already delayed its payment of 22 million LVL to SEB and Citadele banks. Seeing as though the Latvian state guaranteed the Italian credit, the state budget will soon lose 51 million LVL.

LM Also owes 8 million LVL to Latvenergo. The concern request that the enterprise pays its debt before March 28, otherwise Latvenergo will demand LM to be declared insolvent.

The plan developed by LM provides for putting off the payment of the debt and the increase of state guarantees. LM is requesting that the state allows it not to pay 17 million LVL to Latvenergo, help the enterprise pay 11 million LVL to the Italian UniCredit, and provide state guarantees for an additional amount of 18 million LVL.

The government cannot wait any longer. The problem needs to be resolved, because the deadline for paying the credit to the Italian bank is drawing near. The Finance Minister calls to help the enterprise. If the LM finds an investor and realizes investments properly, the government can consider to offer help.

The opinions within the Reform Party differ. The party’s leader Valdis Zatlers supports the idea of helping the enterprise. He believes state support of enterprises hit by the crisis is effective. However, the leader of the Saeima National Economy Commission Vyacheslav Dombrovskis is sceptical.

“Just how perspective is the current business model of LM? This is the first question we should ask. I believe we need to come up with a business plan to reduce expenses. We need to assess the public information about the “extravagant” lifestyle of the Board of LM,” – he said.


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