«Inspections in Liepājas metalurgs affair continue. Those inspections are being performed in two directions: to determine if the old shareholders had used offshores to pump out money from the country and what is the responsibility of officials that offered state guarantees to ensure the company is able to procure a new», as reported by Nekā Personīga.
In 2008, in the very heat of the financial crisis, when Parex Bank collapsed, the government provided state guarantee to LM shareholders worth LVL 112 million (EUR 160 million). Shareholders promised to develop the factory and make it the most modern one in Europe. Unfortunately, LM came close to becoming bankrupt, forcing the state to take on its loans, the programme reports.
«It is suspected that the previously successful company was simply robbed. Shareholders denied this and promised to do everything in their power to save the company,» – Nekā Personīga journalists say.
The programme reports that when LM was suffering from financial difficulties, journalists in Poland discovered the factory’s possible involvement a large-scale fraudster scheme. In 2011 Latvia’s official numbers showed that LM had exported around 300 thousand tons of steel bars to Poland. Numbers uncovered by the Polish Finance Police were 60 times lower. Polish journalists concluded that most of LM’s products were sold on the black market using VAT fraudster firms. The factory’s previous partner Tolmets expressed suspicions that this scheme was used to rob LM.
«If there was such a scheme in place, those people earned millions that never made it to the company’s budget. With that, I say – it was a barbaric theft of turnover funds from the company. It did not help create any added value and certainly did not benefit the company in any form,» – Tolmets chairman Inta Ozolina said in April 2013.
The State Revenue Service refused to reveal to Nekā personīga if there had been any inspections in regards to VAT fraud schemes. SRS only said that no information can be provided on certain taxpayers. The SRS director at the time recalled that inspections had taken place. What was uncovered was later handed to police investigators.
«We decided to hand all documents and information compiled on this case to the State Police. If they find that our information was correct, and that tax fraud had taken place, they usually ask us to perform a tax calculation to see the damage that was done to the state budget. I do not recall a request being made, however. Our work ended on that,» – said former SRS director Inara Petersone.
Nekā personīga has found out from unofficial sources that SRS had performed an inspection in LM in the period between 2010 and 2012. No massive violations or crimes were uncovered, however. A fine of a mere LVL 2,396 was applied for insignificant problems.
According to Kirov Lipmans’ written complaint in August 2012 against his partners Sergejs Zakharin and Ilya Segal, ten possible illegalities were noted in their activities.
The programme explains that Economy Police made Zaharin and Segals suspects and applied arrests on their property. Liepaja prosecutor Uldis Kursinskis took over materials from the police for several months. «And this is when Zaharin’s and Segals’ suspect status and arrest on properties were suddenly and unexpectedly lifted. The prosecutor’s office explained this in a simple way – the suspect status was applied without justification. Shortly after that, properties owned by old shareholders were signed off to other people. The police ended the case last year,» – journalists said.
The programme reports that two investigations continue – one of them was launched by the Prosecutor General’s office after an audit by the State Audit. In it, authorities assess the responsibility of officials that issued state guarantees to LM. Nekā Personīga is aware that SP have received a request from Economy Police to allocate around EUR 50,000 for the economic assessment. The examination should analyse violations uncovered by SA. Such examinations are not performed in Latvia. Because of that, it is necessary to attract specialists from abroad. As long as there is no inspection, there are also no people to hold responsible, the programme explains.
The second investigation is meant to address possible large-scale fraud. Police do not want to reveal any facts about the investigation. Nekā personīga managed to uncover that the investigation may be related to LM’s possible involvement in VAT schemes and money transfers to some Cyprus-based offshore firm.
«The pre-court investigation will help determine all parties involved in illegal activities, if there are any,» – the programme was informed by SP Economic Crimes Prevention Office deputy chief Ilze Sokolovska. When asked by journalists about the angle and progress of the investigation, she said: ‘In relation to the fraud, the investigation is being performed to determine how money was defrauded from LM’.
Nekā Personīga reports that investigations to prove the defrauding of funds from LM have not been successful so far. The same applies to restoration of LM’s function. Ukrainian investor KVV Group had promised to pull the factory back up and pay the state EUR 70 million to cover the old debt for the guaranteed loan. None of the promises have been completed and LM has been forced to shut down, journalists comment. Insolvency process and property inventory commenced last September. Rights to enforce state guarantee was given by the State Treasury to the Privatization Agency, which founded FeLM firm for this exact purpose.
«Actual measures have been taken only recently. It will be possible to speak of results in a couple of months,» – said FeLM board member Janis Ribens.
Nekā Personīga reports that there are three possible scenarios for what could happen in the future. Ideally – it will be possible to find an investor willing to buy the factory and repay the debt to the state. Privatization Agency, insolvency administrator Guntars Koris and Ernst & Young are currently looking for buyers. So far interest has been expressed by investors from China and Europe. «But now is not the best time for the metalworking industry in Europe and elsewhere in the world,» as stated in the report.
While a buyer is being sought, the factory needs to be protected. It is also necessary to pay wages to 150 employees. This costs EUR 180,000 to EUR 300,000 every months, depending on consumed heat and electricity. Most of this amount is secured by the state. Privatization Agency refuses to reveal how much has so far been paid back to the state. It is only known that these payments have taken place in the past four months.
«These costs include the fact that the factory also employs 150 people, who form its core. Those people are experienced and knowledgeable. It is vital for them to stay in order to restore function,» – Ribens explains.
When asked by journalists if the state is basically keeping LM on life support in the event of an investor appearing, he said: «Creditors currently perform the necessary actions to preserve assets and offer them to potential buyers as one whole collection of assets.»
When asked if it is possible to guarantee the appearance of an investor, Economy Minister Arvils Aseradents said: «No, I cannot guarantee such a thing. I can, however, guarantee that we will do everything we can to find a buyer before we declare the factory unsustainable and commence its dismantling».