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Monday 25.06.2018 | Name days: Maiga, Milija
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No peace possible between Parex bank and its former shareholders

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Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RU

Victor Krasovicki (on the left) and Valery Kargin

Last Friday, September 16, the court held a preparatory hearing of the claim against Valery Kargin and Victor Krasovicki, former shareholders of Parex bank. Judge Gvido Ungurs proposal to reach a settlement agreement did not satisfy either side.

Parex bank against its ex-owners

The judge had asked for documents from the State Revenue Service (SRS), the Association of Commercial Banks and other institutions, thereby satisfying the defendants lawyer Ugis Grube’s request. Grube wants a copy from the SRS on audit conducted on September 12, 2009, and reports from January 1995 to December 2008 on Kargin and Krasovicki investments in Parex Bank. The argument of the defendants is quite logical – before Parex takeover there were no problems with taxes, while afterwards two million lats tax debt was discovered.

In addition, Grube has requested data from dozens of Latvian credit institutions on investment interest, as he believes that such information could help make sure that the interest rates of Parex bank were not that different from other banks.

Agris Bitans, representative of the bank, requested to reject this petition. According to him, the aim of the process is coming to terms with losses caused by Kargin and Krasovickis transactions, rather than finding out the situation in the banking sector. Lawyer’s active debates resulted in neither of the parties showing any interest in reaching settlement. The hearing is now scheduled to take place on November 9.

What’s at stake

Let’s remember the case. Parex Bank believes that its former owners – Valery Kargin and Victor Krasovitski’s actions have posed the bank 62 million lats losses. Thus the bank requires to compensate the sum. With the help of the court proceedings and seizure of properties, Parex bank is trying to avoid interest payments to its former owners for their investments in subordinated capital. According to the new Parex bank management, these investments are highly disadvantageous for the bank. It is pointed out that even when the state took over the bank, its ex-owners still were practically paid a monthly salary of 300 000 lats in the form of interest payments.

In accordance with deposit agreements concluded back in 1995, the founders must be paid dividends (24% per year) for the next 37 years.

In 2007, Kargin received 3.35 million lats in interest payments alone, while the sum hit 2.52 million lats a year after. Krasovickis was paid 1.24 million and 0.76 million lats, respectively. Of 103.1 million lats Parex subordinated capital, invetsments of the former shareholders amount for 36 million lats.

Minority shareholders against Parex Bank

Parallel to the “process for 62 million lats”, The Constitutional Court keeps hearing the case against a norm included in the Law on Credit Institutions. Seven of Parex Bank minority shareholders have filed a claim to the Constitutional Court, asking to examine Law on Credit Institutions Article 59.5 compliance with the Constitution.

This Article states that if the Cabinet of Ministers, after the credit institution management’s request, decides to increase the state capital in the bank, the board is righteous to do that, without calling a shareholders’ meeting.

Investigators of the case believe that this norm allowed Parex board to repeatedly boost the bank’s capital without the consent from minority shareholders. Such steps reduced their partnership four times – down from 8.4% to 2.1%.


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