Latvia’s State Audit has presented its report on how Riga Freeport has abused its monopolistic position on the market and has breached the Law on Competition. There is also a major risk that the freeport’s board does not comply with good management principles.
Instead of following the law, good management principles and justify the trust of the state, the management board of Riga Freeport has already wasted more than EUR 1 billion of Latvian taxpayer funds. In addition, it is expected that losses may increase even more in the future.
EUR 1,052,802 – such are the losses that turned up as a result of legal actions taken in hopes of contesting decisions made by the Competition Council, as well as paying fines imposed by the Competition Council and paying for legal and consultancy services. Meanwhile the court declined all pleas submitted by Riga Freeport board. In addition, those are not the only losses Riga Freeport board has suffered as a result of non-compliance with the Law on Competition.
Since 2009, there have been a total of five major litigations related to violations of competition regulations. All of those litigations were launched based on materials submitted by PKL, PKL Flote and PKL Services.
Auditors have estimated that RFB had paid lawyers EUR 296,460 throughout the course of 2009 to 2015 for legal services. This includes EUR 38,702 for services in three litigations in which courts did not decide in favour of RFB.
Decisions in two litigations are still pending. The risk of facing even more enforcements of losses could create even bigger financial losses for RFB. At the same time, considering all of the facts and decisions that have led to major losses up until now, neither RFB nor Transport Ministry have even considered assessing the responsibility of officials for the discovered violations of the Law on Competition.
Problems for RFB do not end there, unfortunately. State Police’s Economic Crimes Prevention Office has decided to launch a criminal process in regards to possible criminal offences committed at Riga Freeport, as reported by State Police.
Following a report from the State Audit, ENAP carried out an inspection. Now the State Police has decided to view conditions mentioned in the report within borders of a criminal process. There are currently no suspects, as reported by State Police.
This is the second criminal process that is directly tied to possible criminal offences uncovered at Riga Freeport.
As previously reported, SA discovered during an inspection that the management of Riga Freeport had wasted financial resources worth at least EUR 611,888 by outsourcing services normally performed by the freeport’s management board.
The audit helped uncover additional losses related to construction of a warehouse. In 2009, the Krievu Island infrastructure development project developed by Riga Freeport’s board was accepted. In 2011, the entrepreneur was issued a construction permit to commence construction. SA believes officials of Riga Freeport board had failed to perform their duty in accordance with regulations and allowed the construction of an unrelated object belonging to a completely different owner on the same territory.
RFB, meanwhile, continues acting as though nothing happened and continues engaging in litigations. The management board of Riga Freeport sees no violations in the realization of Krievu Island project and does not agree with State Audit’s criticisms.
Moreover, Leonid Loginov – head of RFB – believes SA should «keep its mouth shut» and «stop spreading rumours about what has not been proven yet. Because it is only the opinion of a handful of specialists». «You cannot just go and announce for all of Latvia to hear that EUR 41 million was stolen if there is no proof. Something like that does not go unpunished,» – Loginov told Diena. At the same time, Loginov’s rhetoric lacks any admittance of any errors in RFB’s work that could result in serious penalties, drop in the institution’s reputation and the volume of cargoes routinely handled by Riga Freeport.
It should be added that the recent criminal process regarding abuse of power, illegal transactions and illegal payment of bonuses was launched against Leonid Loginov and his deputy Aigars Pecaks. This criminal process has had a major impact on the reputation of the two officials and Riga Freeport as a whole. This criminal case was also launched based on results of an audit performed by the State Audit. Riga City Northern District Court plans to view this case on 19 September 2016.