Lawyer Mārtiņš Kvēps: Ventspils transit business has fallen into one keeper's hands (part II)

Following the previous interview, lawyer Mārtiņš Kvēps (the first part of the interview was published two days ago, which analyzed what frauds Rudolfs Meroni hid in the list of seized property in 2008, which he himself compiled) reveals the largest business crime in the history of Latvia. So far, very little has been written about this crime and only in the form of an assumptions, but M. Kvēps is ready to defend what he has said in court as well.

First part of the interview can be found here.

On the absurd situation of declaring three mutually exclusive true beneficiaries, we applied to the prosecutor's office for criminal proceedings to be initiated. Namely, if Ursula Harrand was indeed the true beneficiary of Yelwerton Investments (conditionally - as the alleged owner of 29% of JSC Ventbunkers shares), then some transaction with the seized property had to take place, and it is illegal. What is your opinion?

The deal already took place there. I think that this is my subjective opinion that in terms of amount it could be the biggest crime in the history of Latvia - in terms of the amount of money exhausted in one transaction.

Are you talking about selling Ventspils Nafta shares?

No. I'm talking about what happened next. The sale of Ventspils Nafta shares was only a preparation for taking over the Ventspils transit business.

What was that deal? It is not publicly known.

At the beginning everyone hoped that someone somewhere in the world would buy the Ventspils transit business. However, no one really wanted to buy, given the sad international political activities. In the end, there was a plan that was coming to the fore: JSC Latvijas Naftas Tranzīts was the place where giant funds were concentrated - in the end, about 200 million in total. It was decided that it was not safe to keep this money in a bank, the money had to be invested somewhere. Of course, not in Swedbank or SEB banka. Probably by chance, a small bank of Meroni acquaintances in Liechtenstein was chosen, under which a mystical investment fund was set up, and all this money was put into it. In the end, it went to London Industry Ltd, a company based in the United Kingdom. It had two intermediate owners, Ursula Harrand and a company established in Cyprus, which in turn was owned by another owner of Ventbunker. The aforementioned fund gave money to London Industry Ltd., which then seemed to buy everything. As can be deduced from these circumstances, the group of companies was supposedly bought for the group's own money, most likely knowing very well in advance that this money would never be returned to Latvijas Naftas Tranzīts.

They bought all the big Ventspils transit business companies?

I don't know about Kālija Parksand other dry cargo companies, I know about Ventbunker. This is the big deal 2016-2017, which was also declared by the former shareholders of Ventbunkers /The companies owned by Olafs Berķis, Igors Skoka un Genādijs Ševcovs, which were shareholders of JSC Ventbunkers, declared a huge profit in 2016 - for example, Kement Ltd., owned by O. Berķis declared a profit of 21.6 million euros - R.R, U.D./

In fact, it was not a normal commercial transaction. There, the same people from both sides of this alleged deal took part, no normal business talks took place; the alleged buyers and sellers were advised by the same people. To a large extent, the two parties to the transaction were also essentially the same.

In order to hide the main "architect" of this transaction, the Austrian Ursula Harrand was presented as one of the true beneficiaries of this transaction. I am absolutely convinced of this and I am even ready to go to court to defend my conviction that Harrand is a fictitious beneficiary who may not even really know where Ventspils is located geographically. I have met her myself, I have also been to her home in Austria. I know how she lives. I also know her husband. They are not transit entrepreneurs. They are, in my view, fictitious beneficiaries, and through these, by all indications, fictitious transactions with their support were simply moved in a huge circle. I think that as a result of these transactions, the state also lost a huge amount of income tax money, because Latvijas Naftas Tranzīts suposedly invested money in the fund, but in fact everyone knew that the money would never be returned. It was put in the pockets of other people. If they paid dividends along the chain, it would all be different - the state would have received it. It is probably told to the State Revenue Service that everything was really beautiful, that an investor had arrived - from an English village with a registered population of about 7,000 people - similar to our micro-enterprises, which provide only a condensed annual report, stating that they own nothing. But now it suddenly owns the whole of Ventspils. In this company, 50% was indirectly owned by Ursula Harrand, but 50% was owned by the family of another Ventspils resident. These other 50%, as far as I know, Meroni bought out and thus the "seller" earned twice. Thus, now both London Industry Ltd. and Ventspils transit business have one owner.

Is it Ursula?

It’s not Ursula. That, of course, is my subjective assessment. I'm sure it's Meroni. I do not believe in the fairy tale that one not even moderately wealthy Austrian businesswoman suddenly decides to go and buy Ventspils transit business.

This is something I as a lawyer cannot understand. This scheme, which I have just told, is like a textbook on money laundering: a fictitious beneficiary, the money goes through a verifiable circle with the aim of concealing its origin, the transaction has no two independent parties - in English there is a term “arm's length transaction”, which means two independent parties to the transaction. But here are the same people who are served by the same consultants. I have seen e-mails with the Bank of Liechtenstein discussing that a company based in the European Union should be used in a transaction to make it more credible. No complicated investigation is required to establish these circumstances. It is elementary for our Financial Intelligence Unit to check all this. I cannot understand why, for example, AB.LV bank has to justify itself to the Financial Intelligence Unit, but nothing is being done about this scheme. Really, I can't understand how this is possible, because all the suspicious features of the deal are like textbook examples.

Another aspect is that its property has not been seized at all because no letters rogatory have been sent to the countries?

Property has been seized. The only question is in which countries this decision has legal force. Latvia is not the United States, which has almost universal jurisdiction. It was also one of the factors that Meroni whispered to me at one time: if it has not been approved in Switzerland, he could disregard it all. Now, however, we are only talking about the principle of geographical responsibility. When Meroni was in Latvia, the property was given to him to be stored here on site. But there is also the principle of personal responsibility. According to the principle of personal responsibility, it would be difficult for Meroni to escape responsibility by simply saying that something is not valid in Switzerland - he assumed his custodian obligations in Latvia and in relation to the Latvian state, and I was there.

You are the author of one very beautiful comparison - Meroni is like a wardrobe attendant who does not want to give you back your coat. Namely, in 2012 you said in an interview: “We used to compare Rudolfs Meroni with a wardrobe attendant who has taken your coat for the duration of the show - in our case it is shares - but refuses to return it after the show. To justify this, the wardrobe uses subtle legal terms - the wardrobe says that he still recognizes you as the beneficiary of your coat and claims that he wears the coat himself solely in your economic interests.” After the court decided to remove him from his duties as property custodian, the only thing Meroni has said publicly is that he cannot be removed from Latvian company boards at all without his consent. So the "wardrobe attendant" has successfully taken the "coat"?

Yes. At the end of the last share purchase scheme, where money from Latvijas Naftas Tranzīts was transferred, as if by buying Ventbunker, one of the rather obvious goals was to get a mathematical majority in Ventbunker as well. He has a mathematical majority and, even according to the prosecutor's office, the mayor of the city or his family has no more than two-sevenths. In any case, it is only a minority of shares that the state could now take over. If the state takes it over in the form of real shares, then there are still enough options that can be done with them. Even if it is just asking - how are the private expenses of the former property custodian paid or not paid from Ventbunker.

The seizing of the property can already take place only in such a way that in the boards and councils, where Meroni himself and his people are now present, the people of the Provision State Agency are appointed. How else?

It is not possible to take over the rights of the beneficial owner at all. It is not property. Real shares must be taken over and the rights arising from them must be exercised at shareholders' meetings. It also allows one to apply for a place in corporate positions. That should be the case by logic and law. But in Ventspils companies, hardly anyone will put the state in any positions that would allow them to check transactions, because it would be a disaster for some people.

Previously, there was such a situation - if someone asked something about the property, then the prosecutor's office directed them to the court, but the court directed them to the prosecutor's office. Pontius to Pilate and no one had any responsibility. Now the situation is almost the same. The agency directs to the court, the court says - go to the agency, we told them to take over! We members of the public - we are interested in this - cannot know anything?

Since the custodian is one of the "legal hands" of the state, if I had to act, I would take over the amount of the seized property fairly quickly. I would turn to the police and the prosecutor's office, where there is a new criminal case, about which there has been public news, and demand that real shares be seized at the level of Latvian companies, and not just pursue some "beneficiary’s rights". Even in theory, I can't imagine what a transfer of "beneficiary's rights" might look like. You really have to laugh - it will probably be brought in the jar with the label "Recipient".

Another thing. Meroni converted bearer shares into registered shares, with Eurocom as the legal owner. Is such a conversion not a change in the seized property which was prohibited?

Bearer shares were banned by law in all British Virgin Islands companies and had to be converted. In Ventbunker, tricks with “beneficiary rights” / i.e. stating that the "rights of the true beneficiary" have been seized and not the actual shares - R.R, U.D./ was precisely so that such moves could be made by converting shares or otherwise exchanging shares. Ventbunker shares have generally walked all around. They have been to some mystical Dutch foundations, which the prosecutor's office has probably never heard of. Also, the division of Ventbunker's main shareholder, the Dutch company Yelverton Investment, into two companies: where Lembergs is in one company, two opponents are in the other company; however, at the same time, as Meroni explains, these two legally independent companies are some kind of inseparable whole, which I think are complete nonsense from a legal point of view. According to his own legal schemes, Meroni could do almost anything that came to his mind. If someone went to him and asked, "Aren't you ashamed to do that?", He would answer, "But the rights of the beneficiaries are still intact! The fact that I manupulate quietly with shares and they have long been owned by completely different companies does not change anything - here, I have written a receipt that states that the "beneficiary's rights" still exist!" This example also illustrates well the status of "beneficiary", that it is not a "right".

In a more experienced country, Meroni could get punished. In Latvia, I think, there is a lack of experience in splicing such schemes.

How do you predict this could end?

If the Provision State Agencydoes not follow the path I said... Well, all right - my personal relationship with Meroni does not allow me to believe it - but now there is still a possibility that Meroni comes to Latvia and then together with lawyers and The Provision State Agencysits and thinks about how to strengthen everything in the most advantageous and legally secure way for the Latvian state, to give everything back in a beautiful, transparent and documented way. Theoretically, such a variant is also possible. But if we only receive bored letters from Crete in which a retired property manager in a foreign language says that he does not have time to deal with the transfer of property, then it will most likely end with nothing. Pursuing a certain amount of property all over the world will only spend a huge amount of money and it will make no sense. If the state really sees this as a matter of honor, another option is to hire a serious international London law firm with a proper court department, not just a Latvian one, and they will quickly push Meroni against the wall - I myself witnessed how it took place in London in 2013. As a result of the diligent work of the London lawyers, the judge was able to conclude: I looked at the evidence and saw that Meroni traded everything, including what the state entrusted to him. If the process had continued in London, it would have been possible to end up in prison for wasting property, despite the fact that the process was a civil rather than a criminal matter. Hiring a large foreign office would be a very expensive thing to do - it might require millions.

Who will be responsible for all this in the end?

In my opinion, Meroni should pay for everything that he has done, if we talk about property liability due to the reduction of the value of the property, as well as the money that will be spent taking over and searching for the property, finding out the circumstances and asking specialists for opinions. If I were the custodian and the Provision State Agencyhad called me with such an unpleasant court decision stating that I may have breached something, I would be present in a moment and do everything I am told. Because the second alternative is criminal liability. No other options. The same should be done for Meroni.

There is also a temptation for people to say that there the state has violated something. My opinion is that Meroni masterfully led us all, including myself, by the nose. At the time of drawing up the attachment report, I really thought that we are fighting together for justice, that everything is exactly as it is written. It wasn't until I tried to sell something that I realized that we were fighting not only for the justice, but also for Meroni's money. At that time I had graduated from a university in America, I had professionally attended law firms abroad. In the context of Latvian conditions, I had quite good private law training. But even this knowledge was not enough to immediately notice Meroni's tricks, I saw and understood them only when the tricks were already put into practice. What, then, could the prosecutor's office understand at the time without any experience in such matters? If I had seen that some of the seeds of Meroni's future business were being cemented there, he would have told Prosecutor Andis Mežsargs at once. But I really didn't see it.