One of the items from John Christmas’ Parex Bank whistleblowing list from 2004 was that Parex secretly owned a bank in Russia.
Christmas claimed that Parex owned and operated Extro Bank. For example, the Parex Credit Committee approved the loans that Extro Bank extended. Latvian State Controller Inguna Sudraba was on that committee.
The fraud claim is backed up by an email written by Parex vice president Gene Zolotarev. The claim is also backed up by a Skype conversation (below) with former Parex manager Christa Rubstein. She also confirms in the conversation that Parex paid employee compensation illegally.
Even though three witnesses wrote that Parex owned Extro Bank, the auditors at Ernst & Young did not care at all and ignored the huge fraud.
Therefore, Parex was able to sell Extro Bank to Banco Santander. Santander is one of the largest banks in Europe and has millions of shareholders in Spain and the United Kingdom.
According to emails (below) from a private investigator who contacted Christmas, Banco Santander got “robbed” in the purchase. The loss could have been 40 or 50 million euros.
Law enforcement is not interested at all, as usual. Also, the media is not interested.
This internal email from Parex Bank indicates that (1) the Parex financial statements were false and (2) all four vice presidents and the head of accounting knew.
The email reveals that Extro Bank, Nezavisimost, Allen Finance, and Northern Investment Bank were “de facto subsidiaries.”
This was illegal in many ways. Parex was supposed to have permission from the Latvian regulator and Russian regulator to own Extro Bank in Russia. Parex was supposed to have permission from the Latvian regulator and Belarusian regulator to own Northern Investment Bank in Belarus.
These companies (and a few more leasing companies that were also undisclosed subsidiaries but were not named in this email, such as Extro Leasing) were funded with loans from Parex that were on the books as loans to unrelated parties. The total amount of these loans was larger than the bank’s equity. Therefore, the bank effectively had negative equity.
This was one of the frauds in John Christmas’ whistleblowing to Ernst & Young in August 2004. Parex reacted by changing the leasing companies from “loans to unrelated parties” into “subsidiaries” without admitting that this had been a fraud. This cover-up, done with fake purchases, was another fraud. The auditor Ernst & Young knew and did not care. Perhaps this was because two of the four vice presidents, Eriks Brivmanis and Liga Purina, were former employees of the auditor.
When Parex gave its liabiliities to the Latvian government at the end of 2008, the government retained Roberts Stugis as head of accounting and Ernst & Young as auditor. Clearly, the government’s objective was to cover-up the truth about Parex while at the same time receiving bailout funds from foreign governments.