UK FSA, Ernst & Young Global, Parex Bank

The UK Financial Services Authority (FSA) and Ernst & Young Global knew that Parex Bank was a fraud already in 2007.  They also knew that whistleblower John Christmas was being terrorized with murder threats.

However, the FSA and E&Y chose to ignore the information and sit and watch while Parex borrowed approximately one billion euros in London through syndicated loans and bond issuances.

The money disappeared and now ordinary Latvian taxpayers must pay back the creditors with bailout funds from the European Union.

Nobody is being prosecuted anywhere.

FSA and E&Y knew

VIP Avia and Parex Bank

Parex Bank used to have a subsidiary called VIP Avia.  In the early 2000’s, consultant ABN AMRO advised Parex not to have this frivolous subsidiary, the function of which was providing private jets for the Parex oligarchs.

Parex did not react by selling the subsidiary.  Instead, Parex changed its balance sheet to show VIP Avia as a loan to an unrelated party instead of a subsidiary.

This reaction was illegal.  However, Latvian authorities refuse to prosecute the responsible people from Parex and Ernst & Young.

John Christmas blew the whistle on this fraud in 2004/2005.  Dienas Bizness newspaper published an article about this fraud in 2009.

pdf snapshot from 18 March 2012:

DB VIP Avia

link, if not yet censored by Latvian authorities:

http://www.db.lv/citas-zinas/vip-avia-ierosinats-arpus-tiesiskas-aizsardzibas-process-134233

Guntars Vitols of Parex Bank threatened whistleblower

In late 2005, John Christmas learned that the Latvian State Revenue Service (VID) would look at the Parex Bank fraud information.  This was great news, because the Latvian Prosecutors Office, Latvian financial regulator, Latvian central bank, Latvian Ministry of the Economy, and other government agencies refused to investigate.

Christmas knew that a senior person in the VID was the mother-in-law of the former President of Parex Asset Management, Guntars Vitols.  Vitols spoke often about how much he hated the liars at Parex, and therefore it seemed possible that he wanted revenge.

Christmas asked Vitols to tell what he knew about tax evasion (paying employee bonuses in unreported envelopes stuffed with American hundred-dollar bills) to the VID.  Christmas suggested going to the American FBI if the Latvian government did nothing.

Vitols apparently went to Parex and warned them that Christmas might go to the FBI instead of telling what he knew to VID.

Christmas received the warning from Jekaterina Ecina immediately afterward.  Parex had sent thugs to look for Christmas.

Fortunately, Christmas was outside of Latvia and therefore safe.  He reported the threats to the Latvian government with only one result:  Vitols contacted Christmas and said that Christmas should expect a phone call from a prosecutor who will explain that Christmas must renounce the whistleblowing or else get prosecuted.

A prosecutor did not call, however Vitols himself called back.  This time, Christmas was ready with a recording device.  Vitols tried to convince Christmas to sign a false confession that the whistleblowing was not true, threatening arrest by Interpol and prosecution in Latvia otherwise.

In the transcripts and recordings below, Vitols (acting as an intermediary for Parex Oligarch Viktor Krasovitsky and the Latvian Prosecutors Office) communicates this illegal threat to Christmas.

It is possible to confirm from the recordings that Vitols himself was witness to at least two of the material frauds at Parex.  He was witness to tax evasion (bonuses paid in envelopes).  And, he was witness to the unreported issuance of stock options (he said “stock agreement” once and “stock option” later).

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Krisjanis Karins, Einars Repse, Ilmars Rimsevics, Janis Maizitis, Janis Kazocins

Krisjanis Karins was Latvian Minister of the Economy at the time John Christmas blew the whistle on Parex Bank.  Karins was one of the recipients of the original whistleblowing letter from 2005, together with Einars Repse (Minister of Defense), Ilmars Rimsevics (Governor of the Bank of Latvia), and Janis Maizitis (General Prosecutor).

All of these gentlemen ignored the whistleblowing and therefore hold reponsibility for causing the Latvian Financial Crisis.  However, Latvian newspapers refuse to inform the Latvian people and therefore the same men are still running Latvia in 2012.

When Christmas began receiving murder threats from Parex, Karins told Christmas to report the problem to Janis Kazocins at the Latvian Constitutional Protection Bureau.  Kazocins also ignored the problem and sat and watched while the national economy was destroyed.  He also remains in power today.

Karins email

SAB email

Valters Kronbergs, Ernst & Young, Parex Bank

When John Christmas learned in August 2004 that the financial statements of his employer, Parex Bank, were false, he blew the whistle as required by law.  He gave a long list of frauds to Ernst & Young Baltics partner Valters Kronbergs.  If Ernst & Young had withdrawn its audit opinions, as required by law, then the Latvian Financial Crisis never would have happened.  Latvia would have a thriving economy today, like its neighbor Estonia.

Unfortunately, Kronbergs reacted to the whistleblowing by sometimes denying that the whistleblowing took place and sometimes getting angry at the whistleblower.  The auditors refused to investigate the frauds and continued to sign Parex annual reports until 2009, after the nationalization.

Many more Parex frauds have been revealed in recent years, but the Ernst & Young auditors don’t care.  They refuse to withdraw their opinions.

Below is an email in which Kronbergs denied the whistleblowing.  It is a simple matter to analyze the wording of this email and determine that he was lying.

And, this paragraph is from a businessman who wrote to Christmas after seeing Kronbergs.  While Kronbergs was denying that the whistleblowing occurred in emails, he was telling people that Christmas was a horrible person for being a whistleblower.

“Where are you? Still in Spain? What are you up to? I understand that you are not too popular in some quarters in Riga, especially dangerously – Parex – and some of the ex-pats [Valters Kronbergs] you apparently included in your assault on Parex? So I heard, but that does not mean any of it is true or otherwise.”

Kronbergs denial

FKTK refused to act

The Latvian Financial and Capital Markets Commission (FKTK) received details of material frauds at Parex Bank from whistleblower John Christmas in May 2005.  The FKTK refused to act.  As a result, the Republic of Latvia suffered a financial and demographic crisis when the corrupt government forced the taxpayers to bail out Parex in October 2008.  Now in March 2012, Christmas is still waiting for the FKTK to begin to investigate the Parex frauds.  He has been unable to enter Latvia since the whistleblowing even though he is a citizen of Latvia.  He has been repeatedly threatened with death for many years and Latvian authorities refuse to investigate.

FKTK email

FKTK letter

Gene Zolotarev, Eriks Brivmanis, Liga Purina, Roberts Stugis, Ernst & Young, Parex Bank

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.

Zolotarev email

ReportingProject.net

ReportingProject.net has well-researched articles about the fraud and money laundering industry in Latvia.  The articles include information that does not appear in Latvian newspapers.  Here is a quote from an article about Parex Bank:

“According to representatives of post-nationalized Parex Bank, Burwell was director of companies that received loans from Parex before nationalisation that the bank now suspects were hidden loans to the former shareholders Kargins and Krasovickis.”

http://www.reportingproject.net/proxy/behind-the-proxies

Rebaltica.lv

Rebaltica.lv contains information about the Latvian money-laundering industry.  The website is a welcome source of true information coming from a country where most of the media is controlled by oligarchs and used to disseminate propaganda.

The money-laundering industry got started in Latvia immediately after “independence” when KGB agent Grigory Loutchansky and Russian prime minister Viktor Chernomyrdin used Latvian banks to skim billions of dollars from Gazprom.

Over the years, Latvian banks have faced limited sanctions from the United States and Russia.  However, these sanctions were not enough and the money-laundering industry continues to thrive in Latvia.

The biggest losers?  The Latvian people themselves since the Latvian government has been thoroughly corrupted and looted by the money-laundering banks.

http://www.rebaltica.lv/en/