As the exiled whistleblower against the largest financial crime in the history of Latvia and also with knowledge of the economic and government situation in Malta, I have gained important insight into the counter-productive operations of a European Commission directorate which we all depend on for integrity in the European Union.
By John Christmas, exiled whistleblower from Parex Bank
Latvian and Russian translations available
Eurostat is located in Luxembourg and has a staff of 800 people who receive 58 million euros per year from our tax money. According to their own website, ‘democratic societies do not function properly without a solid basis of reliable and objective statistics.’ However, sadly, they are working in cooperation with arbitrarily-selected political parties to falsify national debt statistics.
LATVIA: Parex Bank used to be the largest bank in Latvia.
I accepted an offer to be their Western relationship head, with responsibility to convince Western bankers that Parex was not the Russian Mafia. However while attending internal meetings, I learned that the bank was making huge fraudulent loans to criminals and these loans were larger than the bank’s equity. The bank, which had mostly shell-company deposits originated in Russia and Ukraine, was being looted by the Russian Mafia.
Parex has since been identified as the money launderer in the Spanish prosecution against the Tambovskaya Mafia. Tambovskaya was a murderous gang of heroin traffickers and sex-slave pimps from St Petersburg which later became Vladimir Putin’s United Russia political party.
I gave details of a long list of material frauds to the auditors including both EY Baltics and EY Global, and was ignored. I gave the list to about six different departments of the Latvian government in 2005, and was informed verbally that law enforcement worked for Parex for bribes. Then I was chased out of Latvia with murder threats. Nothing was ever investigated, not the frauds or the threats.
How was it possible for something like this to happen within the European Union? Because of a cover-up campaign approved by Eurostat which is still running now in 2020.
Latvia covered-up the looting of Parex by nationalizing and then supposedly privatizing Parex to the European Bank for Reconstruction and Development (EBRD) in 2009. The EBRD claimed to do due diligence on Parex. Upon finding that Parex was valuable, they supposedly bought a stake. However later, a leaked Nomura report showed that the bank was known to be fraudulent and worthless at the time of the privatization. And, I was able to get confirmation from the Dutch government that the privatization was fake. The Latvian government had convinced the EBRD to spend an amount of money buying the worthless stake by secretly committing to reverse back the transaction for a larger amount of money thus protecting the thieves and increasing total losses to taxpayers. They called the reversion a ‘put option.’ It was designated as a ‘state secret’ which means only the EBRD, the Vienotiba political party (now called Jauna Vienotiba), and Eurostat knew about it and anyone spreading information about it would be subject to criminal prosecution.
Anyone who has studied accounting surely knows that secretly paying someone to buy a worthless asset from yourself thus falsifying your revenue and debt is fraud. Some of the most well-known fraud cases in history featured this type of fraud, including Enron.
It is no surprise that the EBRD is completely fraudulent and corrupt. The institution, founded by socialists to help the nations of Eastern Europe recover from socialism, never made sense in the first place. Also, it was founded with immunity from law and has no oversight whatsoever.
The EBRD organized a second large fraud in Latvia in 2010 with the privatization of a Parex successor bank called Citadele. According to a report deep in the Eurostat website but not mentioned in the Citadele annual report or in government and EBRD press releases, this transaction will be secretly reversed in the future. As a result, Latvia’s taxpayers and creditors will get cheated again and the total amount looted from Parex is still unknown.
Finally in 2020, eleven years after this EBRD-Eurostat cover-up racket began, I found a journalist who was able to get answers from Eurostat. Eurostat won’t talk with me or with other journalists who asked them before. I was messaging this new journalist who was messaging Eurostat, back and forth. I have discovered Eurostat’s flawed arguments for approving these frauds which have devastated the Latvian economy.
Eurostat claims that there was no rule about disclosing put options in 2009 when the Parex-EBRD deal was signed and in 2010 when the Citadele-EBRD deal was signed. In 2012, rules were changed and states must tell Eurostat about guarantees however don’t have to tell taxpayers and creditors until the guarantees are triggered. It’s even allowed (as in this case) for one dishonest political party to commit the government to future payments of secret guarantees without telling the other political parties.
A put option is a type of guarantee. When the Parex put option was triggered in 2014, the Latvian government lost approximately 100 million euros paying the EBRD to reverse the Parex sale. This was briefly mentioned in the Media which still won’t mention my whistleblowing, however articles were spun to make it seem like a normal transaction.
We can add to this 100 million to the amount that disappeared from Parex with the loss put to taxpayers, which according to Eurostat and the government was 800 million euros however since we still haven’t had full disclosure and since the Citadele-EBRD fraud is still continuing now in 2020 could have been 4 billion euros which would be all of the assets of Parex.
Personally, I don’t see why the Parex oligarchs would have only stolen 800 million of Parex assets instead of stealing the full 4 billion. They control the government and knew that they would not be prosecuted. Plus, they had plenty of time between my whistleblowing in 2005 and the EBRD deal in 2009 to steal as much as they wanted.
But regardless of whether the amount stolen was 800 million or 4 billion or something in between, Eurostat’s logic is absurd. Eurostat is pretending that it didn’t know whether or not the put option negotiated in 2009 would be exercised until 2014 when it was exercised. However the only reason the EBRD bought shares in Parex was because of the put option. If they didn’t exercise the put option, they would have lost 100% of their investment.
Keep in mind that Latvia didn’t need to lose any money and the bail-out and cover-up were solely motivated by corruption. The government didn’t have to bail out the bank at all. And even after the government did bail out the bank, the government could have recovered the money by prosecuting and suing the people who stole the money and the auditors. Even now in 2020, it isn’t too late to recover the money because the cover-up is still continuing. If the Latvian government would announce that the assets of Parex were stolen and that the previous government stories about how Parex collapsed because of the United States or Sweden were lies, then the government could commence efforts to recover the money and pay off a large part of the national debt.
Also absurd is that Eurostat seems to be partners with auditor EY. EY was aware of my whistleblowing and reacted by getting angry at me. This included my contacts at EY Baltics in Riga and EY Global in London. The same auditors in Riga signed the Parex annual reports from 1998 to 2008 and during every year the annual reports were materially false. Then, in 2008, EY signed the annual reports for both Parex and ABLV Bank at a time when the Parex bailout began and accounts and employees were switching over to ABLV. Then, from 2008 to 2018 EY signed the annual reports for ABLV which collapsed because it got blacklisted by the US Treasury. The Latvian government decided to let ABLV self-liquidate after the proposed independent administrator was machine-gunned dead and to allow EY to oversee the liquidation.
When Eurostat visited Latvia in 2017 to make their report dated 2018 which revealed that the Citadele privatization was fraudulent just like the Parex privatization, guess who was invited to accompany Eurostat? Representatives of EY! Eurostat is supposed to be working for European taxpayers to provide us with truthful information. Eurostat is not supposed to be working with EY to cover-up truth.
Now, on to the next victim country: Malta
In April 2016, the Panama Papers revealed that two senior people in the government, both from the Labour Party, had set up offshore companies for the apparent purpose of receiving bribes related to the state energy company Enemalta which had made a contract with a private company Electrogas. The government pressured Bank of Valletta which is 25% owned by the government to make a loan to Electrogas to finance a project which cost approximately 370 million euros. Corrupt dealings related to Enemalta motivated a whistleblower from Pilatus Bank to come forward with information that was published by a prominent journalist who was then murdered with a car bomb, with the chief suspect being the main person behind Electrogas.
At the same time this was going on, in August 2016, Eurostat approved a request from the Labour Party to establish the Malta Development Bank as a state-owned bank that could borrow a billion euros using a government guarantee and could keep this obligation off-the-books. The Labour Party decided that getting money for projects from Bank of Valletta was too difficult and controversial and therefore Malta Development Bank could be more convenient for future projects. Again, Eurostat is supporting one political party against the other political parties. Thanks to Eurostat, the Labour Party can raise financing for its projects without letting taxpayers and creditors know about it until years later when it could be discovered that the money was stolen by organized crime groups. Taxpayers and creditors will have a big surprise paying the guarantee.
Prevention of this type of lending is why the European Commission has a policy of forcing member states to privatize lenders. Otherwise Europe will become like China where banks are controlled by corrupt government officials and make huge loans to fund unprofitable projects which are motivated only for the purpose of generating kickbacks. However, Eurostat, which is a directorate of the European Commission, is undermining the European Commission’s objectives.
CONCLUSION: European journalists and activists should take action to force change at Eurostat.
When governments borrow money, then the debt should be publicly disclosed. If a government says they privatized an asset however the government has a secret obligation to reverse back the privatization then this should be regarded as fraud.
I have had challenges for years getting the public interested in this issue, mostly because people who aren’t accountants don’t grasp how serious this fraud is. However there is no point requiring member states to privatize companies if the privatizations are secretly reversible. Governments can make their national debt figures completely fake by using this type of fraud. We would be better off saying that governments don’t have to report their national debts at all.
Let’s introduce truth and integrity to the European Union. This will benefit all honest taxpayers and bond investors. The only people who will be harmed are the corrupts, looters, and cover-up artists.
John’s other article Confirmed Fraudster becomes European Commission Executive Vice President is available in English, Latvian and Russian languages.
What about informing US Treasury ? Worked very well on Lembergs..
The FBI and US Treasury know about this for years and they aren’t doing anything. I don’t know why. The US government owns 10% of the EBRD and the EBRD is organizing frauds for the Russian Mafia. It would be very easy for the US government to tell the EBRD not to do this or to cancel funding to the EBRD. The US Treasury has done several things against the Parex Mafia: (1) sanctioned Parex successor bank Credex in Belarus, (2) sanctioned Parex successor bank ABLV in Latvia, (3) collected damages in the US v Daimler (and Solaris) case in 2010 (the Latvian government could have gotten millions from this however decided not to), (4) put Parex mobster Oleg Boiko on the US Treasury Putin Warning List, (5) put Parex mobster Yuri Shefler on the US Treasury Putin Warning List, (6) put Parex mobster Eduard Khudainatov on the US Treasury Sanctions List.