It's beginning to look like 1995 all
over again. That was the year that Banka Baltija, Latvia's largest
bank at the time, was destroyed by economic crime. In fact, looking
back, the whole bank was the
economic crime. It was probably never intended to be anything else.
The case with Latvijas Krājbanka or the The Latvian Savings Bank, is
not identical. For one thing, Krājbanka has historically been around
since 1924. During the Soviet era, it was one of the few institutions
where private persons could keep their money on deposit. After
Latvian independence, it was privatized in 2003 and in 2005 Krājbanka
was acquired by Lithuania's Snoras Bank. Snoras Bank, in turn, was
owned by Vladimir Antonov, a Russian “investor” now suspected of
looting both Snoras and Krājbanka, who also attempted to buy
Sweden's Saab.
Like
Banka Baltija, Krājbanka's customers were mostly private persons. On
its home page, the bank says it is (was now) one of the largest
providers of financial services to private persons. When Banka
Baltija crashed, tens of thousands of Latvians lost their often
meager savings, which they had been criminally lured into depositing
with the bank. Krājbanka's customers entrusted their money in good
faith to a bank that had, in fact, worked as some kind of functioning
bank for over 80 years. In short, the bank did what it promised its
customers, up to some as yet indeterminate point at which Antonov
started influencing the operations of Snoras and Krājbanka with
criminal intent.
Whatever
the sequence of events, the effects of deliberate looting and
deception are being felt – thousands of customers have had their
savings thrust into limbo (theoretically, they are covered up to EUR
100 000, but the payout will take time) and hundreds of businesses
and government and municipal institutions. The total cost to society
will be in hundreds of millons of LVL, including businesses ruined by
the crash, small municipalities losing most of their funds and
further unemployment triggered by all of this.
In
some cases, the losses have been staggering. The Latvian State Radio
and Television Center had more than LVL 24 million on deposit at
Krājbanka, having chosen the bank as offering the best and safest
terms for holding this amount of money. This is now lost, especially
as Krājbanka is likely to be liquidated. The famous Latvian composer
and musician Raimonds Pauls has lost most of his savings of some LVL
700 000 on deposit with Krājbanka. It also looks like significant
funds – something like LVL 70 000 may have been put on deposit by
the Latvian Filmmaker's Union.
Recriminations
are already starting, just as they did when Banka Baltija fell apart.
The Financial and Capital Markets Commission, Latvia's banking
watchdog, is being blamed for missing the signs (or looking the other
way) when it should have seen the shady deal in August that plundered
Krājbanka of funds, diverted, it is said, to Antonov's private
projects, including his attempts to buy Saab.
All
things considered, though, it is impossible for any regulator or
watchdog, no matter what resources it commands (such as the
Securities Exchange Commission/SEC in the US) to double check on
everyone, especially when criminals ar lying. Banka Baltija founder
Aleksandrs Lavents and his managers lied systematically to auditors,
who had neither the duty nor the capability to test every number and
assertion offered by the bank with a lie detector. The Krājbanka
case was different, but at some point, most likely due to the actions
of Antonov, the bank turned into a fraud against its customer.
Moreover,
Antonov's behavior seems to fit into a pattern of criminality and
fraud by Russian so-called investors, who have either earned their
money by some form of crime at home, investing the spoils of
plundering and corrupting Russia into relatively benign Western
businesses, or who are simply taking the worst of so-called Russian
business practices into the West, like a gang of Wild West bandits
riding into town on money bags rather than horses.
Antonov
seems to fit into the latter pattern, making destructive
“investments” in Lithuania and Latvia, attempting to get a foot
in the door at Saab (hindered, at least, by the Swedish authorities
who were aware of his possible organized crime connection). Antonov's
father Alexander survived a shooting, an incident that casts light on
what his lines of business were and possibly still are.
At the
end of the day, the impact of the Krājbanka collapse will probably
be less dramatic than Banka Baltija and far less than Parex Bank's
collapse in 2008, which cost the government around LVL 1 billion in
bailout spending and almost made the country an international basket
case (when the basket says IMF on it, it is just a temporary resting
place until your limbs grow back). Parex Bank's collapse also has
elements of criminal sleaze, but it was done by locals and perhaps
with a bit more sophistication. There is a difference between getting
rich owning a bank that earns money serving shady characters and
doing for them (as well as its other customers) what it promises to
do, rather than breaching its trust to depositors and customers and
simply stealing or squandering their money. In any case, the full
story of Parex and various criminal and semi-criminal activities may
yet emerge.
What
all this suggest that with the Baltic countries being of particular
interest to Russian based criminal “investors” such as Antonov,
it is time to take targetted action. To be sure, there are examples
of Western fraudsters and financial criminals, from the people
running Enron to Bernie Madoff. But these guys eventually go to jail
in the US and other Western countries, they do not move to London and
buy football (soccer) clubs when rival gangs in Russia star breathing
down their neck, or when their gang falls out of favor with the
Russian political elite and the secret services.
I
would suggest that Russian investment in the Baltic countries be
allowed on a “whitelist only” basis – that is, to put you money
into any project in these countries (and why not the US as a whole),
any person whose investment capital was accumulated in Russia
(meaning any wealthy Russian citizen) shall be barred from
significant investment in any enterprise except if he or she is on a
“white list” of investors who have been thoroughly background
checked and vetted to be as clean as possible of any criminal or
Russian secret service ties.
Whitelisting
would be fair to Russians who want to put largely honestly earned
funds into legitimate businesses in the Baltics, but it would create
a presumption borne out by events, that the Russian post-Soviet
super-rich are not to be trusted and probably, by conscious intent or
instinct, engage in barbarous business practices. It may be the only
way to prevent a Banka Baltija 3.0, now that Krājbanka may prove to
be a Banka Baltija 2.0 (Not So ) Lite.
