Curious career zigzags. From shipping schemes to a warm seat in Latvian Railway

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Shadow of doubt over fraud worth five million euros. Career twists with Lembergs’ approval. Secret peace treaty following Uldis Augulis’ entry to Transport Ministry. Illegal state of monopoly in the industry. What hides behind Latvian Railway chief’s «spotless» reputation?

Complaints, litigations and breached EU directive

Edvīns Bērziņš because chairman of LDz at the end of February 2016. The main commitment and priority outlined at the time was the following – ensure full compliance of the company’s operations with EU directives and amendments to the Law on Railway. This applies to matters associated with tariffs and proposals regarding infrastructure fees. Review and expansion of domestic transports is also a major issue, comments one of the members of the Nomination Commission Džineta Innusa when Edvīns Bērziņš was approved in his post.

However, Bērziņš’s objective got stuck as the years went by. Market’s opening for free competition has not been accomplished. Instead there are several ongoing litigations and Competition Council’s initiated case against LDz and LDz Cargo’s possible abuse of dominant market position. Twelve years after railway freight market’s opening in the EU, Latvia still has not done it. This means the country has breached European Commission’s directive.

Latvian State Railway Administration’s director Juris Iesalnieks had previously voiced concerns and a warning that Latvia’s failed tasks could result is serious consequences from the European Commission. Transport companies working in this sector have a great many complaints towards the policy employed by LDz. The head of LDz Edvīns Bērziņš has yet to react to any of them, however.

There are still some unanswered questions when it comes to Bērziņš’s approval. First and foremost – why was management over a company whose operations are associated with state security interests entrusted to a person with such serious problems with reputation?
Officials responsible for his approval had no way of not knowing that the ex-board member of Latvian Shipping Company and its Legal Affairs Office Edvīns Bērziņš along with several other private and legal persons is accused of defrauding approximately five million US dollars from Liberia-based Latvian Shipping Company’s subsidiary Latmar Holdings Corporation. London Court of Law had previously made a verdict not in Bērziņš’s favour, whereas Jurmala Court of Justice, which had received the case in 2013, ruled that Bērziņš needs to pay Latmar GBP 145 000 to cover legal costs for court proceedings in a foreign country. On top of that, the litigation process passed with the usual occupation breach. According to materials of the case, Latvian Shipping Company had used fake consultation contracts with «letterbox companies» that provided no consultations in reality. Part of the money was transferred before the contract was even signed. On top of that, one of Latvian Shipping Company’s «consultants» – Media Locus – was represented by infamous and money laundering schemes-involved Lana Zamba. It is unlikely that Edvīns Bērziņš, who was in control of all contracts, was unaware of getting involved in a fraudulent scheme. It is also unlikely the people who had approved him for the post were unaware as well. This begs the question – who benefited from it?

Aivars Lembergs’ ever-present shadow

It was during this fraud scandal Latvian Shipping Company was still controlled by the so-called Camp Lembergs. Austrian Arindal Beteiligungsverwaltungs GMBH, one of the letterbox firms involved in Latmar fraud scandal, which had also received five payments USD 960 000 each, was 100% owned by Jakobs Hiršbeks, who is mentioned as the trustee behind trusts of suspended Ventspils Mayor Aivars Lembergs’ family. An interesting pattern is outlined – nearly five millions were flushed from Lembergs’ controlled Latvian Shipping Company to a letterbox firm owned by Lembergs’ trustee while the person who later became chief of Latvian Railway with Lembergs’ blessing was holding his hand on the pulse of the entire business operation. This cannot be the only interesting coincidence, can it?

The previous chief of LDz, Ugis Magonis, was detailed in August 2015 by Corruption Prevention and Combating Bureau. Anrijs Matīss was Latvia’s transport minister. Aivars Strakša briefly became acting chief of LDz. There were almost no doubts he would become the next head of the company. In February 2016, however, Uldis Augulis became transport minister, and the situation changed. The ministry ended up under the Union of Greens and Farmers. According to unofficial information, the interests of a certain Aivars Lembergs had largely dictated the rules there, and so Edvīns Bērziņš was appointed as the next chief of LDz around the end of February. Around the same time, peace was signed in secret with Latmar in the fraud scandal.

Tax fraud does not affect reputation

During Augulis’ term as transport minister, Lembergs’ associate Verners Lūsis because LDz chief of logistics. Polish authorities accuse Verners Lūsis of defrauding more than 48 million in a VAT fraud scheme. Lūsis has been associated with Lembergs since 2005, when he because a board member in then Lembergs’ controlled AS Ventbunkers. It is well-known that in the same year, the two of them had engaged in no-so-legal talks in Copenhagen, and the entire conversation was recorded by Latvia’s Constitution Protection Bureau with assistance from Danish authorities. The recording was added to Lembergs’ criminal case.

Verners Lūsis’ name is also mentioned in relation to LDz odd reputation. After his detainment in Lithuania, Lūsis stepped down from his post as chief of logistics of LDz, saying that he made this decision to preserve the company’s reputation. However, almost immediately after that, Lūsis was given a job in LDz subsidiary LDz Cargo with a wage of EUR 3 500 with Bērziņš’s blessing. The initiative to put Lūsis as board chairman of LDz logistics came from Edvīns Bērziņš’s side. On top of that, Bērziņš was the one who insisted on Lūsis’ remainder at LDz Cargo. It would seem that LDzchairman is not the least bit concerned about Lūsis’ reputation problems and possible problems for the company.

A million here and a million there…

There is another confusing link between LDz and Ventspils – the grandiose promotion and sponsoring contracts, which could not have been signed without Edvīns Bērziņš’s direct approval. LDz considers information about promotional contracts a company secret, which makes full information about them inaccessible. The promotional contracts in question were the reason why Latvia’s Transport Minister Tālis Linkaits finally declared no-confidence towards the board of LDz. The minister concluded that many of the company’s signed promotional and marketing contracts had no ties with the company’s actual operations.

Information has also surfaced that corruptive actions had taken place in relation to LDz Cargo’s owned rolling stock, which may have involved fraud.
There is also the failure to build the sound-dampening wall at Šķirotava Station, which LDz had decided to build without organizing a tender six years ago. LDz had transferred an advance payment of half a million euros to Composite Construction. The company then transferred the money to two Hong Kong-based companies, and that was the end of it. Now there is no money or a wall. The only problem is that LDz was ordered to return EU co-financing. The deal went through when Edvīns Bērziņš was still board chairman and Uģis Magonis was in charge of LDz. But why did LDz need four years to take notice of the situation and ask about money recovery options only after Composite Constructions was declared insolvent? The half a million euros was long gone by then, and now it is not possible to recover this money. One of the versions is that LDz started worrying after such a long period of time to so that certain officials would not be made accountable.

The attack by Lembergs’ owned media

It should be clear by now that Latvia’s transport minister had ample reasons to distrust the board of LDz. However, his initially burning activity towards enforcement of corruption and scheming has calmed down. It is not impossible that his may be related to the massive smearing campaign launched by media owned by Aivars Lembers. Newspapers like Neatkarīgā Rīta Avīze and Ventas Balss, whose opinions more often than not are the same as Lembergs’ opinion, do not report the dubious business operations by LDz and the general actions against the interest of businesses associated with the transport industry, but they do actively slam Lembergs’ biggest opponent Dr. Rudolf Meroni, accusing him of all sorts of crimes. However, drowning Ventspils Port’s transit companies using LDz would mean drowning Ventspils along with them. This is because these companies provide the city a great deal of revenue with their taxes. For example, AS Baltijas ekspresis was the biggest PIT payer per employee in Ventspils in 2018. Unfortunately, it seems that LDz and its subsidiary LDz Cargo are doing all they can to reduce this company’s competitiveness. Looks like this state company, which uses its subsidiary to engage in railway freight operations (even though it is not allowed to as the company in charge of railway infrastructure maintenance) cannot possibly accept that LDz Cargo’s market share may drop from 70% to a mere 66% and the market share of AS Baltijas ekspresis might increase from 14% to 22%. However, it is likely that this is one of the reasons for the company’s currently observed hysteria.

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