Offshore files reveal political ties to payday lending giant

The 4Finance payday loan company, set up in 2008 by four Latvian students, was taken over in late 2009 by associates of so-called oligarch Andris Šķēle and well-known businessman Māris Martinsons. They were able to escape paying taxes on cash loans almost completely by using companies in Malta and Belize, according to document copies obtained by the EIC.network of investigative journalists.

  • The story was written with the help of Journalismfund.eu, EIC, and journalists Vlad Odobescu (Romania), Blaž Zgaga (Slovenia) and Matthew Vella (Malta).

Malta files

Over the last three months, the EIC.network of journalists has dug into hundreds of thousands of documents that show how Malta operates a tax system where companies pay the lowest tax on profits in the EU.

The research has brought together 13 media and 49 journalists in 16 countries and 12 languages.

4Finance is the largest and fastest-growing payday loan company in Europe. Since it was set up in 2008 it has provided more than 11.5 million loans totaling over €4 billion.

An investigation by Rus.lsm.lv sheds light on what the so-called Malta files mean for Latvia.

An inverted ownership history emerges

The popular payday loan companies SMS Credit and Vivus, which were later reorganized into 4Finance, were set up in 2008 by four former students at the Stockholm School of Economics in Riga.

The business, which was often criticized as milking the poor, was so successful that in 2011 (or 2012 according to different data) Russian billionaire Oleg Boyko bought up 75% of the company for $70 to $170 million. 

In 2015 media reported that Uldis Arnicāns and Edgars Dupats, associates of former Prime Minister Andris Šķēle, became the co-owners of the business. Dupats, a lawyer, is Šķēle's son-in law, while Arnicans is connected with one of his family businesses, Liepājas autobusu parks.

Arnicāns and Dupats each had a stake of 25.5% in the company while Vera Boyko - the mother of Oleg Boyko - owned 49% through intermediaries.

However a different picture has emerged from the Malta files. It turns out that the politically-connected local businessmen had overtaken the business already in 2009 using companies based in Belize, and from 2011 using Maltese companies.

In addition to Dupats and Arnicāns, who had a 7% and 19.5% stake in the business respectively through the imaginatively-titled 'Fatcat Investments', the Russian ice hockey player Ilya Nikulin (19.5%) and businessman Māris Martinsons (also 19.5%) were also among the owners in the company. 

Martinsons, whose ties with politicians of the Unity party are well-known, was fined in 2015 for attempted embezzlement of EU funds.

As a result, by December 2011 when a confidential agreement was struck for selling part of 4Finance to Oleg Boyko, the local businessmen and the ice hockey player had a controlling stake of 65.5% in the company with the four former owners retaining a 34.5% stake.

What does it mean?

This might explain why short-term lenders have had such a powerful lobby in the Latvian parliament.

Discussions over limiting payday lenders started in 2013, however the Saeima postponed decisions on the matter for several times. In 2015 a Saeima committee only narrowly adopted stringent regulations on payday loans, which were at one time even supported by Latvian sports stars who have benefitted from sponsorship by the companies - in return for their celebrity endorsements.

However following growing public pressure the Saeima finally adopted laws limiting interest rates for quick cash to 100%. Before that, the interest could reach over 1000% per annum.

It is clear that the ties between 4Finance and politicians were not a secret before - they just had now become publicly known.

For example, according to Company Register data (obtained via Crediweb.lv), Māris Martinsons and Uldis Arnicāns had appeared on the company's board as early as May 2009. Later they lent 4Finance millions of euros, raising questions over whether Andris Šķēle is not the one behind this vast influx of money.

Who paid Ameriks the 20%?

Riga vice-mayor Andris Ameriks (Honor to Serve Riga party) has never hidden the fact that he lent money to 4Finance. First he did it in the form of loans and afterwards by buying company bonds.

At first he lent €0.5m to the company in 2010, which was declared in his tax statement. Next year he received the loan plus an astonishing 81,000 lats (about €114,000) in interest, which is a little over 20%. Coincidentally, Ameriks is colloquially known as "Mr 20%" by the public - a moniker he says he does not deserve.

In 2013 Ameriks was unable to say why he lent not to 4Finance directly but rather through the Belize-registered Prosperity Financing Limited, one of the indirect owners of 4Finance. He also did not reveal the person with whom he struck the loan agreement.

IEC journalists discovered that, of the seven Beliza offshore companies, Prosperity Financing Limited was connected to Māris Martinsons.

Martinsons was known as a conspicuously successful entrepreneur already back then. His Moduls-Riga company was regularly awarded construction contracts by Riga City Council (especially those at the Property Department), which is controlled by the Harmony party and its running partner Honor to Serve Riga.

In 2013 journalists asked Ameriks about his ties to Martinsons. Ameriks claimed he did not know him - that he just knew there's an individual of that name.

Yet at the time the two clearly had a significant business relationship.

Speaking through his assistant Mareks Gailītis, Ameriks told LSM: "This matter was reviewed by the authorities, and there were no problems there. So there's no comment."

Gailītis said that Ameriks might not have known who owns the offshore company that paid him €114,000.

Other former shareholders were evasive at best about their role in 4Finance.

Upon receiving written questions, Dupats refused to answer. The questions included one asking where he got the money for buying 4Finance shares in 2009. 

Ilya Nikulin asked LSM to contact him at a later date.

Other former and current shareholders stopped answering phone calls and letters after being sent questions by mail. 

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