Former Parex banka owners told to pay up

Take note – story published 3 years and 1 month ago

Former owners of the notorious Parex banka, Valerijs Kargins and Viktors Krasovickis will have to reimburse the state privatization agency and its subsidiary a cool 124.3 million euros, according to a decision of the Civil Cases Department of the Supreme Court, LSM's Latvian and Russian language services reported May 19.

Former poster child of the so-called 'Baltic tiger' economies, Parex banka collapsed during the 2008 financial crisis, dragging the entire state to the verge of bankruptcy and necessitating an IMF bailout. At that time, the government of Ivars Godmanis decided to save the bank, take over 51% of the shares and invest 200 million lats in the bank. On November 10, Minister of Finance Atis Slakteris, President of the Mortgage Bank Inesis Feiferis and Kargins signed an investment agreement that saved the bank and allowed Kargin and Krasovickis to continue operating it.

However, after signing the contract, the money from the bank began to flow out even faster, while Parex did not suspend disbursements and lending. When this was finally done on December 1, more than half a billion lats had flowed out of the bank.

In total, the state invested 1.7 billion euros in Parex, part of which has been recovered, but 654 million euros remain unrecovered.

Parex was later divided into a 'bad bank' asset recovery arm called Reverta, which was wound up in 2017 while the 'good bank' went on to become Citadele bank, under new owners.

The Privatization Agency wanted to reduce state losses by recovering them from former Parex shareholders. So far, just 4.5 million euros have been recovered for the benefit of the state.

The judgment of the court of second instance was read in the two largest proceedings at the end of January. In the Riga Regional Court, the state tried to recover 81 million euros from the bankers, because under the leadership of "Parex" they concluded deals unfavorable to the bank with relatives and friends. This court ruled in favor of Kargins and Krasovickis.

In its turn, the Latgale Regional Court ordered the former shareholders to pay 124 million euros in a case for damages caused to the state.

On May 18, the Civil Cases Department of the Supreme Court considered the cassation appeal of Kargins and Krasovitskis, reported the LETA newswire. The Supreme Court decided not to initiate cassation proceedings, in connection with which the verdict of the Latgale Regional Court came into force. As a result Kargins and Krasovickis are obliged to pay back 124.3 million euros, plus legal costs.

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