Latvia may have bought 'useless' locomotives as part of corruption scandal

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The deal at the center of a major corruption scandal involving the former head of Latvijas Dzelzcels (Latvian Railways), high-flyer Ugis Magonis, likely concerns the sale of four ancient and decrepit locomotive engines for big money, the BNS newswire reported Wednesday.

Skinest Rail, a company owned by Estonia's wealthiest businessman, Oleg Ossinovski, bought four worn-out 2TE116 engines from the Estonian state-owned cargo operating company EVR Cargo for approximately two million euros in 2014.

EVR Cargo sold four 2TE116 engines to Skinest Rail, maker of the best offer, at the end of 2014. "Two of them were operational, two weren't," EVR Cargo board chairman Ahto Altjoe told BNS on Tuesday.

"One was completely unserviceable – the engine's crankshaft was broken, it hadn't moved already for six months," he said. "Each of them needed a general overhaul. Their service life was about to end in three years. For us they were absolutely useless already," he said.

The sell-off of the engines happened in two tenders, the bidding period in one of which was from April to the end of May and in the second one from September to the end of October.

EVR Cargo decided to sell the engines because they were uneconomical and the company had no need for engines nearing the end of their service life - yet apparently Latvia was eager to get its hands on the rustbuckets as part of its modernization program.

"There were two tenders. Skinest Rail won them with a couple of million euros [combined]," Altjoe said.

On Feb. 12 this year LDz Ritosa Sastava Serviss, a rolling stock operating subsidiary of the Latvian state railway company Latvijas Dzelzcels, announced a public procurement tender to buy four units of 2TE116 engines. The deadline for offers was April 7.

The Latvian daily Diena reported over the weekend that Ugis Magonis may have received a bribe of €500,000 in connection with the tender. Suspicion has fallen on Ossinovski as a possible source of the payment after his offices were raided by Estonian police, though as yet no charges against the businessman have been brought. Ossinovski denies any wrongdoing.

According to the newspaper the Latvian company paid on the average two million euros or more per unit for the engines, or altogether over eight million euros, a grossly inflated price that would have enabled plenty to be creamed off the top.

Daugavpils Lokomotivju Remonta Rupnica, a train engine maintenance company based in the eastern Latvian city of Daugavpils, is part of the same group as Skinest Rail.

According to unofficial information Magonis was detained as he was returning from Estonia in a car driven by his chauffeur. The first attempt to arrest him on the Estonian-Latvian border ended in a high-speed chase, which ended in comical fashion when Magonis car was held up by roadworks.

Magonis was detained by officers of the Latvian Corruption Prevention and Combating Bureau.

A bribe worth nearly half a million euros was found in the car, Panorama, the evening news program of Latvian public television, reported, citing unofficial information.

On Friday, Magonis was summarily dismissed as head of Latvijas Dzelzcels.

The Riga Regional Court on Saturday remanded Magonis in custody.

Latvijas Dzelzcels is a major state-owned company, involved in freight transportation by rail and the maintenance of infrastructure.

The scandal has led to opposition party Latvia's Regional Alliance to demand the resignation of Transport Minister Anrijs Matiss.

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