London High Court Demands USD 40 million Security from Defendants

On 27 May, the United Kingdom’s High Court of Justice, Queen’s Bench Division, Commercial Court ruled that a number of offshore companies, connected with former JSC “Latvijas kuģniecība” (hereafter – Latvian Shipping Company, LASCO) officials, that are defendants in a case in whey they are accused of defrauding LASCO of approximately USD 100 million must post security in the amount of USD 40 million, or make over more than 55 million LASCO shares in favour of LASCO and pay an additional USD 20 million as security for the claim being brought against them by LASCO. 

The High Court has decreed that security should be posted in this amount, because in their testimonies the defendants have admitted perpetrating a fraud involving at least USD 40 million.

In accordance with the High Court’s ruling in regard the fraud case, by 10 June 2010 the LASCO shareholders involved must post security in favour of LASCO in the amount of more than 55 million and furthermore USD 20 million must be deposited with the United Kingdom High Court by 17 June. In turn, if the defendants fail to comply with the aforementioned ruling by the stipulated deadlines, the sum due to be paid by the defendants to the High Court by 17 June will double from USD 20 million to USD 40 million. The defendants in the LASCO fraud case have been ordered to post this security, so that in the opinion of the court, they can even continue their legal defence. If the defendants fail to satisfy any of the court’s requirements in full, the High Court will find them guilty without further review of the case and will recover a sum of up to USD 100 million on behalf of LASCO. 

The ruling by the British High Court applies to the confiscation of LASCO shares on behalf of LASCO which are currently nominally held by a company named,  “International Baltic Investments” (IBI), which is connected to Mārtiņš Kvēps and Arnis Nīcgalis, the attorneys of Oļegs Stepanovs, the former LASCO Board Member now accused of involvement in the scheme to defraud LASCO.

In the legal proceedings which were brought in the United Kingdom at the behest of LASCO, the defendants consist of five offshore companies – “Recoletos Limited”, “Romanica Overseas Limited”, “Skeena Overseas Limited”, “Luzero Limited” and “Chandler Limited”, which are linked to former LASCO officials including Oļegs Stepanovs, Valērijs Godunovs and Alvis Akmenis, and which are the defendants accused of unlawfully concluding more than 60 ship chartering transactions for artificially low rates from 2003 - 2005, thus inflicting losses in the amount of USD 100 million on LASCO. In turn, criminal proceedings have been brought in Latvia regarding these unlawful transactions in which several former senior LASCO employees have been classified as suspects.

“This ruling by the United Kingdom High Court is the first visible step on the way to the actual sentencing of those responsible for defrauding JSC Latvijas kuģniecība and the return of the funds owed to LASCO," stresses LASCO Chairman of the Board, Imants Sarmulis adding that, “We hope that the criminal case in Latvia will also soon deliver concrete results."

LASCO believes that it is absurd that during the course of the court proceedings, the defendants have tried to conceal their guilt by naming various Latvian politicians and companies not-related to LASCO such as Andris Šķēle, Aivars Lembergs, and offshore companies “Hinch”, “Regina”, etc. LASCO has never had any obligations to or taken part in any transactions involving the said persons and LASCO stresses that the identity of the defendants, both legal entities and the private individuals connected with them, involved in the court case are crystal clear. 

In its ruling, the High Court also stated that during the course of legal proceedings, the representatives of the defendants have admitted that approximately USD 12.5 million dollars have been spent on bribes to companies in Russia, Ukraine and Belarus to ensure the successful implementation of the fraud scheme. Instructions regarding the payment of these bribes were issued by Nikolai Baštovoi with Ņina Gļebova as his accomplice.

As LASCO has already stated on several previous occasions, according to the findings of the Economic Police Authority of the Main Criminal Police Authority, as a result of some of the LASCO contracts concluded at discounted chartering rates,  fraudulently obtained funds were transferred to the bank accounts of two LASCO shareholders – offshore companies: “Ojay Limited” and “Eastgate Properties Ltd.”. Subject to the police deciding to arrest these shares within the framework of the cause involving the defrauding of LASCO, a still murky and suspicious transaction was carried out resulting in the said shares coming into the custodianship of IBI. Suspicions regarding the fictitious nature of this transaction were aroused by the discovery that Mārtiņš Kvēps and Arnis Nīcgalis, officials of both Ojay and Eastgate, as well as IBI, are linked to Stepanovs and the fact that the documents sent to LASCO in relation to the transaction are contradictory and mutually exclusive.

JSC “Latvijas kuģniecība” is a public limited company whose shares are quoted on the NASDAQ OMX Riga Stock Exchange. LASCO ranks among the world’s leading ship owners in the mediums-sized or handy tanker segment and in terms of its oil product turnover is among the market leaders in its company category in Northern Europe. 

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Marita Ozolina-Tumanovska

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Phone: +371 67020120, 29287169