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Suspicions of corruption at Riga Satiksme will affect company's borrowing capacity - SEB Banka CEO

BC, Riga, 14.03.2019.Print version
Suspicions of corruption at the Riga municipal public transport company Rigas Satiksme will affect the company's borrowing capacity, Ieva Tetere, CEO at SEB Banka, one of the creditors of the company, told LETA.

Since SEB Banka became a creditor of Rigas Satiksme, it has been following all available information about the operations and reputation of Rigas Satiksme, as well as information about the company's management practices, said Tetere.

When SEB Banka decided to offer Rigas Satiksme a loan in 2016, it did so based on the company's affirmation that all management problems would be sorted out in the middle term, that the company's board members would be independent of any political influence, and that a professional nonpartisan supervisory board would be set up at Rigas Satiksme, said Tetere.

The last time SEB Banka offered a loan to Rigas Satiksme, it did so on condition that it would be one of the lenders together with the European Investment Bank and Nordic Investment Bank, said Tetere.

"The events brought to light by the Corruption Prevention Bureau made us conclude that the changes we had identified were far from reality. The fact that Rigas Satiksme for a long time had politically biased management has resulted in very high corruption risks," said Tetere.

The way a temporary board was appointed at Rigas Satiksme on March 5 is also unacceptable to the bank. "We insist that municipal companies must be run by independent and professional management and supervisory boards," stressed Tetere. In order to solve the grave financial problems and corruption risks at the company, a professional and independent management team has to be set up at Rigas Satiksme as soon as possible so the company could still attract financing, including European Union financing, in the future.

"For such a systemically important municipal company as Rigas Satiksme, good governance principles are of crucial importance, otherwise the reputation of not only the largest municipality in the Baltic countries will be in jeopardy - the entire country's reputation will be," emphasized Tetere.

SEB Banka is communicating with other Rigas Satiksme lenders, but the ongoing investigation of the corruption case will impact the company's borrowing capacity in the future. The existing lenders may require more information about the company's operations, and the cost of borrowing will increase for Rigas Satiksme, said Tetere.

On the other hand, the Treasury told LETA that the Finance Ministry, being one of the lenders to Rigas Satiksme, believes that the company must implement recommendations offered by the EY audit company in order to ensure good governance practices, including in public procurement. Taking into consideration that the audit company's report has a limited access status, the Treasury at the moment cannot offer detailed information about the auditor's recommendations.

As reported, the Corruption Prevention Bureau has started a criminal case on three procurement tenders organized by Rigas Satiksme. Following the Corruption Prevention Bureau's decision, all five Rigas Satiksme board members stepped down and a temporary board was appointed to manage the company, and former Transport Minister Anrijs Matiss was appointed chairman of the board last December, who then proposed that audit be carried out at the company.

The audit, carried out by EY, found that over the past few years Rigas Satiksme lost dozens of millions of euros due to poor management practices, while contracts with e-ticket system operator Rigas Karte and minibus passenger service provider Rigas Mikroautobusu caused Rigas Satiksme a loss of several million euros.

Earlier this month, Matiss stepped down as the acting head of Rigas Satiksme. He explained this decision with lack of support for changes in the company on the part of Rigas Satiksme shareholders, namely Riga Mayor and Harmony’s leader Nils Usakovs.

Ernests Saulitis from the Riga City Council property department was then appointed as the acting head of Rigas Satiksme.

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