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Ministry warns ex-mayor's promissory note can undermine Latvia' s credit rating

Xinhua, July 7, 2016 Adjust font size:

An ungainly attempt by a former Latvian mayor to borrow 200 million euros (222.08 million U.S. dollars) from an offshore firm on behalf of the local authority can seriously undermine the reputation and credit rating of whole Latvia, the Finance Ministry has warned.

The ministry has also criticized the Lielvarde local authority for sorting the situation out too slowly, according to a report published on local media.

In a document attached to its annual report to the State Audit Office, the Lielvarde council expresses fears that the promissory note signed by ex-mayor Janis Abolins might prove legally binding after all.

The Finance Ministry believes the risk is serious enough to be mentioned also in Latvia' s national report.

"The deal can cause significant risks to the country' s reputation and credit ratings. Unless we receive a document, and not a verbal confirmation, that there will be no legal consequences, the State Audit Office' s conclusion about the national and municipal financial reports can be negative," said Finance Ministry official Jolanta Plume.

To avoid adverse consequences for the entire state budget, the promissory note's legal status has to be clarified by the end of the summer. Although the news of the then Lievarde mayor's reckless dealings broke at the end of last year, the local authority is only planning now to hire an international audit firm to analyze the situation.

Abolins, who resigned as Lielvarde mayor after what he described as an attempt to borrow from a Liechtenstein-registered company a sum worth 20 Lielvarde's annual budgets for the region' s development, is still a member of the Lielvarde council.

After Abolins' resignation at the beginning of December last year, Vita Volonte, who was appointed acting Lielvarde mayor, said that the ex-mayor had signed a promissory note to receive 200 million euros from Riverside HK Ltd, an offshore firm registered in Liechtenstein. He then sought the Treasury's approval and guarantee for the deal.

The Finance Ministry applied to the Prosecutor General' s Office and Corruption Prevention Bureau, asking to investigate Abolins' dealings. An inquiry launched by the Corruption Prevention Bureau is still ongoing. Endit