Tuesday, November 11, 2008

So much abut culture...

Six years ago the Estonian judiciary passed a verdict and the former head of the non - profit Estonian Culture Capital (ECC) was arrested. While being the head of the ECC its director Avo Viiol squandered around EEK 8mlj. In the process of untangling the whole affair it was discovered that Mr Viiol was gambling addict and simply used the money to satisfy his own vices. In the aftermath of the scam the Estonian Audit Office made a thorough investigation of the whole affair and discovered that politicization and lack of proper oversight of the non-profit organization made it possible for the lack of transparency in its financial flows. The National Audit Office of Estonia concluded after the ECC affair that the lack of regulation of non-profit organizations was the major cause for donations being squandered by self imposed head of the office. Later it was already former Estonian Ombudsman Mr Allar Jõks who tried to argue that also the politicization of the State Company Boards adds to the continuation of the non-transparent culture of financial flows in the Estonian non-profit and business sectors. While the new Estonian Ombudsman has not come to the issue of the state company boards full of politicians as forcefully as the former ombudsman, at least the ECC runs its business properly now.

In Latvia the Prime Minister has stepped into the shoes of Allar Jõks and he wants to cut down the size of political representatives in the State Company Boards. Last month the news broke out about the Latvian homologue of the Estonian ECC repeating the same ´´mistakes of financial scam´´, and apparently Latvian problems have the same roots. The non-profit Latvian Culture Fund (LKF) acting head Mr Pēteris Bankovskis mismanages the fund for quite some time now. He took over the fund in 1997, and in 2008 the LKF under his supervision lost its status of non-profit organization for the second time already (actually the LKF web page still advertises that they are entitled to accept donations!). Journalists from the the TV3 "Nekā Personīga" weekly program found that donations to the fund have disappeared. It means that not only several cultural programmes have stalled, but also monies to the Latvian poet Imants Ziedonis have disappeared. In the meantime the LKF not only leases a brand new Audi, and rents an office in down-town Riga, but the acting head of the LKF Pēteris Bankovskis has appropriated the real-estate that formerly belonged to the LKF. Diena reports, that Mr Bankovskis acquired the rights over the 3412 sq.m. real estate in Jūrmala for Ls20 000, and now the real estate company sells the Mr Bankovskis property for Ls1,63 mlj!


Photo: Kristaps Putniņš

Pēteris Bankovskis: "I am not a financial genius, but this property is mine..."

The Head of Latvian Audit Office Mrs Ingūna Sudraba discovered gross violations in the LKF financial reports already in 2005. The Latvian State Audit Office did not have a legal right to ask the Prosecutor´s Office to start an official investigation due to the fact that the LKF is a non-profit organization, thought open violations of bookkeeping procedures and other financial regulations were discovered. One may simply leave financial problems of the LKF aside and just look into the LKF website to realize that this institution does not operate properly, because the latest update of their web page dates the May 23, 2007!

If the State Prosecutor's office would initiate investigation vis-a-vis Pēteris Bankovskis unilaterally, then it would be beneficial to tighten the state regulation also in the Latvian non-profit sector. Until the affair is not solved one may only witness that the non-profit cultural organizations may become rather uncultured without proper oversight. Here Latvia is stepping into Estonian shoes again, and just the circumstances are different. While the former Estonian head of the ECC was gambling addict the incumbent head of the LKF is a self - styled financier. His financial schemes cost Latvian culture dearly already, and one can only hope that the Latvian Prosecutor's office and the Corruption Prevention Bureau (KNAB) would act quickly and within confines of law right after the Latvian Independence day.

12 comments:

Anonymous said...

Well, well.. You keep on writing on those issues constantly- from Parex nationalizing to LCCF (taking look at recent the posts of Yours). I must say that I have noticed that this is typical middle/ lower class approach here in Latvia. As to the LCCF- since withdraw of the USSR show business has been biggest market of black assets.
Right they used to say about the show business of Latvia- there is a show, but there is no business; but nevertheless one should look at situation in this market and regular cost estimates. If You would like You may ask Your students to right an essay on this, as proportion of show business in overall money laundering does not much fall behind areas of real estate or banking that You already mentioned. Just like those who have the access knows that Arena Riga (gues who paid for it?)belongs to mafia of suburbs of Moscow and serves as their money laundering institute among others, but the building on the opposite side of street- the Olympic Center serves for great interest of A. Skele- so called national mafia. It is no wonder that industries of public entertainment serve as legitimate laundering devices just like original restaurants and pizzerias served for laundering of Sicilian mafia.
Actually, LCCF plays minor role in over all game. Right persons had always managed to squeeze money out of LCCF to finance at least 50% of their projects by simply knowing employees of LCCF that shape regalement of routine competition. Of course, amounts of stealing budgetary assets are lower than those of other governmental and pseido- governmental agencies including AS Dienvidu Tilts :DD that in future could possibly exceed case of the Digital TV. However it might be, cultural money makes its own share in overall level of laundering. Other wise there would not be fighting among event organizers at equipment hire companies; leaders of official institutions like Helmi Stalte (off going leader of Cultural Department of Council of Riga) would not try to 'privatise' House of Congress; and after all Ella Ivanova would not have been killed just because she decided to switch some policies and money flows in connection of none of Ivanw's businesses but those in connection with Arena Riga.

Show business might not be a top profitable are, but just like in an example of Italian mafia- it is stable and constant; and major event hosting places (their owners), event organizers and governmental and city council's cultural departments as well and their agencies all have their share in greyness of local show business and money laundering via it.

Naivā said...

I just would like to make it clear that Latvian Cultural Fund (LKF) run by Pēteris Bankovskis is not a homologue of the Estonian CCF at all. The homologue, if you like, is Valsts Kultūrkapitāla fonds run by Edgars Vērpe, which IS the subject of the first comment to this blog.

Baltic said...

Mr/Mrs Anonymous:

Thank you for your time and enlightening on the issue of Arena Riga cum Ivanovs Ltd:) Show business similarly to ANY OTHER business in Latvia is allowed to use shady schemas due to the lack of rule of law and opaque bureaucracy in Latvia. Until the system of traditional authority would prevail in Latvia, the status quo system will be promoted unfortunately. To achieve the change of the presnet stagntion of the political elite performace, I envisage the way through IMF or EC conditionality requirements after the present economic crisis.

Decision to write about Parex being nationalized or LKF scam came out because of simple contemplations, that concern me whilst thinking about the sustainability of Latvian statehood in the long run. I do not understand what do you mean by middle/lower class approach? What do you mean by class here?

Baltic said...

naivā:

Thank you very much for the correction! Indeed LKF by statutes has nothing to do with ECC, but the EST National Culture fund (www.erkf.ee/index.php?nid=8) instead:)

Anonymous said...

As to 'Middle class approach' and Latvia state hood- no illusions here- Latvia Inc. as You branded Your own state (unless You are more for Est. or Scandinavia, whatever..) is absolutely real.
I believe in fact that governmental institutions here serve as a facade of business with exceptions of a few 'oldscool' civil servants. There's no talk about government's legitimacy within middle/ lower class as for almost two decades there have been relations between the people and the state that are based on delegation of supervision of almost all types of policy to the state. Therefore as far as all responsibility will be carried by state and hardly any by the people there will not be any fundamental change. I think there is such think as character of the state (meaning state as its people), and as far as this character of Latvian people is weak it will be more convenient to keep on blaming others, in particular their own state. So far about state- people relation.
Now to state business relations. As I mentioned at the moment state serves for interest of business and inadequate attitude toward serious issues as wages of workers of state employed areas by ministers of finance or health is a perfect example. In my own opinion, the only discussion here is about national identity of a certain business. According to national identities there are competing influences- Russians in energy etc., Scandinavians in finance etc., and national business Skele, Gulbis perhaps many more that may be found in publications of history of Latvian business area in 1990s. I don t think that Estonian or Lithuanian influence in market of consumer goods has much context with government.
So to sum:
Government consists competition of different business interests that is major area of its actions. Meanwhile the people keep on neglecting government and blaming it for failures (cases that go against the people's interest, but not necessarily business). Even though global situation is gloomy, Latvia's own politico-economic shortcomings can be separated from global context. I do not think that Latvia's becoming to a quasi Keynesian state is a long term solution. Of course, fallowing international model of nationalizing worthless banks after all the money is withdrawn from them weeks ago or injecting a couple hundred million lats into economy to re credit inconsiderate credits is a normal action, but it is works for up to five years until economic problems have calmed. But quasi Keynesian state will not cure governmental action in interest of business (national or international, whatever). Realize how naive it might sound, but the main problem is lack civic participation, and believe me- I have no idea how this may be cured.

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