Latvijas Kugnieciba's treatment of its shareholders and its fraudulent dealings brings shame on Latvia

Last week witnessed two quite extraordinary events in Riga, which can only
demonstrate to outside observers that getting normal business done in Latvia, a
proud member of the EU, is impossible and the business practices of its
“leaders” have no place in a Western democracy. 

Firstly there was the continuing postponement of LK's extraordinary
shareholders meeting, due to have been held on October 8th. No LK shareholder
meeting has taken place since April 2009. The urgent need for the meeting, the
agenda items and the potential re-shaping of the Supervisory Council (with no
change in the number of members nor the representation on the Council,
including the representation of the State Social Insurance Agency) have all
been fully covered in the last press release issued by VN. Yet again, these
points are re-confirmed by VN. No change in the numbers, no change in the
representation of the State Social Insurance Agency. What is needed is change
in the cost of the Council, a change in the system of governance and a return
to normal business practice at what was once a proud Latvian company that has
now fallen into disrepute. Shareholders are the legitimate owners of public
companies and public companies have responsibilities to engage with their
owners. 

Secondly the public witnessed the fortification of the office. Again, hardly
the action or behaviour that one would expect from a public company, owned by
its shareholders, which has yet to file a set of Annual Accounts for 2009. 
It is also a shocking signal that Latvia, an EU member, cannot guarantee the
safety of investments and that investor rights are threatened. This is hardly
the backdrop against which external investors would consider selecting Latvia
as a place to invest their capital. 

VN management yet again stresses that it is unacceptable for a public company,
owned by its shareholders, to fail to meet with its shareholders on a regular
basis, to review and discuss all aspects of business and strategy. As a 49.9%
shareholder, VN has legitimate rights to engage with the management and has
insisted on convening shareholders meetings since the beginning of 2010.
Despite multiple attempts for this to take place, LK management has gone out of
its way to prevent any discussion or engagement, blatantly abusing the laws of
corporate governance in Latvia. What is it that they have to hide? 

The performance, costs, attitude and behaviour of the management of LK are
outside acceptable business practice in any public company within the EU. As
previously stated, the LK Supervisory Council have paid themselves 5 million
lats in the last 3 years, an appalling misuse of shareholder funds for the
personal enrichment of the Supervisory Council members. This at a time when all
the indications are that the company is on the verge of financial collapse and
is incapable of producing proper audited accounts. To declare that Supervisory
Council member salaries are “confidential” makes an absurdity of the concept of
transparency and public accountability. Perhaps we could remind the Supervisory
Board members of who actually pays their salaries All of this in the third
largest public company within Latvia.  
A shame on Latvia. 

Ventspils nafta

Zane Bojāre
JSC „Ventspils nafta” PR Manager
E-mail: zane.bojare@vnafta.lv
Phone.: 67821691; 29706733