Behind closed doors, trial of Latvian whistleblower begins

By bne IntelliNews April 15, 2014

Mike Collier in Riga -


On April 14 the controversial trial began in Latvia of Ilmars Poikans, who made international headlines under the pseudonym of "Neo" in 2009 when he leaked embarassing tax records of the Baltic country's elite. Just when the EU is accusing Russia of launching a bellicose propaganda war over Ukraine, such conduct closer to home is an unwelcome reminder of how low parts of the EU can still sink in guarding freedom of expression and the press.

Controversially, Judge Una Melameda confirmed that Poikans' defence on charges of obtaining and publishing private data would be heard in closed court with no members of the press allowed in to the hearing, citing commercial confidentiality issues. However in making the announcement she surprised the few journalists in attendance by naming the "financial institution" behind the case as ABLV bank, revealing the identity of what had previously been referred to only as "Bank X" but which the investigative journalism outfit Re:Baltica had already outed in the pages of bne as far back as last November.

Re:Baltica also noted the unusual way ABLV suddenly appeared as the plaintiff after several banks were apparently approached by police and invited to participate. The precise nature of ABLV's commercial secret remains a mystery – and thanks to Judge Melameda it is likely to remain so.

"I'm disappointed the court is closed. I'm surprised anyone could look at the lists I released and see commercial secrets in them," Poikans told bne during a break in proceedings at the Riga Central District Court after the first four hours of evidence on April 14, most of which consisted of wheeling in one geeky-looking witness after another.

On a doomed mission to track down a cup of coffee – that day the courthouse cafeteria was also operating a locked-door policy – Poikans retained his good humour even if behind his smile was a faint trace of concern. Given that he could face a potential two years in jail if found guilty, that's hardly surprising.

Facts of the case

In 2010 a whistleblower known only as "Neo" - a pseudonym taken from the Matrix series of movies - obtained 7.5m classified files from Latvia's tax authority, the State Revenue Service (SRS) after discovering a simple flaw in its electronic security system.

He released selected data into the public domain via investigative journalist Ilze Nagla to show that senior state employees were continuing to pocket large wages and bonuses even as hundreds of lower-paid workers were losing their jobs and having wages slashed by a third as part of an austerity drive following the 2008 crisis. His disclosures included senior staff at bailed-out Parex Bank, the financial regulator (FKTK), the Latvian central bank and state-owned power utility Latvenergo.

Months later, Neo's identity was revealed to be Poikans, who worked as a researcher and computing expert at the University of Latvia. He was subsequently named Latvia's "European of the Year" in an online public vote.

But in 2010 police raided the home of Nagla, the journalist who had been helping Poikans get his revelations to the public while protecting his identity. Nagla complained to the Riga Central District Court but had her case rejected, forcing her to take it to the European Court of Human Rights (ECHR), which ruled the Latvian state had violated the European Human Rights Convention with regard to freedom of expression and ordered that she be paid compensation of €20,000.

Nagla was among the few non-geeky witnesses on April 14 in court and told bne she was surprised Poikans was being held responsible for the leak rather than the tax authorities. "I think they knew about the security hole and they were trying to hide it," Nagla said. "As far as I know, all that happened in terms of consequences was that a couple of people in the IT department of the tax authority had their wages decreased for a couple of months. But they are the ones who are funded by the taxpayer and are entrusted with public information."

Nagla added that while her own case was concerned with rights rather than directly with whistleblowing, "The European Court of Human Rights admitted the information we released was of public importance so I hope that will help with this case."

Lawyer Martins Mits, a human rights expert who is not directly involved in the case, said it was "not particularly unusual" for a case supposedly involving sensitive business secrets to be heard in closed court, though it would place extra importance on the ultimate judgment being fully explained. "From the human rights perspective, it's important the public has full information. In principle the judgment should be made public, however there is also quite strong protection of private data in Latvia, though I understand discussions about where the balance should lie have already started in parliamentary committees. In future we may see some changes, and this case might help with that."

The bank

Founded in 1993 when it was known as Aizkraukles Bank, ABLV Bank is currently the largest privately-owned bank in Latvia with offices in many countries of the Commonwealth of Independent States (CIS), including Russia, Ukraine, Kazakhstan, Belarus, Tajikistan, Uzbekistan and Azerbaijan, as well as an office in Cyprus and a subsidiary in Luxembourg. In 2013 it made a profit of €43m and boasted assets worth €3.32bn.

ABLV was named by lawyers representing the accountant Sergei Magnitsky, who was investigating a massive Russian VAT fraud but was himself arrested and died in Russian police custody, as one of the banks through which the money was illegally channelled, though the lender denies the claim. In a 2012 report, Global Witness claimed ABLV handled a $30m payment from Kyrgyzstan, which was suspected to be part of a money-laundering scheme. ABLV denies that allegation too.

ABLV is also one of only three Latvian banks classed as of systemic importance and therefore subject to direct oversight from the European Central Bank. Coincidentally, bne understands that the other two banks subject to such oversight - Swedish owned Swedbank and SEB – are also the other two banks prosecutors tried unsuccessfully to enrol in the case against Poikans.

Its general business ethos is clear on its homepage where it somewhat eugenically declares: "In business, like in sports, only the weak may be happy with mere participation."

Related Articles

Latvia’s Citadele Bank pulls IPO

bne IntelliNews - Latvia's Citadele Bank has postponed its initial public offering (IPO), citing “ongoing unfavourable market conditions”, the bank announced on November 11. The postponement ... more

BOOK REVIEW: “Europe’s Orphan” – how the euro became a scapegoat for policy ills

Kit Gillet in Bucharest - The euro, conceived as part of a grand and unifying vision for Europe, has, over the last few years, become tainted and often even blamed for the calamities that have ... more

Mystery Latvian linked to Scottish shell companies denies role in $1bn Moldova bank fraud

Graham Stack in Berlin - A Latvian financier linked to the mass production of Scottish shell companies has denied to bne IntelliNews any involvement in the $1bn Moldovan bank fraud that has caused ... more