In late 2005, John Christmas learned that the Latvian State Revenue Service (VID) would look at the Parex Bank fraud information.  This was great news, because the Latvian Prosecutors Office, Latvian financial regulator, Latvian central bank, Latvian Ministry of the Economy, and other government agencies refused to investigate.

Christmas knew that a senior person in the VID was the mother-in-law of the former President of Parex Asset Management, Guntars Vitols.  Vitols spoke often about how much he hated the liars at Parex, and therefore it seemed possible that he wanted revenge.

Christmas asked Vitols to tell what he knew about tax evasion (paying employee bonuses in unreported envelopes stuffed with American hundred-dollar bills) to the VID.  Christmas suggested going to the American FBI if the Latvian government did nothing.

Vitols apparently went to Parex and warned them that Christmas might go to the FBI instead of telling what he knew to VID.

Christmas received the warning from Jekaterina Ecina immediately afterward.  Parex had sent thugs to look for Christmas.

Fortunately, Christmas was outside of Latvia and therefore safe.  He reported the threats to the Latvian government with only one result:  Vitols contacted Christmas and said that Christmas should expect a phone call from a prosecutor who will explain that Christmas must renounce the whistleblowing or else get prosecuted.

A prosecutor did not call, however Vitols himself called back.  This time, Christmas was ready with a recording device.  Vitols tried to convince Christmas to sign a false confession that the whistleblowing was not true, threatening arrest by Interpol and prosecution in Latvia otherwise.

In the transcripts and recordings below, Vitols (acting as an intermediary for Parex Oligarch Viktor Krasovitsky and the Latvian Prosecutors Office) communicates this illegal threat to Christmas.

It is possible to confirm from the recordings that Vitols himself was witness to at least two of the material frauds at Parex.  He was witness to tax evasion (bonuses paid in envelopes).  And, he was witness to the unreported issuance of stock options (he said “stock agreement” once and “stock option” later).

Transcript:

FIRST RECORDING

Guntars: Hi John.

John: Hi Guntars. How are you today?

Guntars: I am fine. I am just in the middle of a meeting. Can I call you back in ten minutes or so?

John: That would be great. Thanks, bye.

SECOND RECORDING

Guntars: I’m kind of sick so I wouldn’t probably go out but its not unusual.

John: Oh, thats all right.

Guntars: Yeah were getting this flu epidemic I think in Latvia here.

John: Yeah I know. Well I think Daiga is healthy right now, so that’s what’s important for me. So she is getting some work done.

Guntars: You know everybody told me to get lost and get home otherwise if everybody gets sick no annual reports are submitted on time.

John: Yeah otherwise you will be back in the office well next week and all of them will be gone sick.

Guntars: Yeah that’s right. No actually flu epidemics is quite serious at this time because people when they get sick they lie down one week or so. And so that’s the deal.

John: Well I hope you get better soon.

Guntars: The reason I am calling is in regards to your matter, or case, or whatever. So basically I got a message back and today I went down to visit Krasovitsky who wanted just to tell me a few things about that. Basically the way it presently stands, he just explained quite a few things of what they have been doing so far and that of course he was assuring me about that there was no kind of any criminal misdoings or something like that in any case but they are very seriously pursuing some legal lines of …

John: Defending themselves?

Guntars: No, no, no. Actually they are trying to… he said there is some case against you already and they are even going, you know, there is some … he said that they might start looking, I mean the legal people, for you in other countries as well.

John: They are trying to prosecute me?

Guntars: Yes, he said that’s what they would be doing if there is no settlement is reached, but basically he said that nobody wants to spend too much time – he said that because of your initial letter that you sent out to like eighty banks or something and because of that there was this trouble that there was a lot of lawyers sitting down and due diligences and answering questions and so on and its just a big and nasty process which in their mind will end nowhere but it just takes a lot of time and therefore their suggestion is that they are very businesslike and he just said that you know why don’t we just sign a paper where you don’t raise any trouble for us and we won’t be making trouble for you and we will drop any potential cases and that will be just a confidential agreement between two parties.

John: And they actually have some proposed agreement that they would like to send to me?

Guntars: He gave me some kind of a paper which is just a sort of a rough draft of something and they said that they wanted to ask me if I could meet you and sort of negotiate for them because apparently I am sort of … I didnt have a relationship with them and that is exactly when you have two parties, like even if you look at a policital scene when you have two countries very hostile against each other there is somebody like myself who is not really big friends or big enemies with anybody…

John: I am very happy. It is very nice of you to be helpful with this. If they give you some proposed agreement then best is to give that to Daiga.

Guntars: I wonder if this is the case. The suggestion was that we discuss this only you and me and in person because there is no need to make too much publicity out of any of this. That is probably why they approached me in the first place in this case. Because they know I have been an insider and they are not letting anyone in on this case who is not familiar with it already.

John: The thing is that there is not going to be any personal discussion because I am not in Latvia and I am not even going to come to Latvia this year.

Guntars: I know but they are suggesting that if I may agree to go and see you someplace. Because I told them that it is not possible – that you are feeling threatened and therefore not willing to be in Latvia in any case.

John: If it’s a written agreement then maybe I can find a safe mailing address and I can give you a mailing address and it can be mailed to there and I’ll be the only one who looks at it, no one else will look at it.

Guntars: If that’s what you feel is the correct way to do it, otherwise I mean for me it doesn’t really matter. I told them that I don’t want to be involved in any sort of – I told them that I agree because I know you and I also do have trouble with them but I can only help out as a negotiator to the extent that, pass on the messages, everything is strictly legal – that there are parties that are not speaking to each other and I am just there to establish the line of communication and not anything about… So its supposed to be … As far as I’m concerned it will be strictly only that. I don’t see any wrongdoing in just trying to get two sides together to reach a settlement.

John: I think what I will do is I will brainstorm for a good address would be where you could maybe just tell them to mail any proposed agreement they have to that address.

Guntars: I have a copy of that. Its just a one page thing and that is something we could discuss. They basically told me to amend it or do something so if we come to certain agreement so that …

John: Could you email it to me? Could you send it to my email address?

Guntars: It is a carbon copy form. I could probably make a scan of it and email it to you. Thats probably possible.

John: That would be the best. And if I like it then I can sign it and send a signed copy by post back to whatever address I am supposed to send it to.

Guntars: Yeah. Right. If you have any major concerns or whatever their suggestion is just to call me up and do this through myself. In this case I told that I dont want to be involved with any third party – only with Krasovitsky himself and that is very well understood and so it is to be kept very close between the three of us at this point.

John: Do you have my email address?

Guntars: I don’t think so. Supposedly somebody probably has your email but probably its Daiga’s email. Do you have a foreign email or something?

John: I can give you an email address.

Guntars: You could just SMS it to me from your mobile phone.

John: I will SMS the address to you. By the way, regarding me getting prosecuted, that is absurd because I did not do anything illegal. In fact I feel that I had a legal obligation to give the information I knew to the Latvian Prosecutor and the fact that the Latvian Prosecutor is talking about prosecuting me clearly indicates corruption. But anymore I dont want to fight this anymore.

Guntars: I will tell you John what I believe is the case. The fact is that you are not a lawyer. You have been very emotional in what you wrote. How you wrote. How you accused, well I havent seen the letter, but according to them, how you accused not only the local … the FKTK … and then he said even some foreign banks and whatever. So, there are a lot of small points which are picked out by a proper lawyer. Then you can go against a lot of wordings which are not based on shear facts. That is kind of a procedural thing. You know that they have enough resources and they have always been very good in litigation and stuff like that that. I am quite certain they are capable of finding places where they can sue you for and what they can sue you for.

John: And they are actually talking with the Prosecutors Office about this? Or they are talking with the FKTK about this?

Guntars: I don’t know exactly. They even said that … Krasovitsky even said there is a certain … one of the alternatives is to start looking for you not only on the territory of Latvia but going through Interpol and stuff like that. Just for accusing something… I mean he may have… maybe not telling the very … of something …. quite clearly the message is that they are businesslike people and let’s not make trouble for each other. That is the idea. I said you are not going to take back your application to the state authorities that you have made because that is the point you made last time. He said that that that is not necessary. What is required is you both sign an agreement where you agree to certain things. And this agreement never sees the light. Any of the parties … Their is a guarantee there that they won’t be suing you either.

John: Okay, I just want to get out of this. So I will send you an SMS with my email address. If there is something that is acceptable … I mean I hope its just a short and simple and acceptable sort of thing, then hopefully I can just be finished.

Guntars: My suggestion to you – it’s just friendly advice – if you agree to the wording and even if you don’t agree and we change something, it would be very good if you send this letter to myself so that I get the signature from the other side.

John: So I should send it to SIA Investors? To you?

Guntars: Sorry?

John: I should send it to your office? To SIA Investors?

Guntars: Yes. Because what you need is an ageement so that you have not only a statement signed just by one party but a proper agreement and in this case sending it directly would be a little bit risky. I dont know. Maybe not.

John: I am more comfortable working through you anyway. I am more comfortable sending it to you.

Guntars: John, remember what happened to our stock agreement? They were sort of signed and then hidden in some kind of a safe locker and they never … they were probably destroyed. … even had a copy on their hands. In order to avoid something that is just my friendly advice.

John: I will SMS this email address to you. I am very happy that the person you talked to is actually Krasovitsky himself. I hope you can vouch for me in general. Just please don’t hurt me. I just don’t want to be involved. I am a nice person. I did what I thought was honest and correct. And I am very sorry that I ever got involved. I will stay away from them. And please can they leave me alone for the rest of my life and not hurt me. That would be nice.

Guntars: I understand. That is exactly what we are starting to acheive here. That was also my point – the person who was sent to me to go up to this – I said that if I agreed to negotiate for the both of you I would only be talking to the key person and that is very important because today I found out exactly what they are looking for. But apparently both sides are willing to reach an agreement and that is very important.

John: I should go now but I will send you an SMS right now. And I appreciate this so thank you.

Guntars: Yeah SMS me or email. I will send it to you tomorrow perhaps. Or maybe even today. I will probably ask the girls just type it into the computer so I dont have to make a scan copy.

John: Okay. Yeah that is the easiest thing.

Guntars: I would expect you to call me back tomorrow, maybe in the afternoon, just to give me some feedback on what is happening.

John: Yeah, Ill give you feedback right away.

Guntars: Thanks.

John: Thank you Guntars.

THIRD RECORDING (ringing)

Guntars: John?

John: Hi Guntars.

Guntars: Good morning.

John: Good morning.

Guntars: How are you doing.

John: Im doing all right.

Guntars: I just arrived at the office.

John: Okay so I caught you right on time. I’ll be quick. So anyway I have this email from you with this proposed agreement or contract or whatever it is supposed to be and I’m not going to sign that. Its basically… it says that I agree that I was lying about everything. That is sort of what it says. My opinion about it is that first of all, I don’t believe that Krasovitsky can have the Prosecutor prosecute me now because I haven’t done anything criminal. And, I think that he is trying to trap me to get me to sign something and that after I sign that he will have me prosecuted.

Guntars: They surely have their own interests. I am sure about that. They are not very simple people as you might imagine, so I would be very suspicious about their intentions or whatever in any case. So that is the kind of reaction I would have myself if I was approached this way. I don’t know. I just suggest that you make a counteroffer or something like that. You know basically says doing something that you could… or drawing up something you might sign or whatever. Because I think, yes, they are not simple people. They do not doing it out of very friendly sort of feelings towards you or something like that. I am even not discussing that. I am not telling you they are nice people. I am not telling you they are very straight-forward people. Or that they are very frank with either myself or yourself because I have been through this machine myself, I know very well that this is not the kind of a situation where you can really trust each other. So I agree with you, John. I am more on your side than on their side. I am not trying to take any sides for the sake of not being a part of any standing against each other. But my feeling is also that you should take things very carefully and they have done their maximum, they have drawn up this very… When I spoke with you I hadn’t even read this paper very thoroughly. But after retyping it into the computer I noticed they want to notify the Prosecutor’s Office about such an agreement which is, I think, kind of unacceptable. It should be if there is an agreement then it should be a hidden agreement so that nobody touchs anybody until the other side does something wrong. That is the kind of agreement that I would be willing to sign. Basically saying that we’re not saying that the information is correct or it is not correct…

John: Another thing is that according to your last conversation it sounded like, it is not really an agreement but rather its like if I sign this then they will tell the prosecutor not to prosecute me and if I do not sign this then they will tell the prosecutor to prosecute me. Something like that.

Guntars: That’s what they told me. That’s what they told me. But after carefully reading through the document, which I did because I typed it in the computer, I sort of realized that what they were saying was not exactly what was stated there. Apparently, I believe that it is probably not very wise to leave it as it is – the situation I mean in an unresolved manner. What you would probably do is make a counter agreement, signed paper, which does not basically . . . where you are not saying that you are actually giving false information or something … which basically says that you are not going to act upon any information if you may have one just for the sake that they don’t act upon you and you basically have that kind of a, it is more I suggest like a peace agreement rather than an agreement where you basically say that you are not correct in the first place, which is wrong for you.

John: Well my idea was that not so much that I want to sign any kind of agreement but just my situation which you can tell to Krasovitsky is that I don’t believe that the Latvian Prosecutor can prosecute me because I didn’t do anything wrong. If the Latvian Prosecutor thinks that he can prosecute me then what you originally said is that Krasovitsky could have or you said that Parex could have someone at the Prosecutor Office call me. If they want to try to force me to sign an agreement then they should have someone from the Prosecutor’s Office call me and tell me that they are going to prosecute me because you can call me and tell me that Krasovitsky said that maybe I would get prosecuted but that… 

Guntars: My feeling is if they had legal and very strong grounds… because what you can read in this proposed agreement is that they are basically saying that they have applied to the Prosecutor’s Office to investigate whether there is anything criminal doing in what you did. And in answer to that they could say „no, John didn’t do anything wrong.” He was saying all these things about „we are going and we are applying and even to Interpol and whatever.” My feeling of course is that he can tell whatever he wants and, its not like I haven’t been there, and I know that you know these people, you can’t take their word for granted. That’s all I can say.

John: Your main bad experience with Parex was just about stock options, right? Like they told you would have stock options and you didnt have those.

Guntars: Let’s not discuss this over the phone because nobody knows who might be whatever… I don’t want to be giving any evidence for or against. But I am just saying I would be very cautious anyway. When they tell these things, I get the same feelings that you do. That’s very natural. Frankly, I expected something like that to come out of you. Because I never told them that I believing in what they said because I know if they had real cards in their hands and whatever. I don’t know. I don’t know. I can’t tell. They know that you are willing to make kind of a peace agreement. They know that. They know that you are out of the country because you are afraid of your situation and personal well-being. And probably what he was saying all these things was to impress you or whatever. To scare you even worse. Looking at it from my viewpoint, It’s okay, I am not going to tell you people that I told you wrong information because that would mean that you don’t have any cards in your hands whatever. I would be willing personally willing to sign that I am not saying this information is wrong or right but I am not going to use it potentially against you if you don’t act against me. That is the kind of agreement that I would personally be willing to sign if I were in a situation like you are. I won’t sign a paper like the one I sent you. But that’s what you told me yourself. It sounds reasonable to me. That’s all.

John: In closing all I can say is thanks for being an in-between. And I hope through all of this we continue to be friends and I hope I continue to be your client and so forth as far as other business is concerned. And I do appreciate this and I do regard you as being neutral in this and that’s nice. As far as any communication back to Parex – if you tell them that I read that and it looks to me like signing something that says that I am guilty and I am not going to sign it because I am not guilty. And also I understand that the main pressure for me to sign that is that I will be prosecuted if I do not sign that, and I do not believe that because I did not do anything wrong so I don’t think I can be prosecuted. If they think they can have me prosecuted then they should tell the prosecutor call me. The prosecutor can call me and I will answer the phone.

Guntars: Frankly I have no willingnes to call them or whatever because, believe me, this is not the most pleasant conversation for me. It wasn’t when I was there because I have so many negative feelings about the institution for emotional or objective reasons or whatever. But they were suspecting that you probably wouldn’t sign this paper in this form but what they would tell me is that .. what is he sort of… is there anything that he is willing to sign. And knowing I don’t want to be this person going back and forth from one party to another, I don’t know. May I suggest that you at least throw out some things that would look like a reasonable agreement or whatever on the points that you would be willing to sign or at least outline your points, otherwise I would be going back and forth and that is not something I would prefer to do. It is very pleasant talking to you but its with that institution its not really that.

John: You don’t have to talk to them anymore if you don’t want to. Just don’t talk to them anymore. Or if they call you and ask you just tell them that John said he won’t sign the agreement and John doesn’t believe that you can prosecute him. Another thing I had said before still is I left the bank in 2004 and my information about them is getting old. Its two years old already. And if they… they already survived the last audit and if they survive this audit, then I can’t really do anything to them anymore anyway. Just with age they’re just going to be free from me because after two audits passed when I learned all this information and they have changed everything around in the company then I don’t really have any dirt on them anymore anyway. So I think they should just be satisfied with that. And that is better than any agreement because its just factual.

Guntars: Look. The way their thinking goes, I would assume, is that unless you have a paper you really can’t trust each other what each other is saying because that is exactly how when I went there I was not inclined to take sides or even think whether he is right or telling the truth or not. Because I know that these words are used free of charge. There is no moral obligation given what has happened before. I know that there is no moral obligation to be truthful to each other. That’s why the only language they understand is that they have a written piece of paper which basically holds back each party involved. That’s how I understand that. In dealing with them I wouldn’t do differently because I wouldn’t take any words from Parex. And don’t think they wouldn’t understand if you communicate that you don’t have any extra information or it is getting old. That is not just the kind of way they are doing business. That’s what I think. I don’t know. I can tell them whatever. I will most probably send an SMS. Frankly I don’t want to even talk to them. Just basically stating that you have changed your mind and instead of looking for some kind of peace agreement which was your message the last time, I can tell that you have changed your mind, and now you are not, even though you will not go after them, you are not going to sign any papers either in any form, because they would…

John: A „peace” agreement is a funny word anyway. What we are trying to accomplish is something that is not legal anyway. It’s like me agreeing that I will not to tell anyone more about the frauds at Parex if they agree that they won’t kill me or prosecute me. How can that be an „agreement” anyway because it is completely illegal.

Guntars: It is something. It is just my recommendation. Otherwise, you leave it like it is and you don’t solve the situation. If you just give them a reasonable offer in writing then why is it illegal? If I am telling you, like „John, I know that you like cheated on your girlfriend but I will tell him if its not legal.” Is it? John: Still the message is that you can say that I changed my mind. I read that and I changed my mind and I decided I will not sign anything with them. If they think that they can prosecute me then I don’t believe that. That’s what you can tell them.

Guntars: May I ask why did you change your mind?

John: I read the agreement and I thought about it more and I dont believe they can do anything to me when I am outside of Latvia. So I think that I am safe now.

Guntars: Which is probably true. They reitterated that they weren’t going to do to you anything except in a very legal manner. By way of prosecuting you. That was their message. But I also told them that you were willing to end the situation and live a peaceful life here in Latvia or whereever you prefer to be, and that’s why it sort of was your approach. Now, I am just thinking how to project because it kind of looks very strange that you have been holding in and out and that would make them worry more, because they would think you are not being very reasonable – like today telling one thing and tomorrow will be a different thing.

John: I don’t care. That’s just the situation – I am not going to sign this.

Guntars: You are not willing to discuss with them any points or any other form of agreement? That would be your message?

John: My message would be that if they want me to sign an agreement, I would only sign that if I was under threat of prosecution and if I am under threat of prosecution then someone from the Prosecutors Office should call me.

Guntars: So unless they have a case against you, you are not going to sign anything. But if there was a case against you, you would be still available.

John: Well if there was a case against me and the case was gonna be dropped if I signed something. That is another thing that this proposed agreement doesnt even say.

Guntars: This something that they said that of course it doesn’t look very realistic to me. They said that they do have a … they have applied and they are in the process and it is a lot of trouble because they have a lot of lawyers on the case. I asked them if they wanted to make a deal and they said yes. That may well … I don’t know, John. That may well not be the full truth or the exact truth. I am just telling you what he told me. I really in that situation take nothing for granted. I don’t know. Who is playing what cards and who is doing what.

John: The only way I am gonna sign an agreement is if I believe that I can be prosecuted and also if I believe that prosecution can be stopped if I signed something. And someone from the Prosecutor’s Office would have to tell me that. For it to be credible, someone from the Prosecutor’s Office would have to tell me that.

Guntars: I guess. What is beeping? Do you know?

John: What’s beeping? I don’t know. I don’t hear any beeping.

Guntars: Its my phone. Its a reminder. Im having a visitor flying in.

John: Anyway I should go myself. But thanks again and sorry no agreement but thats how it goes.

Guntars: I am almost feeling sorry myself because this was supposed to be a very quick matter and I am now in a very…

John: Well you can get out of it. You can just tell them „no I didn’t sign it and sorry bye.” You don’t ever have to talk to them again. They’re not going to prosecute you.

Guntars: I guess not. I guess not. I just want everybody to be in peace and doing good business. Do it in a constructive way. That’s all I want. I can’t really tell them no, I will be helping you. Basically because then they can … whatever. They are not the kind of enemies I would like to have.

John: They wont be your enemies.

Guntars: I hope so. You almost made out of me one when you called me some months back about this … going to all these institutions and telling things and whatever. Then I would be in a very similar situation as you are. John: If you did it. If you went to the State Revenue Service.

Guntars: Yeah. Well if I did something like that. I am not saying that there are grounds or not grounds for that, but just going and telling things … its the same thing about your statements. You are saying that their statements are false. I can’t tell if they are or not. There are all these irregularities but I can’t really prove anything or substantiate… I can suspect or not suspect something. It is something that you are saying. If they are putting your word to test, then that is their right. And that’s how it should be in any country and case.

John: Its, by the way, there is supposed to be an organized way. If someone gives a letter to the Prosecutor Department and the other party thinks that that information is false, there is a legal way to go about challenging the letter. Its not threatening people so that they run away and threatening them again after they leave. There is a civil legal process for challenging what is in a Prosecutor letter.

Gunters: But think about it in a different manner. I mean, going into court … and prosecutors … its costly and time consuming … that’s why people have these kind of settlements where they agree not to … where they drop the case on both sides … and they go and have a reasonable situation. Which is also understandable. Why wouldn’t they want to approach you … that was your idea initially that you would want to approach them and tell them that we could reach an agreement. I’m kind of lost and I feel that, you know… whatever. I think that’s not the end of it anyway.

John: Thanks and if you want it to be the end of it for you, I really think you can do that. You can just tell them „sorry and there is no agreement” and you don’t want to be involved anymore and „please don’t call me.” Guntars: Sorry? John: You could just tell them that there is no agreement and you dont want to talk to anybody about it anymore so please nobody call you.

Guntars: I will call them and I will basically tell them that unless they have real case against you, which can be dropped if you sign anything, you are not willing to sign anything either. Is that the message you want me to tell them?

John: That is exactly correct.

Guntars: Then I’ll work on it. Because I’m not going to…

John: How you said it is exactly correct. If there is a case against me and the case can be dropped if I sign something, then that would be the only reason why I would sign anything.

Guntars: If that’s your case, I won’t see you here for a long time! (laughing)

John: I think this year no. Maybe next year no also. Daiga has a long power-of-attorney for me.

Guntars: Listen John. I will call Krasovitsky some time maybe later today or tomorrow. Thats emotionally very stressful for me and I have to prepare myself. You can bet on that. This kind of relationship is not something I am looking forward to. I will call you back to get his message and I think hopefully it will be that for the time being at least. Okay.

John: Okay.

Guntars: And I hope I dont end up in a situation where I spoil a relationship with both parties. But really benefitting from the situation and not getting anything for myself. John: Thats all right. Your relationship is good with me. I am happy.

Guntars: That’s good to hear. Because sometimes, especially when you are messing with two married people, you are the one who its taking the blame afterward in any case. So that is why you never really try to solve two people’s relationship. Its not really a family situation so I hope I don’t end up as enemies to everybody. That’s what I hope. John: I think youll be okay.

Guntars: Okay, John. I’ll just get back to you as soon as you can from them because you will want to hear their response. But I sincerely hope this will not drag forever, if you don’t want to do anything, I am certainly not willing to be the one in the middle in this situation.

John: I should go. Thanks. Bye.

Guntars: Bye.

 

 

Parex March 2006 1

Parex March 2006 2

Parex March 2006 3