Kargins and Krasovickis gave up their shares of Parex in December 2008 for a government bailout of the troubled institution.

RIGA — Parex Bank is going after its two former owners for compensation after independent audit shows they were fattening their wallets at the expense of the bank.

Valērijs Kargins and Viktors Krasovickis, the two former owners of Parex Bank, gave up the bank in 2008 to the government for the symbolic fee of 1 lats each (€1.43). Since the bank’s nationalization and avoidance from collapse, the state has spent 1.1 billion lats (€1.55 billion) of public funds on the bank.

On July 30 Parex Bank filed a lawsuit against the pair after analyzing loan and deposit agreements that were concluded between Jan. 1, 1995 and Dec. 5, 2008 between the bank and its two former board members, who were also the bank’s majority shareholders, as well as with other persons related them.

The bank has identified a series of transactions which were concluded in violation of the bank’s interests, the bank said in a press release.

“Terms applied to the bank were particularly disadvantageous and much different than those which would usually apply to agreements concluded by unrelated parties. Analysis of these transactions shows that during the stated period, the two former board members enriched themselves at the bank’s expense,” the press release says.

The analysis of the documents was carried out by three different teams, which came to the same conclusion. The legal firms Herbert Smith of London and Eversheds Bitāns of Riga along with auditors KPMG of London carried out the investigation.

“It is of key importance that according to the information that is at the bank’s disposal, the stated agreements were concluded in a way which represented a conflict of interest for Kargins and Krasovickis while also violating a number of legal norms,” the bank said.

“Accordingly, the activities of the two former board members can be said to have involved serious violations of the duties of board members, as specified by law, thus leading to serious losses for the bank.”

Latvia’s Commercial Law prescribes that board members must be honest and careful in their management of any given enterprise. It also says that board members are liable for losses caused to the company by their action or inaction.

The bank is also seeking compensation from the pair for violations in the Investment agreement concluded in 2008, when the bank was nationalized.

The government took over the capital shares of Kargins and Krasovickis on Dec. 5, 2008. At this time, 76.6 percent of the bank’s shares belonged to the Latvian Privatization Agency, while 19.7 percent belonged to the European Bank for Reconstruction and Development.

Since then the bank has been split into two with its new subsidiary Citadele opening for business on Monday.

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