Lawyer Mārtiņš Kvēps: Meroni fooled us all (part I of the interview)

There is no doubt about the competence of sworn advocate Mārtiņš Kvēps in matters related to the takeover of seized property in the so-called Lembergs' case - two months ago, the court ordered the seized property from Rudolfs Meroni to be taken over by the Provision State Agency. Namely, M. Kvēps was once the representative of the so-called Lembergs opponents in the so-called Ventspils transit business wars. M. Kvēps was also attracted to the so-called Lemberg's criminal case as an translator and he has now translated the testimony of Rudolfs Meroni, the former custodian of the seized property, during the pre-trial proceedings. He also personally took part in the transfer of the seized property to Rudolfs Meroni. Respectively, it can be concluded that M. Kvēps and R. Meroni were once "on one side of the trenches". In his interview with Neatkarīgā, the lawyer admits that only later did he realize that the inclusion of “true beneficiary rights” in the seizure decision was a well-planned fraud from the very beginning with the aim of taking over the assets of Ventspils companies worth hundreds of millions.
20.10.2020. Ritums Rozenbergs , Uldis Dreiblats
LAWYER MĀRTIŅŠ KVĒPS (pictured) believes that the former custodian of the seized property Rudolfs Meroni, responding to the so-called Lemberg's criminal case, helping prosecutors and compiling a list of property to be seized, had planned a beautiful fraud to access the assets of Ventspils transit business companies worth millions, as he included in the property list a concept such as “true beneficiary rights” ©Kaspars Krafts/F64

What is your current relationship with Rudolfs Meroni?

We are in a sharp conflict. As an example, I can mention the cases when he tried to sell his virtual, and perhaps not so virtual influence in Ventspils transit business in London in 2012 and 2013 - he had already prepared the first draft agreements. I was listed in English as an "excluded person" in the draft contracts, which meant that I was never allowed to be even close to these transactions. It also characterizes my relationship with him. He was ready to talk about everything with everyone, but just not with me.

It is clear from the public information that the Provision State Agency is not doing well in taking over the seized property. As far as we know, they have sent a letter from Rudolfs Meroni, who has been removed from custody, but Meroni has answered them in a foreign language a month later. Nothing is known about anyone else's actions. In your experience - you have been on the board of JSC Ventbunkers - how should the Provision State Agency act in order to fulfill this court task?

I wasn't just on Ventbunkers' board. I was also present as an interpreter when Meroni handed over the property. I know how it all happened. Over the years, I have almost memorized the protocol of seizure of property. At the time of the seizure of property protocol - I certainly did not know it and I think the prosecutor's office also did not know and did not understand it - Meroni had hidden some tricks in that report.

Like what?

Here’s the trick - you see that the list of seized property includes a lot of different shares, including tangible ones, but the most valuable in this list is qualified only as "the rights of the real beneficiary". It is something completely virtual and elusive. There will probably be people who will not agree with me, but, in my view, "beneficiary rights" are not property at all. I didn't know it at the time of the seizure. I have been researching this issue over the years. A "beneficiary" is only a "factual situation", but it is not a "right" that can be enforced. Meroni put the most valuable companies in the list of seizure of property - Ventbunkers and dry cargo companies, for seizure not as shares, but only as "beneficiary's rights". He specifically put something completely virtual, elusive in the arrest protocol, so that if he had to do something with the shares of the companies in question, if he had to move it all over to other companies - so he could do it completely freely and say that, despite the change of legal owner, its virtual beneficiary rights are still somewhere and floating in the air without change.

And that's exactly what he did later - shares in Ventspils companies traveled freely from one legal entity to another at Meroni's own discretion, without anyone knowing about it and without any control.

Consequently, when it comes to returning the stored property to the state, the “rights of the real beneficiaries” cannot really be returned. How then will he bring them? In a jar or an envelope? As I said, this is a "factual situation", not a real "right". Therefore, if I were the Provision State Agency, I would proceed as follows for the takeover of the property: first, I would take over the shares described in the protocol as shares, that is to say, as real and transferable property. But in those places where only the “beneficiary's rights” have been seized, I would go to the person conducting the criminal proceedings and demand a new seizure of property, but now at the level of shares of specific Latvian companies - seize shares in Ventbunker, seize shares in companies handling dry cargo. And there would be no problem with taking these shares into state custody. When I had real shares of Latvian companies, I would convene a shareholders' meeting, go to the board and say: “Now tell me how you bought helicopters, BMW jeeps for those appointed officials with high salaries and so on. In my opinion, this is the easiest way for the state to get into the companies in storage. In other ways, the state will spend a lot of money and it will probably not make sense in the end, unless Meroni decides to cooperate with the state - to come here, give it back and explain everything. If he doesn't cooperate, chasing him around the world is a completely doomed scenario. We already have that experience. When Meroni tried to market his influence in Ventspils in 2013 in London, two partners from the London office of KPMG - highly experienced people - were appointed as co-managers of the seized property by a decision of the English court. It was thought that they could be co-seated by Meroni and co-manage their property at least in private law. This was actually legally possible, because abroad the decision of the Latvian prosecutor's office on the seizure of property had no great force.

But there, not only Meroni himself, but also the prosecutor's office seriously opposed this decision of the English court to have Meroni's activities supervised by two KPMG partners!

I will tell you the story to the end. Why did I mention KPMG partners? Because they (the British) could not gather almost anything on their own. The two trustees were appointed by decision of an English judge. The English judge said: "I don't really understand what Meroni is trading there at all, he has put down some miracles there!"

The English judge rhetorically asked, "How can he trade what he doesn't own?"

Yes. There Meroni very purposefully, as an already experienced offshore artist - we did not have such experience at that time - he had hidden all sorts of legal "miracles" in the chains of Ventspils business owners, which now, if he wants, he will be able to use very successfully. I remember sitting privately with him in a house in Ķīpsala, which, of course, was not his, but which he also "kept" or managed, and also lived for free with the guise of managing it. I remember very well the conversation when he said that even if the prosecutor's office ever lifted the seizure of property, no one would get it anyway. Everything is built in such a way that no one will ever catch him. Therefore, the most rational thing to do is to go to the person conducting the process and demand the seizure of property at the level of shares of Latvian companies and remove from his hands the most real and valuable property, rather than some "beneficiary's rights" to be delivered in a jar or an envelope.

As a translator, you took part in the seizure process. How did this actually happen? Judging by the protocol, it almost seems that Meroni arrived with a suitcase full of all sorts of shares and trust agreements - the prosecutors looked at the contents, handed them back without even copying and said: "Go back to Switzerland and keep them"?

I don't remember the suitcase, but he himself made the list of stored property. At least to a large extent, because he sent it to me and I translated the list into Latvian. In the criminal proceedings against Aivars Lembergs, the prosecutor's office had already found out something about the ownership structure in Ventspils companies, but the prosecutor's office did not have such a comprehensive list. Even if the prosecutor's office had some lists of property, it would not be possible to understand a thing - what is there and why - from these lists without serious additional explanations. Meroni himself largely compiled the inventory and the prosecutor's office simply accepted it as true. There was no reason to doubt the correctness of the list at that time. I also thought at that time that the list of property to be seized had been compiled correctly and in accordance with the interests of the Latvian state.

Nothing was double checked?

I do not remember and cannot say whether the actual inspection took place. I was more interested in the legal side. I also understand why the prosecutor's office later looked with suspicion at the aforementioned KPMG partners. At that time, in the civil proceedings, Oleg Stepanov paid for the work of these auditors. We all had constant business battles for control in Ventspils. Therefore, no one even had to be told specifically what could happen to all their seized property after it was taken over, because everyone needed control in Ventspils. Nobody already wanted a minority stake. Probably that is why the prosecutor's office at the time thought: what’s the difference, one Meroni will be replaced - another Meroni will come, who will not be able to be controlled and managed in criminal proceedings at all.

This "property" was seized abroad the way that it happened. But then prosecutors in Latvian companies also seized the "rights of the real beneficiaries", not real shares. In general, Latvian law does not contain such a term “rights of the true beneficiary”. The "true beneficiary" is there, but the "rights"? Why, why not make a seizure immediately on the shares?

I did not participate there. I do not know why this was done. Probably to resolve some conflicts in Ventspils companies to protect Meroni from us. I do not know. With the proviso that I am not an academic authority on anti-money laundering, but I have read enough literature, I can say that my belief is that the true beneficiary is "status" and not "right". The difference is that the "right" is recognized as state-protected and can be enforced in court. Example. A swindler registers by company in the name of his grandmother. The swindler does not own anything legally there, but in reality he makes decisions in the company, runs the real business, and his grandmother only brings him a bag of cash withdrawn from the bank every month. But then something happens to the grandmother and she tells her swindler - I won't give you that money anymore, because the company is legally mine. According to the law, the swindler grandson, who has controlled everything, managed it - he is the real beneficiary, not the grandmother. The question is: does he have an enforceable right to money as a result of this fictitious scheme? My answer as a lawyer would be - definitely not! The state does not protect swindlers in such situations. The state says - yes, you earned illegal income from fictitious schemes, so you are considered a beneficiary. But could the state say: you could hide behind others and this gives you enforceable rights in court - definitely not. If one of my clients were to ask me to go to court and enforce his "beneficiary rights" - I can't imagine how to do it. This can only be done if you can prove that you also deserved a real share here, which was not returned to you - there was a trust agreement, so you are without anything, only a "beneficiary". Only if you have real tangible property - only then can you say that you have the "rights". As I said, the "beneficiary" is not a "right", but only a "factual situation" introduced by the state as a legally regulated situation, so that we can all be more easily controlled and we cannot hide behind some schemes.

Can't I then transfer my "beneficiary's right" to a trust management?

No can do! Let's look at the same Ventspils companies. Meroni has now shamelessly declared himself to be the real beneficiary and says that he is the real beneficiary, not on the basis of property rights, but because he has real control over everything. So the question is - how many beneficiaries are there per property? What is the benefit that Meroni gets? Suppose that prosecutors turn out to be true that Ventspils companies have Lembergs, his family or whatever is left there now. Do they have to share the benefits with Meroni now, because he is already the "beneficiary"?

That is exactly what has been declared. Meroni, Aivars Lembergs and Ursula Harrand have been declared the real beneficiaries of Yelverton Investments. Three beneficiaries for one thing! How can that be?

It can't be! Three persons may not at the same time have indivisible and full rights equivalent to property rights without any proportion to the same property. Even in joint ownership, there must be some division of the notional shares. In the field of "rights", such a situation is not possible, as the holder of the right in question and the scope of this right are always precisely identifiable. If there is a "right", then it simply cannot come from or disappear. The "right" must begin and end either as a result of a legal transaction or as a result of the operation of a law. Meroni has now been removed from the position of custodian. It should be the case that his declared control and thus the status of "true beneficiary" has automatically ended. He, of course, believes it is different. This process in itself shows that the "beneficiary" is not a "right". It is a "status" that can disappear in one day as a result of some circumstances. If it were a "right", then it would have to be handed over - as written in the law - and it could not simply disappear for one person, but just as easily appear for another. And then it remains to be seen - at what point was this "right" born and on what basis?

A continuation of the interview is now available here, in which lawyer Mārtiņš Kvēps talks about the biggest business crime in the history of Latvia, about which, moreover, almost nothing is publicly known.