First conviction takes effect in Valka municipality EU funds fraud case

A first guilty verdict has come into force in the criminal case over the fraudulent obtaining of European Union (EU) funds in Valka municipality, Latvia. Krišjānis Zintis Putniņš, owner of the company SIA Mūrbūdu sidra darītava, admitted guilt in aiding fraud, Latvian Television's programme "de facto" reported on 8 November.

Putniņš reached a plea agreement on the sentence, which the court approved. For aiding fraud on a large scale he received three years of probation supervision. His company must pay 31,200 euros, equal to 40 minimum monthly wages, and is barred for two years from applying for EU funding. Putniņš declined to comment on the verdict to the programme.

Background to the case

This case was split off from the original one, in which charges have been brought against Valka mayor Vents Armands Krauklis (Vidzeme Party), Ērģeme parish administration head Pēteris Pētersons and Valka municipality council development department head Gunta Smane. That case is currently being prepared for referral to court.

The criminal case concerns an EU-funded project run by Valka municipality to provide state aid for business development in the regions. Municipalities can apply for co-financing from the European Regional Development Fund and a state budget grant to redevelop degraded areas for commercial use. If a building is constructed for a specific company, EU support cannot exceed 55% of the total; if the user is chosen later at auction, EU funding can reach 85%. Valka municipality officially carried out the second type of project.

Investigators believe that from July 2020 to October 2023 the accused officials used fraudulent actions to obtain project funds of 693,520 euros: 670,032 euros from the European Regional Development Fund and 23,488 euros from a state budget grant. They believe the company Mūrbūdu sidra darītava was secretly involved in and unlawfully favoured in the project, and a new production building was built for its needs on a land parcel that does not qualify as a degraded area. Prosecutors also say the council chairman assumed long-term debt obligations of 396,398 euros on behalf of the municipality.

Link to CFLA

The court ruling states that Krauklis undertook to resolve problems using contacts at the Central Finance and Contracting Agency (CFLA). Krauklis told the programme he has no special contacts there, but said he sought advice from Mārtiņš Brencis, then deputy head of CFLA and now a member of parliament for the United List. Brencis's premises were recently searched in connection with a similar project in Alūksne municipality. According to Krauklis, Brencis replied that it was not his responsibility.