Riga, Dec 16 (LETA) - In response to the criminal proceedings against Valmiera Mayor Janis Baiks (For Valmiera and Vidzeme) referred to the European Public Prosecutor's Office, the Latvian Association of Large Cities (LLPA) has addressed Latvian President Edgars Rinkevics, calling on the politician to "urge the authorities to assess the proportionality of the criminal proceedings".

As LETA was informed by the association, of which Valmiera is a member, it expects Rinkevics to take "institutional leadership for the dialogue between the law enforcement authorities, European Union (EU) fund monitors and municipalities to ensure a legal, proportionate and European standards-compliant approach".

The criminal proceedings, in which prosecution is also proposed against Baiks, relate to the construction of industrial premises in Valmiera, where Patria has acquired a site for a production plant. The municipality attracted funds from the European Regional Development Fund (ERDF) and the Latvian state budget to build the industrial building, but investigators believe that the amount of funds illegally obtained exceeds the regulatory requirements.

Municipalities can use ERDF funds to construct a production building on a land they own, which is then offered for rent to traders after the project is completed. If the potential tenant of a particular facility is unknown and is selected through an open call for tenders, the municipality is entitled to receive up to 85 percent of ERDF funding. However, if the facility is to be built for a specific purpose and the potential operator is known, ERDF co-financing is available at a lower rate of between 45 percent and 55 percent, with a higher share of the funds to be ensured by the company concerned.

However, the LLPA and Valmiera consider that these norms have not been infringed. "According to EU case law and legislation, infrastructure can only be considered to be targeted if it is objectively suitable for one specific user. If an object can be used by several users, it cannot be qualified as purpose-oriented," the LLPA said in a statement, citing an engineering assessment commissioned by the Valmiera municipality, which concluded that the object was suitable for 33 different types of economic activity.

"The risk of compliance within the state aid framework has been assessed, concluding that no targeting can be established. The award of the lease was made through an open, non-discriminatory auction, which excludes any possibility of unjustified state aid," the LLPA is convinced.

In an open letter sent also to Prime Minister Evika Silina (New Unity) and Justice Minister Inese Libina-Egnere (New Unity), the association expresses its position that the criminal proceedings against Baiks are "unjustified criminalization of administrative issues". "In the case of the Valmiera municipality, the municipality manager and the responsible specialists are put in a situation where professional actions taken within the framework of the law are interpreted as criminal," said the LLPA.

According to the LLPA, this case undermines justice and the principle of legitimate expectations, as well as paralyzing "the ability of other municipalities to take decisions necessary for the development of the country in a safe and responsible manner". In the view of the organization, this is a serious threat to the investment environment and the functioning of local governments.

Criminal proceedings against the Valmiera mayor and specialists risk making officials afraid to take decisions, businesses more reluctant to engage in EU fund projects and national development projects slow down, the association believes. According to the LLPA, it is not about one municipality, but about the ability of the Latvian public administration to function "without unjustified threats, about the stability of municipalities as a pillar of the state and about the predictability of the legal environment".

The LLPA calls on the president to promote respect for the principle of legitimate expectations, especially in the implementation of EU fund projects.

As reported, the Corruption Prevention and Combating Bureau (KNAB) has initiated criminal prosecution against five persons employed by the Valmiera municipality, including the mayor Baiks, for several alleged criminal offences in the attraction of EU funds.

KNAB informed LETA that the bureau had urged the European Public Prosecutor's Office to initiate criminal proceedings against three Valmiera municipality officials and two other persons employed by the municipality for alleged large-scale fraud and other criminal offences.

These actions were carried out during the construction of a production building, illegally attracting more ERDF and Latvian state budget funds than the legal provisions stipulate.

The information obtained in the investigation suggests that during the construction project of the industrial building, the officials of the Valmiera municipality did not inform the responsible institutions about the choice of the intended business operator and fraudulently attracted more funding than is provided for by the regulations. Acting in a group of persons by prior agreement, the officials allegedly defrauded EUR 671,300 from the ERDF and the Latvian state budget, KNAB informed.

KNAB has also requested the European Public Prosecutor's Office (EPPO) to prosecute three Valka municipality officials, including Mayor Vents Armands Krauklis, for alleged large-scale fraud in a project to develop a production area. The alleged criminal activities resulted in the fraudulent misappropriation of more than EUR 168,000 from the ERDF and the Latvian state budget.