(adds comment by Krauklis)

RIGA, Oct 28 (LETA) - The Corruption Prevention Bureau (KNAB) has urged the European Public Prosecutor's Office (EPPO) to initiate criminal prosecution against three municipal officials of the Valka Region, including Mayor Vents Armands Krauklis, for alleged large-scale fraud in a project to develop a production area, LETA has learned.

As a result of the alleged criminal activities, more than EUR 168,000 from the European Regional Development Fund and the Latvian state budget were defrauded, KNAB informed LETA.

Local governments can attract EU structural funds to build a production facility on land they own, which is then offered for lease to private sector companies. If the potential tenant of a particular facility is unknown and it is selected in an open tender, the municipality is entitled to attract up to 85 percent of the financing using EU funds.

However, if the facility is to be built for a specific purpose and the potential operator is known, a lower co-financing of between 45 percent and 55 percent is available from the European Union, with a higher share of the funds being borne by the specific company.

The KNAB investigation has obtained evidence that three officials, who were employed by the Valka Regional Council at the time of the alleged offence, agreed that the production building would be constructed for the purpose of expanding the economic activity of the trader, i.e. for the benefit of the trader.

The officials did not inform the competent authorities about the choice of the intended merchant and fraudulently attracted more funding than is provided for by the legislation. The criminal activities resulted in an embezzlement of EUR 160,000 from the European Regional Development Fund and EUR 8,026 from the Latvian state budget.

In addition, KNAB notes that one of the officials involved in the criminal proceedings is the manager of the intended tenant of the production site.

The EPPO, as the prosecutor, must now decide on the further course of the criminal proceedings initiated by the Prosecutor's Office on November 6, 2023.

The KNAB also points out that European Union funds can be a significant support for entrepreneurship in the regions of Latvia. At the same time, local authorities and businesses should bear in mind that this funding is also taxpayers' money from across the European Union, and should therefore be approached with great care and integrity when attracting and investing it effectively.

Krauklis told LETA that he is accused of fraud in a group for greedy purposes for the construction of an industrial building in Karki.

In September, he received a letter from KNAB informing him that he was a suspect in the case, which was opened on November 6, 2023.

Krauklis claimed that he had not been asked anything about the case by any representative of law enforcement bodies so far. The case is similar to the commissioning of an industrial site in Ergeme, Valka municipality, in relation to which the European Public Prosecutor's Office opened criminal proceedings for alleged irregularities in the absorption of European Union funds.

In this case, the production site is located in Karki and is in active business.

As he has signed a non-disclosure agreement, Krauklis is not at liberty to comment further.

"All I can say is that the municipality and I personally have worked to the best of our abilities, we have neither asked for nor received any financial benefits. The aim has been the same - to promote economic development not only in the city, but also in the countryside," said Krauklis.

As reported, last year KNAB handed over to the EPPO another criminal case, in which it obtained evidence that a representative of a company specializing in the production of beverages, together with two officials of the Valka municipality, allegedly defrauded European Union (EU) structural funds and the Latvian state budget in large amounts, KNAB informed LETA.

In this way, the persons may have caused material damage of EUR 581,709 to the EU and Latvia.