BNN ANALYSES | Private equity firm’s top manager from Lithuania allegedly gambled away 16 million euros

Linas Jegelevičius
Can a single casino gambler shake up a state’s entire financial system?
Until now, we read something like this happening in the West, but now Lithuania has its hero of the kind, Šarūnas Stepukonis, who has allegedly gambled away 16 million euros – and the sum can reach even 25-26 million euros – from the private equity firm BaltCap.
The notoriety has already ill effects on Lithuania’s pension funds and the construction of the national stadium in the Lithuanian capital, Vilnius.
Lithuanian prosecutors opened the pre-trial investigation into the activities of Stepukonis, who was also the CEO of Vilniaus Daugiafunkcis Kompleksas (Vilnius Multifunctional Complex), the builder of the National Stadium in Vilnius, last November. 
On the 10th of December, court froze Stepukonis’ assets, including those held in gambling companies, as an interim measure.

With all eyes set on the alleged culprit, Stepukonis, the man is rumoured to be in Ukraine and is unreachable.

Amid the scandal, the Bank of Lithuania, the country’s chief financial watchdog, hastened to say that the country’s pension fund system is sound.
“Assessing the alleged unprecedented theft from BaltCap, the Bank of Lithuania wants to point out that this case is related to the alleged criminal activity by a BaltCap employee, and not to investments or pension systems,” Lithuania’s central bank said in a statement on Wednesday, the 31st of January.
BaltCap is registered in Estonia and falls under jurisdiction of The Eesti Pank, the Estonian central bank.
The Financial Services and Markets Supervision Department of the Bank of Lithuania says that Lithuanian financial authorities are working together with their Estonian counterparts.

The Department assured that Lithuanian pension funds were sufficiently protected.

The list of investors in the Estonian-registered BaltCap Infrastructure Fund (BInF), whose partner and manager was Stepukonis, includes the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), the Nordic Environment Finance Corporation (NEFCO), and Baltic pension funds.
The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) have each invested 20 million euros in BaltCap Infrastructure Fund (BInF), and the Nordic Environment Finance Corporation (NEFCO) has invested 2.3 million euros. 

The list of investors also includes all major Baltic pension funds, a life insurance company, and other investors.

Estonian pension funds are believed to have lost several million euros due to Stepukonis’ actions.
The alleged embezzlement hit Lithuanian pension funds, too, as Swedbank and SEB pension funds have been investing in BaltCap since 2017.
“Speaking of Lithuanian financial market participants, SEB Investicijų Valdymas and Swedbank Investicijų Valdymas are known to have invested in the BaltCap Infrastructure Fund. It is also known that the potential theft affected pension funds managed by the aforementioned companies not only in Lithuania but also in other Baltic states,” the central bank said.
The pension funds’ investments in the BaltCap were in line with common practices and requirements, it added.

BInF-managed companies have filed a lawsuit with the Vilnius Regional Court

against Olympic Casino Group Baltija and its Estonian shareholder OB Holding 1, seeking the return of 16.6 million euros’ worth of financial assets and compensation for damages.
Tomas Palevičius, CEO of Olympic Casino Group Baltija (OCGB), told BNS, a Lithuanian newswire, that he can assure everyone that the procedures laid down in the applicable legislation were also followed in this particular case.
“The gambling had been done online in the non-cash form over a long period of time, and the money was transferred to the gambling account from the accounts in financial institutions operating in Lithuania, and the origin of the money was validated,” he was quoted.
Arnoldas Dilba, head of the Legislation, Staff and General Affairs Division at the Gambling Control Authority, has said the law does not currently allow gambling operators to stop gamblers if they suspect that they are addicted to gambling and are using shady money.
The European Public Prosecutor’s Office (EPPO) announced it has also taken control of the pre-trial investigation into the possible misappropriation of assets by Stepukonis, the Lithuanian Prosecutor General’s Office has confirmed.

According to the Lithuanian Prosecutor General’s Office,

the investigation is being conducted under Article 183(3) of the Criminal Code to establish the exact circumstances of the possible criminal activity. The article provides for a fine or imprisonment of up to eight years for misappropriation of property of a very high value.
Simonas Gustainis, one of BaltCap’s four managing partners, told the business daily Verslo žinios that the former partner (Stepukonis) had the trust of BaltCap and extensive authority, which could have allowed him to create a sophisticated system for bypassing safeguards and checks to organize the withdrawal of funds from companies under his management.
The Vilnius Municipality confirmed that it has received a letter from the national stadium concessionaire, Vilniaus Daugiafunkcis Kompleksas, stating that, despite the situation within the BaltCap Fund, the company is making efforts to implement the project in time.
Approached by BNN, Evaldas Petrauskas, the former head of Palanga Kredito Unija, a credit institution in the Lithuanian town of Palanga, said that

“the whole story sounds very fishy.”

“At some point of my life, I had had the first-hand experience in the gambling sector. As far as I know, casino operators set a certain limit to a client in terms of how much can be lost. I cannot rule out that, in the case, a money laundering scheme has taken place. Some casino operators’ annual turnovers match the sum lost by the BaltCap manager, so collusion cannot be ruled out,” E. Petrauskas emphasised to BNN.
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