Latvian banker jailed for fraud

The collapse of the bank nearly ruined Latvia's finances

A court in Latvia has sentenced the former chairman of the country's largest bank to nine years in prison on fraud charges.

The court, in the capital Riga, ruled that the man, Aleksandrs Lavents, had precipitated the collapse of Banka Baltija in 1995 by granting around $65m in dubious loans.

Tens of thousands of individual investors lost their savings after the collapse of a suspected pyramid scheme run by Banka Baltija.

The scam nearly ruined Latvia's financial system and threatened to provoke a recession.

'Grand' scheme

In 1995, Banka Baltija attracted nearly $400m in savings by offering interest rates of up to 90% on fixed one-year deposits - nearly double the market rates.

After the bank's collapse, individual depositors lost around $130m of their savings. They were able to claim only partial compensation of up to $900.

Prosecutors uncovered around 50 firms connected to Mr Lavents which received loans from the bank.

The case was sent for trial in 1997, but was delayed after two previous judges resigned.

The court also sentenced the bank's former president ,Talis Freimanis, to six years in jail.

A third defendant received a three-year term in prison, but was released having already served his time in pre-trial detention.

Mr Lavents has already filed complaints to the European Court of Human Rights against his detention and slow trial.