The Baltic private equity firm BaltCap is suing the former manager of one of its funds for over 16 million euros. Šarūnas Stepukonis, who managed BaltCap Infrastructure Fund (BInF), allegedly embezzled the fund’s money and spent it in casinos.
The business daily Verslo Žinios broke the news on Thursday night. The Estonian-owned Olympic Casino Group Baltija is also named in the lawsuit.
Stepukonis was fired by BaltCap last November for financial mismanagement discovered during a regular inspection, the company said. In December, Vilnius District Court froze his assets, including funds kept with gambling companies.
Simonas Gustainis, one of BaltCap’s four managing partners, has told Verslo Žinios that Stepukonis had extensive authority and was able to create a “sophisticated system” to take more than 16 million euros from the companies under his management.
The number of claims may change as BaltCap is still conducting a financial audit of the damages.
BaltCap is registered in Estonia and is supervised by the Estonian central bank. Estonian pension funds have invested in BaltCap companies, including BInF, and may have lost several million euros due to Stepukonis’ actions, according to the Estonian public broadcaster ERR.
The alleged embezzlement hit Lithuanian pension funds, too. Swedbank and SEB pension funds have been investing in BaltCap since 2017.
“This investment represented only a small part of our pension funds’ assets. At the end of 2023, the weight was between 0.1 and 0.5 percent,” says Swedbank Investment Management, adding that it will seek to get back the misused funds, although “the process may take a while”.
“SEB pension funds have invested 4.3 million euros in this fund over the whole period and the return on investment remains positive throughout. SEB Investment Management is reviewing the value of this investment in light of the new information. We are awaiting the final results of the ongoing investigation and will then be able to make a full valuation,” notes SEB Investment Management.
Compensations to investors
BaltCap managing partner Gustainis has told LRT RADIO he cannot disclose details while the investigation is ongoing.
“As there are both internal and pre-trial investigations going on, we are restricted from commenting and it would not be correct to do so until those investigations are completed,” he said.
The company is still calculating the damages and expects to compensate for the losses to investors out of its own pocket. “Part of the audit is aimed at calculating the damages and is still ongoing,” Gustainis noted.
“We have confidence in law enforcement and its actions. When they have the results and are willing to share them, then we will disclose them,” he said.
It was later reported that the European Public Prosecutor’s Office (EPPO) has taken control of the pre-trial investigation into the possible misappropriation of assets by Stepukonis.
“After information was received in the course of the investigation that possible criminal actions may have caused damage to EU bodies, the EPPO was entrusted with the control of the investigation,” the Lithuanian Prosecutor General’s Office told BNS on Friday.
Estonian supervision
The Bank of Lithuania does not supervise BaltCap, since it falls under the remit of the Estonian financial authorities.
Vaidas Cibas, director of the Financial Services and Markets Supervision Department of the Bank of Lithuania, says that Lithuanian financial authorities are working together with their Estonian counterparts.
“We are aware of the whole situation with BaltCap, we are analysing it, we are in contact with all the parties both in Lithuania and Estonia, both with pension funds and BaltCap itself,” Cibas noted.
He assured that Lithuanian pension funds were sufficiently protected.
“The investment protection of pension funds is very high, there are huge diversification requirements and very strict supervision. The protection works in such a way that even in such a situation, pension fund participants are fully protected and losses are very small or non-existent,” commented Cibas.
Implications for national stadium
One of the BaltCap Infrastructure Fund companies, Vilniaus Daugiafunkcis Kompleksas, is the concessionaire building the national stadium in Vilnius. It was reported last December that construction works were suspended while the company was negotiating with Vilnius authorities about indexing prices.
According to BaltCap managing partner Gustainis, the financial mismanagement case is not “an essential issue” in the construction, but it can affect negotiations with the municipality.
“The financing of the stadium can be affected by the municipality’s decision not to adopt the price indexation. And this story [Stepukonis’ alleged embezzlement] is more of an irritant than an essential issue. A background to this conversations,” Gustainis assured.
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