Before parliament passed the law, it additionally gave KNAB a responsibility unique among anti-corruption agencies: the power to monitor compliance with campaign finance regulations. This decision was impromptu -- parliament had just passed new party finance regulations in response to public outcry, existing agencies did not want responsibility for implementing them, and the KNAB law was open for amendment. But eventually, this power would become a game changer in the fight against corruption, as the bureau sought to stanch the flow of money that expedited state capture.
An independent committee chose Juta Strike, an experienced police investigator in an elite state security agency called the Constitution Protection Bureau, to be the KNAB's director. However, parliament rejected Strike's candidacy in a secret-ballot vote. Prime Minister Einars Repse, who had campaigned on an anti-corruption platform, contended the vote reflected legislators' fears about having an assertive leader in the position. Incensed by the defeat, Repse appointed Strike as deputy director of investigation and then made her acting director anyway -- a defiant act that prompted the collapse of his government. "This was too much for members of my coalition," Repse recounted. "The three so-called oligarchs made a coalition between themselves that was unthinkable before." Latvia's next three prime ministers all came from oligarch-associated parties.
Alvis Vilks, former head of the State Revenue Service's anti-corruption unit, joined KNAB as a senior specialist and quickly became deputy director of prevention. Vilks and Strike hired most of their staffers through informal processes. Applicants had to demonstrate commitment against corruption, be university educated, and qualify for a security clearance. Eager for the bureau to become operational as quickly as possible, the leadership team eschewed open competitions in selecting its staff members -- a decision that proved regrettable.
From the beginning, the agency faced high expectations. Strike lamented the public's beliefs that KNAB would quickly catch "not just one big fish, [but] all the big fish." One of KNAB's early targets was judicial corruption. Strike said judges were too lenient in corruption cases, which often involved oligarchs or their associates. The judges regularly granted suspended or conditional sentences to powerful defendants. Through surveillance and sting operations, KNAB uncovered cases of judicial bribery that reached high-level judges and prosecutors. "When the public saw how the judges were taking bribes to make decisions, it was a very big scandal," Strike later recounted. After a media firestorm, judges began to take corruption more seriously, handing down harsher sentences in corruption cases.
KNAB also achieved early successes in its prevention efforts, particularly in monitoring party finances. The bureau turned up a large number of violations during the first year. Unaccustomed to oversight, parties expected they could flout the law with impunity. "They were so ridiculous, these violations," Dina Spule, a KNAB member, observed. For example, lists of major party donors included low-income individuals, young children, and the deceased.
With Repse out of power, oligarch-associated parties consolidated their control over Latvian politics, confronting KNAB with new political challenges. Repse's successor, Indulis Emsis, had to appoint the bureau's first permanent director. An independent committee named Strike, Vilks, and Aleksejs Loskutovs as finalists. Once again, the committee awarded Strike the most votes, but the cabinet rejected her candidacy as untenable in parliament. Lembergs, one of the oligarchs, invited Loskutovs to a secret meeting outside the gates of Lembergs' mansion. A soft-spoken lawyer and police academy professor, Loskutovs appeared inexperienced and complacent. During a short stint on KNAB's preventive staff, Loskutovs had feuded with Strike and earned a reputation for absent-mindedness. "It was obvious," Loskutovs said, "that the [ruling coalition's] advisers proposed my candidacy as a theoretical academician who would be more or less easy to manage." Parliament approved the choice in May 2004.
Strike and Vilks were wary of working with Loskutovs because of his tacit support from the oligarchs. However, the new director quickly proved his mettle. Just weeks into his term, the prime minister's party implored Loskutovs to override a KNAB decision to fine the party an unprecedented $185,000 for campaign finance violations. "All journalists in Latvia were waiting to see what he would do," Strike recalled. "He said that he trusted KNAB's unit on political party funding control and lawyers. He read [the case] through, and he agreed the party had to be punished. It was the first sign for us that he was trustful."