Hundimägi: Baku Fraud Convictions Important Precedent ({{commentsTotal}})


Äripäev business daily's deputy editor Aivar Hundimägi writes that Friday's conviction of investment bankers was a landmark case in terms of jurisprudence and signals that misbehavior from well-connected people is no longer tolerated.

Estonia's first investment fraud case recently went to trial, with a guilty verdict returned. The decision is bound to be appealed and may reach the Supreme Court, but it set several firsts. The punishment meted out by the judge is harsher than what prosecutors called for. This is rare in Estonia and especially in a dispute involving complicated business transactions (whether they are intrinsically complicated or intentionally obfuscated). The sentence in the Baku affair was 3-6 months of real jail time, while the prosecutor had called for only a suspended sentence.

The company, GFAS, also drew a heavier punishment than what prosecutors proposed - 150,000 euros instead of 100,000 euros.

The defendants were also ordered to pay 12 million euros in civil damages as that was the judge's assessment of the actual losses for the various investors.

Äripäev investigative journalist Piret Reiljan has been trying to unravel the Baku affair and the activity of the once-successful GILD investment bank figures for years. She has identified various schemes used to distribute the investors' money internationally. Most of the money from the Baku project offering was channeled through a Panamanian offshore company's accounts in various countries marked as "tires," "foodstuffs" and "air conditioner", etc. Some of the money also reached companies related to the defendants. I think many Äripäev readers have long understood what the purpose of the transactions was, and I'm glad the judge shared this view.

The first-tier court decision is important as it shows that such scheming is no longer tolerated in Estonia's business and legal environment. If someone has entrusted money to someone else, the trust must not be abused and it's no excuse to say that the business is inherently risky and thus losses must simply be accepted.

Politicians could also draw a conclusion from the ruling, and that is that people connected to economic crime are not welcome in senior government positions, even if they or their friends have at some point supported the Reform Party or some other ruling party.

Finance Minister Jürgen Ligi kept Tõnis Haavel, a key figure in Baku affair, on the Estonian Railways supervisory board even after the prosecution had started its investigation. And Haavel's business partner and Gild's investment 'Svengali' Rain Tamm was appointed to the ERR supervisory board by the Parliamentary Culture Committee. But Tamm had a holding in GFAS, which was convicted of fraud in Friday's decision.

The typical excuse from Estonian politicians is that they hide behind the presumption of innocence until the final, Supreme Court conviction comes in.

But Baku shows that a different principle now applies. Until accusations have been convincingly overturned, the accused can't continue in senior posts, even if they have sponsored a ruling party.

I hope that Friday's decision was embarrassing for Finance Minister Jürgen Ligi and Culture Committee members Lauri Luik, Yana Toom, Jaak Allik, Tiina Lokk-Tramberg, Mart Meri, Liisa-Ly Pakosta, Mailis Reps, Paul-Eerik Rummo and Andrus Saar.

The original article in Estonian is here.

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