On Ärma Farm and Erma Park: Ilves clarifies regarding Enterprise Estonia support (4)

Work underway at then-presidential candidate Toomas Hendrik Ilves' family farm in Viljandi County. Sept. 7, 2006. (Toomas Huik/Postimees/Scanpix)
10/22/2016 8:02 AM
Category: Business

On Friday night, ERR's Estonian-language news portal was the first to publish in full former President Toomas Hendrik Ilves' more detailed explanation regarding the relationship between his 81.5-hectare (201-acre) Ärma Farm and the nearly 200,000 euros of EU funding awarded via Enterprise Estonia to its development as a tourism business run by Ermamaa OÜ. ERR News is following suit and publishing Ilves' message in full in English.

Media coverage of the last few days regarding my and Enterprise Estonia's decision has generated a lot of questions and accusations. Nobody but I myself can or even should respond to them. I will own up to the fact that evidently previous explanations have not been enough. In this I have nobody but myself to blame. I am sorry that Enterprise Estonia's current and past employees as well as my former good colleagues and assistants in the Office of the President of the Republic have been dragged into this by now.

I have never liked addressing things that I consider to be private matters publicly and in detail. Especially not in those cases, where things have not gone according to plan or when they have gone, quite frankly, badly. I find that this is human. At the same time, I understand that if the main character is the president and if European taxpayers' money is involved, then there is no escaping explanation. I apologize for not always having been up to the task in this regard. I am sorry if belief in the transparency of things done in the Estonian state and, together with it, my own trustworthiness have taken a hard hit as a result.

I have been restoring the home farm of my maternal family since the beginning of the 1990s. To the extent possible, according to my financial opportunities, skills and time. This has been in equal parts in a sense of duty before my predecessors as well as love for this naturally beautiful and peaceful place.

During the past 25 years I have poured all my savings into the restoration of the farm, in addition I have taken out bank loans. When I was elected MEP in 2004, that income, extremely good in Estonian terms, allowed [me] to think bigger. To restore the farm to its former glory. As a home for my family. I had an economic cover for this plan, especially considering the secure, long-term term of office of an MEP, which, if I and the voters so desired, I could have extended five years later as well.

I was supportive of the plan of my then-homemker ex-wife Evelin to establish an agritourism and conference center at Ärma Farm. She had the time and the will; I acknowledge her in retrospect for her initiative. But I made clear both then and now that I do not have the necessary stamina or skills for such an undertaking. I am not taking cover behind Evelin or pushing her in front [of me]. Such large decisions which affect our common home are always made together as a family.

Within the framework of a joint venture, OÜ Ermamaa, established for the management of the tourism farm, applied for support from Enterprise Estonia as well. The project was good, and we received just over 190,000 euros in targeted support adding a European-compliant kitchen, a bus parking lot, a conference hall and guestrooms with all modern conveniences. Rooms which a regular home does not need and without which the farm could not have gotten along very well.

In 2006, after both the loans taken from the bank and support from Enterprise Estonia (which brought with them obligations), I gave into the pleas to run for the head of state. Against expectations of the time I proved to be elected. Suddenly the fate of Ärma Farm and all related plans changed. My income changed manyfold; for understandable reasons, an MEP's salary is greater than that of the Estonian head of state. The only thing that didn't change were the obligations, among them the business plan which was the basis for the Enterprise Estonia grant.

Evelin tried to swim against the tide for some time. OÜ Ermamaa accepted paying clients at Ärma; events took place. But very soon it became clear that the president's home is something different from that of an MEP. Security considerations didn't allow for the head of state and guests with unchecked backgrounds to be under the same roof at the same time. Likewise after the departure of guests, an extensive and expensive security check always had to be conducted after guests' departure to establish that none of the guests had installed any devices posing a security risk.

On the other hand, it would have been at least ethically questionable if not a potentially corrupt situation in which a business belonging to and run by the president's spouse ran a private business in the home of the president. In short, a solution had to be found which would allow for me to fulfill obligations before the banks and Enterprise Estonia without entering into conflict with the promises made and the Ermamaa business plan.

In retrospect I admit that the compromise acceptable to all parties was complex and [I] should have made more of an effort to clarify it — how I became the tourism farm's only client, essentially a renter in my own home. But neither I nor anyone else could think of anything better at the time. The business plan which had been the basis for the Enterprise Estonia grant was frozen until a time when I wouldn't be president anymore. In order to avoid the bankruptcy of Ermamaa and to fulfill the obligations taken before the bank, for nearly ten years I paid approximately 1,000 euros per month from my presidential salary to my wife's limited liability company (LLC). True, as foreseen in the President of the Republic Official Benefits Act the Office of the President covered a substantial part of the farm's so-calld utilities. But the Office of the President has never contributed to so much as a cent toward the farm's capital repair or its capital assets. These things remained strictly apart. The same can be said about me and OÜ Ermamaa. I didn't handle this business and money-related things, just as I didn't handle the agreement concluded with Enterprise Estonia.

Ärma became a state tourist attraction of its own sort in the meantime. Over almost ten years I hosted nearly 4,000 guests there. Estonian cultural and local figures, entrepreneurs, athletes, politicians, European Commissioners. But also nine presidents and numerous other foreign friends and partners. Not once did the thought ever occur to me to ask anyone for money for opening the doors to my home, although business logic would have demanded it. Within ten years, Ärma certainly became the Mulgimaa region's, and indirectly all of Estonia's, business card. Such an informal means of hosting guests is a part of diplomacy and I sincerely believe that it helped contribute to Estonia's course. I will immediately specify, just in case, that the expenses incurred at these numerous receptions, for example involving catering, were paid for neither by me nor by OÜ Ermamaa. These were state, not personal meetings.

After fall 2011, i.e. the beginning of my second term of office, it was time to start thinking about what would happen after Ärma lost its "state object" status. As I now know, Enterprise Estonia decided in 2012 that if the unfreezing of the business plan should not succeed, i.e. if Ärma Farm no longer operated as a tourist attraction, then Ermamaa must return ten percent of the support received to Enterprise Estonia. I did not know the details of this decision at the time.

With the divorce of our marriage, ownership of Ermamaa with all its rights and obligations was transferred from Evelin to me. The division of marital assets is an intimate activity, which is why I won't go into the details of that at this point. But I couldn't abandon my home farm.

Now, as I left office, it had to be decided. As I have previously conceded already, then there is no tourism entrepreneur in me. Enterprise Estonia's 2012 decision went into effect. I will not place responsibility or blame: Enterprise Estonia apparently found that Ärma has in ten years in large part fulfilled its role as a tourist attraction — true, differently than the original business plan intended. I believe that all initiated audits and investigations will confirm this — that not only has [its] conduct been legally proper but that substantial impact on the development of the region, which was expected in the allocation of this support, has been achieved in heaps as well.

As I wrote at the beginning of this explanation: there should have been more public raising of awareness; this current story has come a couple of weeks and apparently years too late. I should have explained the above sooner and more confidently. But that does not change the key [issue]: to the best of my knowledge, not a single Estonian and EU taxpayer euro has been spent unlawfully on the building, development and upkeep of my and my family's home, Ärma Farm. Ärma Farm's gates will be open in the future as well to all of my and Estonia's friends; I hope that both future and past meetings will be of benefit to Estonia.

Timeline

1991: Toomas Hendrik Ilves gets back his ancestors' farm, which has belonged to the Ilves family since 1763.

1991-2006: Toomas Hendrik Ilves gradually restores the buildings on his home farm using 155,000 euros in savings, a 107,000-euro loan taken out in a private capacity and approx. 200,000 euros of MEP wages earned from 2004-2006.

2005: Ermamaa OÜ was established (founder and sole owner Evelin Ilves) in order to start a business project and turn Ärma Farm into a guesthouse and conference center. For this, OÜ Ermamaa took out a 211,000-euro loan and applied for additional support from Enterprise Estonia.

March 13, 2006: OÜ Ermamaa received 190,392 euros in support from Enterprise Estonia.

2006-2007: OÜ Ermamaa built the amenities necessary to establish a guesthouse at Ärma Farm — guestrooms with showers and toilets, a conference hall, a bus parking lot, a Euro-compliant kitchen.

Jan. 2007: OÜ Ermamaa submitted final project report to Enterprise Estonia. The expenses and expense receipts submitted by OÜ Ermamaa were declared eligible and the awarded support was paid out.

March 2006-Aug. 2007: OÜ Ermamaa ran a tourism farm at Ärma. During its first months of operation, an average of 150 guests per month visited Erma Park.

Sept. 23, 2006: Toomas Hendrik Ilves was elected president.

2007: The Personal Protection Service decided that during Toomas Hendrik Ilves' term of office, Ärma Farm could not function as a guesthouse. OÜ Ermamaa was unable to continue with its business plan.

Nov. 6, 2007: OÜ Ermamaa submitted an application to Enterprise Estonia to change its business plan acording to which the offering of accommodation services to the public would be suspended until the end of the president's term of office.

Nov. 20, 2007: Enterprise Estonia board accepted OÜ Ermamaa's application for the changing of its business plan and suspension of the grant agreement. An agreement was concluded with Enterprise Estonia that in order for the company to continue, Toomas Hendrik Ilves must pay Ermamaa OÜ a little over 1,000 euros per month.

2011: Toomas Hendrik Ilves was elected to a second term as president.

2012: Enterprise Estonia decided to, in the event that OÜ Ermamaa would not continue with its business plan following the end of President Ilves' term of office in 2016, reclaim 10% of the support received.

2015: In connection with his divorce, Toomas Hendrik Ilves became the owner of OÜ Ermamaa.

Oct. 2016: Toomas Hendrik Ilves issued a statement to Enterprise Estonia in which he announced that he would not continue with the business plan. Enterprise Estonia submitted a claim for 19,039 euros. Toomas Hendrik Ilves paid Enterprise Estonia the amount claimed.

2006-2016: During Toomas Hendrik Ilves' term of office, Ärma Farm has been in constant use as a representative venue where nearly 4,000 domestic and foreign guests have been hosted. Nine presidents as well as foreign ministers, diplomats, European Commissioners have been hosted; events promoting Estonian food, foreign ministry seminars, think tank discussions have been organized. All of these events have been organized at no profit.

Toomas Hendrik Ilves has returned or paid in full for everything at Ärma Farm that belonged to the Office of the President. The Office of the President has never invested in either the capital assets or the capital repairs of Ärma Farm.

Editor: Aili Vahtla

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