Questions linger regarding funds once used to develop former president's family farm (1)

Ärma Farm in Viljandi County has belonged to the Ilves family for generations. (Urmas Luik/Pärnu Postimees/Scanpix)
10/14/2016 12:47 PM
Category: Business

Ärma Farm in Viljandi County has been in former President Toomas Hendrik Ilves’ family for generations. In 2005, while he was serving as MEP, then-wife Evelin, interested in developing tourism facilities at the farm, registered the company Ermamaa OÜ there in her own name. Eleven years later, Estonia's now-former president found himself faced with a lot of questions regarding the details surrounding the nearly 200,000 euros in support received to develop the farm, just ten percent of which he was required to pay back to Enterprise Estonia this week.

In 2005, Ermamaa OÜ, which according to information publicly available in the Estonian Credit Register was registered under the farm's address on Jan. 18, 2005, applied for and received 190,392 euros from EU structural funds via Enterprise Estonia for the development of tourism facilities at Ärma Farm. That September, Ilves was elected President of Estonia in an electoral college vote.

Following 17 months during which the farm was able to be used for tourism-related purposes as prescribed in the application for financial support, then-President Toomas Hendrik Ilves submitted a petition to Enterprise Estonia on Nov. 6, 2007 to alter the property’s business plan and temporarily suspend the administration of accommodation and tourism services at the farm’s guesthouse, as security requirements for the President of Estonia rendered it impossible to utilize the tourism farm for its intended purpose. Ilves also sought to rent the entire farm from Ermamaa OÜ for an undisclosed sum for the duration of his presidency. The obligation to use the project for its intended purpose was suspended until the end of his five-year term as president.

Upon Ilves’ reelection to a second term as the Estonian head of state, an application was filed on Nov. 5, 2011 for the extension of the previously described arrangement; Enterprise Estonia’s board of directors reached a decision on March 30, 2012 that no later than Jan. 1, 2017, once Ilves’ second term as president came to an end, implementation of the original business plan would continue through July 31, 2020 or else Enterprise Estonia would seek a return of funding from its recipient.

In 2015, when Toomas Hendrik and Evelin Ilves announced that they would be divorcing, the Office of the President announced that Ärma Farm would remain the exclusive property of Toomas Hendrik Ilves, who also became the sole owner of Ermamaa OÜ in May of that year.

Plans canceled in 2016, repayment terms set four years prior

On Oct. 10, 2016, on the day of his replacement as President of Estonia by Kersti Kaljulaid, Toomas Hendrik Ilves, shareholder and official representative of Ermamaa OÜ, submitted a written petition to Enterprise Estonia in which he confirmed his wish to discontinue following through with Ermamaa's business plans to run tourist facilities at Ärma Farm as of Jan. 1, 2017. Enterprise Estonia claimed back one tenth of the original amount of support granted to Ermamaa OÜ, or 19,039 euros, which Ilves paid back two days later, on Oct. 12.

Enterprise Estonia, who submitted a claim to this portion of the original fund money based on the March 30, 2012 decision regarding the matter, explained that when determining the amount to be paid back, which equaled approximately ten percent of the original sum granted in 2005, the foundation took into consideration among other factors the fact that Ärma Farm, belonging to Ermamaa OÜ, did still host a great number of foreign and unofficial guests during Ilves' time in office, and the reason why its use as a tourist attraction was otherwise so heavily restricted from 2007-2016 was due to conditions brought on by his presidency, which lasted two terms.

Following allegations in the media that Enterprise Estonia concealed the conditions of repayment on the support granted for the development of the Viljandi farm, Enterprise Estonia stated that the conditional recovery decision reached by the foundation in 2012 could not be publicly revealed before its entry into force this week, following the written submission of Ilves' intent not to continue running his farm according to Ermamaa OÜ's original business plans, as the foundation could only publicly reveal those recoveries that had entered into force; once Ilves' petition was received, the process for recovering part of the funds paid out to the business was launched immediately.

Same old farm, brand new business

On Wednesday, Oct. 12, two days after Toomas Hendrik Ilves paid back the 19,000 euros owed to Enterprise Estonia after choosing not to continue implementing the original business plan of Ermamaa OÜ, he and his wife Ieva Ilves registered a new, 2,500-euro equity firm, Ilves Consulting Group OÜ, likewise to Ärma Farm, reported Estonian business paper Ärileht.

On Thursday, Ilves, abroad on vacation, also took to social media to to address all at once the numerous questions sent to him regarding the entire issue by providing his understanding of the facts:

"In the year 2005, Ermamaa OÜ applied for support from Enterprise Estonia in order to establish a guesthouse at Ärma Farm. I was an MEP then; Ermamaa OÜ belonged to my then-wife.

"In 2006, the guesthouse was completed shortly before I was elected president against general expectations. The Personal Protection Service assessed the situation and decided that during my term of office, Ärma Farm could not operate as a guesthouse.

"Enterprise Estonia's requirement at the time was that the company would continue to operate and thus we arrived at the solution that I would pay rent to Ermamaa for the use of Ärma [Farm]. Ermamaa OÜ did not accept even one cent for the numerous foreign and domestic visits that took place during my terms of office. Enterprise Estonia decided that once my term of office had come to an end, the question would be revisited.

"As I only just found out this week, Enterprise Estonia had already decided in 2012 that if Ärma did not continue to operate as a guesthouse, Ermamaa would then have to repay the amount that is now known. In 2015, following the divorce, I became the owner of Ermamaa.

"I lack the skills and experience needed to deal with the tourism business. I said as much to Enterprise Estonia as well, upon which I received a repayment claim, which I have paid.

"Enterprise Estonia's then and current directors have explained the situation very precisely and exhaustively. What is most important to me of what they said is the fact that in making the decision, they operated in accordance with procedures which were not meant for the resolving of individual cases but rather which applied to everyone."

Minister orders Enterprise Estonia to conduct audit

Minister of Entrepreneurship Liisa Oviir has ordered the council of Enterprise Estonia to conduct an independent audit which would observe and assess the decisions of the foundation's board of directors from 2007-2016 regarding the suspension and extension of Ermamaa OÜ's period of eligibility for tourism support as well as the repayment claim the fund submitted to Toomas Hendrik Ilves.

First and foremost, the minister hopes to find answers regarding whether Enterprise Estonia's board of directors had the right to make a decision regarding the size of the repayment claim years in advance and whether their decision was in line with the legislation of the time. Oviir expressed hope that this audit will be completed quickly.

Editor: Aili Vahtla

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