Expert opinion: Letters of guarantee issued by Toobal valid

Center Party Chairman Edgar Savisaar (center) with then-Secretary General Priit Toobal (right). (Hanna Samoson/ERR)
9/7/2016 11:40 AM
Source: BNS
Category: News

According to an expert opinion commissioned by Estonian daily Eesti Päevaleht (EPL), the letters of guarantee signed by the Center Party's then-Secretary General Priit Toobal in 2014 are valid.

"First, Toobal was a member of the Center Party Board of Directors when he signed the letters of guarantee," Indrek Leppik, a partner at Glimstedt Law Office, told the newspaper. "Based on entries in the Commercial Register, each member of the Center Party was entitled to represent the Center Party in the conduct of all transactions. Hence Priit Toobal had the right to conduct these transactions single-handedly."

At the end of 2014, Toobal issued two letters of guarantee for a total sum of 690,000 euros to the company Midfield, which belonged to the Reform Party's longtime campaign master Paavo Pettai.

The party's statutes do not set precise limits on the powers of individual members of the board, nor do they prevent the party from assuming a financial obligation like this, it appears from the analysis.

Jaanus Karilaid, the party's deputy chairman, has said the party should now call an emergency congress, change its statutes and make changes in the structure of its leadership. This would also help prevent situations like this in the future, wrote EPL.

The law sets out three possibilities for the termination of a guarantee agreement: either the sum guaranteed is paid out, the period for which the agreement has been concluded expires, or the creditor relinquishes the rights arising from the guarantee. In the present case, the creditors are persons to whom Midfield owes money and to whom the Center Party or Pettai have handed the letters of guarantee, wrote EPL.

Pettai owes more than 200,000 euros to the Estonian Tax and Customs Board.

To deem the letters of guarantee invalid, it needs to be proved that Pettai was aware that Toobal entered into a transaction as representative of the Center Party which ran counter to the party's interests. Whether the letters of guarantee run counter to the party's interests is not known at this point, EPL said.

Under law, responsibility for damage caused by a letter of guarantee is borne by all people who were members of the board at the time when the guarantee was issued. They are relieved of responsibility if and when they can prove that they were not informed about the guarantee.

The opposition Center Party's Board of Directors is made up of 17 members. The board members who have spoken to the media about the issue thus far have claimed that no one else apart from Toobal and Party Chairman Edgar Savisaar knew of the letters of guarantee.

The Center Party has ordered an expert legal analysis of the issue from the Varul law office; the analysis should be completed by Sept. 19, at which the time Center Party's Board of Directors will reconvene.

Editor: Aili Vahtla

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