Not beyond reproach: The Panama Papers make it to Estonia

(Siim Lõvi /ERR)
4/14/2016 10:10 AM
Category: News

Panamanian firm Mossack Fonseca's connections to Estonian individuals were neither outdated nor negligible, ETV’s “Pealtnägija” made perfectly clear on Wednesday. What the investigative program presented covered just their initial look at the documents — and already involved the chairman of the Estonian Bar Association as well as personalities close to the Reform Party.

In the race to publish the first facts derived from the Panama Papers leak, "Pealtnägija" editor Mihkel Kärmas and his team didn’t have much time to go into plenty of detail, but what they had available was already enough to draw a line from a once grand private banker to personalities involved in the Autorollo scandal, the latter of which had forced MP Keit Pentus-Rosimannus (Reform) to resign as Foreign Minister on Jul. 1, 2015.

Private banker Kalle Norberg: The importer

Kalle Norberg studied in the US, entered banking right after the introduction of the Estonian kroon, and went on to become a private and investment banker. In the early 2000s, Norberg took up business in Luxembourg as well, setting up a financial firm that offered services to the new rich in the former USSR to discreetly get money out of their countries.

Norberg himself said that the assets he managed had varied over time, and that they had ranged from a few hundred euros up to perhaps even about a billion euros.

Among Norberg’s firms, particularly noteworthy was LFS Family Office, a Luxembourgian company which had a representation in Estonia, and the managing director of which was former director of the Estonian Tax and Customs Board Ardo Ojasalu.

Norberg’s description of how and when exactly he began to work with offshore companies was long and detailed. The gist of it was that he had offered to help his customers establish them, and had subsequently done so as well. According to Norberg, his cooperation with Mossack Fonseca began in 2004.

The leaked papers also show that in 2002, Mossack Fonseca started a company in the British Virgin Islands called Brokaw Inc., the power of attorney to which was with Kalle Norberg and Marcel Vichmann. The latter individual was involved in the Daiwa loan scandal in the late 90s and today is active in the railway business.

Although Norberg says that offshore companies constituted only a small portion of his business, the leaked papers show that his firm handled 221 companies in the mid-2000s run by Mossack Fonseca, 118 of which where in Niue, 117 in the Bahamas, 31 in the British Virgin Islands, and another 31 in Panama.

Norberg said that his activities were repeatedly audited by the Luxembourgian state, and that no breaches of the law had ever been found.

Dairy businessman Oliver Kruuda: The schemer

Neither “Pealtnägija” nor ERR News wants to insinuate that offshore companies and activities connected to them are necessarily illegal, but there has been at least one case where it can be said that a shell corporation run by Mossack Fonseca was involved in defrauding the Estonian state. The case involved dairy king Oliver Kruuda (Tere AS), a company called Hodge Bay Investments, and 17 million Estonian kroons.

The papers show that Hodge Bay Investments, registered in the British Virgin Islands, acquired a company in the Tallinn district of Mustamäe in 2004 for the price of $928. “Pealtnägija” couldn’t determine its actual owner, as yet another shell company in Niue was listed as such in the paperwork.

Soon after the establishment of Hodge Bay Investments, the company ended up involved in a scandal in Estonia. The Estonian Tax and Customs Board (EMTA) discovered that Oliver Kruuda’s company had bought an expensive cheese production line from that very same company in the British Virgin Islands for its production plant in Paide.

Karolin Lorents, a lawyer from the EMTA, said that the scheme had been built up in a very simple fashion. For roughly €600,000, the cheese production line was bought in Sweden, and then sold to Kruuda’s business in Estonia for €3.5 million. That way, the difference of just under €3 million could be funneled out of the country without spending so much as a cent on taxes.

According to the EMTA, Kruuda arranged the transaction personally. “He arranged the whole transaction, which the court’s judgment reflects as well — he gave instructions, looked for investors, and negotiated the circumstances,” Lorents added.

Oliver Kruuda claimed that he didn’t defraud the state, but didn’t explain his view of things beyond saying that the matter “hadn’t been discussed,” as the Supreme Court had declined to revisit the case.

Meanwhile, the court’s decision would seem rather unambiguous: “Kruuda was the organizer of the conclusion of the fictitious transaction and the beneficiary,” and his activities “aimed to perpetrate tax fraud.”

Kruuda is to pay in excess of €300,000 out of his own pocket in the case, as it turned out in February this year.

Enter the new chairman of the Estonian Bar Association: Hannes Vallikivi

The leaked papers show that just as Kruuda was taken to court by the EMTA, the shelved Hodge Bay Investments Inc. was reactivated — and Kalle Norberg became its managing director. This came up in his “Pealtnägija” interview.

Inevitably, Norberg denied this, in response to which Kärmas presented him with the corresponding papers, including documents with Norberg's own signature, and a copy of the banker’s passport, all out of the files of Mossack Fonseca.

The papers showed that the reactivation of the shelf company also involved jurist Hannes Vallikivi, who was recently elected Chairman of the Estonian Bar Association; Vallikivi had sent instructions regarding the matter directly to Mossack Fonseca.

Vallikivi refused to comment, quoting attorney-client privilege, but insisted that he had done nothing illegal.

Urmas Toome, Raul Markus, and their law firm: The next generation

In what they insisted had been only an initial look at the leaked papers, “Pealtnägija” introduced some more recent names as well.

A 2014 internal memo from Mossack Fonseca showed that Norberg had gotten back in touch with the firm’s office in Luxembourg and brought in a new client — Urmas Toome, of the Estonian law firm MOB. Toome had expressed interest in opening an office in Luxembourg and in buying shelf companies.

MOB has been in business since 1999, specializing in the acquisition and liquidation of companies. A quick look at Estonia's Central Commercial Register showed that Urmas Toome is directly connected to 516 different companies.

In spring 2014, a contract was signed with Mossack Fonseca in Luxembourg wherein Toome and Norberg figured as contact persons.

A notably concise document explicitly stated that the signing clients of Mossack Fonseca are required to cooperate with the police and the authorities — except in cases relating to the breach of financial regulations.

The editors didn’t bring up the names related to Toome’s business dealings, as there was no evidence of wrongdoing and they did not play an important enough role in things to be considered newsworthy, “Pealtnägija” stated.

One detail worthy of note, however, was the fact that Toome specifically sought “vintage” companies — shelf companies with a few years’ history which, over the course of their existence, had already seen some degree of turnover.

Particularly noteworthy was the process that followed once such a suitable company was found. In one such case, Mossack Fonseca found a suitable company in British Anguilla, Tallyfield S.A., founded on Sept. 29, 2014.

The necessary paperwork was signed, including Toome's signature as that of its owner and managing director, and dated September 2014 — a whole year earlier than the Estonian lawyer had first indicated he was even aware of the company's existence.

Another notable internal memo from Mossack Fonseca came to light as well, which mentioned Toome's intention to open a branch office of his own law firm in Luxembourg — MOB-CS, or MOB Corporate Services.

The cliffhanger

Looking at MOB-CS’s website, three gentlemen figure very prominently on the website's homepage — one is Urmas Toome, and the other two are Raul Markus and Siim Roode.

Roode was part of the so-called "Autorollo Scandal." Autorollo was a transport company in the stage of liquidation when its owner, Väino Pentus, also the father of then Foreign Minister Keit Pentus-Rosimannus (Reform), illegally moved assets out of the company. Roode was directly involved.

Roode is currently defended in the Autorollo case by his colleague Raul Markus, whose name also appears in the leaked Panama Papers; Markus’ name comes up as that of Urmas Toome’s lawyer and accountant.

In Estonia, Markus has been represented in the media in connection with property deals and the Reform Party’s “Silvergate” party financing scandal, wherein Social Democratic politician Silver Meikar caused a small political uproar by discussing large amounts of cash changing hands. The "Silvergate" scandal also involved current Minister for Economic Affairs and Infrastructure Kristen Michal (Reform).

Urmas Toome refused to talk to “Pealtnägija," while Raul Markus was quoted as saying that he couldn’t comment, as contracts with customers were confidential.

The "Pealtnägija" report on the Panama Papers ended with the statement that all three lawyers — Roode, Toome, and Markus — were connected to the Reform Party, and that what was presented in Wednesday’s program had been based only on a brief initial look at the available papers.

Editor: Dario Cavegn

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