Opinion digest: Legally speaking, everything is proper (5)

Ärma Farm, located in Viljandi County, has been in former President Ilves' family for generations. (Postimees/Scanpix)
By Dario Cavegn
10/18/2016 3:49 PM
Category: Opinion

After Toomas Hendrik Ilves’ decade in office, and after he promoted Estonia like no other president did before him, his legacy is now tainted by the fact that he seems to have gone for a substantial state grant in 2006 that he never put to use — and of which he will now pay back just a tenth.

There is a nice expression in Estonian to describe shady business dealings and conflicts of interest. It’s JOKK, short for juriidiliselt on kõik korrektne ("legally speaking, everything is proper").

It is used to indicate that though a business or other kind of move might have been legal technically, it certainly wasn’t proper.

The establishing of the new national airline comes to mind, or how Estonian law makes it easy to use private limited companies to evade taxes. How out of the funds handed out by Enterprise Estonia and the Development Fund, a whole self-sustaining scene of grant-mongering and grant-hunting startups was created.

Not all startups fall into this category, of course. But some certainly do, to varying extents.

There was Fits.Me, which scored hundreds of thousands of euros not only in investment, but also in state support, a company that was never more than a hair’s breadth away from bankruptcy and total disaster, until Rakuten finally came to the rescue and bought it.

Or MeraTel, which received more than two million euros in support and never produced what it promised it would, and is now under criminal investigation.

The issue here isn’t that it could be said that few of these companies ever turn a profit, or give much back to the Estonian state in the form of labor tax or other contributions. The issue isn’t that much-hyped Skype, supposedly such an enormously Estonian thing, is a Luxembourg company owned by two Swedes. Or GrabCAD an American, and TransferWise a British company.

The issue is that the Estonian startup scene and the companies it has produced have established an economic microcosmos that depends on the getting, recycling, and kicking back of state funding.

By definition, a startup is a company with an uncertain future. It would be strange to expect a startup to be able to pay back any kind of support within a rigid contractual framework. This is why financial support provided by Estonia’s state funds tasked with breathing life into an emerging entrepreneurial scene comes in the form of grants.

And these, again, come with conditions attached. A standard formula may be that Enterprise Estonia supports a project with 20% of the needed funding — value-added tax not included. The rest of the money the young company has to raise by itself.

Still, these can be hefty sums, as seen with the companies mentioned above, and apparently also with that of Toomas Hendrik Ilves, and then-wife Evelin Ilves. Their startup Ermamaa received more than 190,000 euros from Enterprise Estonia. The purpose of this grant was to turn the Ilves homestead into a working agritourism business.

The latest news is that Ilves will pay back ten percent of that money, as he never put it to its original purpose. One of the things for which Toomas Hendrik Ilves became famous as president was his use of social media, almost hyperactive in comparison with his colleagues abroad; days after the story had started going around, Ilves said in a post on Facebook that he didn’t have the skills to run such an establishment.

This is coming a bit late in the eyes of many, as Ermamaa actually did host guests — official guests of the president, no less, paid for by the Office of the President.

Ermamaa received the money in 2006, the same year he was elected president. In 2012, during Ilves’ second term in office, Enterprise Estonia decided it would want part of it back if the company didn’t implement the business plan based on which the grant had been approved. The changes that needed to be made to the arrangement between Enterprise Estonia and Ermamaa were, it now appears, facilitated by Siim Raie, back then the director of the Office of the President.

In an opinion piece published on ERR’s Estonian-language news portal on Oct. 14, editor Merilin Pärli wrote that once Ilves realized that he lacked the necessary skills to run the farm, he could have hired someone to do it in his place.

"Estonia is full of able people who have the skills, and experience in the toursim sector — Ilves even recognized them during his presidency, among other things at Enterprise Estonia’s entrepreneurship awards gala every year," Pärli wrote. "But the matter isn’t that the right people couldn’t be found, rather the lacking will to share one’s home with others."

Pärli saw evidence for this in Ermamaa’s business plan and the high prices it listed. "The idea hidden behind it is, let’s set prices that are so high that nobody will want to come and disturb us at home once we get it fixed up."

During ten years in office, President Ilves scolded Estonian politicians time and again for being entangled in such schemes — business deals that, though they may be legal, certainly aren’t proper. In the case of Ermamaa, he seems to have thrown his principles overboard.

Risto Berendson, in charge of daily Postimees’ investigative editors’ office, wrote in an opinion piece published in the same paper on Oct. 17 that the assumption that Estonians would simply settle for a situation in which Ilves had to pay back just 19,000 of 190,000 euros was childish and naïve.

"We would prefer that the president of our country wasn’t on the same list with Türkmenbaşy, Aliyev, Lukashenko, Yanukovych, or Putin, who all had fancy homes built with taxpayers’ money," Berendson wrote, adding that thanks to Ilves, they now were.

Ilves’ behavior showed all the classic signs of economic crime, Berendson wrote, but now nothing could be proven anymore. And even if, legally speaking, Ilves was now being judged unfairly, one important fact remained:

As a human being, Ilves would have been aware that this way out of his problem, seen from the point of view of Estonia on the whole, was worse than the fiasco in the electoral college. "This further undermines people’s trust in the state, from Narva to the outmost tip of Sõrve peninsula," Berendson wrote. "There are no half-tones here, that’s exactly how it is."

Editor: Aili Vahtla

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