Analysis by the Government Office (Riigikantselei) finds that while the Ministry of Finance, Ministry of Justice and the Ministry of Foreign Affairs acted together to hire American law firm Freeh, Sporkin & Sullivan, the Ministry of Finance bears ultimate responsibility for the controversial deal.
The conclusion of the analysis prepared by the legislative drafting department at the Government Office is that, even though cooperation with a U.S. law firm is necessary, questions remain in the air when it comes to the nature of the contract awarded to Freeh Sporkin & Sullivan, daily Postimees reported.
Both the Ministry of Foreign Affairs and the Ministry of Justice say they were involved in the search process in the early phase, for the conduct of a background check into Freeh, Sporkin & Sullivan, adding they were also sent copies of the invitation to tender and the draft of the contract. That, however, was the sum of their entire role in the process, and they didn't take part in the final selection of the law firm to represent Estonia's interests, nor did they know with whom the contract would eventually be signed. Two other law firms had been shortlisted, it is reported.
Minister of Foreign Affairs Urmas Reinsalu (Isamaa) said at the end of last month that in the background check on Freeh, Sporkin & Sullivan LLP, the Ministry of Foreign Affairs did not see any conflict of interest. According to Reinsalu, the report of the background check forwarded to the Ministry of Finance contains a reference to said law firm having had "motley clients, as the media have reported as well," but never mentions a conflict of interest.
Postimees pointed out that Louis Freeh's connection with Prevezon, the main entity implicated in the money laundering affair, has been central to the scandal. Prevezon had reportedly channeled funds via the now-defunct Tallinn branch of Danske Bank, at the center of a major international money laundering scandal last year.
The Government Office did not offer an unequivocal stance on whether Freeh indeed assisted Prevezon, and thereby occurred in a situation of conflict of interest, Postimees said.
As stated in the analysis: "The material collected on this matter is contradictory and does not enable to give an assessment of whether and how Freeh has been linked to the Prevezon case."
Freeh recently stepped down from the law firm which bears his name, but continues to act for Estonia in money laundering investigations in the U.S., including obtaining any cut from final damages by way of harm done to Estonia's international reputation in money laundering cases.
The analysis also points out that when it comes to Freeh, it is no longer possible to talk about ethical norms applicable to a lawyer, as starting from last week he is employed solely by a consultancy in his name and is active in the case in question as a consultant.
The Government Office however highlights a discrepancy between court documents and what Freeh said to Postimees to the effect that Danske Bank was not connected with Prevezon.
The analysis says: "There are court documents which show that in the Prevezon case money moved also through the Estonian branch of Danske Bank."
The Estonian parliament's state budget control and anti-corruption select committees gathered for a joint sitting over the same topic on Monday.
The chairman of the state budget control select committee, Jürgen Ligi (Reform), just like the head of the anti-corruption select committee, Katri Raik (Social Democrats), referred to several analyses not made public as effectively precluding the hiring of Freeh Sporkin & Sullivan as not appropriate. Also, Ligi pointed out that monetary compensation for damage to reputation may have an effect contrary to what is desired.
Ligi explained that seeking damages would re-open past wounds that Estonia has drawn the line under.
He added: "Estonia got things done long before Denmark, and European directives came later than our practice. We opened the Danske, Versobank cases, Swedbank came later, but its scale was significantly smaller as well. No mention is made of it that we had the best regulations in 2014."
Prime Minister Jüri Ratas (Center), who also took part in the joint sitting of the parliamentary select committees, did not doubt the necessity of hiring a U.S. law firm, in investigations taking place in the U.S.
The prime minister said: "That Estonia would defend its positions via a law firm, I consider it right. The reputation damage that Estonia has incurred in connection with the topic of money laundering is big -- both for our economy and business operators, it will start to harm individuals as well."
Controversial law firm hired to represent Estonia in money laundering investigations
On July 3, ERR News wrote that finance minister Martin Helme had entered into an agreement with United States law firm Freeh, Sporkin & Sullivan LLP to provide legal services to the Estonian state in international money laundering investigations.
Helme said at a press conference the fee for the contract with the law firm is €3 million for two years. The terms of the agreement have not been made public.
An investigative piece published by daily Eesti Päevaleht (link in Estonian) on July 28 made the claim that lawyer Louis Freeh - a former FBI director - had previously represented Russian company Prevezon, which had allegedly laundered around €6 million via the now-defunct Estonian branch of Danske Bank.
Danske Estonia was closed in late 2019 following revelations that over €230 billion in potentially illicit funds, primarily of Russian origin, had flowed via the bank's portals in the period 2007-2015.
Helme rejected EPL's claims, calling the article slanderous. He added that the agreement brought a front-rank U.S. law firm, which has also worked with the U.S. government, and with experience in international financial crime representation, on board for Estonia.
The hiring of the law firm led to many opposition MPs calling for an extraordinary meeting to get to the bottom of the details of the deal, with opposition Reform Party leader Kaja Kallas specifically calling Helme out, saying that allocating taxpayer funds to a law firm was arrogant and demanding that the terms of the legal agreement be made public.
Members of the opposition Social Democratic Party (SDE) sent out a press release requesting that Riigikogu finance committee chair Aivar Kokk (Isamaa) convene an extraordinary meeting of the committee as soon as possible, to review the agreement Helme made with the law firm.
Reform also made a written query to Minister of Foreign Affairs Urmas Reinsalu (Isamaa) on whether the ministry had warned the government of a possible conflict of interests of the law firm.
Minister of Justice Raivo Aeg (Isamaa) said on July 29 that the government authorized Helme in hiring a law firm to represent Estonia's interests in international money laundering investigations.
He added: "[Louis Freeh] is a former director of the FBI, which should serve as a guarantee of his trustworthiness."
Louis Freeh himself denies having acted for the Russian company linked with the Danske money laundering episode.
Editor: Kristjan Kallaste