Three persons associated with savings and loan association Erial were detained on Tuesday and stand suspected of investment fraud and embezzlement. Erial's founder is also suspected of bribing a Police and Border Guard Board (PPA) internal control bureau employee.
According to suspicions, Erial's shareholders' equity was inflated to mislead customers in terms of its available financial security, the Office of the Prosecutor General and PPA said.
Erial founder Ilja (34), current member of the board Daniela (40) and Delkona OÜ stand suspected of investment fraud.
Ilja, Daniela and Daniel (33), member of the board of Transpire OÜ that is in a contractual relationship with Erial, are suspected of having embezzled assets at the savings and loan association's disposal on a large scale using real estate transactions. Erial employee Sofia (33) is suspected of aiding embezzlement. Preliminary information suggests that damage caused to Erial customers exceeds €1 million.
Head of the Central Criminal Police's economic crimes bureau Leho Laur explained that people gave members of the board control of their money when they signed a contract with the savings and loan association. "Proceedings have determined that the board did not act in the interests of savers and that the business interests of Erial's founder Ilja were observed instead. A part of depositors' money was placed in companies tied to Ilja not for the purposes of investment but rather embezzlement. Interest payments were made using money from new depositors," Laur described.
According to suspicions, Ilja bribed an official of the PPA's internal control bureau who was also detained by Estonian Internal Security Service (ISS) operatives. The official is suspected of promising to offer Ilja favors in exchange for the bribe. They have resigned from police service. The ISS is investigating the bribery case.
The prosecution is seeking an arrest warrant for Ilja and the PPA official.
Proceedings are handled by Central Criminal Police and ISS operatives under the Office of the Prosecutor General.
State prosecutor Sigrid Nurm said that the heads of Erial violated the good faith of depositors. "A savings and loan association cannot be compared to a bank. The former exist to coordinate the activities of members, while members are obligated to ensure the association's wellbeing. The Financial Supervision Authority does not exercise control over savings and loan associations, which is why investing requires active contribution and control by members. Unfortunately, we can see that a lot of members have authorized other members or members of the association's board to use their assets. Too much trust and surrendering power of decision has left members in an unfortunate situation as suspicions suggest authorized persons have based investment decisions mainly on personal gain," Nurm said.
"We urge all Erial members and those of other savings and loan associations to make their own investment decisions and carefully consider who they authorize to decide the use of their money and to what extent. Power of attorney is not just a formal piece of paper but gives the authorized person extensive rights to pursue transactions, whereas it is extremely difficult to prove otherwise at a later time," Nurm added.
Editor: Marcus Turovski