The Porto Franco scandal, when it first broke in January 2021, also led to the collapse of the Center-EKRE-Isamaa coalition and the resignation of Jüri Ratas, in office since late 2016, as prime minister.

Estonia has seen its fair share of political scandals and criminal cases involving politicians down the years, yet the Porto Franco case was the first in 30 years of restored independence to bring down an actual government.

Following a Supreme Court ruling finalizing the matter, businessman Hillar Teder, former Center Party secretary-general Mihhail Korb, and the Center Party as a legal entity were found guilty of influence peddling.

Court records, including conversations involving the guilty parties, are now public domain, and "Pealtnägija" broadcast a selection of these, starting with a phone call from Korb to Teder made on February 6, 2020, as follows (Excerpts are copied from the court records in their original form):

Teder: Hello!

Korb: Hello, hello, dear sir!

Teder: Well, are you still in morning mode? (chuckles).

Korb: Listen, yes. I'm … here in Italy ... Erm … in the Alps, skiing...

Teder: Ooo!

Korb: ... this week.

Teder: Oh, what are we talking about?

Korb: Quite so.

Teder: We "senators" do live well.

This apparently jovial conversation in February 2020 marks the very start of legally intercepted calls in a criminal case that led to the biggest political upheaval in years.

On one side was Mihhail Korb, then an MP and the Center Party's secretary-general; on the other, prominent businessman Hillar Teder.

Neither one of them—one of Estonia's wealthiest men and the ruling party's secretary-general—could have had any inkling at the time that this apparently trivial exchange would contribute to the collapse of a democratic government one year later.

The same call continued:

Teder: Do you have a little bit of time on Sunday?

Korb: Yes, surely, surely. Well, I'll be back on Saturday evening.

Teder was good enough to speak to "Pealtnägija" himself and explained things as follows:

"This is a political thriller. And its title is 'How to destroy the Center Party.' In the first part, around 2015, I played but a small part, but now, in this second installment, they opted to give me a leading role."

State prosecutor Taavi Pern meanwhile told the show: "[Teder] claims that the prosecution still holds a grudge against the Center Party from the old [party co-founder and former Tallinn mayor] Edgar Savisaar corruption case and that he just got caught in the crossfire. This claim is completely unfounded and, to my mind, laughable," said Pern.

To get to grips with this "thriller," we need to set the stage, rewind, and introduce the main players.

Now 62, Hillar Teder became one of Estonia's wealthiest men back in the early 2000s when he sold a juice factory in St. Petersburg, Russia, to the Coca-Cola corporation.

Subsequently, he focused on building shopping malls, chiefly in Russia and Ukraine, where his influence is truly noteworthy.

Then, a decade ago, a cartel associated with Teder began developing an ambitious commercial and residential complex much closer to home, between Tallinn's derelict Linnahall and the Admiralty Basin marina in the Old City Harbor district, which itself was starting to undergo a major facelift.

This is where the Porto Franco project comes in.

One of the main shareholders and representatives of the 150,000-square-meter Porto Franco development was Hillar's son, Rauno.

The project was primarily financed via the European Bank for Reconstruction and Development (EBRD).

"Porto Franco court case: A million here, a million there, and other suspicious wordplay," Teder continued.

"Porto Franco is actually the largest foreign investment in Estonia's real estate sector and the most expensive construction project ever undertaken here. With all financing costs included, it amounts to €250 million," he noted.

The second main character in this story is not a person but a political party—the Center Party—now in opposition in Tallinn and at the national level, but in 2020, in power in Tallinn and ruling alone for a couple of decades, as well as in coalition nationally.

Nonetheless, Center had repeatedly found itself in the Internal Security Service's (ISS) crosshairs, thanks to corruption allegations and links with Russia—the party had had an agreement with Vladimir Putin's United Russia party.

Teder got on well with Edgar Savisaar and sponsored his party both openly and, allegedly, covertly too.

In 2015, Teder was among those charged with bribery, with Savisaar being the alleged bribed party.

At the heart of the matter lay a company called Midfield OÜ, an advertising and PR firm, and its director, Paavo Pettai, who had secretly been funneling money from several major businesspeople into the party's coffers, it was found.

At the end of the mammoth process, Savisaar, who passed away in December 2022, ultimately escaped prosecution due to his poor health; Teder reached a plea deal that required him to pay €200,000 in substantive fines.

What is key to remember here is that the Center Party was still left saddled with around €1 million in debt to Pettai's firm, Midfield, as a result of this affair—campaigning work done by Midfield back in 2015 was adjudged to constitute an illicit donation.

Combined with other financial troubles, this left the party in dire financial straits by 2020.

At the same time, the Porto Franco project was running into issues of its own.

The causes of this are a longer saga unto themselves, but essentially, a ramp leading to the development's underground parking was planned but would pass via city-owned land. The parking lot includes public paid parking spaces.

The city demanded €800,000 for the related easement, far above market value, though as it turned out, this was a fait accompli in any case, as it was the City of Tallinn that had demanded the Porto Franco developers construct the access road in the first place.

Teder's legal representative, Margus Kurm, recalled: "First, the city government forced the developers, essentially ordered them, to arrange underground access. Then they said, 'Now pay €800,000 for that.' This was outright discrimination—compared to other developers, Porto Franco was asked to pay a massive sum for something others had received for free.

Moreover, if you look at the legal framework, the demand was illegal because the city's own regulations state that the servitude fee must be calculated based on what has been charged for similar servitudes elsewhere," said Hillar Teder's representative, Margus Kurm.

If this has been hard to swallow, now is the time to pay closer attention still, as we return to the juicy conversations that kicked off this tale.

Korb is back from his ski trip to the Italian Alps and suggests meeting right away, on the evening of Sunday, February 9.

The meeting place is chosen as the T1 Mall; Korb says he has a family event in the same building, while Teder is on his way to the nearby airport too.

Surveillance cameras capture them in the Fibo restaurant; despite significant background noise, mics are able to pick up the conversation the pair are having too.

Twelve minutes in, Teder steers the discussion toward the matter of his son Rauno seemingly not being able to get a meeting set up with the Tallinn mayor, at that time Mihhail Kõlvart, now Center's leader.

T1 restaurant conversation, February 9, 2020, Mihhail Korb and Hillar Teder:

Teder: Okay. How is Kõlvart feeling? Confident?

Korb: It seems so to me, yes ... He's pushing things forward. Has he been in touch? What did he say?

Teder: I simply wanted to say that ... we should somehow work in such a way where we handle our party things separately ... and now someone should work with Rauno in the city government.

Korb: Yes.

Teder: But as of now, they're blocking things.

Margus Kurm takes up the story.

"By the time Hillar Teder and Mihhail Korb met in February 2020, this process had already been going on for more than two and a half years. For two and a half years, the city government had been unlawfully extorting money from the developer.

"By the way, they did it in a way that made it impossible to take them to court—because as long as there was no official decision from the city government, there was nothing to challenge in court. That is a clever extortion tactic: On the one hand, they demand an absurd price, and on the other, they delay any official decision which could be legally contested," Kurm further commented.

Teder said of his part: "All I did was tell Korb that nothing was moving ahead with the city government; that investors who had sent letters weren't even being responded to."

Back with the February 9 conversation:

Korb: I spoke with Kõlvart about this.

Teder: Yes ... he should at least hear them out.

Korb: Yep. So Kõlvart … hasn't done anything for you?

Teder: No, he hasn't.

Korb: I'll talk with him then.

Teder: Yes. Maybe we can get this sorted because we're starting to run out of time. Look, we need to clear this EBRD loan.

Without an entry tunnel to the subterranean parking lot, Porto Franco would have been something like an airport without a runway.

Critically at this juncture, the missing detail had also started to raise red flags for those banks who were supposed to provide major financing for the development.

In the clandestinely recorded conversation above, Korb at least gives the impression that he has spoken to the mayor about it and promises to do so once more.

After 15 minutes of casual banter, the following dialogue ensues.

Teder: I can certainly pull out, some, some, say a million, gradually, through to the elections. But…

Korb: That sounds like … that sounds all too good.

Teder: Well, but we have some big things going on, let us say, that … if we're moving forward in Ukraine, then … then this is no big deal. There you go.

Korb: Well, see what your options are. I think I'll do it like this: Start drip-feeding it in month by month, you know. Then … then it just happens simply like that, and… and I don't know if we even need to explain it to anyone.

To "Pealtnägija," Teder said: "Anyone who listens to that conversation from start to finish can see that this is not where a million is being agreed on. That's not how a million-euro deal gets made."

Kurm agreed, saying: "To my mind, it is not viable to interpret this conversation as some kind of illicit deal, as some sort of agreement in which Hillar Teder's donations were conditional."

Teder and his legal defense argue that the conversation was actually about the Center Party's longstanding million-euro debt to the advertising firm Midfield.

However, according to prosecutor Taavi Pern, this distinction is irrelevant. The "drip-feeding" line in fact becomes the centerpiece of the prosecution's evidence.

"Our job requires a modicum of luck, and I think we had plenty of it in this case. It is rare that just a few days after launching active measures, we hit the jackpot. At the outset of this investigation, I expected that we'd have to be on the job for months, searching for tiny needles in haystacks and trying to piece the fragments all together.

"But it was a surprise just how well it all came together, even to me," Pern added.

The ISS, known in Estonia by the acronym Kapo, put significant effort into piecing together these fragments, to determine whether the mayor was invol

ved too.

For instance, late on the evening of February 17, surveillance recorded Korb and Kõlvart meeting in a car parked in front of Mayor Kõlvart's home.

They spoke for a few minutes before stepping outside, apparently to smoke.

Kõlvart, however, said that this was a case of mistaken identity.

"I already answered this question in court when the honorable prosecutor asked me whether I smoke. I don't, and I have no intention of taking it up. But there is an expression in the Russian language that doesn't literally mean people are going out for a smoke — it simply means they are going for a walk or to talk," the former mayor explained.

Undercover surveillance picked up multiple, sometimes cryptic phone calls between mayor and party secretary general, where they arranged private, face-to-face meetings. Korb even booked private rooms in restaurants to host these discussions.

"When people meet in a restaurant, this does not necessarily mean they are having a secret meeting. We definitely met at the city hall and in this office too — many times, over and over. First of all, with all due respect, the idea that Mihhail Korb could 'influence' me is, to put it mildly, not a very rational one," Kõlvart went on.

"Second, if 'influence' means that he told me Teder wanted to meet with me and I responded that there is a procedure to go through for such meetings, and that the meeting took place through that procedure — then I don't know, if that's called influencing, then yes, I was influenced. But if influencing means making a specific request or pushing for a specific outcome, then that didn't happen. And even if it had done, my response would be very clear: No one can influence me," he added.

The mayor insisted that there was no secret backroom deal and that he had directed the Porto Franco matter via official channels.

Meanwhile, Korb was whispering updates to Teder about how things were progressing, as this phone call on March 3, 2020, made by Korb to Teder, shows:

Korb: I thought I'd call and check ... is everything okay? Are things moving forward?

Teder: Ah, well ... I'm doing the rounds in Kyiv and in Cyprus now. /…/ I know there was some meeting...

Korb: Yeah, we've touched base there. We're communicating directly with Rauno.

Teder: Well, let's hope so.

Korb: Uh-huh, uh-huh…

Teder: Very good.

Korb: ... Yeah, yeah, he's involved, and like, the plans are clear... we know what needs to be achieved.

Of these talks, Pern said: "When I collated these conversations with the other evidence, I saw that the moment money came up in the discussion, suddenly arranging a meeting became possible."

"Within days, virtually, the meeting got set up. Emails that had allegedly gone unread were suddenly being read, seriously analyzed, and an urgent meeting got scheduled. At that urgent meeting, the mayor telegraphed that the issue needed to be resolved — an issue that had gone unresolved for months, despite its apparent urgency. And that a compromise had to be found," Pern went on.

Two days later on March 5, Rauno Teder finally gets to meet with the mayor and the responsible city officials. The son reports to his father that things are finally moving forward, in this phone conversation from the same day.

Rauno Teder: Where exactly this agreement falls, who the hell knows. Probably somewhere in between, right?

Hillar Teder: Yes.

R. Teder: But still, we saved a lot of money, in the end.

H. Teder: Oh, absolutely, yes.

City officials then pull out an alternative calculation from their drawer, suggesting that the servitude fee could now instead be €300,000 — half a million euros less than the original sum demanded.

Kõlvart takes up the story: "The first decision was indeed incorrect — it was not lawful and did not follow the principle of equal treatment."

"The second decision was made following analysis, meetings, and discussions — it wasn't just pulled out of thin air. It was deliberated upon among various departments and officials, and for quite some time. And the arguments presented by the developer were taken into consideration too. I think that's the right approach to take. After all, officials must communicate with citizens, including developers; if a mistake has been made, it must be rectified," Kõlvart went on.

Then on March 24, Korb called Teder, who was in St. Petersburg at the time, and steered the conversation back to party funding:

Korb: Here, people are, let's say, worried about other things, but if you … if you could maybe … if you could think about our things a little…

Teder: Mmm.

Korb: … give it some thought too, I'd be…

Teder: Yeah, okay!

Korb: … really grateful to you, that…

Teder: I'll, I'll look into it.

Korb: If you have the opportunity, I'd be very grateful, yeah.

Teder: Yes. Okay. Yeah, alright. Mmm.

Korb: Yeah, yeah, it's just that right now… it's getting a little tight, starting to squeeze…

Teder: Mmm. Yeah.

The material paints a clear picture: On the one hand, the Center Party's finances were in dire straits, as the Political Party Financing Supervision Committee (ERJK) was preparing yet another injunction.

On the other, the Teders were pushing to finalize the easement deal already agreed on with the City of Tallinn, now at a greatly reduced rate.

On April 19, Hillar Teder instructed his accountant to transfer €5,000 from his personal account to an NGO called Ausad Valimised ("Honest elections") MTÜ with the reference: "Support for Savisaar's birthday party," which came at the end of the following month.

According to Teder, the timing was merely a coincidence, and in any case the very next day the city government formally approved the servitude fee at €300,000, in a city government session.

The final agreement was signed in early June.

But this is not the end of the story.

The events and phone calls outlined above coincided with the very first wave of the Covid pandemic worldwide and in Estonia.

Societies and economies shut down overnight, and Porto Franco was not spared financial complications.

A financial lifeline was sought from the state-run KredEx fund, now merged into the EIS organization.

According to the prosecutor, Teder may have initially been put under surveillance due to his dealings with the Center Party, but investigators subsequently also discovered suspicious communications with Kersti Kracht, an adviser to then-Finance Minister Martin Helme (EKRE).

Indeed the Kracht-KredEx nexus was one of the most focused-on aspects of the case early on in its reporting and before the court hearings.

The prosecution's case states that Kracht had been, due to debts, at risk of losing her home; Teder allegedly proposed a scheme which would transfer ownership to a proxy.

In return, the adviser reportedly supported Teder's business interests, ie. a type of influence peddling too.

Since this latter case is still ongoing, those involved have not been able to comment further.

However, several intriguing details have emerged, including reports that Teder and Kracht repeatedly met on a deserted beach, to discuss matters.

The pair were already acquainted with each other, while Teder said the location was the result of the strictures of the pandemic.

"Kracht is a friend of my wife," Teder told "Pealtnägija."

"I have known her for a very long time. She sometimes comes over for tea. One of my residences is on Klooga beach (west of Tallinn - ed.), where Kracht also lives. Without revealing private details, I can say that Kracht is opposed to vaccinations. So if you wanted to meet with Kracht during Covid times, you had two options — either have tea next to the house, or take a walk on the beach," he went on.

When asked if he helped Kracht conceal the true ownership of her house, Teder responded that this allegation was fabricated.

The following year, January 12, 2021, everything blew up in public.

The ISS swooped; the main players were taken into custody.

Most dramatically, Jüri Ratas resigned, paving the way for Kaja Kallas to take office as prime minister – though in a bipartite coalition with Center, ironically.

To ease proceedings, the major criminal case was split into two: The so-called Porto Franco case and then the KredEx-Kracht case.

While the defendants have all provided numerous explanations, claiming that the conversations and meetings referenced in this report had been either jokes, misunderstandings, or taken out of context, on appeal via the circuit court, the Supreme Court ultimately ruled in February this year that all of it formed a criminal pattern.

Teder and Korb were handed one and a half years in suspended sentence; the Center Party was fined a million euros, in another irony, the same sum it had owed in the wake of the Midfield affair.

The individuals involved continue to deny all and any wrongdoing and culpability.

Teder said: "My life has reached the point you read about in history books; where every day you must be ready for that knock on your door."

He said he plans to take the case to the European Court of Human Rights.

Mihhail Korb and Kersti Kracht were approached, but declined, to provide fresh comment ahead of this article.

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