By 1993, getting hold of Estonian banks’ money frozen at Russian Bank for Development and Foreign Economic Affairs (Vnesheconombank, VEB) looked next to impossible.As Russian businessman Aleksandr Matt – sniffing a way out – came up with a solution, Eesti Pank opted to play along, ignoring interests of all other entrepreneurs.
That, in a nutshell, is what the Riigikogu VEB fund committee said in its final report. The year’s worth of work did unearth the scheme, but the players involved keep mum on their motives.
Having interrogated nearly 50 people, the committee says the chain of dark events kicked into gear in 1993 after Russia froze accounts of Estonian banks in its Bank for Development and Foreign Economic Affairs. To avoid a banking crisis in Estonia, claims were converged at VEB Fund by Riigikogu decision; even so, with each passing month hopes to get the money back grew dimmer.
In the given situation, Eesti Pank was willing to hear any businessman that had a plan. Indeed, dozens of CEOs darkened the central bank door. One such who proposed a plan to North Estonian Bank (registrar of VEB Fund) was Aleksandr Mitt, chief executive of TSL International – major customer of Union Baltic Bank and a resident of Russia. His plan entailed buying up and realising the claims.
«It is very clear that Aleksandr Matt possessed contacts and information from Russia that for residents of Russia it would later be possible to unfreeze the money. Mr Matt got his initial hints as early as in 1993,» says VEB fond investigation committee head Rainer Vakra.
The plan sounding credible and realistic for North Estonian Bank managers, they introduced the man to Eesti Pank leadership. «In Eesti Pank, Mr Matt met both [its president – edit] Vahur Kraft and vice president Enn Teimann as VEB Fund manager. Former North Estonian Bank managers Peeter Vähi and Riho Remmel claimed that the agreements to acquire claims by government and Eesti Pank were made by TSL International in the very 1993, at Eesti Pank,» said Mr Vakra.
The content of the agreements is still only known to parties involved. What followed went according to plan. In January 1995, Russia’s VEB bank did ask Eesti Pank for data of creditors who were Russian residents. In a response letter dated January 30th 1995, signed by Vahur Kraft, Eesti Pank confirmed four creditors as having claims – but they added a fifth one – TSL International.
According to the letter which contained false data, TSL possessed claims for $32.3m which was Estonian government and Eesti Pank claims (at the time) put together. Three years later, TSL indeed acquired former Eesti Pank and government claims in Estonia for the same worth but for a price ten times lower.
Eesti Pank, however, asked VEB bank to transfer money by payment order to TSL, and to this Russian finance ministry gave green light. Who received the money, the committee was unable to establish.
What disturbs the committee most is that Mr Kraft and Eesti Pank under his leadership, for unclear reasons, created a favourable situation for a businessman. Meanwhile, they did not fulfil the order by Riigikogu to fight to all of the VEB Fund creditors’ frozen money.
«As long as Vahur Kraft has not provided clear answers to Estonian society – why and how – I think the rain clouds will forever remain over his head,» summarised Mr Vakra.
Committee member Marko Pomerants said the other key figure who claims not to remember anything is the vice president Enn Teimann. «One is a pensioner who isn’t doing anything in Estonian state any more. But the other one [Vahur Kraft – edit] has, I think, closed many doors for himself in Estonian state, especially when it comes to the world of finance,» thinks Mr Pomerants.
Why was Mr Kraft’s letter with false data only unearthed 17 years later? «A very narrow circle knew about it. In high likelihood, even National Audit Office failed to see the letter while it audited VEB fund in 1995 and 1997,» explained Mr Vakra.
«In 1990ies, Estonia’s banking was in the hands of people whose brains do not allow then to recall anything, after a while,» said committee member Aivar Riisalu. In his words, it is hard to accuse Aleksandr Matt in anything. «When it comes to Mr Matt, we obviously have to do with an entrepreneur who had a definite plan. We have nothing to accuse him for: he had his options and he realised these,» said Mr Riisalu.
According to Mr Riisalu, the reports by national Audit Office and VEB Fund investigation committee may come in handy with disputes in European Court of Human rights where holders of VEB Fund certificates have sued the state to be compensated for damage up to €300m. «In that dispute, our reports may be really helpful. I would not like to be in the shoes of Estonian finance minister if Europe should satisfy the claim,» said Mr Riisalu.