According to leading furniture producer Enn Veskimägi, testifying on Friday at Harju County Court, the Baku real estate development bonds sold in 2007 were a carefully considered scam, the Gild bankers and their accomplices having no intention whatsoever to purchase the plot in Azerbaijan.
«Gild should have terminated the issue and returned the money immediately upon discovery that the Azerbaijani Ministry of Defence was not ready to sell them the desired plot of land,» he told the court.
«But, instead of that, they started to dilly-dally and say that they’ll get it any minute. Rain Tamm said that, in Azerbaijan, things go different, they have to give bribes, everything takes time. In short: they started to fool the investors,» recalled Mr Veskimägi.
In summer of 2007, Mr Veskimägi purchased OÜ Seaside Residence Baku bonds for close to five million Estonian kroons (€300,000). Mr Veskimägi said in court that he didn’t have the sum readily available back then, and it took him two-three weeks to get it together.
Money went to Bulgaria
The bond issue was organised by Gild. With money earned, a residential district was supposed to be erected in a picturesque location near Baku, on 147 hectares. Investors were promised 60-70 per cent yield, in two-three years.
Mr Veskimägi, at that time the head of Estonian Employers’ Confederation, was not the only businessman hoping for big profit from the oil state. Thus, the newspaper owner Hans H. Luik testified in court, in March, that he bought €3m worth of OÜ Seaside Residence Baku bonds without the slightest idea who owned the plot in question.
As we now know, the plot promised to investors wasn’t even on sale. Which didn’t dampen the zeal of the Estonian and Lithuanian businessmen. As, in Gild, the Baku bond sale was managed by the Lithuanian partner Šarūnas Skyrius, the list of victims now includes quite a bunch of Lithuanian businessmen. They all have filed complaints. However, hopes of ever getting the money back are next to zero.
As claimed by Mr Veskimägi in court, he was deceived. «The bond issue was based on premeditated fraud, not increasing the investors’ money,» said the man.
To prove his case, Mr Veskimägi said that the organisers of the issue themselves bought 20 per cent of the bonds – however, with money from other bond buyers (investment by organisers was a condition for the issue being counted a success).
As another factor, Mr Veskimägi mentioned that the money collected by sales of Baku bonds immediately moved not to Azerbaijan but to Bulgaria and to offshore firm accounts. The bond-backing Gild also having a real estate development in Bulgaria, which investors had to exit with losses.
«We invested into Azerbaijan, not Bulgaria,» said Mr Veskimägi.
The investors high hopes are also evidenced by the fact that as, almost a year after the money was laid on the line, it became evident that the desired plot couldn’t be purchased, Erki Piirsalu and Harles Liiv – who led the firm organising the issue – found another plot near Baku. It was smaller and partially rented out. However, Estonian businessmen liked that one as well – so they continued waiting for the money ship to arrive.
As the US Lehman Brothers went bankrupt and things started to go sour globally, Estonian investors also became worried.
Mr Veskimägi recalls organising an audience for himself and Rain Tamm with the Azerbaijani president Ilham Aliyev, within the visit of Estonia’s president. As Azerbaijani kindness goes, immediately after the meeting, they were met by the country’s economy minister promising to deal with the matter.
Which he did. A year later, as Mr Aliyev paid a return visit to Estonia, the sad truth came out: yes, the Azerbaijanis had taken bribes and failed to mediate the promised plots to Estonians. However, nothing of the €16m gained by bond sale had ever gotten from Estonia to Azerbaijan.
«I sat at the same table, in the Kadriorg Castle, with the Azerbaijani Minister of Economy,» recalled Mr Veskimägi. «He said they had caught their fraudsters, but the money we were talking about had never gotten to Azerbaijan. The minister advised to search for it among our own fraudsters.»
12 lost millions
Searching among out own fraudsters led to arrest of investment company Gild accounts. Now, the company is in court, accused of aiding investment fraud.
Lauri Isotamm, former owner and board member of investment company Gild, told court on Friday that Gild fell victim to fraud – just like the OÜ Seaside Residence Baku clients. «We were an investment bank with a good reputation, we had advised over 100 transactions, had a couple of dozens of successful issues, and no client ever had any complaints against us,» said Mr Isotamm.
In the Gild-led investments scheme, investors lost €12m. Erki Piirsalu now stands accused of investment fraud; Tõnis Haavel, Harles Liiv and Šarūnas Skyrius, as well as AS Gild Financial Advisory Services, are accused of aiding in fraud.
Cheated businessmen
In March 2007, OÜ Seaside Residence Baku bonds were purchased by a sting of well known businessmen and -women, either as private persons or via their firms.
Major investors:
• Marcel Vichmann €4m
• Hans H. Luik €3m
• Aivo Kuldmäe €700,000
• Hannes Allik €678,000
• Veikko Toomere €640,000
• Kristjan-Thor Vähi €600,000
• Veljo Madiberg €300,000
• Eve Urbas €300,000
• Enn Veskimägi €300,000
• Peeter Kukk €250,000
• Maido Kiviorg €200,000
• Hede Truusa €100,000
Source: PM