Squirrel tails sticking from state firm doors

Oliver Kund
, reporter
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Photo: Postimees

Diligently, Postimees has delved into the coterie repeatedly appointed to counsel public enterprises by party bureaus since the change of millennium. Side by side with faithful officials, these are dominated by generous donors and cadres. 

«The councils of the majority of largest public enterprises and foundations are dominated by three names mainly, irrespective of the company’s domain,» write MEP Kaja Kallas (Reform) this May in a letter to native party.

Though Ms Kallas mentioned no names, takes no rocket scientist to figure out who’s who. Kalev Lillo and Remo Holsmer are well-placed indeed. The former sits at State Real Estate Ltd, the latter at Elron. Together, the two take up space at Port of Tallinn council as well.

The young skyrocketing politician Kalle Palling is trusted by party to have a say on three fronts: Eesti Energia, Tallinn Airport, and Estonian Environmental Research Centre (KIK), while busy at Riigikogu as member.

Mercy seat

What Ms Kallas found fault with has formerly been pointed out by two National Audit Office audits, and two Chancellors of Justice in a row: councils of public enterprises should not be mere party bonuses, but an essential input into these firms. Until ministers fail to substantiate for which competencies the people have been appointed into the councils, we lack the conviction that the choices were in best interests of state and not the party.

«Though officially these people are appointed by the minister of corresponding domain, the names are still dictated by party leadership,» said Ms Kallas. «This is not confirmed by the board, it is not discussed in any faction. One is just finds about it at some point of time, to say aha.»

Long-time Riigikogu member and currently its speaker Eiki Nestor (SDE) agrees, the thing is a far cry from democracy: «No written rules here, indeed.»

The key persons are secretary-generals of the parties, who sit as decision-making centres.

A former politician who has now left Reform ranks described the process thus: «After elections, people are approached and asked which committee [at Riigikogu] they want to join. If a person is really eager to become a minister, but the seats have been handed out, they say we’ll give you a place at a council.» In private conversations, two politicians admitted to Postimees that in return for joining Reform Party, its alleged puppeteer Rain Rosimannus has offered them sure seats at councils.

The advantages are obvious. Firstly, the strategic information. A council obtains detailed information from the board on how the company operates, what the business plans are, and how the competition situation looks. Secondly, numerous public corporations from Port of Tallinn to Estonian Air Navigation Services had out hundreds of thousands of euros of sponsorship money each year, out of their profits.

Centre Party secretary-general Priit Toobal said that coalition parties are mostly interested in the successful companies.

«In Riigikogu lobbies, one hears that for starters Reform takes the councils that they want, and only then lets others to the pot. In this, a large role is definitely played by «awarding» certain politicians or offering a seat at a council as a consolation prize,» he described.

Truth be told, the last time Centre was in a coalition, they picked the same berries, when in 2005–2007 lots of Centrists entered important councils, beginning with Vilja Savisaar and Ain Seppik and ending with Evelyn Sepp and Elmar Sepp.

Every fourth is squirrel

To find out about the depth of problems at public corporations, I reviewed decisions regarding compiling councils over the past 15 years.

At the moment, Estonian state has a holding in 32 enterprises. To manage these, 154 council members are currently employed, largely for five years. At least formally, half of each council is appointed by the finance minister, and the other half by minister of the corresponding domain. Even so, as in Estonia the management of public enterprises has been split between ministries, the state lacks a complete overview regarding who, and how often, end up in councils.

And thus the data show that, as at end of May, a quarter of all council members are from Reform. Reform’s first choice has been Kalev Lillo. In addition to current councils, the man educated as physics teacher has managed to counsel Enterprise Estonia (EAS), Estonian Pilot, Estonian Map Centre, and Elron.

As pursuant to law councils are carrying out the will of the minister, a large part of council members are specialist officials of some ministry. The longest-serving of these is state assets department deputy hear at finance ministry Tarmo Porgand who has been placed into councils by various finance ministers a whopping nine times.

A murkier habit yet: the parties have been practicing appointment into councils of entrepreneurs who supported them most before elections. Thus, Centre has pushed in Urmas Sõõrumaa, IRL has had Veiko Tišler appointed, and Reform awarded Viljar Arakas.

In several instances, the entrepreneurs have ended up abusing the trust shown by ministers, or made use of inside information available at the company. This is what happened with Rein Kilk at council of Eesti Energia, and Neinar Seli at Port of Tallinn.

«I know of no cases where a Riigikogu member has been involved in a mess, but I do know of several episodes related to private businessman’s interests,» said Erkki Raasuke who wrote a report on the councils at economy ministry two years ago.

He said entrepreneurs have been linked with several corruption cases which are yet to become public. «Some of these we were able to neutralise, so in the end they did not materialise.»

In their report on 2013, Mr Raasuke and his team arrived at the suggestion that the state should firstly decide which enterprises – and why – it wants to own anyway. Thereafter, clear goals should be set to the enterprises that remain; and thirdly the formation of councils should be rendered more transparent. Meaning: the ministers should substantiate why people are appointed into councils. The management of certain enterprises, however, could be gathered under one umbrella company, the council of which would be elected by public competition.

«The main problem is that when management bodies of the team are appointed in an opaque and corrupt manner, with no explanations and reasons provided, it will also poison the rest of the organisation,» said Mr Raasuke. «If I could only change one thing, I would change the way the councils are put together, and the rest would solve by itself.»

He said the current system of appointments and politicians sitting at councils have been veiled by claiming that the information needs to be used at Riigikogu committees.

«In reality, the business of a well managed public corporation does not need to be constantly discussed at Riigikogu committees. That would point to something being really wrong. All we can do is to cynically ask: why not write in State Assets Act that members of councils are not appointed by the minister but by coalition parties’ secretary-generals?» said Mr Raasuke.

National Audit Office performance audit chief auditor Tarmo Olgo said that after two consecutive audits by them, showing the same thing, there is still no willingness to alter the darkish system, though by this the state clearly suffers loss. 

Lately, National Audit Office called nine chairmen of boards of public enterprises on the carpet. To their great surprise, several of them admitted to auditors that part of their council members seem to belong there rather for the position’s sake, not desiring to do essential work. This has led to situations where CEOs have headed straight to party bureaus to discuss issues, and not to the council.

Michal mulls change

A Reform ideologist and economy minister Kristen Michal said that appointment of politicians ought to continue as, in the opinion of the party, this is more transparent and less likely corrupt than participations of persons outside of parties. The large corporations having a weighty impact on state budget, Riigikogu must necessarily be in the know of what is happening in them.

However, Mr Michal plans to shrink the public enterprise network, bringing Port of Tallinn, Estonian Railways infrastructure, Tallinn Airport and with high likelihood Saarte Liinid under one holding corporation. The process would last a year at least, but four-five councils would be done away with. To manage corruption threat, Mr Michal would want mandatory security check, as well as corruption prevention plan for chairmen dealing with sensitive information. 

The attitude of other parties will be evident as a white book on state assets policy will reach the government, covering these very issues.

«Long-term, we are on the right course. But, if in five years from now, we will still be having corrupt dealings and opaqueness here, the whole society will lose out. In some shape or form, the decision-makers will maintain their positions and welfare, but the society decidedly suffers,» predicted Mr Raasuke.