Joint front formed against Swedbank by Romanian loss victims

Advokaat Maria Mägi.

PHOTO: Erik Prozes

Estonians who invested money into Romanian real estate fund only to lose it have ganged up to fight Swedbank who sold the fund’s bonds to its private banking clients. Investors will be represented by top lawyer Maria Mägi.

«I have agreed to represent the investors,» confirmed Maria Mägi on Tuesday night, just hours after taking the decision. «The individuals who have committed infringements are many,» said Ms Mägi to explain why she was willing to go against Swedbank to defend the rights of 200 investors.

Last week, Postimees wrote about how Swedbank «helped» Estonians lose €8.5m invested in a Romanian real estate fund in 2007. By today, the company IPC Nord Hill Land Portfolio (NHLP) established by Peep Aaviksoo is as good as bankrupt.

Now, the worried investors have united and had recourse to top Maria Mägi.

«This is infringement of investors’ rights, and the possibility still exists to receive compensation for damages,» she said in her Tatari Street office. Ms Mägi added that the comment by Financial Supervision Authority to the Postimees’ story last week, to suggest they were not responsible for what happened, served to clearly show that the bonds issue ought to have been public.

«Such an issue ought not to have been carried out,» said Ms Mägi, resolutely. She said the fact that the issuer declared the issue as closed did not mean a thing as this does not relieve supervision authority from obligation to execute supervision so as to ensure honesty on the investments market.

She added that in 2006–2008 there was an abundance of bonds issues as back then many were getting ideas supposed to bring big profits – talking investors into giving their money – which never came true.

«After the money was lost, they are trying to hide behind a suddenly realised economic risk,» explained Ms Mägi, underlining that risk assessment is the main task of those who offer investment services, and the guarantee of the trust.

Who exactly were the investors that came to her, Ms Mägi cannot disclose as the information is confidential.

Before land was bought up in Romania in 2007, NHLP council featured Kristel Meos as member of Swedbank Estonia management – a person who for Estonian public rather associates with the scandal of Estonian residence permits sold to Russia’s rich.

Postimees succeeded in finding one of the persons who established the company back then together with Peep Aaviksoo – a Romanian called Ciprian Lopata. He also blames Swedbank for the ills of the company, saying the bank managed the company badly and assumed control from Mr Lopata in 2011 before the bonds were due.

«I personally did not invest money into that fund,» said Mr Lopata, currently residing in Romania. «My task was to find the plots of land in Romania and to hold negotiations on local market regarding the deals.»

Mr Lopata was unable, however, to say what the land might be worth today. «I have not seen the latest valuation reports, but generally speaking the Romanian real estate market is rising,» he said. Mr Lopata claims that Swedbank’s representatives in the company went to Romania several times to have a look at the lands. Asked if it was true that the lands are unfit for use and lie in immediate vicinity of a Gypsy village and garbage dump, as the investors are saying, he opted not to answer.  

Another interesting detail: in 2010, Swedbank’s private banking chief Vaiko Tammeväli mentions in an interview to Äripäev that they were unwilling to extend maturity of the Romanian bonds as this would damage the interests of investors. Even so, this was done with the consent of the very Swedbank.

Among those seeking justice is Glen Madis – a young man recently graduated from Edinburgh University financial department faculty. Today, he is battling to get back the €50,000 investment by his mother Kersti Rosenberg-Madis.

Along with the others, he has had recourse to the law office of Maria Mägi.

Starting this February, the creditors have selected Glen Madis, in the name of his mother, to represent them in the council of the company which also features Tõnis Nõmmik, the representative of Swedbank.

«For me, the alarm bells went on the moment that the loan, already assumed at abnormal interest, was about to be prolonged, thereby to capitalise the interest,» said Mr Madis, to explain why he tackled the management of the company and made things thoroughly plain for himself. He adds, that essentially the assuming of the loan meant that the €230,000 originally borrowed has by now grown into over €400,000. Should the loan be extended again, the obligation would balloon over €800,000.  

Namely, to cover running costs of the company, it borrowed €230,000 at interest of 30 percent a year from a company linked to an investor and council member Madis Habakuk. For guarantee, Mr Habakuk’s company got bulk of the more valuable plots of the fund in Romania.

Turns out, the company Nord Hill Solutions who loaned the money has only recently learned that it was tricked into lending it to a company already under liquidation.

«If the years-long liquidation be true, then they have lied both to investors and me also,» said Nord Hill Solutions’ owner Urmas Arumäe. While that company was earlier associated with Madis Habakuk, Mr Arumäe said he was not obligated to disclose who and if are financing the operations of his company. He did mention to Postimees, however, that things are being done behind his back.

Mr Arumäe added that recently he happened upon an e-mail to investors by Swedbank representative Tõnis Nõmmik.

«To my surprise the letter said that I was still willing to extend the loan, » said Mr Arumäe.  «That was the initial plan, but NHLP’s board and council screwed up the option. Today I am far from agreeing to the extension of the loan agreement.»

The bank representative had not addressed the letter to Mr Arumäe. The latter proceeded to add another pungent detail, accusing the bank representative in all-out lying and planning to hijack his company. (Of the letter, Postimees possesses a copy.)

In it, Mr Nõmmik writes the investors that he had a plan to shift the company Nord Hill Solutions – which loaned the money – into the possession of law Office Varul.

«This is the first time I hear of the plan. What the hell is going on?» asked Mr Arumäe. He was hard pressed to believe that Swedbank’s representative was hatching a plan, behind his back, to assume ownership of a company belonging to him and which, at the very Swedbank’s consent, lent a helping hand to a company in trouble.

«The bank is a major factor in the failure of that company and they could have avoided that,» noted Mr Arumäe and added that he had no urge to lend the money at high interest. «They themselves came to ask for it when the company was down on its knees and the bills all over the world, in Romania and Holland, unpaid.»

Mr Arumäe observed that Swedbank could have lent the money itself, and at much better conditions. For some reason they opted not to do that, and now Mr Arumäe as the lender has been cornered himself, bewildered by the scheme wrought behind his back.

By now, the creator of the company Peep Aaviksoo is bankrupt as a private person and earns his daily bread as teacher at Estonian Business School. Hearing about the Romanian real estate fund, the man got upset as said it was unjust to call him the chief of the company.

«I have long ago backed off from the company and am a simple creditor,» said he, accusing Glen Madis for making the business public. «Glen Madis will yet answer for what he has done. He disclosed a business secret.» In the eyes of Mr Aaviksoo, the company is sustainable even now.  

«Unlike other funds, the land does exist,» he observed. Asked how much the land is worth, Mr Aaviksoo chose silence. He did hint, however, at valuation reports compiled in Romania a few years ago where some plots were evaluated at slightly over €1m as guarantees to the aforementioned loan.