The political ferryboat traffic racket

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Photo: Tairo Lutter

A year ago, a bribery scandal of historical proportions was meant to erupt in Estonia. Those closest to ferryboat businessman Vjatšeslav Leedo (63), one dealing with politicians for decades, were planning to go public with a local political heavyweight's demand that a record breaking €30m be paid for extending the operating contract. 

The sum sent shivers down the spine of an otherwise seasoned Mr Leedo and those with him. As agreeing would have been unrealistic – «A sum like that cannot be moved unnoticed, we would surely have been jailed,» claims a person involved –, an evil ploy was hatched to pop the thing publicly. At the new ferry line contest in summer of 2014, that would have made for a might weapon.

The plan was discarded. The political situation changed and, in hopes of a new contact, the businessmen went standby. The politicians kept coming to Mr Leedo and shipowner Olav Miil (48) to talk about all kinds of variants for cooperation, but unlike before they were vague in wording and rather remained on hinting level.

Having had three new ferryboats built six years ago, the businessmen felt confident. No realistic competitors were in sight: Mr Leedo and Mr Miil had the knowhow and the vessels. In view of the contract to come, the men envisioned decent profits.

Finally, the ferry lines competition dawned. In economy ministry, Mr Leedo is not well loved. As became evident at initial discussions of the conditions.

A source said that, at the discussion, unexpected ideas were tabled at the ministry – such as would have made participation by Mr Leedo and Mr Miil’s ships difficult. The talk was about minimal requirements regarding length of vessels and numbers of passengers which the ferryboats Muhumaa, Saaremaa and Hiiumaa could never have met. Bona fide ill will, these suggestions were weeded out by higher powers at the very beginning.

Double play by officials

Before the lines contract competition in summer of 2014, the atmosphere was tense at the ministry. Politicians were considering the variant that state enterprise Port of Tallinn would forward an offer. To their great shock, two weeks before the deadline port managers Ain Kaljurand and Allan Kiil announced the company would not participate as it was lacking the needed knowhow. «This was mega monkey business by port managers,» a person close to the competition tells Postimees*.

The competition drew just one offer – by Väinamere Liinid linked to Mr Leedo and Mr Miil. Smelling a good catch from public coffers, the entrepreneurs weren’t too timid in their profit calculations. Staring at the committee from the papers was a hefty earning.

Which was understandable. Having entered ship building as private investor during the economic crisis of 2009, businessman Mr Miil wanted to make the profit he was promised from the investment. «The sum is not small at all, considering that he invested at a time when the banks were not lending in Estonia at all and Mr Leedo, searching for co-investors was in a forced situation and had to agree with the conditions dictated by Mr Miil,» says the person who saw the contracts.

By some slight technicalities, the private businessmen’s offer was disqualified and the process declared as failure. What followed were the events leading up to the scandal now at hand.

Firstly, the behaviour of politicians underwent drastic change. Having formerly snuggled up to Mr Leedo, now the gloves came off. «The vultures had arrived,» says a person involved.

Secondly: Port of Tallinn, having just said they wanted not and knew not how to deal with the subject did a couple-of-months U-turn. Lo and behold, they tabled an outwardly perfect offer. In light of the fist and botched competition, this felt ugly coming from the state.

Why? Ship building needs special metal, the ordering of which takes up to half a year. Meaning: while Port of Tallinn was pretending it was not interested, behind the scenes and under somebody’s «political protection» they were busy pulling strings.

Hence the allegation that in this procurement the state pulled wool over eyes of Mr Leedo. «I am totally convinced that here the ministry played dirty and showed the port Mr Leedo’s former offer and prices,» says a partner of the state enterprise.

«It’s beyond question that what basically transpired was a robust copying of Mr Leedo’s project in favour of Port of Tallinn,» thinks another leading public sector employee.

It looks like they are right. But they may also be mistaken.

«I don’t believe this,» says a third official, one linked to the competition. «The parameters of the procurement were known and it was not too difficult, on the basis of these, to prepare a project at the port.»

Back then, it remained a mystery why Port of Tallinn management so suddenly changed their minds.

«Only in light of the later news of the bribes clarified the picture became a lot clearer – probably, the bunch over there got personally and financially interested, smelling swift gain,» says a source related to the events.

Vessels sail to distant seas

Port of Tallinn and private businessmen cooperation to use the vessels was now totally out of the question. As admitted by port manager Mr Kaljurand in a conversation, it made no sense moving ahead with Mr Leedo’s stuff as  «the minister would say no anyhow».

In politics with great ambitions, then economy minister Urve Palo (Soc Dems) had turned Mr Leedo into her personal problem. Together with Port of Tallinn, the state had staked all on one card even if it wasn’t the cheapest economically.

To the second competition featuring negotiations, the ministry sent nearly 30 invitations and checked all addressees by telephone if it had arrived. «We were worried indeed. This was very serious and the time was running out,» says an organiser.

Despite that, only the two aforementioned participants signed up. Till the last moment, Mr Leedo hoped to win. Actually, his companion Mr Miil was at a certain point hinted that the deal had been decided. From that moment, the entrepreneurs started to works towards German market.

«Our plan A was not really winning the procurement, as we had been told the thing had been politically decided, but the plan A was to quickly find work for the vessels,» says a person close to the shipping businessmen.

Testifying to the hopelessness of the situation, despite an agreement at the ministry that during the competition the minister Ms Palo would avoid meeting either party, she had coffee with the port manager Mr Kaljurand in Reval Café, in Viimsi. (Ms Palo has confirmed to Postimees the meeting did happen.)

Meanwhile, all doors were closed to Mr Leedo at the ministry because that was the «agreement». True, an «occupational accident» happened as Saaremaa Laevakompanii CEO Tõnis Rihvk squeezed into the ministerial office under pretext of a contractual clause and tried to talk business.

As a private entrepreneur, Mr Leedo still had hopes in the goodness of his ferries, and the professional work displayed over the years. The more so that for the second round of the procurement Mr Leedo and Mr Miil had tightened belts seriously and brought the prices down a lot.

«Respect – the men did try,» admits a senior public sector figure.

Ferries may delay

To that, Port of Tallinn had nothing to counter but promises. The only trump card for the port was the significantly lower price. For the ten years, they asked for €60m less for subsidies. That’s about a half of the alleged building costs of the new vessels.

The fact that maintenance of the new vessels would cost many times more than the current ones interested organisers of the procurement not. Port of Tallinn will have to cover that from own internal resources. Thus this may yet prove a Pyrrhic victory i.e. the project will end up more expensive.

However, the potential hazards are bigger than the money. «Till today, no-one really believes that the four new vessels promised by Port of Tallinn would be built in time by next fall. They may issue their press releases but till the ships are physically here I will not believe,» says a ship building expert.

Already, hints have reached Estonia from the shipyard in Poland that the ferries will be late. At least one of the two. «Real challenge,» they say.

In a bad case scenario, politicians will a lot to explain come next fall. Or else Mr Leedo and Mr Miil must sit down to negotiate again, swallowing the pride. Both sides will need to take a look in the mirror.

* Due to the sensitivity of the subject and as requested by the people talking to Postimees, none of the names are published.