Audit turns decision-makers into black sheep

Please note that the article is more than five years old and belongs to our archive. We do not update the content of the archives, so it may be necessary to consult newer sources.
Photo: Tairo Lutter

The main culprits of the Ermamaa support saga are the former and current heads of Enterprise Estonia (EAS): executives were unjustifiably generous towards President Toomas Hendrik Ilves' family in 2012. It would have been possible to rectify the mistake this year; instead, it was decided to just gloss over critically reviewing the decision.

That could be a summary of audits published yesterday by the finance ministry and auditors KPMG.

The ministry recommends EAS demand the return of 90 percent of support made available to OÜ Ermamaa, instead of the recent 10 percent, as that is the volume in which support was used illegally.

The ministry's calculation is based on the fact that the president's Ärma farm operated as a tourism farm for just six months out of the five-year support period. Should EAS file such a claim, Ilves would have to repay 171,000 euros of the 190,000 he received in tourism support.

However, who made the mistake in the first place, and when?

The ministry finds in its audit that decision-makers haven't provided sufficient explanation for the decision to demand the return of just 10 percent of support. EAS claimed back then that it was impossible to measure the extent to which Ermamaa failed to discharge obligations, while the ministry feels otherwise.

EAS was also not in its right to claim that the Ärma farm was being used purposefully during Ilves' presidency as visitors constituted a national institution in that they were the president's guests and not tourists as prescribed by the company's business plan.

The audit, ordered by EAS, showed that the agency's board failed to properly document how the decision concerning OÜ Ermamaa was made. That is also why it remains unknown on what grounds the incredibly favorable decision was made.

“It is unclear how conclusions were drawn. The biggest criticism is that EAS' decision was extraordinarily favorable for the applicant,” said EAS supervisory board chairman Erki Mölder.

Mölder added that while the current board has acted largely legitimately, it could have taken more time to review decisions made four years ago. EAS had until January to audit and approve its earlier decision; however, it was done in just two days in August.

Minister of Enterprise Liisa Oviir has no doubt the incident has already negatively impacted Estonia's reputation. “A decision was made barring all manner of argumentation in 2012,” she said. Oviir said she is now working towards more legible decision-making processes in the agency to avoid future situations where it proves impossible to explain past decisions. Whether anyone's job is in danger is up to the supervisory board, the minister said.

Supervisory board chairman Mölder said that none of the executives who made the decision four years ago work for the agency today. “It is very difficult to make any of these people accountable today,” he said.

Head of EAS Hanno Tomberg said that he has spoken to the members of the previous management board, and that they said they had discretionary power to decide whether to demand return of 5, 10, or 25 percent of support from Ermamaa. The finance ministry's recent audit disagrees.

“We discussed the matter of the resignation of the current board, and I can tell you the board weighed all options in summer. We have to admit that the recourse claim was made hurriedly. It should have been more calculated,” Tomberg said.

He went on to say that EAS is now awaiting a decision from the European Commission, and that should the latter decide to ask for return of support, EAS will initially cover the cost from its challenges fund and then see whether it is possible to secure the sums from OÜ Ermamaa. An analysis of potential solutions is scheduled to be completed in three months.

“We will launch proceedings to ascertain whether EAS can file an additional recourse against OÜ Ermamaa,” Tomberg said.

The latter process might prove difficult, however, as current owner of Ermamaa, President Toomas Hendrik Ilves, could have just cause to only return 10 percent of the support sum by now. Any corresponding disputes will likely end up in court.

Ilves is also within his rights either to decide to run a tourism farm at Ärma or return support voluntarily.

The audits reveal, however, that a measure of prevarication has taken place also on the applicant's side. For example, it turned out that OÜ Ermamaa, owned at the time by the president's wife Evelin Ilves, learned of the possibly favorable recourse decision already in 2012.

Even if both Evelin Ilves and her accountant failed to notify the new owner of OÜ Ermamaa, Toomas Hendrik Ilves, of the fact during the couple's divorce in the summer of 2015, EAS sent the information to the Office of the President again on August 23 of this year.

And yet Toomas Hendrik Ilves maintained that he did not learn how much EAS wanted returned for failure to turn Ärma into a bed and breakfast until October.