Construction, Estonia, EU – Baltic States, Legislation, Shadow economy

The police announced on Friday that the investigation has ended and that it centered around two companies that employed mainly Estonians.

While there about 20 suspects in total, the four individuals are believed to have played a central role in the scheme.

The two main suspects were under a prohibition to engage in business for earlier economic crimes when the alleged offenses were committed. The main suspects were held in custody during the pretrial investigation but have since been released.

The charges mainly are about serious tax fraud, serious pension insurance contributions related fraud, and serious accounting violations. In addition, it is suspected that waste was illegally exported to Estonia.

"This is believed to be the biggest case of shadow business of the past decade," Janne Jarvinen, the officer in charge of the investigation, said.

The companies were active in the Helsinki area and according to the police the offenses were committed in 2013-2015. The businesses posted a turnover of about 10 million euros in total at the time.

Both businesses closed under bankruptcy proceedings around 2016-2017, according to the officer.

The police suspect that the companies left all taxes and social security contributions unpaid on their workers, as a result of which the state failed to receive 4.6 million euros in tax revenue and 1.3 mln euros in pension contributions were never made.

The companies performed simpler works in the construction of kindergartens, schools and apartment buildings as subcontractors. 

Police have identified 350 people who worked for the companies. It is suspected that over 300 workers more whom the police have been unable to identify performed maintenance works for them.

The workers are believed to have been paid over six million euros in cash-in-hand wages.

Unlike in similar cases investigated earlier, not all the wages were paid in cash. To some employees wages were paid with taxes and social security contributions deducted, but the deducted amounts never reached their intended destination. 

Jarvinen said it was possible that a part of the criminal proceeds was hidden abroad. 

"It is usual in cases like this that the activity takes place in Finland but those responsible have a life of their own somewhere else, such as in Spain, Turkey or Asia," Jarvinen added.