Corruption, Estonia, Legislation, Port, Transport

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Corruption risk at Port of Tallinn enabled by weak supervisory board

BC, Tallinn, 23.05.2016.Print version
The emergence of corruption risk at Port of Tallinn was made possible by a weak and over-politicized supervisory board, which did not perform the duties entrusted to it or check the activities of the management board, the committee investigating potential corruption at the state-owned port company says in its preliminary findings, informs LETA/BNS.

"In great probability the investigating committee will present its report on June 14," the chairman of the committee, MP Artur Talvik, told BNS. "The report is effectively ready and the committee will discuss it on May 31, and more if necessary," he said.


The committee finds that the way Port of Tallinn was managed and its activities were influenced significantly by agreements and disagreements between the ruling parties, with public interest and the interests of the company serving a secondary role besides political objectives. The supervisory board of the company did not act as a united implementing body of the interests of the owner and of the business, it stands in a blueprint of the committee's report obtained by BNS.


Differences on political grounds surfaced on repeated occasions between the members of the supervisory board chosen on the basis of ther party allegiance and the minister administering the stocks, which prevented the observance in the company of the interests of the state as the owner and diverted attention from the activities of the management board. As a result of political influences supervision by the administrator of the shareholding over the developments inside the company remained poor. This offered the management board of Port of Tallinn the possibility for uncontrolled action.


The committee finds there to have been a shortage of both competence and commitment when it comes to the supervisory board of Port of Tallinn. In most cases a minister would agree to the nomination of a candidate for member of the supervisory board even if the candidate did not fully meet the minister's expectations. The candidacy was agreed to for politial reasons, the appointment to office by the minister being mostly a formal act. Members of the supervisory board of Port of Tallinn did not meet all the requirements set out in the law and there were cases of conflict of interest.


Differences on the basis of party allegiance emerged between members of the supervisory board on repeated occasions, where members of the supervisory board from one party would not meet the expectations of the minister coming from a different party. With the supervisory board made up on the basis of party allegiance the danger became reality that instead of being a united body implementing the expectations of the owner it becomes an arena for political battles.


For political reasons, the possibilities of the minister representing the sole shareholder of the state-owned company to appoint and recall members of the supervisory board were extremely limited. When a member of the supervisory board ignored the wishes of the owner, but there was no political agreement for his or her recall, the minister had to accept the situation. Hence relations and agreements between political parties emerged as more important than the interests of the owner and the business, which one was prepared to let suffer.


Communication between the members of the supervisory board and the minister representing the owner took place via political channels, the movement of information was mostly informal and was not recorded. In most cases information about developments inside the company did not reach non-political officials at the ministry, and there were no officials in the composition of the supervisory board.


The former board members of Port of Tallinn who have come under a suspicion of corruption stayed in office for more than ten years, and if not for the suspicion of corruption leveled against them they would have had the authority to stay on in their jobs for several more years. On two occasions the wish was expressed to replace the board members, but to no effect. Also the minister representing the sole shareholder wished the board members to be replaced. This was not because of a suspicion of alleged corruption, but due to dissatisfaction with the managerial skills and competence of the board members. Later on a replacement of the members of the management board was considered not possible because of the ferry tender, the time critical nature of which did not allow to pass on the task to new board members.


It was claimed to the investigating committee, among other things, that the management board members' staying in office was a result of support for them by the Reform Party, of which one of the board members, Allan Kiil, was a member. The committee pointed out in this connection that a two-member management board's staying in office in the same lineup for more than ten years is not justified, as it inevitably entails stagnation.


Political bickering in the supervisory board created favorable conditions for the emergence of situations fraught with the risk of corruption. For instance, at the time of the purchase of the icebreaker Botnica in 2012 there were big differences between the minister as the representative of the owner and three members of the supervisory board, including the chairman of the supervisory board. The differences ran along political lines, with members of the supervisory board representing the Reform Party being not ready to support the wishes of the Pro Patria and Res Publica Union (IRL) minister in a situation where the government had supported the purchase of the icebreaker.


When Port of Tallinn was entrusted with the task of providing regular passenger service between the mainland and Estonia's large western islands, the company yet again entered a new sphere of activity. The task was assigned, just like had happened with the purchase of the icebreaker, by the owner. To fulfill the duty, Port of Tallinn had to obtain ferries to operate the routes with and to sign an agreement with the state.


The supervisory board of Port of Tallinn adopted a lukewarm attitude toward the expectation of the owner concerning the organization of ferry traffic. There were differences between representatives of the ministry and members of the supervisory board, which prevented rapid progress in advancing the project. Besides the ruling coalition was replaced, which caused changes to the lineup of the supervisory board and saw the minister administering the shares replaced.


Pressed for time, the supervisory board was in a situation where it had to trust the management board because there was no time to mull different options, change direction or check the activities of the management board. This is also the reason why the supervisory board supported the staying of the board members in their jobs by consensus at the time. A situation like that, where the management board was free in their actions, gave the management board the possibility for non-transparent and uncontrolled action, which created favorable conditions for corruption.


The Riigikogu investigative committee recommends, for reducing corruption risk at state-owned companies, to reform procedures having to do with members of supervisory boards in such companies in the future. The process of appointment of members of the supervisory board should be changed to increase the transparency, professionalism and competence of supervisory boards and at the same time reduce their politicization.


The Riigikogu Committee of Investigation to Identify Possible Corruption Risks at Port of Tallinn, set up in October 2015, was initially tasked with submitting the final report on its work to the Riigikogu and the public by May 1, 2016 at the latest. In mid-April the parliament extended the deadline of submitting the report until June 16, 2016.


The chairman of the management board of Port of Tallinn, Ain Kaljurand, and member of the board Allan Kiil were detained by the Internal Security Service (ISS) as suspects in bribe-taking on Aug. 26 last year. At the beginning of January a court endorsed the release of Kaljurand and Kiil from pretrial detention and placing them under electronic surveillance.

The former board members are suspected of accepting bribes on a large scale over a period of several years at least since 2009. The Public Prosecutor's Office has said the placement of orders for the construction of two new ferries at a shipyard Gdansk, Poland is a central point of the investigation.


Officers of the Internal Security Service (ISS) last week detained Martin Paide, head of maintenance at the state-owned port company Port of Tallinn, Postimees said.


In the week before last, Martin Paide, head of maintenance at Port of Tallinn, was detained as part of the criminal proceeding under way with regard to Port of Tallinn, spokespeople for the Public Prosecutor's Office said. Searches were conducted at Paide's dwelling and workplace. Paide is suspected of bribe-taking. The prosecutor's office did not seek custody for the suspect.






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