TALLINN - Hansapank, Estonia's leading financial institution, announced Aug. 8 that one of its top employees committed fraud, costing the bank approximately 66 million kroons ($4 million). Hansapank filed an application to police on Aug. 14 for the opening of a criminal case against Mait Koldits, head of its department of trade finance, who allegedly withheld knowledge about a non-guaranteed loan issued by Hansapank, said bank spokeswoman Kristi Liiva.
Hansapank also contends Koldits submitted false information to the bank's credit committee, according to a press release.
Koldits' contract was immediately terminated, and the bank will make provisions for the amount of kroons lost sometime this month, Liiva said.
Koldits has denied all charges.
The amount is not enough to damage the bank's profits, she said.
"But this is not just a loss of money," said Aivar Rehe, Hansapank's chief risk and credit officer. "We have seen this before during the Russian crisis, when the whole banking world lost money. We also faced direct losses," he said. "But this was involved on a personal level."
For the past two years, Koldits has cheated them, Rehe said.
Koldits, who had been with Hansapank since 1995, maintained his innocence in an interview with the daily Postimees, claiming he gained nothing in the way of profits from the loan deal.
"Neither Hansapank nor the police will be able to find any motive of personal gain in this case," he told the newspaper. "This is definitely not a case in which acquaintances of mine are involved, but a long-time and major client of mine and Hansa-pank's."
Postimees also reported that the loan in question was made for purchasing wood to an unnamed subsidiary of the timber wholesaler AS Varu, where Koldits was a board member, in the summer of 1998.
However, neither Hansapank nor Varu would comment on these details to The Baltic Times.
The news did not appear to put a significant damper on Hansapank's financial situation. Its share price came under selling pressure the day following the announcement but rebounded in the week's later trading.
Paavo Pold, analyst with Suprema Investments, assured that the 66 million-kroon loss fell within their forecast range for the bank, so no long-term devaluation of its stock were expected. He further praised Hansapank for its willingness to be up front about the investigation, noting that the announcement was posted on their Web site shortly after Koldits was fired.
"Hansapank has been quite prudent in whatever they do.. . .I think they have learned their lesson," he said.
Rehe explained that Hansapank intends to look more closely at the organization of its work procedures and at the internal rules in its department of finance in order to prevent future similar occurrences.
"A bit more information will be required for proposals of our trade finance clients (in the future)," he said.
Hansapank officials would not disclose any further details about the case, saying the bank must wait until the investigation is complete.
Kaja Kell, spokeswoman for the Eesti Pank (Bank of Estonia) denied that the fraud would cause damage to the credibility of Estonia's banks, which are still struggling for higher international ratings.
"This is an isolated case. One can never create a loan portfolio with no delinquent loans at all," she said. "It is evident that Hansapank has to make amendments. . .At least the information was voluntarily and rapidly made public by the bank involved. It is a step in the right direction."
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