Suspected fraud ring investigated

  • 2010-11-10
  • From wire reports

TALLINN - Owners of two Estonian construction firms, Wolmreks Ehituse and Kristiine Ehituse, are suspected of participation in the organization of operating an illegal scheme causing the state and subcontractors to lose millions of kroons, reports news agency LETA, referring to Aripaev. The scheme’s design was simple - after winning a public tender and choosing subcontractors, the owners of Wolmreks and Kristiine Ehituse told subcontractors that the agreements on subcontracting work will be made not with Wolmreks and Krstiine, but by a third company, Merkton Ehitus. The latter is now being liquidated and owes the state and subcontractors at least 18 million kroons (1.1 million euros).

Some of the subcontractors have filed an application to the police claiming that Merkton was a fraudulent company from the start. Subcontractors claim that the owners of Wolmreks and Kristiine Ehituse justified the use of Merkton with the need to increase its revenues so that the company could participate in public tenders in the future.
Wolmreks, Kristiine Ehitus and Merkton are all registered at one address, in the head office of Wolmreks in Spordi street in Tallinn, and share the same e-mail address.

The suspected fraud may involve Arco Ehitus, subsidiary of listed real estate developer Arco Vara, that was a co-bidder for several public tenders.
Wolmreks Ehitus and Kristiine Ehitus won four public tenders for general contracting for the Parnu children’s home, Parnumaa Vocational Education Center and two daycare centers in Tudulinna and Rouge.

The Parnu Children’s Home tender that was won by Wolmreks Ehitus and Arco Ehitus in 2009 was worth 16.8 million kroons. The Rouge daycare center renovation project was won by Kristiine Ehitus and cost 8.5 million kroons; the construction of Parnu vocational school project was won by Kristiine Ehitus in the amount of 36 million kroons, and renovation of Tudulinna daycare center was won by Kristiine Ehitus and Arco Ehitus in 2009 for the amount of 6 million kroons. 

One victim of the scam is Koda Ehitus, which claims 716,000 kroons from Merkton for work performed on the heating, water, sewerage and ventilation works in the Rouge daycare center. In addition, it claims 260,000 kroons from Wolmreks for work in Parnu and another 350,000 kroons for outstanding services.
The CEO of Koda Ehitus says that it was clear that Merkton was a front company from the start. “They now recommend that we contact a person who has been put in charge of Merkton who has started the liquidation procedure,” says the CEO.

Anne Hunt, the owner of A.H.Trading that is claiming 630,000 kroons for work performed on the construction site of Parnu children’s home and Parnu vocational school, says that a similar system is used by many larger companies as well.
“Many companies who win a public tender request that you sign a subcontracting contract with a third company. This is because when they see they cannot meet their costs, they will be able to let the company go bankrupt,” she said.
Olavi Israel, a board member of Wolmreks Ehitus who has also been governor of Murru Prison, denied any wrongdoing. “We have fulfilled all subcontracting contracts as required and have no unpaid bills for subcontracting from this year’s project,” he noted.

A key person behind Wolmreks, Kristiine Ehituse and Merkton is Adu Haki, a member of the Center Party. Haki, who was ranked Estonia’s 396th richest businessman in 2008 with wealth of 96.1 million kroons, owns 80 percent of Wolmreks Ehitus, with the rest owned by Olavi Israel, Hanno Muga, Tarmo Rahn and Illar Ehala. Haki also owns 100 percent of Kristiine Ehius, and in 2009 founded Merkton Ehitus, together with Merle Pung.

Haki was not available for comment. Also, Arco Ehitus refused to answer Aripaev’s questions saying that its CEO, Priit Hainoja, was on a vacation.