On Nov. 3, 1997, the fund concluded two transactions worth 143.7 million and 181 million kroons with Uhispank. Although both now agree that the 181 million kroon transaction was terminated the same day, both parties have different opinions on the other deal.
Huvitusfond says that on Nov. 3 they concluded a forward deal with Uhispank. According to this deal, Huvitusfond bought a number of different companies' shares at current price to sell them for Uhispank on May 5, 1998. In return, the bank should have paid Huvitusfond 143.7 million kroons.
The bank now claims that both transactions were terminated the same evening because the Uhispank's board was against taking such a big risk.
Huvitusfond representatives, on the other hand, say this deal was not scrapped because it is recorded in their 1997 annual report. They agree the 181 million kroon deal may have been terminated as the company has no documented information about it.
The fund, which was founded by the state to redeem compensation vouchers but was also allowed to carry out business deals, foresees 300 million kroon losses this year.
Andres Laisk, Huvitusfond's spokesperson, said if the fund proves that the forward transaction is still valid, the 300 million kroon loss will be cut by 80 million kroons, the current value of shares the fund bought for Uhispank.
Uhispank's Vice President Janek Maggi said the fund should not blame their losses on the bank. The 80 million kroon loss resulted because the shares lost their value, not because the bank did not pay for them, he said.
"The deal would have saved them from this loss. They acted as if the deal was valid in order to show the auditors that they did not [lose money on these shares]," said Maggi.
But Laisk denies the fund used the terminated deal to brighten up the balance sheet picture.
"Huvitusfond relies on documents, but Uhispank on emotions," said Laisk.
At the beginning of 1998, Huvitusfond sent two confirmations of the deal to Uhispank, the first one to confirm the balance sheet liabilities and the second one to confirm the off-balance sheet liabilities, which also included the 143.7 million kroon transaction.
Uhispank, on the other hand, claims that the transaction was not recorded on the Huvitusfond's confirmations, and if it were valid, it should have been concluded on May 5.
According to Andres Mannart, former Huvitusfond board member, the fund had several meetings with Uhispank's representatives in order to find solutions to execute the deal.
Since relationships between the two organizations were still good at that time, Huvitusfond was ready to ease Uhispank's liabilities, Mannart said.
Until Huvitusfond's auditors and lawyers finish the investigation, the fund can not give any concrete opinion on the transaction, said Laisk.
But the fund still assures its bondholders that its bonds are still guaranteed and have a 7 percent fixed yearly interest regardless of the uncertainty surrounding the deal. The fund has issued bonds for 440 million kroons, the last date of purchase for which is 2002.
The board of Huvitusfond has been dismissed, and the new members are trying to clear up the present situation.
"As soon as the new board finds out what is going on, the truth will be told to the public," said Maggi.
Huvitusfond and Uhispank both find that public argument about their controversies is neither conducive for business nor in the best interest of either party's shareholders, clients and the whole community. The parties promised to inform the bourse and public immediately after the differences are resolved.