Minister charged with shady privatization

  • 2001-03-29
  • Aleksei Gunter
TALLINN - Estonian Minister of Economic Affairs Mihkel Parnoja was lambasted in an Estonian daily on March 21 over the Estonian railway privatization process.

The Postimees daily claimed the minister, who also heads the Estonian Privatization Agency, lied to the agency team and used his position to give the right to steer the privatization tender to Gibb Ltd., although other well-known consultancy companies offered cheaper assistance.

Gibb Ltd. offered its services for 40 million kroons ($2.28 million) which was at least three times more expensive than Pricewaterhouse-Coopers' bid of 12 million kroons.

Gibb also received 4 percent of the best bid sum, which amounted to several million kroons. Although the process of the Estonian railway's privatization has been frozen because the bidders are involved in several legal suits, Gibb has already received the fee for its services.

According to the newspaper, Parnoja first said the offers of PricewaterhouseCoopers and other companies exceeded the budget of the privatization agency but later applied pressure to get the Gibb project accepted.

Postimees quoted Ulo Sarv, the head of the public procurement office, a subordinate to Parnoja. Sarv told the daily that now he realized the minister had lied to him.

According to Karin Varkel, a spokeswoman for the Economic Affairs Ministry, the story published in Postimees on March 21 was erroneous and biased.

Parnoja himself rejected all accusations from the newspaper and officially requested the security police to clear the corruption accusations against privatization agency officials involved in the Estonian railway case.

"I hereby demand the security police board to investigate the circumstances of the corruption charges presented against the Estonian Privatization Agency's members," wrote Parnoja.

As a proof of his innocence, Parnoja explained the process of privatization in detail.

"The privatization process consisted of two stages, the first one featured general bids from the contestants, and the second one included detailed business plans and concrete financial offers," said Parnoja.

"The first stage of the privatization was supervised and sponsored by the EBRD and cost nothing to Estonia," he said.

It would be impossible to accept the 12 million kroon offer from PricewaterhouseCoopers because it was too expensive at that stage of the privatization, added Parnoja.

"The second one demanded more work. Besides, the EBRD had used the service of Gibb during the first stage," said Parnoja.

He stressed that Gibb had gathered a significant amount of background information while working with EBRD, and that another company would spend more time and probably demand more money for advising the second stage.

"Because Postimees intervie-wedÊSarv via the telephone late in the evening, he (Sarv)Êhad confused two absolutely different things, namely two particular stages of the privatization," said Parnoja.

However, the daily also wrote that the audio recordings of the privatization agency meetings were partly destroyed.

Parnoja waved the tapes off as irrelevant.

"It's the written decisions of the agency that matter," he said.