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Ovsyannikov, 39, who owns Junona Ltd., a company with a network of 12 currency exchange outlets in the northeastern towns of Narva, Sillame and Kohtla-Jarve, faced charges of foreign-currency-related fraud and the destruction of accounting data. The police also established that Junona had broken the general rules of the Bank of Estonia.
According to a police spokesman, the Ida-Virumaa district court issued a four-month arrest order for Ovsyannikov.
After some minor violations were revealed at Junona this January, the company went on breaching regulations on currency deals and opened several new outlets where most of the employees worked illegally without contracts or social insurance.
After a search of the Junona premises in January, the police wanted to interview Ovsyannikov. He vanished for several days, but then appeared again to testify. The case was handed to the tax department and the economic police and eventually, after the evidence was collected, to the security police who decided to arrest the businessman.
"Businessmen and city councilors should not be immune if they do something wrong," said Yevgeni Solovyev, the chief inspector of Narva's police department.
Commenting on the situation, Ovsyannikov said his arrest was politically motivated and cited plots within the Narva city coalition of the Center Party and United People's Party, which are both in opposition in the national government. Ovsyannikov heads the Pro Patria Union faction in the City Council.
"Perhaps some people don't want to see business activity in Narva. Maybe certain people want to cut down the amount of jobs in this town," Ovsyanikov reflected in an interview to the Russian-language radio channel Radio 4.
Last year, on November 23, the entrepreneur addressed other local businesspeople in an article called "Businessmen, come out of the underground" in a local newspaper.
"As a businessman myself, I know most of us use underground financial methods. I would like to call on businesspeople to come out of the shadows. The city will appreciate that. First of all, legal employment contracts should be signed," Ovsyannikov proposed.
The City Council will suspend Ovsyannikov until his release, according to council chair Elsa Suikanen.