Estonia's tax police have charged well-known real estate developer Ernesto Preatoni with tax fraud in connection with a series of late 1990s real estate deals allegedly conducted to hide money from the government.
Tax authorities say that Preatoni failed to pay 22.7 million kroons ($1.33 million) in income tax on a piece of property sold to his real estate firm, Pro Kapital, by Baltic Investments Ltd., an offshore company that they allege is connected to Preatoni.
He was charged April 11, but the charges were not made public until this week.
Pro Kapital bought the property, a 17,200-square-meter plot known as the Rotermanni lot, from Baltic Investments in late 1998 for 57,700 euros ($53,000). A year later Pro Kapital sold the land for a reported 5.2 million euros.
Preatoni's lawyer, Aivar Pihlak, also faces fraud charges.
Both deny the charges.
"Thanks for not accusing me of building the Kristiine shopping center and renovating houses in the Old Town," said Preatoni.
Preatoni also denies he is connected to Baltic Investments Ltd.
"I did not found Baltic Investments Ltd, head it, own it or use it in any other way," he said.
Estonia's Tax Board has been investigating Pro Kapital Group, which also operates in Latvia, since last July, when it began to look into real estate deals made by Baltic Investments.
Law enforcement officials refused to comment on the charges or the investigation.
It is not Preatoni's first brush with regulators in Estonia.
The Tallinn Stock Exchange delisted Pro Kapital last year following allegations that the company withheld vital financial information from the exchange.
Pro Kapital appealed the decision and is awaiting a court ruling.
Preatoni began investing in Estonia in 1995. Since then Pro Kapital has invested in several projects in Tallinn, including the recently opened Domina City Hotel in Tallinn's Old Town.
In Latvia, Pro Kapital has proposed to build a 50,000-square-meter Domina Shopping Complex on the site of the defunct VEF electronics factory.
He said the proposed projects, including the Domina Shopping Complex, would continue despite the charges.
Preatoni was in Latvia this week with the special permission of investigators. He signed a document last week prohibiting him from leaving Estonia.
He was one of a handful of foreigners granted Estonian citizenship in 1999 for "outstanding services" to the country.
Preatoni renounced his Estonian citizenship last September.
If convicted of fraud he faces up to seven years in prison.