Eesti Loto gets new director amid scandal

  • 2003-06-21
  • Justin Petrone

The board of supervisors at Eesti Loto, Estonia's financially embattled state-owned lottery company, appointed a new director June 6 in Tallinn, ending the term of the current director who turned the company around but who, some argued, was paid too much.

Aivar Lepp, a former electrical engineer and the current director of production for Elcoteq, a major electronics producer, was selected from among several candidates that included current director Monika Salu, to take the reins of the company on July 5.
The 33-year-old Lepp will inherit control at Eesti Loto amid a public controversy surrounding the salary of Salu, 34, who netted 4.4 million Estonian kroons (281,000 euros) in bonuses in 2001 and 2002.
The bonuses were part of her contract, which stipulated that she receive 25 percent of whatever earnings the company made over its annual profit forecast.
When Salu turned the 4.6 million kroon loss of her predecessor in 1999 into a 13 million kroon profit in 2000, the year she took over as director, it not only spelled financial success for Eesti Loto but also for her. She trimmed Eesti Loto from 70 employees to 52 and reorganized its management.
Eesti Loto, which had nearly declared bankruptcy two years earlier, turned a 15 million kroons in profit last year.
At the end of 2002 Salu's salary was renegotiated to allow for a more modest 120,000 kroon bonus if forecast earnings were met.
"Of course I was very well paid," said Salu. "Nobody came to say that I was making too much."
That changed when the new government took office in April. Both Finance Minister Tonis Palts and Prime Minister Juhan Parts publicly said that Salu's earnings represented a "terrible mistake" on the part of the previous government.
"Bonuses should be within reasonable limits," said Palts, whose ministry oversees Eesti Loto.
"In the case of Monika Salu it was clearly not so," said Palts.
Salu found herself part of a public scandal over her earnings and also defending her post as director.
Salu was originally favored to be reappointed as director in March 2003, but the new government that took office changed the protocol for hiring employees for such posts, forcing those who thought that their contracts would be renewed to apply for their old jobs again and to be selected from a fresh pool of applicants.
Tonis Palts defended the new selection process.
"As I pointed out when I took office, it is a part of a broader governmental policy to evaluate the management of state-owned enterprises when the contracts with the directors expire. This should not come to anybody as a surprise. After all, this is why the boards of directors have job contracts until a fixed date," said Palts.
However, it did surprise Salu, who expected her contract to be extended three years.
"As of March 2003 the board of supervisors were talking about prolonging my contract until 2006," said Salu.
In April 2003 Palts sent a letter to the company's board of supervisors informing them that there had to be a competition for the slot of director of Eesti Loto.
The board would have the final say on the new director.
Two board members were also replaced when the new government took office in April.
While Tonis Palts has publicly criticized Salu's bonuses, he insists that the selection of Lepp over Salu had nothing to do with her earnings or the scandal surrounding them.
"It is customary that new governments, having to take responsibility for their decisions, wish to replace some board members of state-owned enterprises to ensure the successful implementation of their political objectives," said Palts.
Salu says that the publicity over her earnings have widened her future job opportunities.
"I have gotten such good publicity out of this farce. People in economics and business owners can see what I have done with Eesti Loto. I have a lot of opportunities." she said. As for the future of Eesti Loto, Salu is comfortable with the government's new appointment.
"The owner of the company can do what he thinks is better for his company," she said.