Curd snack advertisement deemed political


The Baltic Times, TALLINN
By Kairi Kurm
Nov 30, 2005

More than a month after municipal elections, the National Electoral Committee has adopted a resolution that the green curd snack advertisement that had been plastered across the country did resemble the logo of the ruling Center Party and should therefore be regarded as an outdoor political advertisement.
However, the committee stopped short of abrogating the election results on the basis that outdoor political advertising had been banned during the duration of the elections. Committee members said it was impossible to know if the campaign significantly affected the voting results.

“The national electoral committee discussed this for a long time and found that it was not possible to measure its influence on election results. It is difficult to measure how [the curd snack ads] might have influenced the results and whether it was significant,” said Mihkel Pilving, head of elections department at the Chancellery of Riigikogu (Estonia’s parliament).

The dairy posters were everywhere in Estonia. Kalle Tull, a representative of the Narva city election party Linnakodanik, submitted a complaint and appealed to the Supreme Court against the committee’s resolution.

Tull still insisted that Narva’s election results should be cancelled.

“There was a big election fraud in Narva that influenced the election results,” he told The Baltic Times.

“It was not only the curd snack advertisement. There was an outdoor advertisement on Tallinn’s highway, another advertisement in the polling station, four polling stations did not have polling booths and two were without curtains,” he explained. “This enabled foremen to inspect the elections, watching the people they had brought to the polling stations, most of whom were antisocial and usually do not participate at the elections. [These people] were driven to the stations by taxi.”

“What makes them so active this year?” he asked. “According to some information, they also got paid, but since it was a bilateral agreement, they would not admit it and we can not prove it.”

All the violations in Narva were related to the Center Party, Tull claimed. Some Center Party members in Narva are related to the criminal underworld, he added, and the party head even once threatened to take his own life.

Linnakodanik is a party established by entrepreneurs. Although several parties were invited for cooperation, only the Russian party merged. Tull said that he was worried about Parliament’s forthcoming elections, since Estonian laws were not enforced in Narva. As a result, people related to criminal syndicates might receive seats in Parliament.

Mihhail Stalnuhhin, a Center Party representative in Narva, said that Tull was using political methods to protect his personal interests in Narva. Tull has downtown real estate that, due to its bad condition, he does not want to sell to investors, Stalnuhhin said.

Meanwhile, the city wants to condemn the building.

“He is ready to lie in order to protect his materialistic interests. Most of us, in an analogous situation, would use all tools to protect their possession that does not appeal to the city,” said Stalnuhhin, who will head the town council.

Complaints have been sent to the electoral committee regarding Res Publica, a right-wing party, after the latter was caught buying votes, Stalnuhhin said. The polling stations’ missing curtains and cabins were not Center Party’s fault, he added.

As for election results, Tull was not the first to complain. The Electoral Committee’s Web site contains a list of complaints.

The Center Party ended up winning the elections in Tallinn, garnering an astounding 41 percent of the vote in the capital. The party now controls 32 of 63 seats on the City Council.

The Center Party, the firm that produced the K-Kohuke curd snack and the Idea AD advertisement agency have so far denied that the curd snack campaign was political.

“The Center Party is in no way related to the advertisements; it has not ordered it and hasn’t paid for it. It is an advertisement of a dairy product,” said Toomas Raag, spokesman for the Center Party.

Mark Eikner, head of Idea AD, said that the dairy snack still exists, and its sales improved after the campaign. “The Center Party is not the sole owner of the letter K and the green color. These have been used before and will be in the future,” said Eikner.

Now that a resolution on the so-called K-Kohuke outdoor advertising has been adopted, Parliament’s anti-corruption committee is demanding that the Center Party include advertising expenses in its election campaign report. The committee is also asking that the party clarify five orders in the amount of 2.56 million kroons (163,000 euros) given to Idea AD.

Farmers take jam to Brussels to protest sugar fine


The Baltic Times, TALLINN
By Kairi Kurm
Nov 30, 2005

Disgusted with EU sugar policy, the Union of Tartumaa Farmers has announced it would send 5,000 jars of homemade jam to Brussels to prove that it’s not only companies who bought sugar prior to EU accession.

“We claim that 42,000 out of 91,000 tons is due to private consumption, and Brussels should not fine the excess sugar in private consumption,” said Jaan Sorra, the union’s chairman. “We started a nation-wide initiative to gather jam, which would prove to EU officials that Estonians make jam.”

The union took umbrage at the EU’s agricultural commissioner, Mariann Fischer Boel, who facetiously told a recent press conference in Washington, “Imagine 91,000 tons of sugar in the cellars of housewives!”

The European Union is claiming that Estonia had an excess of 91,000 tons of sugar on the eve of accession in April 2004. Since such stockpiles are against the rules, the country will have to pay some 46 million euros if the companies that imported the sugar fail to get rid of it by Nov. 30. Excess stocks should be either exported or turned into fodder or fuel, but not consumed by Estonians.

The matter has been taken to a European court, where Estonian lawyers will try to prove that most or all of the excess sugar was imported to meet private demand. Estonians, after all, love to make homemade jams and preserves, and there was also a fair amount of panic buying on fears that sugar prices would skyrocket after accession to the EU.

According to research conducted by the Estonian Institute of Economic Research, families fearing price-increases stored about 42,000 tons of sugar, or about 31 kilograms per person. “When rescuers entered flooded Parnu cellars they found lots of sugar bags. Rural people bought a lot of sugar. They were afraid of the price hike,” Sorra said. “We are not fighting for the companies.”

But the jam, which was collected from families for over a month, is headed for Belgium. The union planned to collect up to 4,000 jars, but as of Nov. 30 they had a little over 1,000 before the final pick up.

The cargo will be taken to the jam exhibition on Dec. 3 in Olustvere Castle and then transported to Brussels in January.

Estonian Veterinary and Food Board told the union that jam could only be distributed if a licensed company had produced it. The board cannot stop the import of 500 jars to Brussels, but will ban the distribution of jam to orphanages and homeless shelters.

Olev Kalda, deputy director general of the Estonian Veterinary and Food Board, believes that demonstration, unlike distribution, would not be a problem.

Sorra does not know for sure if he can pass Belgian customs. “We hope to get to Brussels; the volumes are not large. We do not make anyone taste jam,” he said.

The union had planned to distribute the rest of the jars to 2,000 orphans but might have to come up with another alternative. (Jam cannot be distributed to homeless shelters for the same reason.) Thus, the union might have to leave the jars near waste bins.

Sugar was the main article that rose in price after EU accession. The price of sugar increased from 7 kroons (0.45 euros) to 14 euros per kilo. The current EU negotiations might lead to a decrease of sugar prices by 39 percent next year.

Estonia, unlike Latvia and Lithuania, does not have its own sugar production facilties.

Kristiina Ojuland, former minister of foreign affairs, told The Baltic Times recently: “The current EU sugar regulation is a nonsense of the 21st century and should be changed as soon as possible.”


Fuel traders win major battle

The Baltic Times, TALLINN
By Kairi Kurm
Nov 23, 2005

Foreign fuel retailers were beside themselves after the Ministry of Environment decided to postpone a regulation that would ban the sale of sulfur-gasoline and allow domestic competitors to continue importing lower quality Russian and Belarusian fuel.
The government, alarmed at the rapid rise in inflation, fears that the exodus of smaller fuel distributors will further exacerbate prices and harm the country’s ambition to join the eurozone at the earliest possible date in 2007.

The ministry originally passed the sulfur-free fuel regulation this year, with the aim to have it go into effect Jan. 1, 2006.

Foreign retailers Neste, Statoil and Hydro Texaco protested the move. “Some companies adhere to the law and are ready to sell sulfur-free diesel and meet Ministry of the Environment regulations as foreseen in the act of May 19, 2005,” said Helle Kirs, managing director of Eesti Statoil.

“It is regrettable that other companies refuse to follow the legislation and put pressure upon changes in law on the assumption of their business interests,” said Kirs.

The amendment postponing the ban was prepared by 10 fuel retailers who buy gasoline containing up to 50 milligrams of sulfur per kilogram. It is estimated that half of Estonia’s gasoline is purchased from these suppliers, who import from Russia and Belarus. They control approximately half of the retail fuel market.

Currently, fuel suppliers in Russia and Belarus are unable to sell sulfur-free fuel (actually containing up to 10 milligrams of sulfur per kilogram) due to market demands. However, they are preparing to increase output capabilities by Jan.1, 2009, when, in accordance to EU regulations, only sulfur-free fuel can be sold in member states.

Estonian importers also claim that pushing gasoline with sulfur out of the market will lead to a “monopoly” on behalf of Finland’s Porvoo refinery and Lithuania’s Mazeikiu Nafta.

Ando Raud, head of Mokter, a company engaged in fuel wholesale, said purchasing sulfur-free diesel from Mazeikiu Nafta would be expensive since retailers could not buy directly from the refinery but through its trading arm in Estonia, Mazeikiu Nafta Trading House.

Shipping fuel from Finland, Sweden and Norway is even more expensive, he added. “This may lead to a number of bankruptcies of fuel retailers,” he said.

Lembit Eespaev, head of Jetoil, a fuel wholesale company, said that Russian fuel would always be cheaper than that of competitors, since Russian companies are vertically integrated and control the whole production chain starting from well to pump.

Villem Tori, director of the Union of Estonian Automobile Enterprises, said that Lithuanian and Latvian transportation companies would have received a competitive advantage on the transit market if the amendment had not gone through since the sale of sulfur-gasoline will not be banned in the neighboring countries next year.

Finally, a ban would also have led to an increase of illegal trading with Estonians trekking to Russia to fill up their tanks with cheaper gas. One truck can take 1,000 liters of fuel and with 200 trucks passing the Ikla customs point daily, the state may lose significant tax revenues, said Katri Laanela, head of fuel wholesale company Saurix Petroleum.

According to Tori, fuel prices have increased about 80 percent since Estonia joined the EU in May 2004, and automobile enterprises can not survive another price hike. He couldn’t say how high the price might have increased had the amendment not gone through.

“Estonia has moved toward environmental friendly production too fast, from 350 mg just a few years ago to 50 mg and now 10 mg, outracing EU norms. That is not wise,” said Tori.

Tonu Aaro, manager of Mazeikiu Nafta Trading House, said that the price of sulfur-free diesel was only 0.04 kroon more expensive per liter on average in a yearly basis, and not some 0.40 kroons as claimed by those supporting gas with a high sulfur content. The company currently sells both products for the same price.

He did admit that there could be a price-hike in the logistics chain now that the ban has been postponed. “It will be most difficult for small retailers who have to invest in new containers and tanks,” he said. “They have not perceived that the sales of sulfur-free diesel is still compulsory even if the sales of higher-sulfur content diesel is allowed.”

Aaro said the Ministry of the Environment should have proceeded from the environmental aspect.

Kirs agreed. “By arguing around the business we forget the main aim of the act – to create a cleaner living environment. Why postpone the amendment another three years?” she said, adding that in Tallinn alone busses consume 30,000 liters of gasoline per day.

The initial law to ban high-sulfur diesel in January 2006, three years before the date set by the EU, was suggested by fuel retailers themselves, said Viktor Grigorjev, adviser of the environmental management and technology department at the Environment Ministry.

“Due to changes in the world economy and the situation on the fuel market, it is necessary to avoid a price-hike that may occur with the change of sulfur content by postponing the distribution of diesel containing up to 50 milligrams of sulfur per kilogram until the deadline given in the directive,” he said.


Nostalgia brings Russians to Tallinn for New Year’s Eve

The Baltic Times, TALLINN
By Kairi Kurm
Nov 23, 2005

The city of Tallinn and Enterprise Estonia’s advertisement campaigns, plastered across metro stations and kiosks in St. Petersburg and Moscow, could bring up to 25,000 Russian tourists to Estonia for New Year’s celebrations – 25 percent more than last year.
“Russian tourists like to spend their New Year’s Eve in Estonia, going to Tallinn shops and restaurants. Some also want to visit the countryside,” said Asko Valdmann, board member at Taluday Resorts.

Eduard Kohlhof, director of Livonia Tours, said it was mainly the nouveau riche from Moscow who enjoy celebrating the New Year in Estonia.

As a result, local Russian pop singers are in big demand at various hotels. But event organizers forget that Russians also want to see their president’s speech broadcast from TV that night, he said.

“Most of the Russian tourists have been here before. They come for the nostalgia,” Kohlhof said. “We don’t have as many of them as we could because they’re afraid we won’t speak Russian to them and that we’re nationalistic.”

Since train and flight routes between Tallinn and Moscow were booked within days, transportation companies have come up with additional services. Go Rail will add wagons to its trains, and Taluday Resorts, in cooperation with Estonian Air, will add new flights to the Tallinn – Moscow route.

“At the year’s end we work at full capacity. The tickets on sale in mid-November went fast,” said Mihail Rutenberg, sales manager at rail company Go Rail. “Russian travel operators have ordered two charter wagons from us for an additional 2000 passengers on Dec. 31.”

The company initially planned to offer a special train connection between Tallinn and St. Petersburg for New Year’s Eve, but later cancelled the idea. A regular route will be opened in May.

There are currently no direct flights, train connections or ferry routes to St Petersburg. The distance is only a few hundred kilometers and people use cars and buses to get to Tallinn from St. Petersburg. However, according to Eurolines, some bus tickets are still available.

Several Tallinn hotels offer their New Years Eve programs on the city website in Russian. The capital promotes itself with the slogan “Winter fairytale in Old Tallinn,” while Enterprise Estonia uses a less seasonal slogan, “Warm Nordic welcome,” to invite people to spas and city holiday resorts, said Ruta Rannala, an Enterprise Estonia representative in St. Petersburg. At the end of the year, additional employees will be hired at the Estonian consulate to meet the growing demand for visas, she said.

Although Rannala couldn’t give the exact amount spent on Enterprise Estonia’s promotion, she said that Tallinn managed a good campaign with a fairly low budget.

The city spent 550,000 kroons (35,000 euros) for advertisements in the press, on Web sites, the metro and the streets.

Last year, 63,000 Russian tourists visited Tallinn, one-third of whom came in December and January, thus inspiring the capital to direct its winter campaign toward Russian tourists, although more tourists arrive from Finland, Sweden and Ger-many

‘EU leaders need to wake up to 21st century’


The Baltic Times, TALLINN
Interview by Kairi Kurm
Nov 16, 2005

She certainly stood out among the diplomatic crowd. For international reporters covering soporific EU meetings, and even more for a tiny country trying to create an international image, this was a major plus. And although Kristiina Ojuland is no longer Estonia’s foreign minister, she is actively involved in international affairs as chairwoman of Parliament’s EU affairs committee. One of her big fights now: annuling the 47 million euro fine against Estonia for excess sugar stocks prior to EU accession. As she told The Baltic Times, this was an example of “21st century nonsense

What do you do on the EU affairs committee in Riigikogu (Estonia’s parliament)?

Perhaps the most outstanding issue in the committee is the question about Estonia’s fulfillment of the acquis communautaire. Today [Nov. 14] we shall have a committee meeting where we discuss how many procedures the EU has started against Estonia. But in general the role of the committee is to supervise the government’s positions in the European councils, and we also closely follow the question of how EU money is being used by Estonian authorities and others.

You were minister of foreign affairs between 2002 and 2005. What were the main issues that you handed over to the new minister and what were the ones that you had to deal with yourself?

I left with a good feeling because the two big tasks were fulfilled – Estonia became a member of the EU and NATO. There were a number of challenges the new minister had to face within the ministry. Since income to the Estonian state budget increased enormously this year, a number of questions can be solved such as structural development within the ministry and the broadening of Estonian foreign policy capacities in other member countries and outside the EU.

We are planning to open representations in the Middle East and southern European countries.

What was your stance toward Russia? You were quite cooperative compared to some party representatives, who suggest that Russia should be ignored.

Interesting that you say that. The Russian-speaking media accused me all the time of not being cooperative enough, and the Estonian media always accused me of being too ready to cooperate with Russia.

Looking back on those three years, I should say that my experience was mostly negative. Russia and my Russian colleagues did not respond to this openness that I truly had at the beginning of my time in office. For example, I was never invited to Russia as a foreign minister; at the same time we are neighboring countries and have many issues of common interest to discuss and probably resolve. I am not only speaking about the big border treaty issue, but also of bilateral cooperation, economic cooperation and cultural cooperation. The regions near the border need this cooperation, and cooperation is needed on the highest political level, which was lacking then and also today.

Is it possible that it was a personal approach, because you are a woman? There are traditions in Russia about a woman’s position in society.

(laughs) No, I don’t think so. There have been strong political women leaders in Russian history – take Catherine the Great, for example. Or Valentina Matvienko in current politics. She is a very outstanding politician in Russia and very powerful.

What could have been the reason you were sacked from the minister’s post? Was it the confidential documents that went missing or something else?

It was a political decision of [then Prime Minister] Juhan Parts. Juhan Parts made the decision together with his few friends, warning our party leader just a few minutes before firing me. The way he did it was absolutely unacceptable to the Reform Party. He did it before the investigation of missing documents was finished and before the final report was handed to him.

And what has changed now? If you ask the ministry if someone was punished for the missing documents and what happened, then you see that nothing much has happened. There were documents missing throughout several years due to poor records, but it was also a good reason to use the situation against me.

Foreign Minister Urmas Paet was scheduled to attend a roundtable on Russian-Estonian border relations in St. Petersburg on Nov.10 but was denied entry by the Russian Foreign Ministry. How would you comment on this? Could it be because the visa application was turned in late, or was it a political decision?

I don’t think it was about the round table, nor who was invited. It was a foreign minister of a EU country, NATO country and neighboring country, who did not receive a visa.

In any case, whatever the reason, if foreign ministers want to visit a country, they should get the visa. It is a question of good relations and diplomacy. We have had a number of cases in the past where the application was submitted quite late, but with a diplomatic passport they normally receive the visa. The question is one of attitude.

Estonia has been a member of the European Union for one-and-a-half years. Has everything turned out the way you planned?

If we put positive and negative experiences side-by-side on the balance sheet, I think there are more positive things. In opinion polls support for the EU is higher than it was before joining, when it was hardly 50 percent. Of course we have had negative experiences too. Sugar regulation is an extremely negative example. The current EU sugar regulation is a nonsense of the 21st century and should be changed as soon as possible.

You are an expert in EU matters. What is the EU’s future in your opinion?

As it looks at the moment, frankly speaking, I don’t see a light at the end of the tunnel because of too many things that we’ve seen in the last one or two years. It does not have to do with EU enlargement, but rather with an understanding among old EU countries that things can’t last forever the way it has for the last 20 years.

The EU has been very successful, but now with globalization taking place, it influences us so much. We cannot close our eyes to the fact that China is developing faster and faster, and India is right behind. If EU leaders do not want to carry out rapid changes and are afraid to make necessary reforms in their countries, they will put us in a situation where we’re not able to compete on a global scale.

I’d like to add that the political future of the EU is fragile at the moment. I agree with Margaret Thatcher who said that the EU should first of all be a basis for economic cooperation.

Estonia halts expansion of ‘expensive’ windmills

The Baltic Times, TALLINN
By Kairi Kurm
Nov 16, 2005

Wind power has fallen out of Estonia’s favor in recent months, with the Economy Ministry deciding to limit support to wind-power producers and Parliament adopting amendments to the energy law that will give preference to other forms of renewable energy.

Einari Kisel, head of the Ministry of Economy and Communications’ energy department, puts it bluntly: “We do not want to have too many wind mills,” he says. “The price of wind energy is expensive. The unstable production causes additional costs to other producers.”

On the other side is Hannu Lamp, managing director of Tuulepargid, which developed the Pakri wind park, Estonia’s largest. He finds the recent decision short-sighted and discriminating.

“So far we had no limitations. It took us five years for preparations and the state is turning its back now,“ says Lamp.

“There is a good opportunity to gain additional financing through the Kyoto joint implementation scheme from countries with high level of CO2 emissions. These funds last only until 2012. We would not be able to utilize this financing to reduce the cost of green power if the state sets limits on production,” says Lamp.

With its long coastline, Estonia has a comparative advantage for generating wind power and can do it at a favorable cost compared to many European countries, argues Lamp. The average payoff period of a windmill investment depends on the site wind conditions, wind power purchase tariff, the cost of capital and share of “carbon” financing. Still, the average return on investment is 10 years, and Kyoto funds could help cover up to 10 percent of expenses.

Currently Tuulepargid has contracts with the governments of the Netherlands, Finland and Denmark, which are ready to support green power projects in Estonia in exchange for greenhouse gas emission reductions generated by these projects.

It has been estimated that Estonia’s possible revenues from selling emission quotas to renewable energy producers could amount to 7 – 17 million euros annually. Most of this revenue would go to the state utility Eesti Energia, which has obtained the highest share of emission allowances under the European emission trading scheme.

Kisel says that limits are set in the current regulation as well. Network companies are obliged to buy renewable energy in the amount that does not exceed their network losses. “The establishment of risk-free wind energy projects has come to an end today. However, those mills already established should not worry,” says Kisel.

Currently 91 percent of Estonia’s energy is based on oil shale. The rest is natural gas, and about 1.5 percent is renewable energy. State owned energy producer and distributor Estonian Energy would continue to have a monopoly on the market until 2013, as agreed with the European Union.

Still, by 2010 Estonia has promised to boost its share of renewable energy to 5.1 percent of total electricity consumption. But for the Economy Ministry, that doesn’t translate into favoritism for wind.

“It does not mean that wind energy should have the privilege,“ says Kisel.

With the recent changes to the law, the ministry wants to facilitate the development of other renewable energy such as landfill gas and wood.

In the future, the ministry wants to limit the amount of wind energy purchased to 200 GW. This can be produced by wind farms with an aggregate capacity of roughly 75 MW. But as of February this year, the subsidiary of Eesti Energia has contracts to the amount of 185 MW, and there is a request to produce a total of 400 MW of wind energy annually.

Kisel says that many of the companies with contracts have not taken financial obligations and have not started work. Mills currently established can produce a total of 35 MW.

According to some calculations, every additional percentage of market share that wind energy acquires will increase the price of energy for customers by 0.01 kroon/kW (0.064 euro).

Kisel said that the market share of wind energy could increase 10 – 15 percent, and the subsequent 0.15 kroon price rise would be significant.

Wind energy producers counter this by saying that the true cost of oil shale energy, with all environmental and social expenses included, would be several times more expensive.

Lamp says there are few locations in Estonia to set up new windmills, only if they are placed near the sea. This ultimately means that there is little reason to fear the arrival of many newcomers. Windmills will also have to predict the exact amount of energy they produce, which according to the producers is not possible.

Under the current agreements, Estonian Energy will buy electricity from wind parks at a price of 81 kroons/kWh, which is double the 0.41 kroons/kWh that Narva Power Plants sells. The price would be valid for 12 years for 200 GW of wind-power in each year.

At the same time, it will be possible to sell electricity directly to eligible customers at the market price and to get a premium of 0.5 kroon/kW, the ministry announced.

“[Windmill producers] will have to learn to predict. They were given a lead-time. Electricity can’t be stored in warehouses,” says Kisel.

Lamp prefers to use the Danish analogy. “On windy days Danish mills produce 100 percent of energy demand in western Denmark, and in Estonia we’re talking about a possible problem if the share should exceed 2 – 3 percent,” he says. “Energy can be exported if there is a surplus, and wind turbines could also be shut down in crisis situations.”

Wind producers require that inflation be added to the fixed price annually and that limitations should not be set on the amount of energy produced by wind mills.

Kisel, however, says that there are several price models offered in the amendment, some with inflation included.

“The problem with wind mill projects is that they take it as a financial investment. They build the mill and wait for the money to come. They should start marketing the electricity themselves. There is an opportunity to sell the electricity on the market for a higher price. Our aim is to direct them to the market and not depend on the minimum state guarantees,” he explains.


LHV traders struggle through SEC trial

The Baltic Times, TALLINN
By Kairi Kurm
Nov 09, 2005

Attorneys for Lohmus, Haavel & Viisemann, the investment firm whose employees have been accused by the U.S. Securities and Exchange Commission of using insider information to profit on stock trades, appeared in a U.S. district court on Nov. 8 as the first step in a rogue trading case that has put Estonia in the international spotlight.

The court made no decision and instead issued preliminary injunctions to both LHV and traders Kristjan Lepik and Oliver Peek, whose lawyers were not present.

The court gave the two defendents another chance to appear on Nov. 23.

Amy Greer, district trial counsel at the U.S. SEC’s district office in Philadelphia, told The Baltic Times, “LHV has been cooperating with the SEC in connection with this matter, and we anticipate the firm’s continued cooperation.”

Greer said the court also ordered Lepik to return 156,499 euros that he allegedly withdrew from a U.S. account once news of the scandal broke on Nov. 2.

The SEC has claimed that the firm’s employees profited from trade on U.S. public companies by using more than 360 confidential press releases belonging to Business Wire, a real-time business news agency used by brokers and traders around the world.

The watchdog believes that the traders may have racked up some $7.8 million in profits on the illegal trades.

In Estonia, LHV is trying to distance itself from the two traders, who apparently used personal – not company – accounts when trading on U.S. stocks.

It was unclear whose computers they used when trading.

The employment contracts of Lepik, Peek and three other employees suspected of participating in the illegal trading, have been suspended, Rain Tamm, LHV chairman, told The Baltic Times.

Peek was a member of LHV’s investments services team, and Lepik an LHV partner and head of the bank’s trading department.

Meanwhile, Rain Lohmus, one of the firm’s founders, and whose account was reportedly involved in illegal trading, stepped down from his position as chairman of the firm’s council.

Many were surprised to learn that Lohmus had also been a client of Oliver Peek.

“Usually we do not comment on our customers’ data, but we found that it was important to say [Lohmus was involved],” said Tonis Haavel, one of the firm’s founders.

Lohmus left for Moscow on Nov. 2, the morning news of the scandal broke, and didn’t return before Nov. 4. Haavel couldn’t say if Lohmus had been aware of possible illegal trading.

According to one report, Lohmus opened a $2-million account with LHV Trader in April this year, with the money eventually being deposited with U.S.-based Interactive Brokers. As a result of subsequent transactions, the size of his account swelled to $8.3 million by November.

According to the SEC, the illegal trading activity involved five different accounts, including those of Peek and Lepik.

Peek reportedly received $2 million and Lepik $200,000 in nine months this year.

“The in-house investigation is ongoing, and we are giving [the SEC] the information they request. It is very voluminous,” Haavel told The Baltic Times.

The firm

LHV claims that young men were trading as private individuals. In every statement, it emphasizes that the investment bank had nothing to do with any possible illegal trading of its former employees, and that the company has in no way profited from any such trading.

Still, the accusations have damaged the company’s reputation. Several customers have pulled their funds from LHV’s accounts, and Vilniaus Akropolis, Lithuania’s largest mall operator, cancelled its contract with LHV. Vilniaus Akropolis had been planning an IPO with the firm.

The SEC has frozen the accounts of about 180 LHV customers. Currently only those who used the LHV Trader investment services on the U.S. market through certain brokers cannot receive their money.

“Our lawyers have spoken to [the SEC]. The commission is in principle ready to unfreeze the accounts of our other clients. When it will happen, we don’t know,” Haavel said, adding that LHV has a total of 4,500 customers. “According to the securities’ act, companies like us keep clients’ assets totally separate.”

The firm’s partners have pledged to increase owners’ equity to $1 million if necessary to cover the claims.

The SEC investigation was launched after a drug company, InKine, noticed a spike in trading on its shares on June 23, just before news was released about a planned merger. About 46 percent of the volume came from Estonian traders, who earned some $300,000 by selling the shares immediately after the merger was announced.

The same scheme was used in July when various earning announcements were released by eBay and Yahoo. In those cases, even larger sums were used.

Business Wire made a statement defending the integrity of its data system, stating that traders could not have acquired secret access.

Still, Tamm told the press that Peek and Lepik may have come across a security gap in Business Wire’s system.

Estonia’s Financial Supervision Authority has started a separate supervisory procedure into the matter.