VZCZCXRO3740
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHTL #0003 0030924
ZNR UUUUU ZZH
R 030924Z JAN 08
FM AMEMBASSY TALLINN
TO RUEHC/SECSTATE WASHDC 0415
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS TALLINN 000003 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPARTMENT FOR EUR/NB 
 
E.O. 12958: N/A 
TAGS: ECON KCOR PREL EN
SUBJECT: ESTONIA'S LAND SWAP SCANDAL 
 
REF: 07 TALLINN 435 
 
¶1. (SBU) SUMMARY:  A Security Police (KAPO) investigation has 
implicated several key Estonian politicians and business leaders 
in a high-profile corruption case.  The "Land Swap Scandal" 
alleges the ex-head of Estonia's Land Board orchestrated the 
exchange of environmentally-protected state land for less 
valuable private land in exchange for bribes.  KAPO also named 
two former GOE ministers as suspects in the case.  The 
investigation could go several more months before coming to 
trial, but legislative remedies are already underway.  While the 
case has hurt the once-strong People's Party, there is little 
chance it will significantly tarnish Estonia's overall 
reputation for transparency and a pro-business environment.  END 
SUMMARY. 
 
¶2. (U) In October 2006, KAPO named Kalev Kangur, the former head 
of Estonia's Land Board, and three prominent businessmen as 
suspects in an alleged bribery scheme.  In a case going back to 
August 2005, KAPO claimed that owners of private land exchanged 
their property for more valuable, public land by exploiting 
their ties to Kangur.  Prosecutors have said the swaps made by 
the Land Board were often unfavorable to the state, and they 
allege that the landowners effectively traded unusable rural 
plots for prime urban real estate. 
 
¶3. (U) Kangur is accused of masterminding the scheme of swaps, 
and directing the acquisition of plots throughout Estonia, using 
inside information about which lands were to be placed under 
conservation status.  Kangur allegedly used front companies to 
exchange or resell properties received from the state to buyers 
he selected.  He also supposedly influenced appraisers to value 
plots unfavorably to the state, and drafted land swap 
resolutions for then-Minister of Environment Villu Reiljan to 
approve.  Reiljan -- a sitting MP and ex-chairman of the 
opposition People's Union party -- resigned last year from the 
parliamentary committee that supervises the activity of security 
agencies to avoid conflict of interest during the investigation. 
 
The Case Widens 
--------------- 
 
¶4. (U) In October 2007, KAPO formally named both Reiljan and 
former Minister of Agriculture Ester Tuiksoo as additional 
suspects in the case.  Both are accused of approving the deals 
in exchange for financial and material gratuities from those who 
benefited from the swaps.  KAPO also named two more businessmen 
- building entrepreneur Toomas Annus, and car dealer Andres 
Sarri - as suspects, bringing the total to nine.  The 
investigation is expected to continue for some time. 
 
¶5. (U) On November 5, the GOE's coalition council approved a 
draft proposal by current Minister of Environment Jaanus 
Tamkivi's to amend the Nature Conservation law.  The following 
day, the ministry sent the proposal to other ministries for 
review.  The proposed amendments would end the practice of 
exchanging nature conservancy land for state-owned properties 
and replace it with a more transparent system for purchasing 
land at market prices.  Minister Tamkivi has said he believes 
the new system would not only be more fair, but would also save 
the state the USD 1400 processing costs it currently pays for 
each land deal.  (Note: Presently the Land Board is processing 
over 500 land swap applications.  End Note.)  The Cabinet and 
then Parliament will have to approve the proposed changes to the 
law. 
 
Comment 
------- 
 
¶6. (SBU) Estonia has a reputation as a good place to do business 
(reftel).  We do not believe the Land Swap scandal will have a 
significant impact on investor confidence in the real estate 
sector, or Estonia's wider image abroad.  Politically, however, 
the case has already done some damage.  Support for the People's 
Union party, a member of the 2005-2007 governing coalition and 
one of six parties in the current parliament, has been declining 
since the defeat of its candidate, former President Arnold 
Ruutel, for re-election in fall of 2006.  With the alleged 
involvement of Reiljan and Tuiksoo, the scandal has become 
closely associated with People's Union. According to recent 
polls, if elections were held today, the party would fail to get 
enough votes to qualify for any seats in the Parliament. 
 
DECKER