Stockpile agency turns to police over botched 10m-euro PPE deals

The agency said it has also moved to void the related sales contracts and recover some of the money it handed over.

From left: Interim HVK CEO Janne Känkänen, Jari Gustafsson, permanent secretary of the Ministry for Employment and the Economy and Ilona Lundström, chair of the National Emergency Supply Agency, HVK. Image: Roni Rekomaa / Lehtikuva

Finland's national stockpile agency has requested a police investigation into a deal to purchase protective equipment that failed to meet the standards required for hospital use.

At a press conference on Tuesday evening, chair of the National Emergency Supply Agency Ilona Lundström said that two deals that involved a businessman with a chequered financial past, Onni Sarmaste, and one-time reality TV personality Tiina Jylhä, did not comply with established procurement procedures.

The HVK chair said that the agency has since attempted to void the sales contract with Sarmaste's firm, LDM Partners Ltd. Tests of the equipment supplied by Sarmaste found that it failed to meet the standards required for hospital use.

"HVK has begun to partly void the deal and is calling for a refund of the sum paid for goods that were not delivered as well to compensate for the poor quality of the products supplied. We have also requested a police investigation into the deal," Lundström explained.

"The protective masks were not suitable for hospital use and did not correspond to what was requested. However they can be used in care homes and for home care and they have been taken into use," she added.

An independent investigation by accounting firm KPMG found that the agency had not sealed any other deals with Sarmaste's LDM Legal Partners Ltd and Jylhä's The Look Medical Care, Lundström said.

The deal with Sarmaste's firm was valued at 4.9 million euros, all of which was paid, while the purchases from Jylhä's firm totalled 5.3 million euros, about half of which -- 2.6 million euros was paid. However that payment was frozen.

HVK chair: Management did not need board approval

Lundström refuted Sarmaste's claims in the media that the order did not specify that the products were needed specifically for use in hospitals. "Our investigation does not support this claim. The commission received from the Social Affairs and Health Ministry and the order placed on that basis are the same and the equipment was meant for hospital use," she said.

She added that there was no evidence to support public speculation that there was any connection between the HVK management and the two firms.

The board chair said that HVK has called on Jylhä's The Look Medical Care to void the contract due to money-laundering suspicions and because the firm had marketed similar products with forged certificates.

Lundström said that an external review of procurement procedures by KPMG found that HVK did not have the resources to respond in the circumstances presented by the state of emergency.

"HVK's operational management has repeatedly and significantly deviated from procedural and financial rules. The board did not have sufficient visibility into the risks associated with these acquisitions," Lundström commented.

She added that the CEO did not require the board's blessing to proceed with the equipment purchases. HVK purchased the protective gear after receiving eight requests from the Ministry of Social Affairs and Health by 13 April -- three of them related to purchases of protective equipment.

Last Friday HVK's then-CEO Tomi Lounema resigned after it came to light that the order supplied by Sarmaste's company, LDM Legal Partners Ltd, did not correspond with what was ordered, either in terms of quality or quantity.

Ministry chief: No further probes

Meanwhile Jari Gustafsson, permanent secretary with the Ministry for Employment and the Economy, (TEM), said that there would be no more investigations into the matter. He added that the KPMG investigation revealed deficiencies in HVK's procurement processes.

"There has been widespread non-compliance with financial rules and regulations as well as with HVK's normal procurement procedures. There have been deficiencies in vetting suppliers' reliability and certification and there have been many shortcomings in clearing contracting parties," Gustafsson noted.

"Payment terms have deviated considerably from normal procedures and the choice of supplier candidates has not been as systematic as one might expect," he added.

He said that these failings were such that haste or workload could not make them acceptable. He said that the ministry's view was that the sales contracts should be voided, except in the case of products delivered that had already been taken into use.