Who and how the RMK's golden gifts to selected companies were misappropriated

Over the years, RMK's discount wooden models have been favored at a higher level, despite many doubts and complaints. Photo: Shutterstock

For many years, the Council of the State Forest Management Centre (RMK), the Ministry and other supervisory bodies have looked the other way at the sale of discounted timber, which the State Comptroller has declared illegal. At the same time, selected entrepreneurs pocketed tens of millions.

Postimees asked Raul Kirjanen, the former major owner of Graanul Invest, whether the State Audit's description of the circumstances of the secret special agreements concluded with Kirjanen's company was true: «According to RMK, companies interested in investing first approached politicians, and from there they came to RMK with specific requests. Concerning the agreements with AS Graanul Invest, RMK explained during the audit procedures that RMK was orally instructed by the management of the Ministry of the Environment to conclude a cooperation agreement with AS Graanul Invest and OÜ Osula Graanul, which was not documented.»

Raul Kirjanen Photo: Madis Veltman

On behalf of Raul Kirjanen, Ants Nõmper, a lawyer at Ellex&Raidla, sent a letter to Postimees: «After reviewing the report, RMK stated that it is still unknown how the communication with the Ministry and politicians took place and how information was exchanged to support the construction of the AS Graanul Invest factories. Also, according to RMK, there is no basis to say that the Ministry had to give instructions to conclude a cooperation agreement. /.../ The statement about RMK and the National Audit Office is not true and is a fiction.»

According to Nõmper, his client Kirjanen has done nothing illegal.

RMK did not present convincing arguments

«As the person responsible for organising timber sales, the chairman of the board (Aigar Kallas - ÜH) always accompanied me to meetings with entrepreneurs interested in investing. That's why the cooperation protocols resulting from negotiations with the chairman bear my signature,» says Ulvar Kaubi, RMK's timber sales manager, who will soon leave his post.

It seems logical that Kaubi knew what he was doing when he signed the secret agreements, which the state auditor called illegal and contrary to RMK's timber sales procedure, and continued to sell timber below market price. When asked on whose orders he had done this, Kaubi objected: «It's not logical. The question contains assumptions and journalistic beliefs. As far as I know, I did not carry out any illegal orders, nor did I give any illegal orders to my subordinates.»

«I am sure that all the relevant decision-making levels of RMK you are asking about acted in accordance with the powers granted to them by law,» Kallas replied. «During my work at RMK, my only wish was to act on the basis of the applicable legislation, the best available knowledge and the interests of the owner.» Kallas did not mention where he got the information about the «interests of the owner».

Andres Talijärv. Photo: Sille Annuk

Forestry Grey Cardinal: I knew nothing

Andres Talijärv, the then chancellor of the Ministry of the Environment and a member of the ministry's council, who has been dubbed the grey cardinal of forestry, and who moved from his position as CEO of the ministry's forestry association, claimed that he knew nothing about the secret agreements.

«These guidelines certainly did not come from us. It was their (the RMK board's) agreement that they made such a decision. The board of RMK had to make sure that all the rules were followed.» You didn't even ask about the duration of the contracts? «Of course I didn't ask.» Why not? «But why did I have to ask?»

Keit Pentus-Rosimannus (Reform Party), who was Minister of the Environment at the time of both Horizon's original contract and Kirjanen's secret agreements, responded as follows: «Of course, Minister RMK does not draw up and agree on contracts and their details.» Minister Heiki Kranich (Reform Party) made the same claim at the time of the birth of RMK's permanent contracts and the conclusion of the preferential contract with Estonian Cell.

After Talijärv moved to head the Estonian Private Forestry Association (2018), Deputy Prime Minister Marku Lamp was a member of RMK's council and led forestry issues in the ministry, whose inaction on the issue of RMK's sustainability contracts has been written about many times by Postimees.

«I am not aware of the directive you are referring to, and I consider it extremely unlikely,» Lamp said, distancing himself from what was described in the National Audit Office audit.

Illegality of secret preferential agreements known for years

In connection with the pulp mill scandal (2018), the management of RMK, the council and the ministry received a representative legal analysis and audit, which clearly described that signing secret long-term agreements with selected companies to sell timber below the market price is prohibited state aid.

In January 2017, Est-For Invest OÜ submitted a plan to build a billion-euro pulp mill in Tartu. The plan involved Mati Polli, who was chairman of the RMK council before the plan was made public.

In September 2017, when Polli had resigned from the council, it was said in the council that RMK was ready to sell half of all pulpwood to Est-For with a 15-year contract. Not at the Estonian market price, but at the Nordic market price. The minutes of the meeting do not mention that these prices were a third lower than in Estonia (see graph).

Asked on whose instructions the RMK management drew up the original draft of the cooperation agreement with Est-For Investiga, Kaubi replied: «Est-For Invest approached the Government of the Republic with proposals and wishes, including the conclusion of a long-term contract.» However, in this appeal (13.02.2017) there is no mention of the price or the amount of wood.

The scandal almost blew the lid off the cesspit

The secret plan for timber sales between Est-For and RMK was revealed in the Estonian television programme «Pealtnägija».

The programme featured a relieved Raul Kirjanen, who said of RMK's managers: «I believe that they themselves understand that it is not really okay to give such gifts in the amount of tens of millions of euros» and «The development of today's biotechnology would make it possible to produce high-quality products on a much smaller scale and on a piece of land in a more environmentally friendly way.»

Lawyers who «advise competitors claiming wood raw materials» and «represent companies critical of the pulp mill» (Media) presented a legal assessment on the show, according to which the sale of discounted wood to Est-For smacked of prohibited state aid.

The closure of the Est-For pulp mill was in Kirjanen's business interests, as Kirjanen's pellet mills competed for the same wood. Est-For planned to open its mill in 2020, when Kirjanen's last secret contract to buy discounted wood from RMK expired.

Est-For would then receive almost twice as much of the same type of wood, earning a hypothetical 54 million euros from the price difference between Estonia and Sweden (see graph).

Postimees contacted most of the RMK councillors at the time and found out which of them had leaked the draft secret agreement, who had given it to them and what their motives were. With the parties involved furiously denying everything and threatening to sue, it is currently in third hands whether the circumstances of this deal will ever become public.

The people behind Est-For haven't let up

Despite the scandal that had broken out, RMK did not want to break the deal with Est-For. At the March meeting, Talijärv presented the legal assessment of the controversial letter of intent that RMK had commissioned from sworn lawyer Indrek Lillo.

Kallas added that the legal assessment shows that the protocol does not violate state aid and competition rules as long as the timber sales contract is not signed. In other words, the sale of the timber as planned would violate state aid rules.

In May, Talijärv and Kallas said that the working version of the protocol no longer contained a legal contradiction. The Council was ready to allow the Commission to sign it.

But competitors threatened to sue over the Est-For deal. Environmentalists and residents of Tartu fought against the construction of the pulp mill because it would have polluted river Emajõgi. The government ended the special plan for the mill, and at the end of the year Est-For announced that it was abandoning the pulp mill.

However, RMK resold the timber to other companies with long-term contracts. The question of whether anyone was receiving prohibited state aid was still open.

At the request of one of the members of the RMK council, RMK included the work plan of the internal audit «Compliance of RMK's Timber Sales Arrangement with European Union Competition Law and State Aid Rules».

Such audits had been carried out before and after. After each audit, RMK's management promised to solve the problems mentioned, eliminate the risk of corruption, etc. The next time, and the next, and the next, it turned out that, metaphorically speaking, the dog's tail had been cut off, hair by hair, and the sale of cheap timber continued. How was this possible - the audits did not analyse the actual timber sales prices.

Postimees article attracts the attention of the State Audit Office

After the article «RMK sold 52 million euros of wood cheaper than the auction prices» was published in Postimees (5.01.2022), RMK ordered some more legal assessments and two internal audits. Even though it was already known at that time that timber had been sold at a lower price than the auction prices under permanent contracts, and the question was who was being audited if it was cheap. In response to the minister's question as to whether the sale of timber under permanent contracts was really harmful to the Estonian state, the audit answered that it was the added value of the timber sector. Yoko Alender (Reform Party), then a member of the RMK Council and now Minister of Climate, said at the RMK Council meeting that she was not in favour of issuing a press release about the results of the audit, and the results were kept secret.

However, following the Postimees articles, the National Audit Office launched an audit to investigate RMK's timber sales.

Yoko Alender Photo: Madis Veltman

The Minister deceived Parliament

On 30 June 2024, the ruling came into force, according to which RMK's long-term contracts are public information. In mid-July, the state audit was published, the results of which were discussed by the RMK council on 18 September. It turned out that the RMK management had ordered the ongoing state aid analysis only for expired timber sale contracts, without discussing it in the council beforehand.

However, Minister Alender gave MPs and the general public the impression during a briefing to the Estonian Parliament on 6 November that an independent audit would clarify whether RMK had until recently sold timber with permanent contracts below the market price, which is prohibited as state aid.

«If this analysis shows that state aid has been given, then we have the possibility to turn to the European Commission for the next steps, and RMK is the institution that, if it turns out to be state aid, can also recover these amounts from the state,» she said.

The same impression was given by the parliament's special anti-corruption committee and the special committee for the control of the state budget, the deputy chancellor of the Ministry of the Environment, Antti Tooming, and the head of RMK, Mikk Marran.

According to the law, the state itself has three years to reclaim illegal state aid, and the European Commission has ten years.

Minister Alender probably knew that he was setting the parliament up for a fall, and that nothing could be demanded from anyone as a result of this analysis. More than ten years have passed since the contracts in question were signed.

Did Alender deliberately deceive the parliament? Postimees asked Alender why he had made such a statement. Alender did not answer, but communications advisor Marion Leetmaa replied: «You have misinterpreted what was said in the parliament and the additional speculation is not true.»

Lawyers let RMK timber bosses off the hook

Law enforcement officials knew about the suspicions surrounding RMK's timber business years ago, but failed to investigate even when the anti-corruption law could have sealed the parties much more tightly.

The questionable links between RMK's discount timber business and top officials and politicians came to the attention of law enforcement, if not before, then certainly during the pulp mill scandal in 2017-2018.

People with a nature conservation background who had followed the pulp mill saga (the names are known to Postimees - ÜH) went to Estonian Internal Security Service to talk about their connections. Later, they also communicated with the staff of the Public Prosecutor's Office and the Central Criminal Investigation Department. Those who spoke recalled that although nothing had expired at that time, the law enforcement officers listened to the information and then did not contact them again.

Remarkable arrest

However, something happened: in June 2018, at the same time as the government decided to end the special planning for the pulp mill, the chancellor of the Ministry of the Environment, Andres Talijärv, resigned to become the head of the Estonian Private Forestry Association.

Strangely, Talijärv claimed that he only found out about Graanul Invest's contracts after the state audit, although they had been discussed several times in the RMK Council during the preparation of the Est-For contract.

Talijärv retired from the private forestry company in September 2021 - a few months after Postimees started asking RMK for data on the long-term contracts.

The interest of the lawyers was renewed in 2022 after Postimees's revealing articles on the significant price differences of timber sold at auction with duration contracts.

According to the recollection of a person who went to discuss this issue at the corruption unit of the Central Criminal Police, the investigator had complained that it was difficult to find evidence. The same investigator had expressed a keen interest in revisiting the issue this summer, immediately after the publication of the State Audit, but had disappeared like a puff of smoke before the meeting.

The National Audit Office's audit did not change his mind

The State Auditor, Janar Holm, found that RMK had broken the law by selling timber below the market price and at a special price to selected companies without any apparent justification.

Estonian Internal Security Service, which is responsible for dealing with corruption offences committed by senior state and local government officials, refused to open criminal proceedings. The prosecutor's office promised to look into the matter, but gave up after only two weeks.

Marek Soomaa, Chief Prosecutor of the District Prosecutor's Office for Economic Crimes and Corruption, argued that there was not enough information in the State Audit Office's audit. At the same time, the prosecutor's office did not ask the National Audit Office about the audit before making its decision, the National Audit Office confirmed to Postimees.

Estonian Internal Security Service and the Central Criminal Investigation Department announced that the huge profits of certain companies, now published in Postimees, did not make them change their previous positions.

Considering that the RMK's preferential timber deals have caused damage to the state and profited companies, why is it not possible to suspect some top officials of corruption?

«We understand that when we see injustice, we want to hold someone accountable,» replied Marta Tuul on behalf of the Estonian Internal Security Service. «Estonian Internal Security Service cannot give an assessment of the Ministry's activity or lack of activity if there is no specific reference to the crime. An unfavourable transaction cannot be a crime. A charge of corruption must be based on some activity. For example, a bribe was given or some other benefit was received for the service provided.»

Soomaa said that the composition of the crime is only fulfilled if the crime caused damage of more than 40,000 euros.

However, according to the graphs published in Postimees, in the last five years alone wood was sold to nine companies at a discount of 19.3 million euros compared to the market price at the same time. Why does Soomaa think that the damage is less than 40,000 euros?

«The Public Prosecutor's Office does not have any information that would allow it to say with certainty that the transactions you mention have caused damage to RMK. The article gives a view of the statistics, but not a confirmation of possible damage that is considered in terms of criminal law,» says Soomaa.

When Postimees pointed out the misunderstanding of the article, Soomaa did not want to add anything more. However, he had another argument for not addressing the issue: «What's more, in order to confirm the damage, it must be taken into account that it was caused as a result of someone's unauthorised and deliberate action. At the moment, based on the information available from public sources, it appears that RMK has improved its work processes over time, which confirms that the previous activity was based on the best knowledge at that moment and not on someone's malicious desire to cause damage.»

Soomaa also did not answer the question in what case, according to the Prosecutor's Office, the action would be «inadmissible and intentional», because RMK's management could not accidentally set wood prices for companies.

Sometimes you can, sometimes you can't

«Criminal proceedings cannot be opened to look for crimes,» Soomaa emphasised. However, such views have not always been an obstacle. The most colourful example is the ongoing trial of former deputy mayor of Tartu Priit Humal (Isamaa party) and Bigbank owner Parvel Pruunsild. At the centre of the allegations is a house in Tartu that Corp! Sakala, close to Pruunsild, bought at a public auction for 1.2 million euros from Riigi Kinnisvara AS (the state real estate company).

Among other things, the trial revealed that the Estonian Internal Security Service had been following Tõnis Rebbas, the head of the legal department at Riigi Kinnisvara AS, simply because he was a friend of Pruunsild, and although nothing illegal was ultimately found, the man lost his job as capo.

If the Estonian law enforcement authorities essentially refuse to investigate the issue of illegal state aid, which has caused the suffering of companies that did not receive discounted timber from RMK, the latter have the possibility to appeal to the court or directly to the European Commission.