Timber transport cartel suspected

TALLINN - Investigators at the Estonian Competition Board unveiled a case of the biggest alleged cartel agreement concluded in the history of Estonia, reports Postimees. It is suspected that the timber transportation companies concluded illegal agreements for bids in public procurement, with sums that could reach a couple of billion kroons.

A number of companies and their executives are involved in the case, as is one official of the State Forest Management Center (SFMC). Allegedly, the forestry transportation companies concluded an illegal agreement for a procurement organized by the State Forest Management Center two years ago in order to get more favorable transportation contracts. An official of the center, forestry management chief specialist Rainer Laigu, allegedly contributed to the illegal cartel.
The alleged cartel case becomes remarkable due to the extraordinarily big volume of the state procurement: 1.7 billion kroons (108.9 million euros). Nearly 60 forestry transport companies participated at the procurement. SFMC’s management thinks that the activities of 25 of these companies was suspicious and should be investigated.

It is not yet known how big a loss the illegal agreement could have caused the SFMC. SFMC’s board member Tavo Uuetalu said that it depends on the outcome of the court case. If the forestry firms are declared guilty, there will be civil suits. Uuetalu said that the loss can reach tens of millions of kroons. Uuetalu said that the final volume of the cartel agreement will be smaller than the total volume of the procurement was since the agreement concerned only transport of timber from properties in Virumaa and Jarvamaa counties.

Both Laigu and the suspected forestry companies contacted by Postimees consider the accusations of the prosecutor’s office unjustified. “This is an invented accusation. The state organized a procurement, people had to make choices and when the deal went sour, the matter was blamed on businessmen” said Kaupo Nommemees, head of Vikingmodum transport firm operating in Ida-Virumaa.

SFMC’s board chairman Aigar Kallas said that in 2008, transport companies terminated their contracts one after the other. Oil prices were at record levels and companies did not agree to provide services based on old contracts anymore. Thus the SFMC management decided to carry out a new procurement to find transporters for five years for all forest felling grounds of the state-owned company. The giant procurement was to be organized basically by just one official, Rainer Laigu. He had several aides and the final responsibility bearer was Uuetalu, but in essence he was the one that had to find the contract partners. SFMC sees no problems in Laigu’s behavior.

Since SCNF did not set the condition of receiving guarantee money from the bidders, large transport companies submitted dozens of bids that they later withdrew. When the lowest priced bid that won the contest was withdrawn, SFMC was forced to conclude the contract with the next bidder, whose offer was more expensive. And that is where the Competition Board and prosecutor’s office see the essence of the crime, as they think companies had concluded agreements in advance to behave this way. A full 240 of the 517 bids submitted were withdrawn after the results came in. Thirty eight transport contracts were on offer.