Back in the spring, LVM’s actions in the pulpwood market were told, where for three years now LVM-produced pulpwood has been exported to Scandinavia through one company, bypassing competition.
Boards from pulpwood do not come together, therefore it is recycled, which is made in Latvia by pellet and particle board producers, while the largest buyers are Scandinavian pulp mills. The price of the product is determined by the existing Scandinavian market and is variable. The show explained that the Scandinavian market is unpredictable, so Latvian companies cannot buy it at a high pulpwood price.
To prevent this, LVM invented a new product – “technological wood”, which contains both pulpwood and worthless logging residues – dry trees, branches, firewood. This is not suitable for Scandinavian pulp mills, so the new product was only allowed to be bought by those who have plants for processing.
Despite the condition of the production plant, the companies “Pata” and “Pata Board” owned by Mierkalns were attached to the technological wood.
The show explained that with the introduction of a new product, in reality nothing changes in the forest, because the wood is sorted as before – pulpwood is stacked separately and sorted by species. Dry trees, together with very thin wood, end up in a pile of firewood. Furthermore, the timber is supplied to customers by LVM carriers. Invoices show that wood of different qualities is not mixed together during transport. Consequently, it can be concluded that LVM still produces pulpwood, only calling it technological wood. LVM takes the technological wood sold to the company “Pata” straight to the ports, where stevedores accept it and the representatives of the Scandinavian pulp mills buy it as pulpwood.
The documents analyzed in the show show that at first LVM tried to hide the scheme because the bills of lading did not contain the word “Pata”. LVM delivered the product to the ports, where the owner of the cargo changed, while on board the same wood already came under the name “pulpwood”.
The Economic Crime Control Department of the State Police has started a departmental investigation into these transactions. KNAB has also paid attention to this.
The Board of LVM prepared an explanation to the Ministry of Agriculture that there were no violations in the sale of wood, emphasizing that technological wood is not pulpwood and anyone can buy it.
The chairman of the LVM council Jurģis Jansons emphasized to the program that all market participants had equal opportunities. He explained that the condition of the plant was not the only one, because the procurement was in two parts. Janson has no information that the plant will not be built in the company. It is known to the program that, despite the fact that “Pata” does not have a production plant, the company accurately fulfills its contractual obligations and pays the price set by LVM for the assortment.
It is known to the program that in 2018, when the price of pulpwood in ports was at a record high, Pata Board purchased at least a fifth of all LVM technological wood. At that time, it was bought from LVM at a price almost twice lower than that paid for pulpwood in ports, but LVM does not disclose how much of it was still “Pata”.
At the suggestion of the council member Arnis Muižnieks, it was decided to order an independent audit, which will be performed by the law firm Sorainen.
The program reported that Mārtiņš Gaigals, a member of the LVM Council, received 70,000 euros from the Mierkalns company “Pata Strenči” two years ago for the sale of the property. He also works in the council of the company “VMF Latvia”, where he receives a salary. This company enters into transactions with LVM, the last of which took place this year for more than three million euros. Arnis Muižnieks heads the Forest Owners Association, where LVM is the largest member. Jurģis Jansons heads the forest science institute “Silava”, for which LVM is one of the most important sources of funding. Elmārs Švēde, on the other hand, has donated 95,000 euros to the Greens and Farmers Union over 12 years.
According to LVM, it is very difficult for the company to sell technological wood at the moment, so LVM is happy to have many large buyers.
This pulpwood scheme has also been discussed among industry players. In correspondence with the members of the Latvian Federation of Timber Industries, Andris Ramoliņš, a member of the Federation Council and the owner of the company “Stiga RM”, admitted that the facts mentioned in the program about pulpwood were true.
Mierkalns promised that “Pata” would defend its reputation in court and take action against everyone, including Ramoliņš, for “every false name and damage to the company’s reputation”.
The program also reported that this month, after the discovery of suspicious transactions, LVM announced a tender for civil liability insurance for members of the company’s top board and council, which means that the insurer will cover all expenses of senior officials if they are held liable for conflicts of interest, losses or otherwise. Unlike last year’s contract, this year’s chosen company has to commit to paying top management half a million euros to hire lawyers, as well as another 300,000 euros to restore its reputation.
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