Alexander Pudovkin at the 2018 Eastern Economic Forum.
London, 23 December 2020 – The timber tycoon behind one of Russia’s biggest illegal logging scandals has escaped punishment for bribery.
The head of timber conglomerate BM Group, Alexander Pudovkin, walked free after the far eastern region of Khabarovsk’s Central District Court on Wednesday dismissed the case against him at a preliminary hearing reportedly closed to the media.
The 59-year-old will not be held legally responsible for paying €870,000 in kickbacks to a federal official because of his “active repentance” for his actions, the court said in a statement to newspaper Argumenty i Fakty.
Pudovkin’s leadership of one of Russia’s largest wood product makers earned him friends in high places and an honorary title from the Russian president. He was charged with bribery on “an especially large scale”, one count of which he admitted to in an indictment hearing in November.
An Earthsight investigation published earlier this month, Taiga King, detailed how Pudovkin paid Moscow official Vladimir Potapkin bribes through a middleman in return for state subsidies for a sawmill that was never built.
The BM Group president, who did not respond to a detailed list of findings in the investigation prior to publication, further admitted coming up with the bribery scheme in court testimony against the bureaucrat, who denies wrongdoing.
Prosecutors say Potapkin also secured the sawmill venture its place on Russia’s federal list of priority investment projects. This allowed Pudovkin’s firm to access state subsidy grants and sidestep public auctions for forest rights.
Earthsight's Taiga King report was released earlier in December.
Set in precious taiga forests home to brown bears, wolves and lynx, his Asia Les (Russian for “Asia Forest”) project promised hundreds of jobs and proceeds exceeding €1 billion within its first five years. It collapsed within a decade.
According to prosecutors, Asia Les illegally logged 600,000 cubic metres of wood through contracts obtained through corruption and fraud. Processed into finished products such as cladding, this wood has a street value exceeding €870 million ($1 billion).
Customs records show more than 100,000 tonnes of timber linked to the scandal entered Germany, France and other EU countries despite rules meant to tackle the illicit trade.
Imports continued despite mounting evidence of wrongdoing, and even today BM Group wood remains certified by the major timber accreditation body Programme for the Endorsement of Forest Certification (PEFC).
The first details of the scandal emerged with the publication of a damning audit report by the Russian accounts chamber in late 2018.
The report found that Asia Les failed to deliver on its promises, broke the rules governing priority projects and received public funds to which it was not entitled – with no punishment from regulators. A criminal investigation was launched soon after.
Russia’s FSB domestic spy agency raided BM Group’s Khabarovsk office headquarters last year, seizing files, computer hard drives and a safe. Pudovkin was arrested and placed under investigation together with Potapkin and Vasily Shikhalev, a retired local government official formerly in charge of the region’s forestry industry.
Earlier this year the Khabarovsk Central District Court found Shikhalev guilty of abuse of office and handed him a suspended prison sentence of four years and six months. The court heard how he lobbied for his friend Pudovkin’s sawmill firm, provided it with cut-price forest rents illegally and hid evidence of rule breaking.
His actions delayed the removal of Asia Les from the federal list of priority projects, allowing the company to continue to log state forests and receive subsidies. Company filings show his son holds a senior position at BM Group.
The trial of Vladimir Potapkin, who is charged with accepting bribes and abuse of office, continues.
BM Group management told Earthsight all products exported were harvested in accordance with all relevant laws and regulations. They claim the wood had nothing to do with the activities and criminal case against “individuals” like company chief Alexander Pudovkin.
Earthsight director Sam Lawson said: “The man at the centre of the largest illegal timber case in Russia this century is being allowed to walk free unpunished, for the laughable reason that he is sorry.
“This decision flies in the face of common sense and makes a mockery of any claims by the Russian authorities to be getting on top of the country’s rampant timber corruption problem.
“It also shows Russian court decisions are no better a guarantee of compliance with the flagship EU timber law than PEFC certificates.
“The European companies involved in the multibillion-dollar Russian timber trade are risking more than just their reputations.”