In what may be the largest documented case of timber laundering in recent Cambodian history, one of the country’s most powerful tycoons, Try Pheap, allegedly made more than $220 million in unreported profit by illegally logging rosewood over a three-year period in the Cardamom Mountains, official figures suggest.

The evidence was included in an unpublished 2012 report by a major international conservation group, a leaked copy of which was obtained by the Post. The report provides the first substantial documentation of large-scale illegal logging by the Try Pheap Group of Companies.

According to the findings, which were never released publicly due to the gravity of the allegations, Pheap’s MDS Import Export Company, owned by his wife, Mao Mom, used permits for clearing timber within the Stung Atay hydropower dam reservoir and three concessions in the 330,000-hectare Phnom Samkos Wildlife Sanctuary as cover to move protected rosewood felled outside those areas.

The report concludes that Pheap transported more than 16,000 cubic metres of rosewood out of the Cardamoms in southwestern Cambodia using the permits to clear the dam site, despite an estimated reservoir zone stock of just 1,000 cubic metres.

Based on data on Pheap’s sales collected by the Forestry Administration – MDS bought the wood from brokers and sold it for $20,000 per cubic metre to Vietnam and China – the report says a “realistic estimate” of his illegal profits from the operation would be $227 million.

“On the evidence of the reviewed licences, the MDS Company has … taken 16,135 [cubic metres] of rosewood out of the O’Som inundation zone. This figure is a conservative estimate of the total amount of rosewood taken out as it is for transport through the Phnom Samkos Wildlife Sanctuary only,” the report says, referring to the reservoir area.

Officials have claimed the logging was legal, pointing to Pheap’s licence to clear the dam site, but what they could not account for is the sheer amount of timber taken out of the Cardamoms by MDS.

“If they said that profit is illegal, I don’t understand,” said Thun Sarath, cabinet chief at the Ministry of Agriculture, Forestry and Fisheries.

Kranoung wars

A short distance away from O’Som, on a pitch black August night in Pursat province’s Kravanh district, a Post reporter was chased along narrow dirt tracks by men on motorbikes armed with assault rifles, who locals said worked for MDS and had been tipped off to the arrival of journalists by a network of spies whose job it is to protect brokers who are working for Pheap.

The reporter had found a camp where dozens of workers were felling rosewood. Known locally as kranoung, rosewood is considered critically endangered in Cambodia, while the country’s forestry laws list it as a legally protected species.

According to UK-based environmental watchdog the Environmental Investigations Agency, soaring demand for the wood in China and Vietnam has fuelled its continued exploitation and effectively allowed Pheap to use his connections to sidestep legal constraints in what could be a billion-dollar black-market trade.

Conservationists have long documented – and opposed – the attempts to exploit the Cardamoms’ rosewood stocks, considered a stronghold for the species.

But countering the conservationists’ work and the long-time resistance of indigenous communities that rely on the forests are organised criminal “nexuses” controlling the trade, according to the government-commissioned 2005 Independent Forest Sector Review.

At the centre of this trade lies O’Som district, which straddles the Central Cardamoms Protected Forest and the Phnom Samkos Wildlife Sanctuary, a haven for the illegal timber trail since the Khmer Rouge controlled the logging roads to Thailand.

Between the Stung Atay and Russey Chrum hydropower dams lay some of the largest estimated stocks of rosewood left in the country, according to the report.

Pheap signed the logging contract for the Atay dam reservoir zone – covering less than 5,000 hectares – with the China Yunnan Corporation on February 16, 2007, it says, and in March 2009, the Council of Ministers issued a directive confirming that the contract had been granted to MDS. That May, MDS was given the go-ahead to log in the area, with the proviso that the timber must not be exported.

“Timber trading brokers set up businesses under the protection of MDS-employed … soldiers next to the MDS compound in [O’Som],” the report notes. “Logging roads went into the [protected areas] rather than the inundation zone.”

In April 2010, the Ministry of Environment clamped down on the trade, setting up a checkpoint to monitor every truck and catalogue how much timber came out of the area.

That December, MDS was awarded two economic land concessions (ELCs) in the Samkos sanctuary’s conservation zone, and later a further concession near the Thai border in Thmor Da district. With Environment Ministry rangers monitoring the road out of the Atay dam site, the report notes, MDS began to use the Samkos concessions to launder the wood.

“While some rosewood [was] taken out under company licences under the assumption that it is being taken from the hydropower dam inundation zone, other timber is also being taken directly to illegal furniture factories who quickly transform it to furniture which is legally allowed to be exported,” the report says. In 2011, “Prime Minister [Hun Sen] visited the area, at which time MDS and the brokers covered up all stockpiles of rosewood and hid illegally logged timber.”

Pheap’s wife, Mao Mom, declined to comment on the evidence. Eang Sophaleth, spokesman for Hun Sen and a secretary of state at the Agriculture Ministry, declined to comment. “It’s not in my jurisdiction. I would advise you to contact the FA,” he said, referring to the Forestry Administration. Chheng Kimsun, director of the FA, did not respond to requests for comment.

Numerous attempts to seek comment from Try Pheap representatives were unsuccessful.

The relationship between the illegal logging trade, the government and conservationists is complicated. In 2009, Ouk Kimsan, the man appointed by the Forestry Administration to ensure Pheap did not abuse his licence to transport the timber from the Atay dam, was arrested for attempting to take two trucks laden with illegal timber to Vietnam.

“Ouk Kimsan worked for [Conservation International] and [the Forestry Administration] and facilitated the licences for the company to export rosewood from the Stung Atay hydropower dam inundation zone that MDS has the contract to clear. He was jailed in Koh Kong but is now out and working as a senior director in MDS Export and Import,” the report says. Kimsan could not be reached for comment this week.

Marcus Hardtke, a long-time supporter of the late forest activist Chut Wutty, who was gunned down in 2012 while investigating illegal logging in the Cardamoms, said the Atay case study was just the tip of the iceberg.

“The [Try Pheap] logging cartel has expanded, and their operations can be found in all provinces with valuable timber resources. It has become a key driver of large-scale illegal logging,” he said. “The nature of these operations shows that they have support from the highest level in government. The cartel has become untouchable, with the relevant authorities acting more like subcontractors than regulating agencies.”

Rise of a tycoon

Little is known of Pheap’s early days before he rose to become one of Cambodia’s most powerful mandarins. In August 2004, he was granted the title of okhna, a Khmer word that historian David Chandler has said is derived from the Sanskrit for the Hindu god Shiva, but which now carries a $100,000 price tag – a payment made in “donations” to “development projects” linked to the ruling Cambodian People’s Party.

In 2005, Pheap went into business with arguably the country’s most powerful tycoon, Senator Lao Meng Khin, and forged ties with Cambodia’s military leadership.

Meng Khin and Pheap are listed as directors of an iron mining company on the border between Stung Treng and Preah Vihear provinces – Hongfu-Try Pheap Mining Development Construction – which is part owned by RCAF commander-in-chief General Pol Saroeun and a state-owned Chinese firm.

As well as forming close business ties with Chinese investors, Pheap has also cultivated strong relationships with Vietnamese companies – and the leadership of the CPP.

In 2009, MDS was granted a licence to clear-fell a concession granted to Singaporean firm HLH Group, which has previously been linked to Hun Sen’s sister, Hun Sen Ny. Shortly after the deal was penned, Pheap was made an adviser to Hun Sen with the rank of secretary of state, according to a government decree.

Despite having two concessions in Mondulkiri province cancelled in January 2011 due to lack of investment, just a month later, Pheap was granted two 70-year leases covering 18,855 hectares in Virachey National Park in Cambodia’s remote northeast, an area between the Laos and Vietnam borders known as the Dragon’s Tail, where he later built a casino.

In early 2011, Pheap “donated” cash and goods worth more than $130,000 to Environment Ministry staff and the local CPP branch in the Boeung Per Wildlife Sanctuary in Preah Vihear province – and was granted a rubber concession there shortly afterwards. Last year, the Post reported that Kimsan – the former CI official in charge of keeping tabs on Pheap’s logging in the Cardamoms – had taken over as head of Pheap’s operations in Boeung Per.

‘Land of development’

In Stung Treng province’s Siem Pang district last month, a logger working for Pheap had just arrived and set up camp under a tarpaulin amid the hammering rain. Resting gingerly on a crutch supporting his missing leg, which he lost fighting for the Khmer Rouge, the 57-year-old logger from Takeo province said he has followed Pheap’s brokers for years, having just moved from Pursat’s O’Som district.

“I have been working on logging since the Khmer Rouge regime,” he said.

The logger, who requested anonymity, was one of a vanguard of “anarchic” workers the Post witnessed arriving in Siem Pang last month – several sharing the back of trucks bearing the logo of the Try Pheap Group – who each day sell their haul to brokers working for Pheap.

On the road into the district, Post reporters passed dozens of trucks bearing the code used by Pheap’s companies, which smoothes their passage through any checkpoints they might encounter: 1168, a Chinese “lucky” number said to mean “the road to good fortune”.

The road used by Pheap’s trucks was built with Chinese aid money but has since lost its surface under the weight of the hulking vehicles and is now little more than a slippery river of mud. MDS had assigned several tractors to patrol the road and dig out the trucks that get stuck. One of Pheap’s drivers told the Post he had been stranded on the remote stretch of road with his over-laden lorry of thnong wood – another protected species – for two days and nights.

Villagers, loggers and local officials told the Post that Pheap had emptied their villages of men, who spend every day journeying across the Srepok River to log thnong in the reservoir of the Lower Sesan II dam, where Pheap has also allegedly been laundering timber from logging operations in Ratanakkiri province, according to forest campaigners and locals.

The Post followed several of Pheap’s trucks from Siem Pang to an MDS holding area nearby and also witnessed several of the trucks parked in the grounds of an under-construction luxury hotel in Stung Treng town that the tycoon is building.

By the side of the river in Siem Pang, a stout woman was busy organising the latest load of thnong to be taken to the MDS collection point down the road, ready for the company’s vehicles to arrive at nightfall.

“We work very hard, but we have to pay the [police] officers, too, or they will arrest us,” she said. “But if I don’t do that business, someone from outside will come to do it, so we have to join to destroy the trees with Try Pheap.”

Over the past two years, Pheap has been granted several licences to collect and transport timber across the country, making him the “preferred bidder” at government auctions, according to a conservationist who requested anonymity.

“We see a drive to monopolise the trade in luxury timber, with FA crackdowns on independent operators,” Hardtke said. “As the rosewood stands are largely exhausted, the [Try Pheap] cartel has switched to other species, like thnong, and will continue down the species list until Cambodia’s remaining forests are reduced to shrubbery.”

In February and March 2013, Pheap was given the rights to collect all timber logged in ELCs in Ratanakkiri province and to establish yellow vine processing plants in the Atay dam area. Then, in April, Hun Sen praised Pheap for donating nearly $250,000 to build a Buddhist temple in the prime minister’s home commune of Jiro in Kampong Cham province. The next month, he won a contract to transport all timber from ELCs in 15 provinces and the concession for the casino in Ratanakkiri.

More than 1 million hectares of land was granted to foreign and local companies through ELCs during the last CPP government – an area twice the size of Brunei – with most clustered near the country’s largest remaining forest reserves. The Forestry Administration told investors last year that local demand for timber would continue to rise until 2018.

A European Union delegate, who co-chairs the Technical Working Group on Forestry Reform, said Pheap’s licences, which are up for review next month, had been discussed at the past two meetings.

“They addressed the issue of the licences for the collection of timber and the licences given to some companies to buy timber from other ELCs,” the EU said in a statement. “The EU strongly believes transparency in the attribution of public markets, including ELCs and timber, is a key element of good governance.”

Pheap was granted a $3.4 million licence to confiscate almost 5,000 cubic metres of mostly luxury wood from the FA – about $700 per cubic metre – last year. Using his concessions in Ratanakkiri, Pheap was accused of illegally exporting large amounts of luxury wood from concessions owned by Vietnamese subsidiaries of the Hoang Anh Gia Lai Company, better known as HAGL.

Pheap got a new licence to “destroy” all remaining “waste wood” in FA and Ministry of Environment offices and permission to “keep what remains” earlier this year. Most of the wood taken by Pheap so far – estimated at more than 1,500 cubic metres – is thought to be luxury species.

“This policy of ‘collecting confiscated timber’ is a rather old trick in the region to circumvent legal and policy frameworks,” said Hardtke. “In the past, the Cambodian government issued ‘old log collection permits’, meaning there’s no cutting involved, just the collection of previously felled trees. Needless to say, it was abused for years, covering several hundred thousand [cubic metres].”

In its 2000 Structural Adjustment Credit assessment, the World Bank called Cambodia’s forests the country’s “most developmentally important natural resource”.

But a damning indictment of donor institutions’ inability to curtail illegal logging, a 2013 World Bank investigation, found that $4.1 billion of its global investments in forestry over the past 10 years have done little to benefit local communities in developing countries. The bank, which declined to comment, is now considering funding land concessions in Cambodia once more, after a three-year moratorium on loans.

Despite the mounting evidence of illegality in the forestry sector, officials are seemingly oblivious or unwilling to offer any practical solutions.

At the opening of a sugar factory in Kampong Speu province in 2012, Hun Sen praised the economic progress the government had nurtured since the civil war. “We have transformed this pitiful land,” he said, “soaked in blood and tears in the past into a land of development.”