Serious allegations against timber company Schweighofer in Romania

From profil 10/2016

Illegal logging is endangering Europe’s last big virgin forests. Environmental activists and Romanian authorities blame Austrian timber company Schweighofer. Schweighofer denies the allegations. The author goes in search of evidence.

By Joseph Gepp (March 7, 2016)
Translated by EIA

Here’s the original German version

It’s a long drive until we leave all traces of mankind behind. The large and imposing prefabricated apartment blocks in the capital gradually get smaller and more run down as we leave the city behind and head into the countryside. Soon after, only the occasional farmhouse flashes past the car window. Then wooden huts. Then nothing at all.

At the edge of this nothingness, Gabriel Paun pulls to a halt. He gets his rubber boots out of the trunk as the snow is deep. It’s not far from here, he tells us. The 38-year-old environmental activist who works for the organization Agent Green knows the way. He’s been here many times before. He is worried that the nothingness is disappearing.

We are in Câmpuşel, near the small town of Petroșani in Romania, where Europe’s last remaining virgin forests sprawl over the slopes of the Carpathian mountains. The forests here have grown for centuries without any human interference. There are wolf tracks in the snow. The sound of the snow crunching underfoot is the only sound far and wide. “There’s a wild mix of beeches, pine trees, old trees and saplings here,” says Paun. The area of virgin forest in Romania today is thought to be almost as big as the Austrian state of Vorarlberg. Not for long, he warns.

This story is about the owner of Câmpuşel forest, the Schweighofer Group. Schweighofer is a timber company with administrative headquarters in Favoritenstrasse 7, Vienna. The group is owned by Gerald Schweighofer, who comes from the Austrian region of Waldviertel. Schweighofer’s family has been in the timber business for 400 years. Over the past decades, Schweighofer has expanded the family business into a multinational corporation with annual sales of around €500 million. The focus of Schweighofer’s operations is in Romania, where the company has been active since 2002. Business magazine Trend ranks Gerald Schweighofer as the 25th richest Austrian with estimated assets of €1.2 billion.

ALLEGATIONS HAVE BEEN CIRCULATING FOR MONTHS

Almost everybody in Romania has heard of Holzindustrie Schweighofer S. R. L. This is not just because Schweighofer is by far the country’s largest softwood processor with three large sawmills and just under 3,000 employees. It’s also because the name Schweighofer keeps popping up everywhere – in articles by investigative journalists, in the Facebook posts of environmental activists, on the banners of demonstrators on the streets, and in the dossiers of public prosecutors.

The allegations have been circulating for months and they are serious. Mr Schweighofer is said to widely and systematically encourage illegal logging among his timber suppliers. He is said to turn a blind eye when illegal timber is delivered to his mills and is suspected of logging in nature reserves. According to Alexander Bismarck, environmental activist from the US organization Environmental Investigation Agency, Schweighofer’s entire business model is based on illegal timber. For the company’s management it is a case of innocent until proven guilty.

It all started with an undercover operation by Bismarck nine months ago. Posing as a timber merchant, Bismarck visited a Schweighofer sawmill in the Romanian city of Sebeș with a hidden camera. He offered to sell the mill illegal timber and, as shown in the video (see below), his offer was met with interest. Last July, the Romanian Minister of the Environment at the time, Grațiela Gavrilescu, said that inspections at Schweighofer had revealed “a number of irregularities and inaccuracies”. The company was suspected of sourcing timber from illegal logging. Investigative media have also reported on dubious business partners and bogus companies that Schweighofer is allegedly using to control further sections of the timber market.

But Schweighofer is hitting back, claiming that it is being used as a scapegoat for corruption and shortcomings in other sections of the industry. What about the undercover video? “It was edited in a very misleading way,” says Georg Erlacher, spokesman for the Schweighofer management. What about the allegations? “Deeply immoral”, “questionable from a legal point of view”, a “smear campaign”.

Is this just a matter of environmental activists and public authorities zeroing in on the popular boogeyman of the foreign corporation? Or is this the dark side of Austria’s much praised economic expansion in the east? Is the Austrian company to blame for plundering Europe’s last remaining untouched natural treasures?

“RIGHT IN THE MIDDLE OF VIRGIN FOREST”

Yes it is, according to environmentalist Gabriel Paun. He wants to prove this by showing us a concrete example here in the forest of Câmpuşel. Although the snow is piled high, it’s not quite deep enough to completely cover the tree stumps that Paun points out. Look at the orange marking on the tree, says Paun. And there, another one. And over there, tree trunks ready to be taken away. “Right in the middle of virgin forest.”

Câmpuşel, a Natura 2000 protected area, has been owned by Schweighofer since 2005, along with 18 other forests in Romania. A study conducted in the same year by a Romanian forest research institute and the Dutch Society for Nature Conservation classifies the area as virgin forest. According to forestry law, these areas are to be “rigorously protected”. And yet Schweighofer is cutting timber here.

Getting to the bottom of these and other controversies requires an understanding of the system operating in the background. The law requires every forest in Romania to have a management plan. This plan has to be approved by the government and applies for a period of ten years. The management plan sets out whether logging is permitted, and, if so, how much of which kind.

When a forestry worker cuts down trees and loads them on to trucks, every load is given an individual code. This code indicates that the timber was logged in accordance with the management plan. It is then legal timber.

However, the system does not work well in practice. Many more trees are logged in Romania than are set out in the management plans. Much more than the forests can tolerate. Timber companies fool the laws by, for example, using one and the same code for several loads of timber. Or the trucks simply drive off to the sawmills without a code, and the sawmills buy their timber. As a result an estimated 20 to 50 percent of timber logging in Romania is illegal. The Ministry of the Environment estimates that 8.8 million cubic meters of timber are logged illegally every year. This corresponds to an area of around 44,000 hectares of forest that vanish illegally every year. For comparison – the area of the city of Vienna is 41,000 hectares.

ENVIRONMENTAL INSPECTORS AND PUBLIC PROSECUTORS TAKE UP THE CASE

According to US environmentalist Bismarck, Schweighofer is indeed the main culprit: “The company has purposefully and knowingly bought large volumes of illegal timber.” Bismarck’s team spent two years researching the methods allegedly practiced by Schweighofer, publishing its findings last fall in the extensive report “Stealing the Last Forest”. Initially, Bismarck says, his team did not intend to focus specifically on Schweighofer at all, but on illegal logging in Romania in general. “But in the course of our research, we found out that almost every truck carrying illegal timber went to Schweighofer.”

Once Bismarck’s initiative had attracted attention in Romania, the authorities took up the case. Environmental inspectors and public prosecutors initiated investigations. Since then, they have discovered large amounts of illegal timber – at least this is what an internal report made available to profil suggests. Last November, the Environmental Ministry passed this 61-page report on to Diicot, the Directorate for Investigating Organized Crime and Terrorism. The report speaks of hundreds of thousands of cubic meters of unregistered timber.

The Schweighofer mill in Sebeș, for example – the same one that Bismarck visited for his undercover video. According to the report, there is a discrepancy “of a volume of 281,461 cubic meters” between the figures in the official system and the consignment notes between July 2014 und April 2015. Another example: “There is reason to believe that 27 suppliers of logs delivered a total volume of 30,141 cubic meters to Sebeș without documents proving their legal origin.” However, the authorities have never officially commented on the report. The outcome of the investigations is still open.

At a parking area in Rădăuți, north Romania, dozens of trucks loaded with logs are clustered around a construction site container. They are waiting to be let in to the Schweighofer mill. Schweighofer manager Erlacher, formerly a board member of ÖBF (Austrian Federal Forests), says that more than 20 trucks pass this point every day. Plus a similar number of freight cars. “And this,” he says, “is just our first checkpoint.”

The second checkpoint is further along, a barrier with a glass-fronted shack, where the truck drivers hand in their transportation papers to be checked. “No illegal truck gets in here”, says Erlacher. Because of these kinds of entry checks. And because of the stringent inspection procedures requiring Schweighofer suppliers to prove the legal origin of their timber before they are let onto the premises.

Behind these checkpoints there is a huge sawmill that looks nothing like people unfamiliar with the industry might expect. No screeching saws, no footprints in the wood shavings, hardly any sweating workers. Instead, a fully automated system the size of a small village that works away, quietly and rhythmically. The staff in the control room watch the swinging robot arms gripping the tree trunks. The chips and shavings are sucked up automatically and crushed to make biomass and pellets. The tree trunks themselves glide quietly forwards for processing. Trunk after trunk, almost 24 hours a day. They come out at the other end of the factory as planks and beams.

FORMAL ERRORS IN THE HECTIC COURSE OF DAY-TO-DAY BUSINESS

In the midst of all this technology, friendly Austrian managers dismiss all the allegations. They talk about environmentalists seeking the spotlight, sensationalist media, politicians that are biased against corporations, all of whom are targeting Schweighofer. They suspect that some of the politicians may themselves be in cahoots with the timber mafia. “When the allegations came out,” one employee told us, “I looked my boss Gerald Schweighofer straight in the eye and asked him whether there was anything to it. And he said, no, nothing at all.”

Schweighofer only concedes to having made a few small errors, venial oversights, entirely without criminal intent. The fact that official inspectors found around 9000 cubic meters of illegal timber in Rădăuți in 2014 is proof for environmentalists like Bismarck that things at Schweighofer are sorely amiss. But Schweighofer, while admitting to the case, emphasizes that this amounts to just a tiny proportion of the total timber it deals with – just 0.9 percent to be precise. Schweighofer puts this down to formal errors that occur in the hectic course of day-to-day business, such as employees putting the commas in the wrong places on forms.

The same arguments are used to dismiss the logging revealed by environmental activist Paun in the virgin forest of Câmpuşel. Erlacher claims that the logging was actually ordered by the local forestry authority itself. The forest was hit by a storm, and, according to the law, the damage has to be removed. This is necessary to protect the surrounding areas of commercial timberland from disease. The borders to the commercial forests are so fluid that not even the authorities always know exactly where these are, says Erlacher. For this reason, logging is permitted according to the management plan. “These kinds of instructions put us in a dilemma. If we don’t dispose of the damaged trees, we are not complying with the authorities. And if we do, we face criticism from environmentalists.”

What about the public prosecutor’s report? The one about the hundreds and thousands of cubic meters of illegal timber? Erlacher does not wish to comment on this as he says Schweighofer was never officially informed of this. It is undoubtedly true that illegal timber trading is a problem in Romania, he says. “But only among local networks and small businesses.” A large company like Schweighofer cannot afford to do such things.

There seem to be two contradictory realities here in Romania, here in this evidently deeply corrupt industry. Out there, environmentalists and Romanian authorities are accusing Schweighofer of serious offences. In here, there is the clean and hi-tech Rădăuți mill and its friendly Austrian managers. Could such serious offences really take place in these surroundings? Yes? Or, perhaps, no?

It is evening, not far from the Rădăuți mill. “The Gerald’s” is a four-star five-story hotel, the best one far and wide. It belongs to the Schweighofer Group and even bears the name of its owner. Schweighofer runs the hotel because there is no hotel close by where it could accommodate its business partners and employees.

And here we find Gerald Schweighofer, sitting in the back room of the restaurant, tanned and wearing rimless spectacles and a loden coat with antler buttons. He says that the motives of the Romanian politicians are unfathomable. They sometimes agree to talks with Schweighofer managers, then they abruptly block them off. You never know where you’re at in this country, he says.

What about the US environmentalists’ allegations? And those of the investigative journalists? The public prosecutors? Can this really all be a conspiracy against Schweighofer? “We haven’t done anything wrong”, says Gerald Schweighofer. In such cases, he says, one accusation often leads to the next. Schweighofer has agreed to meet journalists here in the hotel in order to clarify the alleged misunderstandings and to salvage the reputation of his company. In fact, however, he hardly says anything except: it’s all not true.

If there really is a conspiracy against the company then it is rapidly gaining ground. While the public prosecution Diicot did not answer profil’s query as to the current stage of investigations, insiders believe their work will be completed in the next few months.

Trading in illegally logged timber is no longer a trivial offence, environmentalist Bismarck points out. “Schweighofer needs to make the origin of its timber easy to track for consumers.”

Schweighofer has already announced steps in this direction. Erlacher is planning to increase transparency by tracking its timber with the help of a GPS system. This move is probably motivated by the fear of losing market shares. Major customers from Western Europe and Japan are apparently already contacting Schweighofer due to concerns of being associated with illegal timber trading.

In the airplane on the way back to Vienna. Soon after take-off, the broad roads and big apartment blocks disappear from view. Very soon, the roads in the Romanian countryside turn into paths, villages to individual houses, houses to huts. Finally, only mountains and forest are visible. Nothing else.

Then, suddenly, the nothingness stops. Instead there are tree stumps.

On all excursions with environmental activists and Schweighofer, profil covered the flight and hotel costs itself.

Schweighofer video: “Don’t ask me how”
By Joseph Gepp (March 7, 2016)

What the undercover video shot at the Schweighofer sawmill really shows.

US investors visit the Schweighofer sawmill in Sebeș, wanting to sell the company timber from Romania’s forests. However, they also say that the legal stipulations on the volume of permitted logging are too “rigid” for them. The Schweighofer managers reply that this is “no problem”.

This video caused quite a stir nine months ago. The timber traders were actually from the US NGO Environmental Investigation Agency (EIA). Their undercover film allegedly shows Schweighofer accepting illegal timber.

Schweighofer, however, claims that the video was “edited in a misleading way”. The company has requested that EIA release the unedited footage. EIA Executive Director Bismarck has refused, saying that this would “endanger further research and uninvolved third parties”.

profil nonetheless obtained exclusive access to the full, unedited footage. It consists of two roughly one-hour visits to Sebeș, including a meeting with Karl S., Schweighofer’s purchasing manager for Romania. To be clear: profil could not see any difference in content between the unedited and the edited version.

During the interview, Karl S. repeatedly emphasizes how urgently Schweighofer needs timber for its sawmills: “There isn’t enough raw material to meet our needs.” The supposed timber traders are told to send the company as many trucks “as you can load”.

The undercover investigators stress several times that they would like to log more than is officially permitted. They say, for example, that they would welcome “any extra production”. Karl S. replies to such suggestions: “We have 120 trucks (arriving, ed.) every day. We are very flexible.” Curiously, the managers criticize the problem of illegal logging in Romania at the same time.

The conversation moves on to a bonus system for suppliers who supply more timber than agreed. They receive extra money from Schweighofer “at the end of the month and at the end of the quarter”. Schweighofer now claims that these bonuses are only for small additional volumes of wood that can be logged legally in special cases.

At the end of the meeting, Karl S. again emphasizes the enormous amounts of timber bought by Schweighofer: “We process (in Sebeș, ed.) one and a half million cubic meters without importing anything,” he says, “and it works.” Followed by: “Don’t ask me how, but it works.” S. has since left the company although the company claims he has done nothing wrong.

E-mails made available to profil paint a similar picture. The supposed timber traders follow up the meeting with an email asking whether they really can deliver “twice the allowed amount”. A Schweighofer employee replies: “We can sign the agreement in June, no problem.”

Later – on April 24, 2015 – a completely different e-mail arrives. The same employee now suddenly makes it clear that “the legal origin of all timber (…) must be confirmed by the documents”.

So is everything above board after all? Not quite, given that the day before this last e-mail a Romanian TV journalist working for the station Antena 3 contacted Schweighofer saying that they had undercover videos of questionable meetings.

Further Information:

EIA’s undercovervideo: http://tinyurl.com/holzundercover

Report „Stealing The Last Forest“, full length: http://tinyurl.com/dergestohleneurwald

Schweighofer Counter-report in English language: http://tinyurl.com/schweighofer-counter-report

Further reactions of Schweighofer on the allegations in English: http://www.schweighofer-initiative.org/en/