WASHINGTON -- February 23 -- Investigation Finds ³IMD² In Indonesia: JP Morgan Chase and BlueLinx linked to illegal logging of endangered forests and resulting humanitarian crisis.
- DirtyMoney.org publishes ³investment of mass destruction² case study linking JP Morgan Chase and BlueLinx IPO to illegal timber trafficking.
- Conservation community calls on megabank and timber trader to comply with voluntary embargo of Indonesian wood.
- Illegal loggers called ³terrorists² by Indonesian government as unlawful clear-cuts cause humanitarian crisis.
San Francisco Investigations by Greenpeace and Rainforest Action Network have confirmed that JP Morgan Chase (NYSE: JPM) client BlueLinx (NYSE: BXC), America¹s largest building products distributor, is smuggling legally disputed, undocumented timber out of Indonesia¹s critically endangered rainforests and flooding the U.S. marketplace with artificially cheap lauan plywood. The conservation community is calling on JP Morgan Chase and BlueLinx to immediately comply with a voluntary corporate embargo of Indonesian forest products already in place at Centex Corporation (NYSE: CTX), International Paper (NYSE: IP) and Lanoga Corporation.
Information obtained from U.S. Customs & Border Protection, an agency of the U.S. Department of Homeland Security, proves that BlueLinx, a former division of Georgia Pacific (NYSE: GP), is knowingly purchasing from eight Indonesian mills that have well-documented histories of trafficking in illegal timber according to the Indonesian Department of Forestry. An IMD case study published on DirtyMoney.org details the trafficking of undocumented wood by current BlueLinx suppliers in Indonesia including Barito Pacific Timber, Decorindo Inti Alam Wood, Kayu Lapis Indonesia, Melapi Timber, Sangkulirang Bhakti, Sumalindo Lestari Jaya, Tunggal Agathis Indah Wood and Tunggal Yudi Sawmill Plywood.
On September 2, 2004 BlueLinx filed paperwork with the Securities and Exchange Commission for an initial public offering of common stock raising approximately $120 million. The required registration statement declared that BlueLinx has ³a substantial amount of debt.² An attached amendment submitted November 26, 2004 documented a credit agreement dated October 26, 2004 as Exhibit 10.18 listing JP Morgan Chase Bank as a documentation agent and a leading lender for a $165 million loan.
In a December 10, 2004 letter to Charles H. McElrea, chief executive officer of BlueLinx, Michael Brune, executive director of Rainforest Action Network, and John Passacantando, executive director of Greenpeace, provided detailed investigative findings and probable forest degradation caused by the company¹s practice of purchasing undervalued undocumented wood from corrupt cartels. On a January 21, 2005 conference call, Barbara Tinsley, general counsel to BlueLinx, indicated that her client had no intention of changing its Indonesian purchasing policies. In a January 25, 2005 letter to Mr. McElrea, Brant Olson, director of the Old Growth Campaign at Rainforest Action Network, requested a ³description of any and all existing procedures at BlueLinx to identify vendors sourcing fiber from illegal and/or undocumented harvest operations including descriptions of any methodologies deployed to audit sources of timber for sawmills, any data collected regarding timber origin and any baseline data or benchmarking of such data over time.²
(Copies of correspondence available upon request.)
Indonesia¹s chainsaw massacre
Indonesian Ministry of Forestry reports that 43 million hectares of the country¹s forests have been damaged or destroyed over the last several decades due to illegal logging, with the average annual deforestation rate estimated at more than 2.8 million hectares (7 million acres) since 1998.
³Tropical timber producer and consumer countries should share a significant responsibility in combating illegal logging and its associated timber trade,² said Malam Sambat Kaban, the minister of forestry for Indonesia in a January 2005 speech. ³Expecting or asking one country to combat illegal logging while at the same time, receiving or importing illegal logs does not support efforts to combat these forest crimes. Allowing or importing illegal timber will only encourage illegal logging in the timber producing country. Illegal logging can not be stemmed significantly without an effort to restructure the forest industry.² ³These illegal loggers are like terrorists,² said Nabiel Makarim, the former environment minister of Indonesia, referring to massive unlawful clear-cutting that has turned seasonal rains into deadly flash floods and landslides. "It is difficult to combat illegal logging because we must face financial backers and their shameless protectors.²
Mr. Makarim confessed to the Jakarta Post that the government ³does not have a clue² how to combat rampant illegal logging. The ministry told the AFP news agency that illegal loggers have formed mafia-like international networks throughout Indonesia.
According to a recent BusinessWeek editorial titled ³Indonesia¹s Chainsaw Massacre,² Indonesia¹s ravaged rainforests are ³disappearing at a rate equivalent to the area of 300 soccer fields every hour, gobbled up by loggers eager to turn them into plywood and planks for McMansions across the U.S. and Europe.²
In its 2004 report ³Illegal Logging and Global Wood Markets,² The American Forest & Paper Association, the largest and most powerful timber trade association in the United States, estimates that 55 percent of plywood exports from Indonesia are illegal.
Global Forest Watch, an initiative of Washington, D.C.-based World Resources Institute, estimated in a 2002 report ³The State of the Forest: Indonesia,² that illegal logging ³appeared to be the source of 50-70 percent of the country¹s wood supply.²
Yale study calls for action
Satellite and field-based analyses by a team of international scientists from the Yale School of Forestry and Environmental Studies confirms the ³expansive and accelerating deforestation² of Indonesia¹s disappearing lowland rainforests caused by decades of crime and corruption. The Yale report concludes that a failure to implement immediate solutions will lead to ³irreversible ecological degradation.² The study published in Science magazine also concludes that ³stemming the flow of illegal wood from Borneo requires international efforts to document a legitimate chain-of-custody from the forest stand to consumers through independent monitoring² and calls for ³immediate transnational management² to end the massacre.
³Buyers and consumers must recognize and assume responsibility for how their actions contribute to this illegal logging crisis in Indonesia, said Lisa Curran, Ph.D., director of the Tropical Resources Institute at the Yale School of Forestry. ³We must lead by example by implementing independently verified chain-of-custody programs that document the sources of wood products and materials. Consumers have a right to stump-to-store tracking of wood products to be sure they are purchasing products that were not acquired illegally from protected areas and national parks.²
³Many companies worldwide have realized the extent of illegal logging and are adopting wood procurement policies to ensure that their wood does not come from illegal or destructive logging operations, but from certified sustainable forestry practices,² said Pamela Wellner, senior campaigner at Greenpeace. ³Companies that choose not to independently verify the origin of their wood, only exacerbate illegal logging and its ruinous impacts on ancient forests.²
³BlueLinx has no business building the American dream out of Indonesia¹s illegal logging nightmare,² said Brant Olson, director of the Old Growth Campaign at Rainforest Action Network. ³Norway, Finland and the European Union have already signed agreements with Indonesia boycotting products made from illegal timber, and the time is long overdue for the U.S. forest products industry to live up to American values and stop trafficking in contraband wood that has been unlawfully clearcut from Indonesia¹s critically endangered forests. BlueLinx¹s Indonesian purchasing policies and practices constitute crimes against nature and humanity.²
³JP Morgan Chase has built its financial empire by making investments of mass destruction like BlueLinx,² said Ilyse Hogue, director of the Global Finance Campaign at Rainforest Action Network. ³Illegal logging in Indonesia is both an environmental and humanitarian crisis. It is morally reprehensible that America¹s second largest bank is connected with corrupt timber cartels that are directly responsible for the wholesale destruction the most fragile and endangered forest ecosystems on Earth. JP Morgan Chase¹s involvement in the illegal timber trade is not only a national scandal, but further proof that the company must put renewed effort into matching the environmental commitments of industry peers such as Citigroup and Bank of America.² "Indonesia suffers from widespread illegal logging," said Allan Thornton, president of the Environmental Investigation Agency. "Throughout the country, plundering profit-seekers destroy forests, breed corruption and disrupt local communities. This devastation is being driven by unchecked demand for cheap tropical timber in the United States and other consuming countries.
One of our core values at Lanoga is to operate our business in the most sustainable manner possible,² said Paul Hylbert, chief executive officer of Lanoga Corporation. ³As such, we support forest certification and avoid purchasing products from those areas of the world where the forests are endangered. As Indonesia has been a concern for some time, in 2003 we informed our suppliers and our own purchasing people to avoid supplying or buying products from there. We are very concerned about the allegations being made and intend to follow this situation closely to both understand fully what is going on and to take appropriate action as a result.²
Headquartered in Atlanta, BlueLinx is the largest building products distributor in the industry, with more than 11,700 customers including building material dealers, industrial manufacturers, modular and manufactured housing producers and home improvement retailers. BlueLinx offers more than 10,000 forest products used in residential and commercial construction, manufacturing, manufactured housing, repair and remodeling, and home improvement do-it-yourself projects. Among its stated values are to ³demonstrate respect² and ³be ethical.²
JP Morgan Chase
With assets of approximately $1.1 trillion and operations in more than 50 countries, JP Morgan Chase is the largest U.S.-based bank still operating without a comprehensive environmental policy for responsible investing. The megabank backtracked on a written commitment made by CEO William Harrison to provide the environmental and socially responsible investing communities with a policy by October 2004 and has failed to meet new industry best practices on the environment set by Bank of America (NYSE: BAC) and Citigroup (NYSE: C).
Tropical Resources Institute
The Tropical Resources Institute (www.yale.edu/tri/) is an interdisciplinary, non-degree granting program located within the Yale School of Forestry and Environmental Studies. The institute supports student research projects aimed at practical solutions to conservation and management of resources in the tropics. The Yale School of Forestry & Environmental Studies prepares new leadership and creates new knowledge to sustain and restore the long-term health of the biosphere and the well being of its people.
Greenpeace (www.greenpeaceusa.org <http://www.greenpeaceusa.org> ) is the leading independent campaigning organization that uses non-violent direct action and creative communication to expose global environmental problems and to promote solutions that are essential to a green and peaceful future.
Rainforest Action Network
Rainforest Action Network (www.ran.org <http://www.ran.org> ) campaigns for the forests, their inhabitants and the natural systems that sustain life by transforming the global marketplace through grassroots organizing, education and non-violent direct action.
Press Conference Participants
Professor Lisa Curran, Ph.D., director, Tropical Resources Institute, Yale University Pamela Wellner, senior campaigner, Greenpeace Allan Thornton, president, Environmental Investigation Agency Brant Olson, director, Old Growth Campaign, Rainforest Action Network Ilyse Hogue, director, Global Finance Campaign, Rainforest Action Network
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