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BlueLinx Buys Illegal Indonesian Timber

by Steve SlatterySpecial to CorpWatch
March 14th, 2005

BlueLinx Holdings Inc., the largest wood distributor in the United States, is exporting undocumented timber out of Indonesia’s critically endangered rainforests, flooding the U.S. marketplace with artificially cheap plywood, investigations by Greenpeace and Rainforest Action Network (RAN) have confirmed.

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, is knowingly purchasing wood from eight Indonesian mills that have well-documented histories of trafficking illegal timber, according to the Indonesian Department of Forestry.

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.

In response to accusations about purchasing undervalued, undocumented wood from corrupt cartels, the general counsel to BlueLinx, Barbara Tinsley, on a January 21, 2005 conference call hosted by RAN, indicated that her client did not intend to change its Indonesian purchasing policies.

The Indonesian Department of Forestry reports that the average deforestation rate since 1998 is estimated at 2.8 million hectares (7 million acres) per year. In its 2004 report “Illegal Logging and Global Wood Markets,” 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.

“Many 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,” said Pamela Wellner, senior campaigner at Greenpeace. “Companies that choose not to independently verify the origin of their wood, only exacerbate illegal logging and its ruinous impacts on ancient forests.”

A recent BusinessWeek editorial entitled “Indonesia’s Chainsaw Massacre,” stated that Indonesia’s ravaged rainforests are “disappearing 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.” The country has lost 70 percent of the ancient forest already and, at the present rate, what remains will be gone within 15 years. In addition to Indonesia’s list of endangered species, the longest of any nation, 40-50 million indigenous people also depend on that ecosystem for their sustenance.

The conservation community is calling on BlueLinx to join the voluntary corporate embargo of Indonesian forest products already in place at Centex Corporation, International Paper and Lanoga Corporation.

Activists, who have for decades targeted logging companies are now beginning to take on the financial institutions behind the scenes. As the World Bank has redirected funding from controversial projects, there is a growing movement to hold smaller financial institutions to the same principles. In this case, that means JP Morgan Chase, a leading lender to BlueLinx.

In September of 2004, when BlueLinx filed for an initial public offering with the Securities and Exchange Commission, the required registration statement declared that BlueLinx had “a substantial amount of debt.” A later amendment documented a credit agreement, which listed JP Morgan Chase Bank as a documentation agent and a leading lender in a $165 million loan.

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 and Citigroup. A spokesperson for JP Morgan Chase recently declined to comment on their connection to Indonesian logging practices.

“JP Morgan Chase has built its financial empire by making investments of mass destruction like BlueLinx,” said Ilyse Hogue, director of the Global Finance Campaign at RAN. “Illegal logging in Indonesia is both an environmental and humanitarian crisis. It is morally reprehensible that America’s second largest bank is connected with corrupt timber cartels that are directly responsible for the wholesale destruction of the most fragile and endangered forest ecosystems on Earth.”

Nabiel Mkarim, the former environment minister of Indonesia, recently confessed to the Jakarta Post that the government “does not have a clue” how to combat rampant illegal logging, adding, "It is difficult to combat illegal logging because we must face financial backers and their shameless protectors.”

The ministry told the AFP news agency that illegal loggers have formed mafia-like international networks throughout Indonesia.

Brant Olson, director of the old growth campaign at RAN, said that “BlueLinx has no business building the American dream out of the Indonesian illegal logging nightmare. “Norway, Finland and the European Union have already signed agreements with Indonesia boycotting products made from illegal timber. BlueLinx’s Indonesian purchasing policies and practices constitute crimes against nature and humanity.”

In a January 2005 speech, Malam Sambat Kaban, the minister of forestry for Indonesia, had this to say, “Expecting 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. Tropical timber producer and consumer countries should share a significant responsibility in combating illegal logging and its associated timber trade.”

A team of international scientists from the Yale School of Forestry and Environmental Studies confirms the “expansive and accelerating deforestation” of Indonesia’s disappearing lowland rainforests caused by decades of crime and corruption. The Yale report concludes that a failure to implement immediate solutions will lead to “irreversible ecological degradation.” The study, published in Science magazine, also concludes that “stemming 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 monitoring” and calls for “immediate transnational management” to end the massacre.