Stealing the Last Forest: Austria’S Largest Timber Company, Land Rights, and Corruption in Romania Contents 3 Executive Summary 6 Part 1

STEALING THE LAST FOREST: AUSTRIA’S LARGEST TIMBER COMPANY, LAND RIGHTS, AND CORRUPTION IN ROMANIA CONTENTS 3 EXECUTIVE SUMMARY 6 PART 1. ILLEGAL LOGGING IN ROMANIA: A LONG-RECOGNIZED PROBLEM 8 SECTION 1.1: RATES OF ILLEGAL LOGGING For over 25 years as a 8 SECTION 1.2: RESTITUTION PROCESS AND ILLEGAL LAND ACQUISITION nonprofit organization, EIA 10 SECTION 1.3: ROMSILVA’S MISMANAGEMENT OF NATIONAL PARKS AND STATE FORESTS has pioneered the use of 12 PART 2. THE CASE OF SCHWEIGHOFER undercover investigations to 12 SECTION 2.1 SCHWEIGHOFER IN ROMANIA 13 SECTION 2.2: POLICY OF DESTRUCTION REVEALED expose environmental crime IN UNDERCOVER INVESTIGATIONS 14 SECTION 2.3: KNOWLEDGE AT THE TOP: MANAGEMENT around the world. Intelligence BY GERALD SCHWEIGHOFER reports, documentary evidence, 16 PART 3. CASE STUDIES: ALL ROADS LEAD TO SCHWEIGHOFER 16 SECTION 3.1 BUYING ILLEGAL WOOD - SCHWEIGHOFER’S campaigning expertise and 1,000 SUPPLIERS PER YEAR 20 SECTION 3.2: STOLEN FORESTS - SCHWEIGHOFER an international advocacy AND ILLEGAL RESTITUTIONS network enable EIA to achieve 22 SECTION 3.3: BUYING FROM NATIONAL PARKS 26 PART 4. SCHWEIGHOFER’S EUROPEAN CUSTOMERS far-reaching environmental 26 SECTION 4.1: SCHWEIGHOFER’S EUROPEAN EXPORTS protection by spurring changes 28 SECTION 4.2: EUROPEAN UNION TIMBER REGULATION (EUTR) 29 SECTION 4.3: VOLUNTARY CERTIFICATION: in market demand, government NO GUARANTEE FOR LEGALITY policy and enforcement related 31 PART 5. ROMANIAN POLICY CONTEXT 31 SECTION 5.1: ROMANIA’S ATTEMPTS TO REFORM FOREST GOVERNANCE to global trade in wildlife and 32 PART 6. CONCLUSION environmental products. 33 RECOMMENDATIONS 34 GLOSSARY 36 WORKS CITED ACKNOWLEDGEMENTS SIDEBARS AND GRAPHICS EIA would like to thank the following funders for their support: 7 TYPES OF ILLEGAL LOGGING COMMON IN ROMANIA The Tilia Fund 8 ROMANIA’S LAND RESTITUTION LAWS Good Energies Foundation 9 THE GHICA COMANESTI ILLEGAL RESTITUTION CASE Weeden Foundation The Cox Fund 11 FOREST LOSS IN ROMANIA 2000-2014 © Environmental Investigation Agency 2015. 12 SCHWEIGHOFER’S OPERATIONS IN ROMANIA 13 SCHWEIGHOFER FINANCIAL STRUCTURE No part of this publication may be reproduced in any form or by any means without permission in writing from the 15 ILLEGALITIES OF HOLZINDUSTRIE SCHWEIGHOFER’S TIMBER SUPPLY CHAIN Environmental Investigation Agency, Inc. The contents of 17 LOCATION OF CASES AND SCHWEIGHOFER FACTORIES this report do not necessarily reflect the views and opinions 24 SCHWEIGHOFER’S MAJOR CUSTOMERS ACROSS EUROPE of EIA’s funders. EIA is solely and entirely responsible for the 26 KINGFISHER’S ROMANIAN LINKS contents of this report. 27 SCHWEIGHOFER ROMANIA’S 2014 SALES TO TOP 25 EU CUSTOMERS Cover: Agent Green 29 BIOMASS AND WOOD PELLETS IN THE EUROPEAN MARKET Additional content: Ecostorm 2 EXECUTIVE SUMMARY Retezat National Park in Romania Agent Green Europe’s last remaining virgin forests are being illegally most of the instances of illegal logging EIA encountered in throughout the country (see Case #1: Borșa, p.16).12 A more logged and sold to consumers throughout Europe as bio-fuel the field, loggers sold the timber to Schweighofer’s mills. recent study by the Romanian National Forest Inventory took and lumber by the continent’s largest retailers.1 The eastern Through a series of case studies covering the past decade, this a more detailed approach, including numerous field visits to European country of Romania, which contains two-thirds report documents specific examples in which Schweighofer logging sites across the country. This study concluded that of Europe’s last remaining virgin forests,2 also home to the has received illegal timber, and shows the consequences to 8.8 million m3 of timber was cut illegally each year between continent’s largest populations of wolves, bears, and lynx, is Romania’s forests, national parks, and communities. 2008 and 201413 – equivalent to 49% of the timber cut now overrun by foreign companies taking advantage of its during this period.14 It appears that this study did not take This report further identifies Schweighofer’s largest recent timber resources.3 Of those, an Austrian timber and wood into account all forms of illegal logging, such as timber cut on European buyers, which include some of Europe’s biggest processing company named Holzindustrie Schweighofer illegally restituted land. biofuel and DIY stores, at a time when a new European (Schweighofer) has taken the greatest advantage of all, law to stop the trade in illegal wood, the European Union Illegal logging and poor forest governance have led to severe and now processes around 40% of the country’s total Timber Regulation (EUTR), is beginning to be implemented deforestation in once-pristine forests. An analysis of satellite annual softwood production4 including large amounts of across member states.8 Schweighofer has threatened the data showed that Romania lost 280,000 hectares of forest illegal wood. Schweighofer sells their pellets, briquettes Romanian government with legal consequences if it does between 2000 and 2011.15 Almost half of this forest lost was and timber products to nearly every European Union (EU) not weaken ongoing national forest policy reform processes located within national parks and other protected areas.16 member state, 21 in total.5, 6 Its customers include Europe’s that endanger their rapacious business model.9 Romanian top biomass companies such as Austrian firms Genol and EIA’s investigation reveals the many forms of illegal logging civil society and politicians alike have voiced their outrage, Drauholz, and some of Europe’s largest DIY (“Do-It-Yourself” that occur throughout the Romanian forest sector (see and Romanian prosecutors have started an investigation into home improvement) stores, including Hornbach (Germany), SIDEBAR: Types of Illegal Logging Common in Romania, the company.10 Schweighofer now faces legal consequences Baumax (Austria/Germany), and Bricostore (owned by p.7). Common violations of harvesting regulations across the within Romania, and its clients across Europe must confront UK-based Kingfisher) (see GRAPHIC: Schweighofer Romania’s country include exceeding allowable cutting limits, illegal the fact that their purchases include illegal wood as well as 2014 Sales to Top 25 EU Customers, p. 27).7 clear-cutting, and regular abuse of so-called “sanitary” fuel the destruction of Europe’s last great forests. This report by the Environmental Investigation Agency Illegal logging in Romania has been widely recognized by (EIA) follows a two-year investigation into illegal logging in the government, media, and environmental activists as a Romania. The results showed that Schweighofer has been the serious problem for over a decade. In a study focused only Taking the many forms of illegal logging single biggest driver of illegal logging in the country over the on a limited set of illegal harvesting methods, the Romanian past decade. The company is the largest buyer of softwood documented by the Romanian government, government estimated that, between 1990 and 2011, 80 timber in Romania, and as this report demonstrates, it million m3 of timber was cut illegally in Romania – 24% of lacks effective measures to avoid sourcing illegal wood. An local NGOs, and in EIA’s own investigation, EIA the total volume of wood cut during this period - worth at undercover investigation showed the Austrian Schweighofer least €5 billion.11 This figure is conservative, because it fails official who was most influential in setting up the company’s estimates that at least 50% of all timber cut in to capture many forms of illegal logging, such as logging Romanian operations openly accepted illegal wood and on land stolen from local communities through unjust Romania was illegally sourced. further, offered bonuses for suppliers of illicit timber. In and illegal restitution processes that continue unabated 3 permits for cutting of diseased or storm damaged timber. A deforested area near Borșa in Maramureș Initiated in the early 1990s, the ongoing restitution process County, Romania (see Case #1: Borșa, p.16) for forest land confiscated by the communist government in 1948 has also been plagued by illegalities. The Romanian government estimates that at least 20% of all public forests meant to be returned to the original owners has been illegally acquired by others, resulting in widespread disenfranchisement of the true land owners and the extensive deforestation of illegally obtained forest land.17 In most cases, organized criminal groups including government officials and politicians orchestrated these illegal restitutions using fraudulent documents and bribery.18 Taking the many forms of illegal logging documented by the Romanian government, local NGOs, and in EIA’s own investigation, EIA estimates that at least 50% of all timber cut in Romania was illegally sourced (see Section 1.1: Rates of Illegal Logging). In the majority of the cases of illegal logging investigated by EIA, the Austrian company Schweighofer appeared as the destination for the illegal timber (see Part 3: Case Studies). Schweighofer has misled its customers about its sourcing practices in Romania for more than a decade, despite purchasing around 40% of the country’s softwood production and acknowledging Romania’s forest sector as very high-risk. The company states that its forests are Forest Stewardship Council (FSC) certified, that all of its supplies come from Programme for the Endorsement of Forest Certification (PEFC) controlled sources, and that it refuses timber cut

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