It's about buying illegal harvested wood, about clear-cuts, about the Romanian authorities investigation on Holzindustrie Schweighofer. No question remains unanswered.

Reporter: Mr. Schweighofer, what can you tell us about your company ? About the business, about how big it is...

Gerald Schweighofer: Also about the history?

R.: No, only about the recent years.

G.S.: We started our industrial business around 14 years ago. In 2002 we had three employees. We started to build up the wood industry and have now around 3,500 employees. The production sites are in Romania, but also in Austria and Germany. We have offices in other places, too.

R.: As I know you just expanded in the fiber production in Austria. Who are your clients for this new range of products ? Anybody we know ?

G.S.: We took over an old pulp mill which produced only pulp for regular paper. Under the current conditions in Central Europe it is very difficult for a company like this to be competitive. So we had to invest to into special products. Our choice was to focus on pulp for viscose fibers, which are used mainly the textile industry, but also for the food sector. We produce wooden pulp with a very high grade. 90% of our production is used in textiles; 10% for specialties, like the food industry, for ice-cream, or for tooth-paste. Just recently we started to deliver pulp to Japan as raw material for noodles. They eat pulp pasta.

R.: You mentioned the textile industry ? Any famous European brand ?

G.S.: The textile industry is mainly based in China. They purchase viscose pulp from us. The further processing, like spinning, happens in China. Those products are then sold to the textile industry worldwide.

R.: Is it possible that we are wearing right now clothes made with your product ?

G.S.: Yes, maybe. Much is also used in hospitals. Many people think that cotton is a natural product. What they are not aware of is that cotton needs lots of pesticides. For wooden pulp, you don’t need any pesticides. It is a natural product. We even utilize more and more of the by-products from the pulping process. When you cook the wood, you don’t only receive pulp, but also a liquid containing hemi-celluloses and lignin that we supply to the bio-based industry as a raw material. And we produce a lot of bio-energy from waste water which is fermented to natural gas and converted to green electricity and heat.

R.: I would like to talk about your Romanian business. We know that you are a supplier for some big companies there. Among them we counted Kronospan, Egger, Kastamonu. Are you still working with them ? Since when ?

G.S.: When we started in Romania, Frati, an Italian particle board producer, was the only customer for by-products. It was a logical decision to build our first factory in Sebes, close to Frati, which was later taken over by Kronospan. Romania did not have a pulp and paper industry at that time. So we could not sell the chips to them, like in Western Europe. In Romania all this pulp and paper industry had closed. Also nowadays, we have only a few of options, to use chips and saw dust. We can either make pellets, or sell it to Egger, Kronospan or Kastamonu, who produce panels. Or we can ship it to Austria for pulp, or Germany for panels.

R.: Are these your biggest customers ? In terms of volume ?

G.S.: No, the majority goes to other customers. The named companies are big customers, but they do not get the major volume.

R.: Are you still working with them ?

G.S.: Yes, of course.

R.: As we know, during 2014 three of them bought from you products worth of 23 million Euros. So they are important clients. Don't you agree ?

G.S.: I don’t know how much turnover we had with them. I would have to look it up. But you have to consider, that you recover only 50% from the log volume as lumber. The rest are by-products, chips and saw dust, which are sold to the panel industry.

R.: You are aware that in the last two years the name of your company has been mentioned in many public scandals. Do you have a comment on this ?

G.S.: Of course, we are a big player in Romania. In our industry there is a big difference between new investors with very modern technology and the old ones. They invested a lot of money in order to be able to fabricate those products that are sought-after by the customers. On the other hand, you have thousands of small saw mills with old technology. Of course, there is a conflict of interest. Small saw mills have completely different ideas what to do—this results in a little bit of tension. We had the same situation 30 years ago in Austria. Back then, there were 3000 saw mills. With the introduction of modern equipment and large investments a modernization process started. Those investments led to a conflict between small saw mills and big saw mills.

R.: How many wood suppliers do you have in this country ?

G.S.: I don’t know exactly, but I guess around 800.

R.: Not around 1000 ?

G.S.: I don’t know exactly, I have to check. But does it really matter, 800 or 1,000? There are many.

R.: Can you firmly say that all the logs you bought during the last decade were 100% legal ?

G.S.: We do everything for it. You can believe me, since the beginning we were always interested to purchase only legal wood for our factories. We undertake significant efforts and employ lots of staff to control our purchases. You won’t find any other company in Europe or worldwide, that has so many employees dedicated to check all documents, for controlling the suppliers and for checks in the saw mills. I think, we have around 60 people only to control the papers, to control our suppliers and the harvesting sites, and to ensure that only legal wood enters our factories.

R.: The Romanian government estimates that around 8.8 million cubic meters of wood is illegally harvested every year in Romania. How can you be sure that none of this illegal wood is accepted in your factories ? Especially that is well known how many ways to conceal the origin of this kind of wood are.

G.S.: We have a market share of 7% of the total Romanian logging. With that percentage we are not the major consumer of these logs.

R.: But can you tell us what is your market share for softwood ?

G.S.: You are aware that we are limited to 30% with conifers. Hence, we cannot buy more than 30%.

R.: Your activity is currently under investigation by Romanian authorities? Do you have a comment on this ? Are you aware of the result of this investigation?

G.S.: Such investigations are happening at all wood processing companies. You won’t find a single large timber processor in Romania, who is not subject to controls or investigations. We did not receive the report of the investigation at our mills, yet. We asked for it, but our request was refused. If we would have this report, it would be much easier for us to see if mistakes did happen in our company and what did we do wrong. But we don’t have this report so it is hard for us to give you an answer.

R.: I don't believe that Kronospan or Kastamonu are also investigated. You said ALL wood working companies are under investigation..  

G.S.: … under general investigation. There are numerous controls from different organizations—I meant in general.

R.: But only your company is investigated under this circumstances, so...

G.S.: Yes, but this happened already one year or one and a half years ago. And still we did receive no documents, no report, really nothing to see what we would have made wrong.

R.: You are aware that is really simple to get these documents. For instance we have the preliminary report. And you must know that is pretty rough. It says that your sawmill in Radauti bought wood from not existing or inactive companies. How can someone accept wood from a non-existing company ?I could give you the report on Radauti.

G.S.: Can I have this report?

R.: It is very simple to get it. If I could, you can also.

G.S.: It is the DIICOT report?

R.: No, it is a preliminary report.

G.S.: Okay, I don’t know about it.

R.: So, for example, apparently you bought wood from a supplier that has been inactive in the last four or five years ? 

G.S.: I cannot say, which company it is here … 

R.: We are talking about a volume of 1,008 cubic meters of wood. In other situation there is also a suspicion that one of your suppliers for Radauti sawmill reported to SUMAL system falsified documents for a volume of 4,790 cubic meters. 

G.S.: I'm not aware of the details of all 800 suppliers. There are my colleagues who can give you a better answer, as I’m not so into the details to. But I ensure you that we make a due diligence for all customers. Everybody can see this. We have many controls, and we keep all the documents in our company. Of course, you can never be immune of crimes somebody committing. The government has also no chance to prevent all crime. But we do everything to identify criminal companies. And if we recognize illegalities, involvement in a crime even forestry related lawsuits, such suppliers are delisted. We cancel the contract and the timber from such companies has no chance to come into our saw mill. 

R.: So you cannot take responsibility for your suppliers ?

G.S.: No, we take responsibility for everything. But we cannot do more than to control with 60 people all shipments that come to our saw milsl. If there is a criminal act, some sort of fake, or something like this—how can we recognize this? We cannot make sure, that there is no crime in the country. It is also not easy for the state to find all people involved in crime.

R.: We were talking about your Radauti factory. In Sebes factory the suspicions are even worse Apparently about 27 suppliers sold directly to your company 30,000 cubic meters of wood without any certain origin and they also delivered via other suppliers to you another important volume. We are talking about 165,824 cubic meters of wood without any certain legal origin. 

G.S.: Which report is it?

R.: It is a preliminary report of the authorities about your Sebes branch.

G.S.: We control all the trucks. Of course, mistakes may have happened. Also NGOs have alerted us about irregularities. And we have done much, much more in our due diligence process that what is needed and necessary by law. We have now developed the GPS system, which exceeds the Romanian regulations by far. We can control first-hand the route using GPS-devices that are installed on all log-trucks. From the middle of December, everybody can watch where our logs are coming from.

R.: We are not talking about an NGO here but a Ministry. They have a list of suppliers. Are you still buying from them? 

G.S.: I don’t know. We have 800 suppliers, thousands of customers, how should I give you an answer, which of them is still is supplying or not? 

R.: … Because this investigation is pending for over one year. Haven't you seen the public statements ?

G.S.: We hired external consulting company. They will review what was in past until now. 

R.: One of the suspicions was that an organized structure has been built in order to „laundry”the illegally harvested wood and the members of this structure are the forests administrators, transport companies and people in charge with wood checking and acceptance. That means the structure includes some of your employees.

G.S.: We do everything, what the Romanian law says and we truly respect the Romanian legislation. If one employee really made an illegal deed, it would be very important for us to know. If somebody makes a criminal act in our company, we would be happy to find this individual together with the authorities. 

R.: How is it possible that you do not know? Being your employees you should know.

G.S.: Yes, but which criminal act should he have made?… at which company and …

R.: We are talking about an organized structure with the purpose to „laundry” illegal wood, and we are not talking about just one but more employees. These are the suspicions over your company.

G.S.: I can only say: If one of our employees violated the Romanian law in a criminal act, you have to consider that we have 3000 employees. I cannot guarantee for all the 3000 employees. 

R.: But not all 3000 are working in the forest. You have a total of 3000 employees but those working in the forests are way more less than that.

G.S.: We have 60 people only for controls. In addition there is the purchasing department. We have hundreds of people involved with the forest. 

R.: Let's get back to those 165,824 cubic meters of wood without known legal origin. This is around 6% of the yearly quantity you buy in Romania. How can you ignore such a quantity ?

G.S.: I’m sure, we have checked everything. Why do you say this is illegal wood? 

R.: The report says this quantity is of unknown legal origin. So it must be illegal, isn't it ?

G.S.: We do everything and we check everything. I’m 100% sure we have checked also this material. We check the documents for everything that arrives at our mills. 

R.: Do you believe that the result of the investigation is going to clear your name because it will infirm the allegations ?

G.S.: Once we have a copy of the final report we will be able to give answers. Maybe we find out there was some mistakes from our employees. At the moment we know... 

R.: We are not talking about a simple irregularity ! This is a crime !

G.S.: Also a criminal act is something we as a company consider to be a mistake. It is in our highest interest to become aware of such acts. If we have employees acting criminally, we need to find them, draw the consequences and stop working with them. If individuals committed criminal acts, the Romanian police and the Romanian authorities will act and these people will go to court. We will respect this and see what the Romanian justice will conclude.

R.: But what if the authorities suspicions will be confirmed ? What if illegal facts will be connected to your company ?

G.S.: We have to find out who committed the crime, how and why. This process will have to happen in a very transparent way.

R.: Do you know the Romanian counties of Caraș-Severin and Hunedoara. Have you ever been there ?

G.S.: I’ve heard about these provinces.

R.: Did you go hiking in the Romanian mountains?

G.S.: I was travelling all over Romania … I guess I was there.

R.: I would advise you to go there because of this wonderful forest. But the problem is that in the same area there is also a hidden place. Do you know what I am referring to ? I am talking about clear-cuts. I mean completely de-forested areas. No less than 31 hectares of clear-cuts. These are in Bucova region and the locals say that all these trees ended up in Schweighofer's sawmills. What do you think about this ?

G.S.: In Romania it is the same case like in Austria and everywhere else: The law defines how much harvesting is allowed and how big a clear-cut can be. Based on these rules you receive a permission for the clear-cut. You are right this photo shows a clear cut, but we have had many cases of wind falls where NGOs and the media claimed that it would have been clear-cuts. Even experts confirmed, that it was a windfall but looks like a clear-cut. Not here in your image, you are right, this is a clear-cut, indeed.

R.: But I’m asking you personally - do you find that beautiful?

I think it is not beautiful—but you will find this size of clear-cut, maybe not four of them next to each other, but you find the same size clear-cut also in Austria or Switzerland.

R.: You don’t find it beautiful, but you have no problem buying this wood ?

G.S.: It is the same case in every country: You have a protected forest and you have areas approved for harvesting. We spoke about Canada before. There you find areas with 300 ha big clear-cuts. This is the norm there. It is permitted. The law allows making clear-cuts of 300 ha. In Austria we have maximum clear-cut area of, I think, 3 or 4 ha. If you have special permission you could go up to 10 ha.

R.: Once again, you find this ugly, but as a businessman do you find it ok ?

G.S.: If you have a managed forest you have to harvest the trees. I do too 100% agree that we must also have natural forest, and protected forest areas. And generally: you can only harvest at maximum the volume that is growing. Otherwise the forest is overcut. All over Europe much more timber is growing than what is harvested. You find this in all countries. Historically, trees have always been harvested. And it makes sense— if we don’t harvest trees, eventually they would die and rot, releasing all CO2 they absorb during growth. Considering the current discussions about CO2, the only thing that can really remove CO2 from the atmosphere is lumber. If you cut a tree and build houses you have this CO2 removed. Sustainable wood use is therefore a goal of European Union. For that you need managed forest. This cannot happen without harvesting. I’m convinced that natural forest and national parks are very important. They must not be touched. This protection has to be enforced by the governments and the EU. Productive forests need to be managed and harvested—but of course not more than what is growing.

R.: This area has the size of 42 soccer fields...

G.S.: If you show me a photo like this, just like a lot of NGOs did, those seem to show windfall in Romania.

R.: This is a picture taken by our crew.

G.S.: This is good, I agree, yes.

R.: Does the name Mahena Silva rings a bell ?

G.S.: No.

R.: You don’t know this company ?

G.S.: Maybe there was some supplier …

R.: It is one of your top-10 suppliers in Romania and in 2014 they sold to you 6 mln EUR worth of wood. It’s your 5th supplier in Romania, so it is an important one. The locals say that this company have illegally cut 4,000 cubic meters of wood in this area. They say this company have cut on seven meters width each side of the forest road, taking out 4,0000 cubic meters of wood and this wood reached your factory in Sebes.

G.S.: I’m not sure, I cannot prove it now, if the supplier had all documents for this or he had the cutting permission. Who is the owner of this forest? Was this state forest?

R.: No, it is not a state owned forest, it's a Composessorat.

G.S.: And they had the cutting license for this?

R.: No, not for this one.

G.S.: What is the Composessorat doing then …? When somebody is logging in my forest without a cutting permission then I have to go to the police immediately.

R.: But this is a proof that illegal harvesting is still a practice...

G.S.: If you are a forest owner and somebody enters your forest and cuts a tree, what you will do? You go to the next police station and report: “Somebody is cutting my forest”.

R.: But let's remember that corruption is still an issue in Romania.

G.S.: I would understand the case if it concerned the state forest, but not when it is a private forest…

R.: Is it true that your FSC certificate has been suspended ?

G.S.: Yes

R.: But you are still PEFC certified ?

G.S.: Yes

R.: Is this the only one you still have ?

G.S.: I suppose, no...

R.: How important is this PEFC certificate ?

G.S.: Of course it is important. It doesn’t matter if the certificate is from PEFC or FSC—it is voluntary, not legally required. We have committed to the certification to be on the safe side, to prove everything is right, to have more audits and to have more secure processes in the mill.

R.: You obtained this certificate in May, 2014 and has been confirmed in June 2015. At that time you were under investigation in Romania. How could you obtained the confirmation under those circumstances ?

G.S.: Regardless which certification scheme we talk about, all have strict and precise procedures that have to be followed. Regularly we have to prove that we fulfill the criteria, conduct field-audits, check everything, follow the due diligence standard, that we fulfill all regulations—even if we consult with the stakeholders. This applies not only to us—a lot of companies are certified. The Romanian state forest is certified.

R.: I wasn't talking about the company that issued the certificate but about the fact that the confirmation came while you were under investigation. Since you mentioned, it does the name Manfred Brandstätter sounds familiar ?

G.S.: Yes, I do.

R.: Do you know him?

G.S.: Yes, of course.

R.: Where do you know him from?

G.S.: I know him for a long time. We both grew up in the lumber business. His father had also a small sawmill not so far from ours. In the Austrian timber processing sector everybody knows each other.

R.: But are you friends, or…?

G.S.: I know him for long time—like many else in this industry. It is quite a small community..

R.: This gentleman works for you. Are you just friends or is it more than that ?

G.S.: He is in the jury of the Schweighofer-Prize, where he evaluates the ideas submitted to the prize. He has great knowledge about wood research. In the jury he is among six other members. Three jury-members are from Austria and three members…

R.: Do you pay him ?

G.S.: Yes, everybody receives compensation for their work and efforts. They have to sit all many hours to review the submissions. It is a small amount that everybody receives.

R.: How much ?

G.S.: Maybe 2,000 EUR, I’m not sure.

R.: So, you know him for a long time ?

G.S.: Yes

R.: In fact he has been a member of your jury since the beginning.

G.S.: Yes. The Schweighofer-Prize exists since 13 years

R.: But how come you chose a certification company represented by Manfred Brandstätter himself. Don't you see a conflict of interest here ?

G.S.: No, I think not. I chose him because he is very experienced in wood research. He knows a lot about gluing and wood processing. The auditors, on the other side, who are working at Holzforschung Austria, are completely independent in their assessment. This was already subject of a lengthy discussion following a complaint a year or half year ago. The Austrian Ministry has checked this complaint, and concluded in a written statement, that the auditors are independent, that they’re not dependent on the board.

R.: Do you believe that if his team would find irregularities in your company, Mr. Brandstätter would refuse your certification ?

G.S.: Again, the auditors are in their assessment are completely independent from the board—otherwise they wouldn’t get their accreditation. I trust here the Austrian Ministry. They control many companies that are accredited to issue certification, not only the Holzforschung Austria. The Auditors have to be independent from the board—I’m 100% sure Holzforschung Austria’s auditors are completely independent.

But generally speaking, you have so many questions. Why you wouldn’t come to Romania and stay two days there and observe how we work ?

R.: We asked for this since the beginning.

G.S.: Did you ask in Vienna, at the headquarters?

R.: We have asked everywhere and they told us it won’t be possible

G.S.: Can you give me his name?

R.: No, because he doesn't work for you anymore.

G.S.: ....

R.: When Mr. Ponta was the Prime-Minister of Romania you sent him a letter.

G.S.: Yes, I have sent many letters to the government.

R.: Yes, but this letter was really serious, because you said you will lay off your employees from Romania.

G.S.: I think this one was about this 30% limitation.

R.: Do you believe it was a fair way to address this issue ? It seems rather an economic black mail. How could you threaten the prime minister to fire all of your employees due to a new regulation the government wanted to approve ?

G.S.: This concerns our last sawmill in Reci. Before we’ve built this sawmill I personally visited the Minister of Economy and asked: ‘Does Romania want to have this factory’. He answered: ‘For hundred percent, you have our support if you build this sawmill’. At that time we were even nominated as the ‘Investor of the Year’. But finally they said ’no, you are too big for this country; we will limit purchasing to 30% of the harvest’. What does this mean? We have to import from Austria, Poland, or the Czech Republic. We do have the possibility to import the raw materials at the moment. But without importing, what alternative would we have? Only to close one or two mills.

R.: But you said that you buy only only 7% of the harvested wood in Romania?

G.S.: As you mentioned correctly—for conifers our share is bigger. My point is: you cannot say to an investor ‘you are welcome’ and afterwards you say ‘you are not welcome, you are too big’. A minister, who made a decision to support an investor, has to be fair and to follow this decision.

R.: Maybe, but you cannot threaten the Prime Minister to cause a social turmoil.

G.S.: Sorry, I couldn’t understand.

R.: You threaten to cause a significant disturbance among the small and medium enterprise industry and as well among the population.

G.S.: Maybe the wording was a mistake. But you understand: if we are subject to a limitation and cannot get the raw material our only option is to shut down the mill. Or what is alternative? There is no alternative.