Corruption scandal: Eucalyptus Fibre Congo accused of paying “black money” in the Republic of Congo, while it was FSC certified

A company called Eucalyptus Fibre Congo S.A. is alleged to have paid at least US$76,500 in “black money” to Congolese public officials in 2012. At the time, the company held an FSC chain of custody certificate.

Three weeks ago, Arnaud Labrousse sent an email to Kim Carstensen, FSC’s Director General. Labrousse has a few questions for FSC. Unfortunately, FSC seems reluctant to answer them.

FSC-Watch looks forward to posting Carstensen’s reply.

    From: Arnaud Labrousse
    To: Kim Carstensen (FSC)
    Cc: Chris Burchmore (FSC); Mathieu Auger-Schwartzenberg (FSC); Marais Gerrit (Sabie) (SGS); Gemma Boetekees (FSC); Richard Robertson (FSC); Thomas Colonna (FSC); Felix Romero (FSC); Francois Busson (European Commission); Thibaut Portevin (European Commission); Moustapha Ndiaye (World Bank); Jean-Christophe Carret (World Bank); Matt Cassetta (U.S. Department of State, Congo Basin Forest Partnership); Davyth Stewart (Interpol); Patrick Alley (Global Witness); Simon Counsell (Rainforest Foundation UK)
    Sent: Thursday, June 25, 2015 2:33 PM
    Subject: Congo-B bribery investigation

    Dear Sir,

    I was wondering whether you’d like to comment on the acknowledgement last week by the Canadian firm MagIndustries Corporation that its Congolese subsidiary Eucalyptus Fibre Congo S.A. (EFC) paid at least $76,500 in “black money” to Congolese public officials in 2012, at a time when the firm held FSC certificate SGS-COC-006777.[1] Canadian media report that “this could be one of Canada’s biggest foreign bribery scandals in years.”[2]

    MagIndustries’ 16 June press release states:

    In January 2015, the RCMP [Royal Canadian Mounted Police] conducted a search of the Company headquarters in Toronto. The search arose out of an Information to Obtain Search Warrant (“ITO”) sworn on January 16, 2015 which made allegations of corrupt payments to foreign public officials in the Republic of Congo […]. [The ITO alleged that “black money” payments were made to reduce tax and other liabilities of a Company subsidiary, Eucalyptus Fibre de [sic] Congo S.A. (“EFC”). […]

    The Investigation has confirmed that, in 2012, EFC made payments in Congolese currency equivalent [1] to approximately $US 51,000, $US 12,000, $US 8,500, and $US 5,000 to a variety of tax and social welfare inspectors and officials to reduce taxes and penalties owing by EFC in the Congo. A fifth “black money” payment in Congolese currency equivalent to approximately $US 10,000, in Q1 2013, was still being investigated.[3]

    SGS Qualifor’s remarkable November 2013 “FSC Controlled Wood Risk Assessment” of EFC, approved 2 July 2014, states:

    Due to the low CPI [Transparency International Corruption Perception Index] (22) for the Republic of Congo, it was decided to accept that even at district level the risk to [sic] the illegal harvesting of wood is unspecified. However, at the FMU level this risk was assessed to be LOW due to all harvesting and land lease conditions being complied with and all relevant payments being up to date. The reports on corruption in the logging sector in ROC are confined to logging in natural forests. EFC is in total control of their own Eucalyptus plantation resource and no evidence was detected of corrupt practices and little incentive exist[s] as there is a single channel marketing of this product through the company itself. The only possibility is the non-payment/manipulation of the harvesting tax – this was checked and payments were found to be up to date.

    All other categories were also found to be low risk at FMU level and the overall risk assessment is therefore LOW. The original 2009 risk assessment was reviewed by the company in September 2010 and verified by SGS on 26/10/2010 […]. No change in the risk assessment for 2013.[4]

    How is it that in 2013 SGS was able to detect “no evidence” of “corrupt practices” at EFC when only the year before the company had paid $76,500 “to a variety of tax and social welfare inspectors and officials to reduce taxes and penalties”?

    Although SGS’ risk assessment was approved 2 July 2014, EFC’s COC certificate was terminated three months later, on 4 October 2014.[5]

    Why was EFC’s certificate cancelled?

    I understand that the FSC signed a cooperation agreement with the Sassou regime in Brazzaville last 24 April 2015.[6]

    When will FSC publish the text of this agreement?

    It seems to me this incident illustrates once again FSC’s extremely bizarre approach to the political economy of logging in the ultra-authoritarian regimes of Central Africa. Your green labels purport to guarantee “legality” where the rule of law is, as you know, largely absent.[7]

    Sincerely,
    Arnaud Labrousse


    [1] MagIndustries, “MAGINDUSTRIES REPORTS INTERIM RESULTS OF INDEPENDENT INVESTIGATION AND RELATED MATTERS,” 16 June 2015.
    Note that in 2006 the European Investment Bank approved a 13 million € loan to MagIndustries for feasibility studies concerning “a potash plant, a magnesium smelter and the rehabilitation of hydro power station units” in Congo. (EIB, “Kouilou Magnesium Phase I,” 6 January 2006).
    See also Ambassade de France au Congo, “Visite de l’Ambassadeur de France au CRDPI de Pointe-Noire,” 17 December 2014.

    [2] Financial Post, “MagIndustries Corp reveals evidence that subsidiaries allegedly paid major bribes in Republic of Congo,” 17 June 2015.
    See also The Canadian Press, “MagIndustries confirms subsidiaries paid ‘black money’ to Congolese officials,” 16 June 2015.
    Reuters, “TSX eyes delisting MagIndustries over actions in Congo Republic,” 17 June 2015.

    [3] MagIndustries, op. cit., MagIndustries footnote: “An exchange rate of 1USD = 587CFA was used.”

    [4] SGS Qualifor, “2013 “FSC Controlled Wood Risk Assessment,” “Doc. Version date” 5 December 2012.

    [5] info.fsc.org

    [6] FSC, “FSC Signs Cooperation Agreement with Congolese Government,” 19 June 2015.

    [7] See, in this regard, MagIndustries, “MagIndustries Comments on Presidential Election and New Government in the Republic of Congo,” 18 September 2009.

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