$35m of timber purchased by major EU parquet flooring manufacturers from two Ukraine firms linked to widespread illegal logging, corruption and business malpractices, new investigation finds
The suspect dealings of Ukraine’s forestry sector are under renewed scrutiny after two controversial timber dealers were revealed as supplying thousands of tonnes of oak to major parquet flooring companies in Austria.
Tayfun and Tsunami, firms linked to illegal logging, corruption and money laundering, sold more than $35 million worth of timber to four parquet manufacturers between January 2018 and May 2019, according to the latest chapter in an explosive new investigative series about illegal logging in Eastern Europe, by Austrian news outlet Addendum.
Styrian Oaks from Ukraine Forests, to which Earthsight contributed research and evidence, details various malpractices within the two firms’ operations and highlights how FSC certification is failing to protect European buyers.
The “Made in Austria” sustainability credentials trumpeted by the four manufacturers – Admonter, Parador, Weitzer Parkett and Scheucher – are largely debunked in the report.
Addendum found the firms to have purchased a combined 8,300 tonnes of lamellas (the top oak layer used to produce parquet floors) from Tayfun and Tsunami, two timber firms based in western Ukraine close to the Carpathian forests, in the 17 months to May 2019.
Despite the Austrian firms’ use of certification provided by the Forest Stewardship Council (FSC), the investigation shows the limitations of FSC in halting timber sales from firms connected to wrongdoing and illegal deforestation in Ukraine.
The Western Ukraine offices of Tayfun were raided in 2016 as part of a major investigation by the SBU, the country’s domestic secret service, into a criminal syndicate of illegal logging.
“The investigators had discovered that this network consisted of more than a thousand people, which hired front men and set up dozens of dummy companies to resell the timber,” the Addendum report stated. “The investigators quickly found what they were looking for during the raid and seized 3,918 oak logs without papers and certificates. The black-market value amounted to 19 million hryvnia, the equivalent of almost €700,000.”
No criminal charges were ever bought against Tayfun. Oleksandra Hubytska, an investigative journalist from Ukrainian NGO Nashi Groshi, who has looked into the aftermath of case, said the outcome was of little surprise. “In our country, unfortunately, money and influence can resolve most things, shut down investigations and have entire proceedings abandoned,” she told Addendum.
Meanwhile, a chief forestry figure in Eastern Ukraine was arrested in 2018 after reportedly facilitating the illegal clearing of state forests in the region with “a black-market value of more than €3 million”. The Addendum report names Tayfun as a buyer of timber from this scheme.
Logs confiscated by the SBU during their sting.
For its part, Tsunami is revealed by the Addendum investigation as being linked to the “money laundering machine of Latvia.” It is named as a client of Rietumu Bank – an entity fined €70m by French authorities in 2017 for aiding and abetting tax evasion.
The company has also been identified as allegedly complicit in using undocumented- and possibly illegal- timber.
Addendum interviewed Natalia Politchuk, a local journalist who during investigations into Tsunami “discovered hundreds of logs without legal badges [tags] on their premises.”
Ukrainian law requires harvested trees to have a tag on them, which guarantees they are from a legal source.
Politchuk and her colleague allege they were assaulted by a Tsunami security guard and by Ruslan. D, the firm’s owner, after discovering the illegal logs but no action was taken against the company. The security guard demanded they delete their footage of the logs.
“We discovered what no one was supposed to see and became a threat to someone who does not tolerate it,” she told Addendum.
In response to Addendum’s findings, a representative from Tsunami stated that certain clans of oligarchs were trying to discredit him due to his work fighting corruption in the forest sector.
The company stated that the logs filmed by the journalist were legal and the camera’s memory cards had not been destroyed to get rid of evidence, but because the journalists had filmed without a license.
Addendum also visited a site of illegal sanitary felling within a nature reserve with Ukrainian environmentalist Yehor Hrynyk. It is common practice in Ukraine for healthy trees to be wrongly marked sick so they can be cut, and the timber sold on the market.
“That is how suppliers obtain timber far below the market price. It is incredibly difficult to prove violations, inspections are rare, penalties are low.”
Another Ukrainian forestry expert, Petro Testov, described how he discovered that several state forestry enterprises supplying Tsunami were violating forest laws.
The violations range from ‘’deforestation in reserves without a permit to illegally issued papers for fellings and illicit sanitation harvests carried out during the rest periods of animals.’’
Tayfun’s sawmill in Western Ukraine.
Continuing complicity of EU buyers
The allegations against the two firms are the latest in a string of corruption and illegality cases to have hit Ukraine and come 18 months after the release of Earthsight’s major Complicit in Corruption report that laid bare the prevalence of widespread illegal logging in the country, fuelled by demand from billion-dollar EU firms.
The report showed how FSC certification is failing in Ukraine, due to systemic problems with the way it operates. Ukraine’s forests are state-controlled, and are the source of most of the timber sold to firms like Tayfun and Tsunami.
Earthsight’s report exposed corruption within enterprises controlled by Ukraine’s state forestry agency, which owns the vast majority of Ukraine’s forests, and pointed to an in-built conflict of interest within the Agency as one of the main reasons for this corruption.
Despite the report prompting a crackdown by Ukraine’s then Prime Minister Volodymyr Groisman, the reforms of the Agency urgently called for by NGOs as well as the EU to remove this conflict have failed to materialise.
The Addendum report provides another example of how FSC efforts to promote sustainable and ethical timber sourcing have failed to tackle and investigate cases such as those against Tayfun and Tsunami.
Both Tayfun and Tsunami have FSC certification, and source timber from forests controlled by the Ukrainian forestry agency, including from forests that are FSC-certified.
And although the European Union Timber Regulation (EUTR), a 2013 law designed to prevent illegal timber from entering the EU, is in place, its impact has been nominal in Austria.
“Since the EUTR came into force, only eight such Ukraine checks were conducted at Austrian parquet manufacturers and importers of raw materials,” the report said. “Out of these eight instances, seven were reported for violations of due diligence.”
The Ukrainian Carpathians are home to animals such as the Brown Bear and Eurasian Lynx.
Additional research by Earthsight found consumers in the UK could inadvertently be complicit in this dodgy trade.
Admonter and Weitzer both have sales offices in the UK which list oak flooring among their products, according to their websites. Parador also has UK stockists and Scheucher states there is ‘increasing interest’ for its parquet floors in the UK.
In response to the investigation’s findings, Admonter said that it relied on FSC or PEFC certification for its wood purchases.
''Part of this system is that, as a downstream actor in the value chain, one must be able to rely on the correctness of the external certification of its upstream agencies,'' the firm told Addendum.
It also stated that it had been audited twice by the EUTR authority in Austria in 2019, without any issues being detected.
Parador stated that they would use the allegations described by Addendum as an opportunity to re-audit the companies.
''This is a common step in our control process to directly investigate irregularities in third-party collaboration or advice and, if necessary, initiate follow-up steps such as suspension,” a statement read.
Scheucher said that it relied on FSC and PEFC for compliance with the EUTR. ''Regarding the situation in the Ukrainian forestry and the other questions we can unfortunately not give you a serious answer because of missing detailed knowledge,'' the company said.
Weitzer stated that they planned to meet with FSC to discuss the issue of the credibility of the certificate for Ukrainian sources.
The FSC said in a statement published in response to the investigation that it would initiate checks of the suppliers named. It stated that while it rejected any criminal acts or unfair behaviour on part of FSC certificate holders, that the ‘’controls of independent organisations like FSC could not replace the role of the state.’’
Their comments raise questions about the efficacy of voluntary certification in countries where the state itself is a major actor in the illegal timber trade.
The Addendum report comes just before the publication of a damning new study into the efficacy of the EUTR, which found that six years after its entry into force, the EU law was failing to discourage the placing of illegal timber products on the EU market as it was intended to do.
The report by WWF EU, based on a survey of 16 EU member states including Austria and the UK, also found that sanctions issued by implementing authorities in EU member states were failing to be dissuasive, and were usually only applied after repeated detection of shortcomings and multiple warnings were issued.
WWF Austria filed a formal complaint about the four companies’ Ukrainian imports with the Austrian EUTR authority on 19 December.