Untamed Timber

In the December 2018 decision confirming one of Indusparquet's fines, Ibama’s then São Paulo superintendent, José Edilson Marques Dias, said that “the authorship and materiality [of the infraction] have been duly established.” The infraction notice alluded to the “inconsistency between the amount of physical timber in the yard and the amount registered in [Ibama’s] system.”

Dias concluded that the initial fine (R$150,000) against Indusparquet's headquarters should be tripled to R$450,000 due to reoffending. As public records show, the company had already been fined by Ibama in 2017 for misrepresentation.

Part of the justification for his decision was that the investigation and the conduct of his agents had been in accordance with standard procedures and within the law. Six months later, his successor would adopt the opposite view.

To justify cancelling the R$482,300 fine against an Indusparquet subsidiary, Colonel Silva pointed to “defects” in the investigation and in Ibama agents’ actions. No evidence of such “defects” was provided in Silva’s ruling and Ibama did not respond to Earthsight’s questions around the cancelation of the fines.

The superintendent appointed by the Bolsonaro government accepted Indusparquet's arguments and considered “the production of new evidence or information unnecessary” concluding that Indusparquet had been right and his agents wrong. Silva ordered the immediate release of the timber (which would fill more than 70 trucks) and the cancellation of the fine.

“The applicant claims that all the timber, which is the subject of the fine, has a legal origin, and that the timber inspected at the site is from Indusparquet’s headquarters and is covered by a license,” wrote the colonel. He also claimed not to see any evidence of reoffending, despite the 2017 fine against Indusparquet’s headquarters and the 2018 fine confirmed by his predecessor only six months earlier.

Colonel Silva is not a career environmental agent, nor does he have any expertise in environmental issues. He took over as Ibama’s São Paulo superintendent less than two months before signing the cancellation of one of Indusparquet’s fines.

In April 2019 the Environment Minister who appointed him, Ricardo Salles, had a whole floor of Ibama's offices in São Paulo, 1,000km from the capital Brasília, refurbished and began working from there frequently. This was an unusual move for a federal government minister, as highlighted by the Brazilian press at the time. Before joining Bolsonaro’s government, Salles was convicted in 2018 for defrauding environmental maps to favour mining companies during his stint as São Paulo State Secretary of Environment.

Elisabeth Uema, executive secretary of the National Association of career civil servants specialised in environmental issues (Ascema), told Earthsight: “The cancellation of the fine by Superintendent Silva gives us an example of what could happen at the national level.

“As of January 2020, initial rulings on fines have been the sole responsibility of Ibama's superintendents, who in the vast majority are not career civil servants specialised in environmental issues. They were appointed by Minister Ricardo Salles to serve the Bolsonaro government's political interests. It is shameful that this fine has been cancelled in light of the many signs of irregularities.”

In a statement sent to Earthsight, Indusparquet points to Ibama’s recognition of the legality of its timber and claims that during Operation Patio “nothing wrong was identified at Indusparquet.” The company alleges Ibama only detected “possible administrative inconsistencies" mostly related to the conversion of sawn timber to finished products in Sinaflor. The company states such inconsistencies have since been rectified and do not justify the timber seizure or the large fines levied (read Indusparquet’s full statement, in Portuguese, here).

The decision to cancel one of the Indusparquet’s fines and release its confiscated timber is not yet final. A search for the case number on Ibama’s website indicates that the case is still under analysis by higher ruling authorities within Ibama’s Brasília headquarters.

Questioned about any criminal proceedings resulting from Operation Patio, the Federal Police told Earthsight that “several indictments were carried out during the investigation based on the material obtained.” The Federal Police did not specify the identities of those indicted citing secrecy rules. Earthsight has no evidence on whether any of those indicted have any links to Indusparquet.

Late last year, Indusparquet’s lawyers contacted Mongabay – the environmental news outlet that had published a version of Earthsight’s 2018 investigation – requesting the organisation to take down the article from its website or de-index it.

The attorneys justified their request by claiming that “several facts were reported without necessary context and/or that some details conveyed in this article are wholly incorrect,” without however detailing the alleged errors. They also highlighted the fact that Indusparquet “has suffered enough as a result of this situation and the subsequent reporting on it.”

Rhett Butler, Mongabay’s founder and CEO, told Earthsight the request “was accompanied by the false claim that Mongabay had not contacted Indusparquet in advance of the article's publication. The article in fact quotes Indusparquet spokeswoman Flavia Baggio objecting to the investigation's findings.”

Butler also said “it's very unusual for Mongabay to receive a demand to take down an article without more substantiation of claimed inaccuracies,” and that “at present we do not see any errors or inaccuracies in our reporting that would warrant modifications to the story.”

Indusparquet claims to be “the world's leading producer of premium hardwood flooring.” It boasts of having supplied wood flooring to the Vatican, the Taj Mahal, the Mirage Hotel in Las Vegas, and Dolce & Gabbana shops in Milan.

It is among Brazil’s 20 largest multinational corporations, with three manufacturing plants in the country and distribution centres in the US, Italy, France and Argentina. In Brazil, the company controls Compensados Império Ltda, a manufacturer of engineered floors – multi-layered products with a top surface of tropical wood. It sells these products under the brand Masterpiso.

In the last five years Indusparquet exported over 55,000 tonnes of solid wood floors and decks to nearly two dozen countries. International trade data analysed by Earthsight shows that, despite Indusparquet’s claims of significant negative impacts to its business, Operation Patio has had no effect on its exports. The company’s exports in the two and a half years following the operation’s initial revelations have in fact increased compared to the previous two and a half years.

The US is by far the main destination for Indusparquet's products – made from species that include Cumaru (Brazilian teak), Tauari, Jatobá (Brazilian cherry), Sucupira (Brazilian chestnut), Ipê, and Angelim – accounting for over 90 per cent (49,600 tonnes) of the firm’s worldwide sales. US importers’ unrelenting demand for Indusparquet’s products – with a 15 per cent rise in volumes following Operation Patio – largely explains the growth in the Brazilian firm’s exports despite its well-publicised breach of Brazilian laws on timber certification.

In addition to Indusparquet’s own export volumes, its subsidiary, Compensados Império, is itself a large exporter of engineered wood floors. In the past five years the company has exported over 19,000 tonnes of engineered Masterpiso floors to the US, both directly to large retailers and for distribution by Indusparquet’s subsidiary in Florida, Brw Floors. Masterpiso floors are made from Jatobá, Ipê, Sucupira and Brazilian Koa (Tigerwood), among others.

Indusparquet export volumes before and after Operation Patio

There is reason for US firms to be vigilant when sourcing from timber companies which are under investigation for a lack of compliance in their certification processes or supply chains. Under the country’s Lacey Act, firms are banned from importing timber that was illegally sourced in another country. The severity of sanctions against guilty companies depends on the efforts made by them to avoid such scenarios. This means they should be diligent in verifying the legal origin of their imported wood products.

One case in particular provides a cautionary tale.

In 2016 US retail giant Lumber Liquidators, the now re-branded LL Flooring, was sentenced by the Department of Justice for importing illegal timber from the Russian far east and levied with the largest illegal timber import-related fine in history – $13 million. The company was forced by US authorities to implement a strict system meant to prevent any risk of further purchases of illegal wood and put under a five-year probation period. Nevertheless, Lumber Liquidators has since become one of Indusparquet’s largest customers.

In late April 2018 – a month before the raids at Indusparquet took place – Lumber Liquidators started purchasing Masterpiso engineered floors. It appears that instead of reviewing its purchases from Indusparquet in light of reports of the raids, the firm actually increased them through 2018 and 2019.

Imports in 2019 were more than double those of the previous year. Purchases have continued to-date, with the most recently recorded arriving in late December 2020. Between May 2018 and the end of Lumber Liquidator’s probation period on 6 October 2020, the company imported at least 6.3 million square metres of this flooring, with an approximate retail value of $6 million.

While Earthsight has no evidence to indicate that the specific wood floor products imported by Lumber Liquidators – or any other importer – from Indusparquet were illegally sourced, evidence against the Brazilian firm suggests that the wood was at risk of being illegally sourced.

Furthermore, under the Lacey Act government paperwork or third-party certifications accompanying the wood does not necessarily eliminate the risk that it will be subsequently shown to have been illegally sourced. It is questionable whether purchasers could have been confident of the origin of Indusparquet’s timber in the immediate wake of the Ibama bust and arguably this remains the case. Yet nothing in Lumber Liquidators’ Lacey Act compliance plan appears to have prevented the company from purchasing from Indusparquet.

Earthsight made repeated attempts to seek comments from Lumber Liquidators but received no reply by the time of publication.

Indusparquet told Earthsight that in December 2018 an American client audited the company’s operations and procedures in detail, leading to “extremely satisfactory” results. The firm says the auditors found no evidence of illegal timber and agreed that Operation Patio had been flawed. When questioned about the client’s identity and asked for more details of the audit process, Indusparquet declined to respond citing contractual restrictions.

France, Italy and Belgium have continued to import Indusparquet wood products into Europe following Operation Patio, while Denmark has since become a new destination. Together, these countries have bought over 1,000 tonnes of Indusparquet goods in the last five years.

Imports into Italy and Belgium have significantly increased since May 2018. Similar to their US counterparts, European firms operate under laws that ban the import of illegal timber. The European Union Timber Regulation (EUTR) also forces importers to carry out due diligence to ensure that the risk of buying illegal wood is reduced to a negligible level.

In 2018, Earthsight revealed that Floor & Decor, the US’s largest flooring retailer, had been buying wood floors from Indusparquet before the seizure and had continued thereafter, potentially risking severe penalties under the Lacey Act. Analysis of trade data suggests that Floor & Decor has now dropped Indusparquet as a supplier. But by picking up new customers, most notably Lumber Liquidators, Indusparquet’s US trade has not only remained unaffected by the scandal but has thrived.