Styrian Oaks from Ukrainian forests
Austrian parquet flooring manufacturers are making large profits while praising the sustainability and local origin of their wood. However, investigations in their source have led all the way to Ukraine, where they end in criminal structures, violence and the depletion of natural resources.
The man from Eastern Europe who delivers the crucial hint narrows his eyes. He thinks about whether he should say the next few sentences. They could put an end the investigation before it even started. “One thing should be clear,” the informant says in the end, “the place where the wood for the beautiful parquet comes from is run by the Mafia. These people do not shy away from anything. There is a lot at stake for them. This is about a very well-guarded secret and, in the end, also millions of euros. You need to think about whether you really want to mess with them.”
Austria is a Parquet Powerhouse
This is the start of a journey to the precipices of a product that seems rather unspectacular – its story, however, is all the more astonishing. It is about globalization, greed and violence, about great quantities of illegal timber and about quality seals that cover it all up. Wooden parquet is popular, it gives rooms a cozy, homely atmosphere, leaves a green footprint – and leads to profits in the millions. Demand has been rising for years. The Austrian market grew by 4.6 percent to 5.5 million square meters sold in 2018 alone. This amount would suffice to cover Vienna’s entire first district twice over. Every year, that is.
In no other European country (except Sweden) are more wooden floors installed than in Austria. This benefits domestic manufacturers, who in 2018 generated sales of €143 million and can more often than not look forward to high returns. In addition, Austrian parquet makers are the third largest exporter in Europe; consequently, their product can even be found in the Eiffel Tower in Paris, as Weitzer proudly points out.
“We use domestic wood“
When looking at the brochures of these manufacturers, it quickly becomes clear that they’re cleverly cultivating their “Made in Austria” image. They enjoy praising the abundance of forests in Styria, home to the three big players of the industry. “We use domestic wood and reduce transport routes to the bare minimum,” promises a promotional video of the Admonter company, for example, which is owned by the local Benedictine monastery and thus, by the Catholic Church. The “careful treatment of nature” comes first and “sustainability is guaranteed,” they assure customers, especially in times of climate change. Thus, Weitzer touts that his wood comes from “happy trees” from “sustainable forestry within a radius of at most 250 kilometers.” Oak, which is the most popular type of wood for parquet flooring, accounts for roughly 80 percent of sales and comes “mainly from Austria, Hungary and Croatia,” the catalogue informs us. Depending on the design, the parquets cost between €40 and €110 per square meter.
The first clue: Import volumes
This story begins with no more than a clue. According to it, large quantities of the top layer of the parquet do not come from Austria or its aforementioned neighboring countries, but in fact from Ukraine. The 3.2-millimeter-thick top layer, also called the lamella, is the most valuable part of a parquet floor. The underlying core layer consists of much cheaper spruce and is often a waste product of wood processing. However, the lamella is the crucial part, the expensive one – the one that we stand and walk on, the one we see. So, can this be true? At Addendum’s request, Statistik Austria provided data on lamella imports from Ukraine. The numbers are clear: The imports doubled to 11,000 tons per year between 2014 and 2018.
A ten-wheeler truck in the last of the morning fog
But how do such quantities ever make it to Austria? An autumnal day in the town of Zehensdorf in southern Styria offers a first possible answer. This is where, at the edge of a forest, Scheucher Holzindustrie has its factory. Next to Admonter, Weitzer and Parador, it is one of the four major players in the industry. With 200 employees, Scheucher has generated sales of €52.7 million, earning its owners a profit of €10.7 million. After hours of waiting, one possible explanation for this high margin makes its way along a narrow country road: An inconspicuous unmarked ten-wheeler truck. It makes a turn at the Scheucher factory gate. In the last of the morning fog, it waits for entry at the barrier. Inside, the truck offers room for up to twenty tons of lamellas. The license plate of the large vehicle? A district in western Ukraine, well over a thousand kilometers from Scheucher’s company headquarters.
The omen: Tayfun and Zunami
Investigations revealed the first names of Ukrainian companies that produce those exact types of lamellas and are said to supply the Austrian parquet industry. Two of these suppliers are Tayfun and Zunami. The names seem like an omen, as their emergence resembled a storm that would sweep many other suppliers off the market. Price lists of the Ukrainian companies that Addendum has in its possession indeed show that they offer a square meter of lamella up to 50 percent below the going rate in Central Europe; a difference that cannot be sufficiently explained by the lower wages in Ukraine.
A crime syndicate
Flight 6736 touches down in Lviv, Ukraine. Considered the center of the western part of the country, the city was part of the Austro-Hungarian Empire under the name of Lemberg until 1918.
60 kilometers further east, a road littered with potholes leads to a small village. This must be the same road that heavily armed men concealing their faces with black ski masks took in 2016. They were investigators of the domestic secret service SBU, who stormed the factory of the lamella manufacturer Tayfun. The operation against the supplier to Austria was part of a raid on a criminal syndicate that was cutting oak and ash wood illegally on a large scale. 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 logs were also transported by truck to Tayfun by night so that nobody in the village would notice. There, hundreds of people labored in three shifts on a miracle – they created legal lamellas from illegally-felled trees. 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.
An influential parliamentarian
It is a sunny Saturday afternoon. Work is being done in the halls that Tayfun has stated as its production site. People come and go, a truck drives up to the gate. No logo, sign or even a single clue would indicate that this is Tayfun’s headquarters. However, everyone in the village confirms that this is the company that produces lamellas. Aleksandra Gubytska is here for the first time and is amazed that Tayfun is still operating after everything she had read in the court files. She is an investigative journalist and researched what happened after the raid. “Even though Tayfun had demonstrably obtained large quantities of illegal timber, parts of which were confiscated, no charges were brought against them. They only handed in some papers and even got their timber back,” she reports.
One can only speculate about the reasons. However, one report offers a clue. A news portal reported at the time about an ominous man who had appeared during the raid, identifying himself as a member of the Ukrainian parliament. He tried to stop the police operation, intimidated the officials and threatened them with “trouble.” The journalist is familiar with many cases like this: “In our country, unfortunately, money and influence can resolve most things, shut down investigations and have entire proceedings abandoned.”
Tayfun and the Corrupt Chief Forester
Gubytska is one of those people who courageously opposes this practice and yet, she is not surprised that Tayfun is part of an extensive investigation once again. In Kharkiv, in the eastern part of Ukraine, the local chief forester is suspected of having illegally cleared the state forests under his administration for years. Since 2018 alone, he and his clan have diverted timber with a black market value of more than €3 million. According to insiders, the storage depots for the timber are even said to be assigned to the current Ukrainian interior minister, Arsen Avakov. The chief forester has since been arrested. He was later caught offering $100,000 in cash to a special agent to stop the case against him. In the clear-cutting operations he was responsible for, one type of wood was particularly sought after because it makes the most money and is in high demand abroad: oak. One of the buyers of this Mafia timber: none other than Tayfun – the secret supplier of the four biggest parquet manufacturers in Austria.
Just as a photographer for Addendum is about to take a look at the Tayfun factory through his camera lens, a man in black storms in front of the company. He gestures wildly, utters threats and tries to stop the investigation. Later, a silver limousine tears past with men filming the Addendum team.
Attack on a journalist
Anyone assuming that all of this is already bad enough is mistaken – this is just the beginning. A good 200 kilometers further north, in the Volhynia region, there is a woman in her car who knows what it means to be attacked. Her name is Natalia Politchuk, a TV reporter for the local channel “Avers” and a courageous woman. Illegal deforestation of large areas has been a controversial topic in the wooded regions of northwestern Ukraine for a while now.
“The people here are both sad and angry when they see how our woods are getting smaller and smaller, slowly disappearing and how very few are getting richer because of it,” she says. On the road she encounters semi-trucks loaded with logs and Politchuk always checks for black plaques affixed to them. These are tacked onto the logs after felling by state forest departments and are supposed to prove their legality. “That is how the idea for a TV report came about last year. My cameraman and I wanted to check in with the companies in the region, to see whether they were only processing legal timber.” All went well until they happened upon another supplier to Austria – Zunami. Politchuk discovered hundreds of logs without legal badges on their premises, her cameraman started shooting. A few minutes later, he was gone.
She tells how a man ran up to her screaming, grabbed her by the arm, twisted her hand, threw her cell phone to the ground and dragged her away. She found herself in a locked room, where her colleague had already been taken. He had been beaten, his pictures deleted, the camera destroyed. The two journalists were held in the room, where a different man threatened them with a gun. When the police arrived, it turned out that the two officers were former colleagues of Zunami’s security guard, the man brandishing the gun. Consequently, they were reluctant to take the journalists’ statements. Especially when they realized what Natalia Politchuk would only learn later – namely that her first attacker was not simply a out-of-control security guard, but Ruslan D. himself, owner of Zunami and business partner to the Austrians.
Zunami and the Mighty Men
“I recognized him in a photo,” Politchuk explains today, “he and his partner are very powerful men here.” One of them, Ruslan D., has been active in forestry for decades, has a seat in key committees and knows all relevant players in the state forest enterprises which are in charge of 87 percent of the forests in Ukraine. Thus, it is hardly surprising that in this case, too, the proceedings went nowhere and were stopped. For Politchuk, the conclusion is clear: “We discovered what no one was supposed to see and became a threat to someone who does not tolerate it.”
Later, Zunami’s boss Ruslan D. himself gets in touch with Addendum. He describes himself as a long-time fighter against corruption in the forestry sector. His goal is to overcome the monopoly of the state forestries. In order to do that, he sends studies that he conducted and that is exactly why certain “clans of oligarchs” are trying to discredit him. He also feels misunderstood concerning the attack on the TV crew, as his wife, who speaks German, explains in a phone call. The timber was definitely legal, she says, the journalists, on the other hand, were not. They had “not looked properly and filmed on our premises without a license.” The camera’s memory cards had not been destroyed to get rid of the evidence, she says and tries to make a comparison: “If I visit you tomorrow to film everything in your personal life, in your home – Is that okay?”
Weapons, mailboxes, Baltic banks
For the four Austrian parquet companies, Zunami is an even bigger supplier than Tayfun, as the numbers available to Addendum show. But apparently the money did not flow directly into Ukraine but took a detour through the “money laundering machine of Latvia,” as “Die Presse” once ingloriously called the Baltic state’s banking system. Addendum has evidence that shows that Zunami makes use of the Rietumu Bank, which is located there. It was just in 2017 that the French justice system imposed a fine of €80 million on the bank for aiding and abetting tax evasion. But Latvia is not the final destination of this financial carousel. In fact, it’s a brown brick building that looks like a child could have drawn it. A wooden door, a window to the left and a window to the right, a roof above. The address? 44 Main Street, Douglas, South Lanarkshire, Scotland.
This house in a sleepy miner’s town has long been notorious. It sits across from the local pub and serves as the official address for thousands of dummy corporations aiding dubious deals and tax evasion. After dozens of scandals, the address last hit the headlines again when Ukrainian bribes for arms shipments to the Middle East took a detour along 44 Main Street. Both the Austrians and the owners of Zunami may well know the address, as a Ukrainian shell company called Daytime Investments L.P. is registered there. It is used to process payments.
A villa for 700 euros
On the drive back to Lviv, it is worth taking a short detour. It leads to an elegant suburb, with one magnificent villa after the other. One of them, which looks like it’s not in western Ukraine but rather somewhere in southern United States, catches the eye. The property is registered to the wife of the chief forester of the Lviv region. Not bad, considering her husband officially makes at most €700 per month. Family members are often used by civil servants to conceal true ownership of property. According to Transparency International’s Corruption Perceptions Index, Ukraine ranks 120th out of 180 countries surveyed – making it the most corrupt country in Europe after Russia.
40 percent illegal timber in the EU
A forest on the foothills of the Carpathian Mountains, part of the area overseen by the chief forester with the stately residence from which Zunami also obtains timber, is the last stop on our journey. The drive takes us through villages where time seems to have stood still. Flocks of geese waddle past low wooden houses, while old Ladas navigate their way forward between potholes. Along the side of the road, paths lead into the forest, which consists mainly of old oak trees and is protected as a nature reserve.
Yehor Hrynyk, a young biologist, marches ahead. He points at rare mushrooms, talks about threatened animal species and means an entire eco system that is endangered. Environmentalists like him are fighting a desperate battle, as long as the West remains the most important buyer of illegal timber from Ukraine. The British NGO Earthsight has stated in a report that most of the illegal timber imported into the EU does not come from the tropics but in fact from Ukraine. 70 percent of the wood felled there, worth more than one billion euros, goes to the EU every year. 40 percent of it may have been logged or traded illegally.
“Austria plays a decisive part within the EU as a buyer of Ukrainian timber,” says Tara Ganesh, who has been investigating illegal practices in Ukraine for Earthsight for three years. “This powerful Austrian timber lobby should use its weight to initiate useful reforms of the forestry sector and sustainability certificates in Ukraine. Instead, the case of the parquet manufacturers uncovered by Addendum shows that these companies are continuing as before to get unhindered access to cheap Ukrainian timber.”
Loggers in the natural reserve
Yehor Hrynyk offers a bigger picture to the investigation into lamella suppliers. “There, can you hear them?” he asks suddenly and puts his index finger on his lips. “They must be over there,” he now whispers. Leaves rustle. He points to the right, from where the sound of chainsaws can just barely be heard. He follows the sound and soon happens upon thick furrows of trucks that forge their way through the wilderness. Giant felled trees appear, two men are sawing them apart, a third is loading the logs onto a truck with a claw arm. A group of loggers quickly forms around him. At first, they scrutinize Hrynyk but then they talk to him.
“This is exactly what I wanted to show,” he will later say, “here we see timber harvesting in the middle of a nature reserve, where valuable oaks are felled. Of course, this would be illegal, but it is being done under the pretext that they are sanitation harvests. The trees are categorized as sick for spurious reasons and cut down, but then they are sold at manipulated auctions as healthy and expensive timber because they come with papers.” Since the pressure is immense to get more timber from the woods in order to satisfy demand from the West, commercial felling alone is not enough anymore. The state forestries, riven by corruption, have felled 12.4 million cubic meters of wood as a result of such sanitation harvests, while the regular felling only amounted to 9.4 million – thus, the exception has become the rule, sanitation has become the norm. “But that is only one of many ways in that state forestries bend the rules and their bought-off bosses enrich themselves,” Hrynyk explains: “That is how suppliers obtain timber far below the market price. It is incredibly difficult to prove violations, inspections are rare, penalties are low.”
The failure of the FSC quality seal
Thus, there are three types of timber in Ukraine: legal timber, illegal timber and legalized timber. The latter is aided in receiving papers by a corrupt system, massive legal loopholes and lacking inspections. Therefore, it is a good thing that a globally recognized quality seal exists, which claims that legal and sustainable forestry is also guaranteed in Ukraine: FSC, the Forest Stewardship Council. It promises to inspect certified companies once a year, verify documents and conduct spot visits to forests.
In practice, however, this system fails significantly. Earthsight criticizes the fact that FSC inspections, which are announced in advance, are conducted in an exemplary manner when checking that suitable work pants are worn and that the current version of forestry regulations are displayed, but that they completely ignore cases of large-scale corruption. It is also suspicious that the majority of regional state forestries – and thus, the majority of Ukraine’s forests – are FSC certified. They keep their quality seal, even when facing corruption investigations. And in case they do lose it, they can reapply for a new one shortly after. The FSC system may therefore be a useful instrument in the West, but it seems to be badly suited for dealing with the rampant corruption in Ukraine, which means, according to Earthsight, that it is unable “to effectively reduce the risk of illegal timber imports.”
The biologist Hrynyk and his friend, the environmental scientist Petro Tiestov, are more than suspicious of the quality seal. Tiestov has whole binders full of cases in which the FSC did not live up to its responsibility. But because the Austrian parquet manufacturers boast about their FSC certificates, which their clandestine suppliers Tayfun and Zunami also have, Tiestov took a closer look at them. He quickly discovered violations of FSC standards at the regional state forestries that supply Zunami. These 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. “It is also symptomatic that only those suppliers of Zunami that did not cause any problems are picked during FSC inspections,” Tiestov says. This may also be due to the fact that Zunami’s boss, Ruslan D., sits on the committee that sets FSC standards.
436 truckloads of timber from a high-risk country
Huge amounts of illegal timber in a system rife with corruption, obliterating forests and permanently destroying ecosystems, where criminal cartels operate and threats and violence are commonplace. A system emerges that seems to be the opposite of what companies in this country are advertising. It has very little to do with short transport routes, careful treatment of nature and sustainability.
And yet the total volume of deliveries is enormous. Between January 2018 and May 2019, the four manufacturers Admonter, Scheucher, Parador and Weitzer purchased 8,300 tons of lamellas worth a total of 35.9 million US dollars from Tayfun and Zunami alone. A total of 436 trucks transported the timber to Austria. But the Ukraine connection could be much bigger. After all, the data from Statistik Austria show that the total import volume is even larger. And so far, Addendum only followed the trail that leads to the two biggest suppliers.
Violation of the law: Illegal timber import
However, none of this is happening in a legal vacuum. Since 2013, the European Timber Regulation (EUTR) has been in place, which is intended to prevent the import of illegal timber into the EU and is binding in all EU member states. In its implementation plan, the European Commission classifies Ukraine as a “high-risk country” in regard to timber imports and explicitly points out an “especially high risk” concerning oak wood in particular. “Therefore, the EUTR stipulates that initial importers, in this case the Austrian parquet companies, must take all measures to exclude with an almost absolute certainty any illegal timber sources,” explains Johannes Zahnen of the WWF, who has spent years working intensively on the law. “The EUTR clearly states that in a high-risk country like Ukraine, government documents or voluntary certifications like the FSC are not enough, and that companies need to carry out further research.” In other words, he sees a clear violation of the EUTR.
Hit rate: Seven out of eight
The Austrian Federal Forest Office, which reports to the Ministry of Sustainability and Tourism, is responsible for monitoring imports. At Addendum’s request, it shared the assessment of Ukraine being a “high-risk country.” Four employees are said to be in charge of EUTR monitoring, which deliberately places “priority on timber imports from Ukraine.” However, since the EUTR came into force, only eight such Ukraine checks were conducted at Austrian parquet manufacturers and importers of raw materials. Out of these eight instances, seven were reported for violations of due diligence. For data protection reasons, the Federal Office does not disclose which companies are involved.
For Johannes Zahnen, this hit rate is further proof that “there is a lot of catching up to do concerning the implementation of the EUTR. Inspections are carried out too infrequently and the deterrent penalties demanded by law are also far too low,” the expert criticizes and points to the USA as a counter-example. “A similar law applies there and just recently, the largest American parquet manufacturer was sentenced to a 13.5 million dollar fine. He had made out that he was importing oak from Europe for his parquet. In reality, however, the timber was illegal and came from Russia’s Far East.”
How the companies react to the accusations
When Addendum confronted the four Austrian parquet manufacturers with its findings, their reactions differed quite a bit.
Weitzer Parkett was the only company that agreed to meet for a one-on-one interview. In it, manager Josef Stoppacher confirmed that they receive lamella deliveries from a total of four companies in Ukraine. Yet, the fact that the country is not mentioned in the brochures “is certainly not a malicious deception of the customer,” but rather they left it out because “Ukraine is not one of our main supplier countries” and because messages need to be kept “short and sweet,” especially in advertising. They cover “roughly 15 percent of the oak parquet with Ukraine.” The numbers researched by Addendum show that with 60 truckloads, Weitzer does indeed receive the smallest amount from Tayfun and Zunami in comparison to the other companies. In an industry where everyone knows everyone, conclusions can be drawn quickly. “There is a competitor in Austria, who I would guess purchases 90 percent from Ukraine,” Weitzer relates. When Addendum confronts Weitzer’s management with the incidents surrounding their suppliers Tayfun and Zunami, it is clearly shocked. “We had no knowledge of any of this. These incidences are absolutely reprehensible and we will look into them and initiate investigations,” Stoppacher promises. Later, Weitzer thanks Addendum in a written statement for informing them of the allegations in question and explains in detail what consequences they have drawn from them.
The manufacturer Parador, which produces in Güssing and is owned by an Indian group, vows to do the same. According to the company, “it currently has 10 to 15 suppliers from Ukraine, who work for us on an order-by-order basis,” including Tayfun and Zunami. The company does not want to divulge the total import volume from Ukraine. However, with this number of suppliers it is likely higher than the 77 truckloads that the research gathered by Addendum shows for the mentioned period of time. The fact that the EUTR deems the FSC certificate insufficient to prevent the import of illegal timber from Ukraine is news to Parador. It was also unaware of the findings concerning the backgrounds of the suppliers. From “business practices of that kind, Parador expressly distances itself and assures that we do not endorse or support them in any way or form,” claiming they will initiate inspections and, if necessary, also “issue a suspension,” their statement continues.
In contrast, the manufacturers Admonter and Scheucher do not even address the incidents surrounding the suppliers Tayfun and Zunami. Throughout its whole statement, Admonter avoids using the term Ukraine at all. Instead it refers to certification systems like FSC and PEFC. These would guarantee that “products across the whole value chain came from actively, sustainably and climate-friendly cultivated forests,” which means that the company “should be able to rely on the correctness of the external certification of upstream bodies.” Admonter does not provide any information regarding the number of its Ukrainian suppliers and the quantities it obtained from them. Thus, it is impossible to say whether and how much timber Admonter obtained from Ukraine aside from the 100 truckloads documented by Addendum. When the company states that “70 percent of the wood it uses comes from Austria,” then this calculation would likely include much cheaper spruce wood, which is used as the core layer for parquet. After all, the company’s statement does not provide the percentage of oak wood which Admonter purchases from Ukraine.
The company Scheucher, on the other hand, claims in its statement that it obtains “85 percent of the wood it processes from the EU,” and that “most of it comes from Austria.” It remains unclear how this percentage comes about despite such large import volumes from the non-EU country Ukraine. The numbers available to Addendum show that out of the four manufacturers, Scheucher is by far the largest customer of Tayfun and Zunami, with 199 truckloads of lamellas. Scheucher confirms that they know of these two companies and, like the other manufacturers, refers to the sustainability certifications and recently conducted inspections. “Unfortunately, due to a lack of detailed knowledge, we are unable to offer a serious answer concerning the situation in Ukrainian forestries,” the statement concludes.