By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
Merlo was replaced as CEO of Louisiana-Pacific by former International Paper Company executive Mark Suwyn, an old friend of Louisiana-Pacific board member Pierre DuPont. But the problems for LP didn't end with Merlo's ouster. Earlier this year, its stock price plunged after the company was forced to make a $300 million charge against its income. This announcement was followed by a new criminal investigation by the FBI into allegations of timber theft by the company on the Tongass National Forest. Forest Service whistleblowers had alleged that over the past 10 years Louisiana-Pacific has stolen more than $24 million worth of federal timber.
Assigned the extraordinarily challenging task of running the public relations campaign over the past few years for the embattled company is a man called Thomas Hoog, general manager of the super-firm of Hill & Knowlton. Like many of the partners at Hill & Knowlton, Hoog's political ties are to the Democratic Party. He served as chief of staff for former Colorado Sen. Gary Hart. Another Democratic powerbroker at Hill & Knowlton is the firm's CEO, Howard Paster, a golfing partner of President Clinton who served for a year as director of legislative affairs in the Clinton White House. Hoog, who attended two of those White House coffee sessions, played a key role in persuading the administration to settle the Louisiana-Pacific case in Alaska.
Sen. Frank Murkowski, the Republican from Alaska who now heads the powerful Energy and Environment Committee, has been a key player in defending Louisiana-Pacific's reign of terror on the Tongass for nearly two decades. During the 104th Congress, Murkowski authored legislative initiatives aimed at overturning environmental regulations on the Tongass in order to accelerate logging in areas under contract to Louisiana-Pacific. In the spring of 1995 it was revealed that Sen. Murkowski owned more than $25,000 worth of stock in Louisiana-Pacific and that he was a major shareholder in the Ketchikan State Bank, one of the pulp mill's largest creditors.
It now seems that Murkowski used his clout as head of the committee responsible for reviewing Federico Pena's nomination as Secretary of Energy to extract concessions on the Tongass. "Murkowski threw his weight around and the administration quickly caved in," said a Democratic staffer. "Everyone thought the fight on Pena's nomination was over the Yucca Mountain nuclear waste site. In reality, all the discussions had to do with logging levels on the Tongass and whether or not LP was going to be compensated for closing down the pulp mill."
The reaction of Alaskan environmentalists to the bailout of Louisiana-Pacific has been strangely supportive. "We are grateful that the contract is voided," said Tim Driscoll of the Southeast Alaska Conservation Council in Juneau. "Now the challenge for the Tongass is to shift toward a sustainable economy in the region. That means a smaller harvest which independent sawmills use to make value-added products."
The problem with this rosy scenario is that there are few independent timber companies left in the region and almost no capital available to build new mills. Louisiana-Pacific is largely responsible for this situation. Native companies were hit the hardest by Louisiana-Pacific's near-hegemony over the regional timber market. In 1979 the Reid Brothers, a small logging company owned by members of the Tlingit tribe, filed a civil suit against both Louisiana-Pacific and the Alaska Pulp Company. Among other things, the Reid Brothers alleged that the timber giants had rigged bids on Tongass timber sales, had conspired with local banks to manipulate the financing of small mill owners, and had overestimated stumpage and logging costs to extract more subsidies from the feds. As a result of these predatory activities, more than 100 small sawmills were driven out of business between 1970 and 1979. The district court ruled in favor of the Reid Brothers and the 9th Circuit Court of Appeals upheld the opinion that Louisiana-Pacific had violated anti-trust laws.
In the wake of the Reid Brothers case, the Forest Service began its own investigation of the pulp company. It determined that Louisiana-Pacific had defrauded the government out of more than $80 million. Yet no action was taken against the corporation. Forest Service sources say that is because Assistant Secretary of Agriculture John Crowell had quashed the investigation before it reached the Justice Department. Previously Crowell had served as general counsel for Louisiana-Pacific.
Now Louisiana-Pacific, a company with one of the longest eco-rap sheets in the nation, has finally achieved its goal of being the sole player in the lucrative Tongass timber market. And, as a surprise bonus, it has been handed by the Clinton administration $140 million in cash, which it will most likely use to expand its operations in Mexico, China, and Bolivia.