A: The illegal timber trade is the harvesting, processing, transporting, buying or selling of timber in violation of national and international laws. As much as 23% to 30% of globally traded hardwood lumber and plywood may be sourced from the illegal timber trade, and illegal timber accounts for over 70% of timber exports from several countries with tropical forests critical to regulating the Earth’s climate. INTERPOL estimates that between $51 to $152 million USD worth of timber is illegally harvested annually.
A: Some common fraudulent activity related to the illegal timber trade includes: • Directly bribing foreign officials to avoid local lumber regulations, either through a subsidiary or the main agribusiness; • Funding a commodity producer knowing that it will offer bribes to officials to ignore illegal timber clearing; • Operating under an improper license to engage in the harvesting, processing, transporting, buying or selling of timber; • Neglecting to perform environmental impact reports and site inspections; • Violating other environmental and safety regulations; • Continuing to operate after a stop notice from the local or national government; • Falsely labeling the type of timber, the milling, or source in customs statements about goods being imported or exported; • Knowingly importing wood through a trans-shipment point to obscure the origins of illegally trafficked timber; • Making knowingly incorrect statements about the source of timber to potential purchasers.
A: A robust framework of federal whistleblower reward laws exist that can be used by whistleblowers to report instances of fraudulent activities within the illegal timber trade supply chain including the False Claims Act (FCA), Dodd-Frank Act, and the Foreign Corrupt Practices Act (FCPA), among others. These laws protect whistleblower confidentiality and establish safe reporting channels. They also allow whistleblowers to receive rewards if the information they provided results in a successful prosecution or enforcement action. Additionally, whistleblowers may rely on various environmental laws with whistleblower provisions such as the Lacey Act or Endangered Species Act. These environmental laws were put in place to protect fish, wildlife, and plants from illegal trafficking and harvesting, authorizing rewards for those bringing forth actionable information.
The False Claims Act is one of the most powerful whistleblower laws. One of the types of fraud it encompasses is known as “reverse false claims”, which has been increasingly applied in recent years. The core principle of reverse false claims is that a wrongdoer has prevented the government from collecting what it is owed. One of the most common types of reverse false claims center around customs violations. When goods are knowingly falsely stated, undeclared, undervalued, or misclassified on a customs form, an entity has kept the government from receiving proper compensation. As the U.S. is one of the main importers of wood products worldwide, there is ample opportunity for customs fraud.
The Lacey Act is a federal conservation law. In 2008, to increase the scope of protected products under the Lacey Act, a landmark amendment banned the importing, exporting, buying, and selling of illegally sourced, plants, requiring companies trading in most timber products to submit formal declarations of the species and origins of harvested timber. Cargo without accurate declaration can be seized, and companies that provide false information can be prosecuted and fined. The Lacey Act has been foundational in combating the illegal timber trade, setting crucial precedent to prosecute lumber trade fraud and bring forward large criminal and civil penalties on rule-breaking companies. Under the Lacey Act, whistleblowers with information that leads to an arrest, criminal conviction, civil penalty or forfeiture of property may receive a reward. The amount of such a reward is designated by the Secretary of the Interior, Agriculture, Commerce, or Treasury, as appropriate.
There is an array of laws including the Lacey Act, Endangered Species Act, and False Claims Act that authorize rewards for whistleblowers who provide information that leads to successful prosecutions. If successful, the whistleblower may receive a portion of the collected damages, with the amount dependent on the law used to report the fraudulent activity. Under the False Claims Act, for example, whistleblowers may be eligible for a mandatory reward between 15% to 30% of the collected proceeds.
Yes, the Lacey Act, False Claims Act, and others all allow for non-U.S. whistleblowers to make disclosures and receive awards, so long as the fraud in question has a U.S. nexus.
Yes, the Lacey Act has been successful in bringing forth fines on multiple companies illegally sourcing timber. For example, in 2015, U.S.-based Lumber Liquidators was fined over $13 million in the largest Lacey Act fine to date for buying illegally logged wood from eastern Russian forests. An NGO, the Environmental Investigations Agency, was key to building the case against Lumber Liquidators. This case marked the first instance in which a U.S. company has been convicted of a felony related to illegally sourced timber under the Lacey Act.
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