Top U.S. flooring retailers linked to Brazilian firm probed for corruption

A yearlong investigation by Mongabay and Earthsight has uncovered new evidence of corrupt deals and illegal practices used by Brazil’s largest flooring exporter, Indusparquet, and its suppliers.

From its headquarters in São Paulo to the Amazon and the Atlantic Forest, Indusparquet has used fixers to secure secret timber deals from suppliers who have been fined millions for their illegal sourcing practices, while claiming to supply products to high-profile projects like Las Vegas’ Mirage Hotel, the Vatican and Taj Mahal.

The company was charged in two bribery lawsuits in Brazil over its use of public officials to gain access to timber supplies. Following a tip-off from an anonymous source, we obtained access to dozens of hours of wiretaps and video footage revealing how Jose Antonio Baggio, the company’s co-founder and defendant in one of the cases, used a local official to secure bracatinga (Mimosa scabrella), a tree species native to the Atlantic Forest — the most threatened Brazilian biome.

Requests for further information confirmed that Indusparquet had bought bracatinga from suppliers named in the court case against Baggio during the same period, which the wiretaps show was for an unnamed “U.S. client.” Despite Indusparquet’s claims that court decisions cleared the charges against Baggio and closed the case, there is still room for appeal, as the prosecutors’ office confirmed to Mongabay.

The second prosecution we documented was sparked by a major 2018 raid on Indusparquet’s headquarters, code-named Operation Pátio. A federal prosecutor charged the firm with involvement in a 154.37 million reais ($30 million) timber laundering scheme that used an analyst at IBAMA, the agency responsible for environmental monitoring and enforcement, to falsify origin credits to release wood from the national timber accounting database. The official later admitted to receiving bribes from an Indusparquet employee.

Our investigation also found Indusparquet had sourced wood from sawmills in Pará state linked to Operation Handroanthus, a huge timber raid in 2020 that seized 226,760 cubic meters (296,590 cubic yards) of wood.

Operation Handroanthus had significant political repercussions, as following the then-environment minister Ricardo Salles’ visits to the area to lobby on behalf of powerful landowners supplying the sawmills, the Supreme Federal Court launched two investigations that led to his resignation in June 2021.

Elsewhere in Pará state, we found that timber from a threatened Indigenous reserve that is home to uncontacted peoples had been purchased by Indusparquet from suppliers that were fined $466,198  for falsifying timber origin data. Separately, the owners of the land within the reserve were fined $2.7 million in 2021 for destroying almost 1,000 hectares (2,471 acres) of forest and violating restrictions on accessing areas where uncontacted peoples reside.

Overall, a partial review  of Indusparquet’s hundreds of suppliers shows they have been fined about $3.7 million between 2015 and 2021 for a wide range illegal logging activities, from falsifying information on official databases to harvesting timber in Indigenous lands and protected forests.

Despite being mired in scandal, Indusparquet remains Brazil’s largest flooring exporter, shipping products worth an estimated $250 million to the United States between January 2017 and August 2022. After being fined for breaching the Lacey Act in 2013 over its illegal timber exports and being closely monitored by U.S. agencies since then, LL Flooring, a U.S. retailer, has continued to source timber from the company, as have other major firms.

The deal

The city of União da Vitória in Brazil’s southern Paraná state was a hive of activity. It was September 2016 and daily rallies around the country ahead of municipal elections the following month were drawing in lively crowds. As the candidates sought to woo voters, court records seen by Mongabay and Earthsight show Indusparquet was also busy.

“We have already agreed. He will saw the wood, we just need you to sort things out.” The voice on the line was identified by the authorities as Baggio, Indusparquet’s co-founder, in a cache of wiretapped conversations attached to a class action lawsuit filed by Paraná’s State Public Ministry. A state prosecutor is accusing Baggio of paying bribes to André Luis Aleixo, the head of the Paraná Environmental Institute (IAP) in União da Vitória, in exchange for access to 250 cubic meters (327 cubic yards) of bracatinga through Luiz Roberto Granatyr, the owner of a local sawmill.

“There is no doubt that the defendant André Luis Aleixo took advantage of the public office and helped the company Indusparquet in the acquisition of bracatinga wood and in the bureaucratic procedures before the environmental agency in exchange for an undue advantage [“commission”],” Juliana Mitsue Botomé, the state prosecutor, wrote in a court filing.

These conversations came to light only because state prosecutors in neighboring Guarapuava municipality requested the special action group to combat organized crime (Gaeco) collect evidence of wrongdoing from public servants in licensing environmental processes in Paraná. The wiretaps collected by the state investigators between Sept. 26 and Nov. 8, 2016, reveal in detail how the alleged kickback scheme worked.

Alessandro Faria, the manager of Masterpiso, Indusparquet’s subsidiary in Paraná, was the first point of contact with Aleixo, describing Baggio as “somewhat desperate” for bracatinga to fulfill an order for a U.S. client in a call on Sept. 26. Faria explained the sawn wood would be transported to Indusparquet’s facilities, where it would be converted into flooring for export.

“Are you able to work if I can find the wood?’’ Aleixo asks Granatyr, who seems to be in the same room. Aleixo tells Faria that Granatyr charges 700 reais ($135) per cubic meter. “Actually, I was going to suggest 700 to see if he [Baggio] paid me a small commission, right?” Aleixo says. Faria then suggests Aleixo send a quote of 750-800 reais ($145-155) so his commission can be “guaranteed.”

Aleixo tells both Granatyr and Faria he will help finance Granatyr’s sawmill and work as his partner. “I’ll make a partnership here with Luiz [Granatyr] and join his company,” he says to Faria. “See how God does things right. [He] brought the guy [Granatyr] to my door here.”

With the general guidelines set, Faria tells Aleixo that Baggio would take the lead on the negotiations. Eighteen minutes later, Baggio calls Aleixo’s cellphone and greets him as “my friend.”

“I asked him [Granatyr] to speak to you,” Baggio tells Aleixo. “We have already agreed with him to saw [the wood], you just [need] to sort things out [arrange the bracatinga logs], right, then after he leaves we’ll talk to you to arrange the things for you too [commission].”

Two days later in a follow-up call, Aleixo tells Baggio that he will help Granatyr find local bracatinga producers: “Make me earn commission on this.” Baggio replied: “Of course, for sure.”

Baggio was recorded in direct conversations with Aleixo twice and his name was mentioned in separate conversations between Aleixo and Granatyr, who became Baggio’s main point of contact during the negotiations.

The negotiations advanced throughout October, with Granatyr indicating that Baggio was keen to close the deal as soon as possible. New players were added to the scheme. Alexandre Freiberger Puzyna, who acted as an intermediary in the deal on Aleixo’s request, bought and transported bracatinga from a rural producer to Granatyr’s sawmill, court records show.

“Let’s do the following, even if you find the guy who has the authorization [logging permit], let’s pass it on to Puzyna. I prefer that each one takes care of one line [own duties],” Aleixo tells Granatyr in a Sept. 28 call.

The term “commission” appears in several extracts of the intercepted communications. While discussing the price of wood with Faria, for example, Aleixo asks if he would be paid for his service in this extract on Sept. 26:

– Aleixo: Actually, I was going to leave it at 700 [reais] to see if he would pay me a small commission, right [laughs].
– Faria: Of course, you have to ask, send [a quote of] about 750-800 [reais] to Zé Antonio [Baggio]. … Then get a little commission for you.

In a Sep. 28 wiretap, Baggio can also be heard suggesting that Aleixo become his representative in exchange for a “commission.” “Send my commission proposal too,” Aleixo says in the call. Baggio replies, “Of course, this is logical. You can work as our representative in the region, because I hope we sell a lot of this wood.”

With his position in the scheme apparently secured, by Oct. 25 Aleixo asks his colleagues at the Environmental Institute in the capital Curitiba to expedite the allocation of permits for Granatyr’s sawmill through IBAMA’s system. The permits are issued in November 2016.

The wiretaps show that Aleixo used his office on several occasions as a meeting place for negotiations with Puzyna and Granatyr during working hours. He also helped Granatyr meet bracatinga suppliers and smoothed things over when a truck transporting the timber was without the proper paperwork.

As arrangements for the deal progress, Baggio continues to apply pressure to the group. “He needs it because the timber he has there is not enough for him to do what was agreed with his client and he is worried,” Granatyr tells Aleixo on Nov. 8, according to one of the wiretaps.

This was one of the last conversations intercepted by investigators, who were wrapping up their investigation into environmental crimes in the region. Despite a lack of details about how the deal was concluded, receipts and timber transport permits issued by the supplier and transport firms show the logs reached Granatyr’s sawmill on Dec. 2.

Between December 2016 and March 2017, five shipments from Granatyr’s yard arrived at Indusparquet’s headquarters in Tietê, in São Paulo state, totaling 35.64 cubic meters (46.62 cubic yards), according to documents from IBAMA seen by Mongabay and Earthsight. There is no record of anything being traded between these two companies after that period.

In both the criminal and civil lawsuits, Botomé charged Aleixo for “illicit enrichment while in public office” and Baggio and Indusparquet for offering an “undue advantage” to a public official in return for information on wood suppliers with the appropriate permits. Puzyna, Granatyr and Granatyr’s sawmill company were also charged for their participation in the scheme.

“At the objective level, it was fully proven that defendant André Luis Aleixo requested an undue advantage [commission] due to his role as IAP’s regional chief and accepted a promise of such advantage, and that defendant José Antonio Baggio offered and promised an undue advantage to defendant André Luis Aleixo, so that he could provide him with information about the beneficiaries of forestry authorizations and guarantee the supply of wood to the company,” Botomé, the prosecutor, wrote in a court submission.

Long legal battle

Over the four years since the lawsuits were filed, there were setbacks, not only to enlist witnesses requested by the defense, but also by defendants denying what was recorded in the intercepted calls, with some even changing their previous testimonies.

Prosecutor Botomé refuted all the defendants’ and their witnesses’ arguments, highlighting not only the content of the intercepted calls but also documents and testimonies of witnesses enlisted by the accusation.

In 2017, Baggio claimed that he did not remember speaking with Granatyr and had never heard of Aleixo. However, on Nov. 5, 2021, he admitted to calling Aleixo and asking for bracatinga, though he claimed to have cut off contact with Aleixo a few days later. He denied knowing that Aleixo was an official at the IAP. “We know this very well, we have dealt with IBAMA for a long time. We follow the rules. A civil servant can never do that. But we were ignorant of the fact he was a civil servant,” he said.

The prosecution, however, doubted that Baggio would have been connected with Aleixo without first having run a simple background check, according to the lawsuit.

Baggio also claimed that he did not know that Aleixo and Granatyr were working together and said that he negotiated with Granatyr two or three months before he talked to Aleixo. This account differs not only from the intercepted talks but also from origin documents and receipts of bracatinga shipped from Granatyr to Indusparquet from December 2016 to March 2017.

“Now, why would defendant José Antonio Baggio tell Luiz Roberto Granatyr to look for defendant André Aleixo if everything had been arranged for Luiz to saw the wood?” Botomé wrote in a submission to the court. “Obviously because defendant José Antonio Baggio had full confidence that the defendant André Luis Aleixo had the … necessary tools and knowledge to facilitate the acquisition of the wood, which could only be justified on the grounds of the public office he held.”

In his court hearing, Aleixo denied he had requested a commission or had worked as a consultant for Granatyr. He argued that he reached out to Indusparquet’s subsidiary to get further details about their operations as he was considering work in the private sector after leaving IAP in early 2017, even though this was never recorded in any conversation. “From my education, I know what the consequences are … for failing to comply with the principles of public administration,” Aleixo said.

He also denied using his position to facilitate the permit allocation for Granatyr’s sawmill, adding that he abandoned the negotiations after realizing that Baggio was demanding a huge amount of wood to be delivered while he was still in office.

Granatyr claimed the deal was moved forward without the help of Puzyna and Aleixo, contrary to what was recorded by the authorities.

In fact, the testimony of a witness called by prosecutor Botomé showed that Puzyna and Aleixo were involved in the search for bracatinga. Antonio Remi Iusviak, who owns the farm from where the logs were sourced, said that Puzyna had visited his property together with Granatyr.

In its defense, Indusparquet enlisted employees and three of its suppliers to testify in Baggio’s favor. The witnesses tried to convince the judge that asking for a “commission” in timber negotiations is common practice, as well as the informality between Baggio and suppliers and, finally, that the company was unaware that Aleixo was the head of IAP at the time.

There were curious nuances in the four hours of video hearings assessed by Mongabay and Earthsight. The three suppliers, for example, all repeated the same narrative, in the same order, which may be an indication they may have been coached by Indusparquet to discredit the corruption allegations.

Controversial court decision

A verdict in the cases was finally issued earlier this year. The court’s decision in both criminal and civil lawsuits absolved all defendants following the expiration of the statute of limitations. The court rulings also found the payments to Aleixo a private matter that were unrelated to his position as a public servant.

Brazil changed the administrative improbity law in October 2021, setting a statute of limitations of four years for trials. Key witnesses in the case against Indusparquet could not be tracked down for more than two years by court officials.

During his hearing before Judge Emerson Luciano Prado Spak, presiding over the criminal case, Baggio said he intended to open a factory in Irati, a municipality in Paraná state, and asked the judge: “It looks like it’s the doctor’s hometown, right?” The judge nodded. Spak concluded the hearing by congratulating Baggio.

Spak did not reply to Mongabay’s and Earthsight’s request for comment.

On Feb. 3, Spak decided that the wiretaps “demonstrate more than enough” that Aleixo “actively participated” in the bracatinga negotiations. The “undeniable” facts of the case, he said in his concluding remarks, were that the commission was not “requested to pay for the practice of an act inherent or materially linked” to Aleixo’s position in the IAP.

Prosecutor Botomé appealed Spak’s decision but it was upheld by a higher court that said there was a lack of evidence to prove a causal link between the advantage offered to Aleixo and the privileged information he passed on to Baggio. The prosecutor’s office in the second instance filed a motion for clarification in August. In July, Botomé also appealed the sentence for the civil case that absolved all defendants.

In an emailed response to Mongabay and Earthsight, Indusparquet said the criminal charges were dismissed, arguing the court recordings “simply confirm a regular negotiation, with common language and tone, where prices, measures and sales commissions are discussed.” The company added that Aleixo did not identify himself as a public official and that Baggio and Faria only became aware of his position subsequently. They called “ridiculous and absurd” insinuations that Baggio’s remarks of opening a factory at the judge’s hometown or of the judge having dismissed the case because of proximity to Baggio.

In an emailed statement, Aleixo denied the accusations, calling the prosecutor’s allegations “unfounded,” adding that he was acquitted in the first and second instances in the criminal suit and the action of administrative improbity was dismissed, with appeal by the State Public Ministry.

In an emailed response, Puzyna also denied the accusations. “There was never any purchase or negotiation made by me, much less the transport of wood from a rural producer to Luiz Roberto Granatyr’s sawmill,” he said, adding that the criminal lawsuit is baseless and was “ruled totally unfounded” by court in the first and second instances.

Granatyr and IAP did not respond to requests for comment.

Orchestrated bribery scheme to manipulate timber system

In another case that mirrors closely the model used in Paraná, an alleged bribery scheme was uncovered involving Indusparquet, an official and six timber companies in Bauru city in São Paulo state. According to court filings, police reports and intercepted emails, the scheme aimed to manipulate IBAMA’s timber tracking system to the company’s advantage.

IBAMA’s Sisdof/Sinaflor system is used to monitor timber trading and logging across the country, allocating virtual credits to forest concession holders to allow scrutiny of the species and volume of wood authorized to be cut.

Investigators found 988 entries in the Sisdof/Sinaflor system benefiting Indusparquet and the other timber companies between 2014 and 2016. Of this total, 106 records were “directly related” to emails mentioning the payment of bribes, according to a 2017 IBAMA report contained in a lawsuit filed by the Federal Public Ministry (MPF) in Bauru. Further analysis revealed “inconsistencies” in the records either due to failures in the duly filed documentation or verification of the physical address of the enterprise and relevance of IBAMA’s action, the report adds.

At the center of these manipulations was Markus Otto Zerza, an IBAMA analyst, court records show. Zerza was allegedly paid kickbacks by Alberto Antonio Cezar, who worked simultaneously at Indusparquet’s purchasing department and as a middleman skilled in resolving bureaucratic and operational issues for timber firms.

By law, each timber transaction must be backed by an origin certificate, known by its Portuguese acronym DOF. While Cezar specialized in resolving “DOF blocks” to allow timber to be sold, Zerza approved the release of seized wood, authorizing timber stocks for trade and “adjusting” companies’ credits, filling IBAMA’s database with “false and improper data,” court records show.

Indusparquet was the biggest beneficiary of Zerza’s alleged manipulations. While the flooring giant was still waiting for new operating licenses, Zerza reportedly entered “conversion licenses” in Sisdof/Sisflora in June 2014, October 2014 and February 2015, allowing the company to convert sawn timber into other products without the need for prior authorization.

These conversions generated to Indusparquet estimated sales of 154.37 million reais ($30 million) through the conversion of 19,753 cubic meters (25,836 cubic yards) of timber credits, the MPF calculated.

“These corruption crimes, they are very difficult for you to detect,” Pedro Antonio de Oliveira Machado, a Bauru-based federal prosecutor, told Mongabay in a phone interview. “If there wasn’t this breach of email confidentiality, what I would be able to identify was that he [Zerza] had made improper entries in the system, but never that he had received a bribe.”

The first intercepted email reproduced in the lawsuit was a message from Zerza to Cezar on March 29, 2014, revealing how the bribes were paid.

“See if you write down this address in your diary …,” Zerza wrote from one of his two personal email accounts, “you will use it a lot.”

The “address” was the banking details of his wife, Marisa dos Santos Zerza. The Federal Police identified five small bank transfers totaling 2,900 reais ($560) from Cezar to Zerza’s wife’s account in 2014 and 2015. Fifteen larger transfers totalling 173,945 reais ($33,700) from unidentified sources were also found in her account between 2014 and 2017, which investigators said are likely linked to the bribery scheme.

These new revelations are the result of a previous crackdown on the illegal timber trade in the country: Operation Pátio, a 2016-18 joint investigation by IBAMA and the Federal Police that seized the largest amount of “illegal Amazon timber” in São Paulo state’s history at the time. The hundreds of pages of records from the Federal Police attesting that Zerza manipulated the Sisdof/Sinaflor credits system were generated under that operation.

Beyond the seizure of goods that IBAMA said lacked the necessary permits, the operation in May 2018 included an alleged laundering scheme used by Indusparquet to conceal 10,740 cubic meters (14,047 cubic yards) of illegally harvested timber among legal stocks through counterfeited timber credits. Accused of illegal practices, the flooring giant was fined 995,762 reais ($259,030 at the time), and its main warehouse in the city of Tietê was temporarily prohibited from trading timber.

As previously reported by Mongabay and Earthsight, Indusparquet’s largest fine was lifted and its seized timber returned under reportedly suspicious circumstances in June 2019 amid loosening enforcement of environmental laws in the country during President Jair Bolsonaro’s premiership.

Bribes flow

In March 2021, prosecutor Machado filed a public civil lawsuit against Indusparquet and six other firms involved in the scheme: Baurupisos, Thais Cristina Teixeira Brasil, Ulimax Esquadrias de Madeira, Indústria Madeireira Uliana, Demarchi & Co, and Faurtil Fábrica de Urnas Tietê (also called Jonacir Amorim). He has also filed 15 criminal lawsuits so far against Cezar, Zerza and his wife, and 30 others involved in the scheme.

The bulk of court documents, including testimonies from key players in the scheme and intercepted email extracts, show that Zerza manipulated the Sisdof/Sinaflor credits system “in a totally illegal way,” Machado said.

“He [Zerza] asked for a bribe. … It’s very clear. … It’s all documented [in] the emails he exchanged with people.”

The hundreds of pages of intercepted emails — obtained within the scope of developments of Operation Pátio — seen by Mongabay and Earthsight also indicate a consistent pattern: Cezar sent documents to Zerza, asking him to move forward with a company’s request, and Cezar billed the firm for the service.

In an email dated Aug. 25, 2014, Cezar forwarded a request from Ulimax’s accounts department to Zerza in which Zerza mentioned a spreadsheet described as “the application,” in addition to an agreed transfer fee of 2,200 reais (about $427).

In the same month, Zerza “adjusted” Ulimax’s timber credits, eliminating 1,722 cubic meters (2,252 cubic yards) of wood from its stocks, court records show. Two months later, Uliana reportedly had two loads of timber excluded from its records, totaling 3,848 cubic meters (5,033 cubic yards) of wood.

Zerza also released seized timber stocks to four other firms: 297 cubic meters (388 cubic yards) of wood worth 575,510 reais ($111,800) to Demarchi; Baurupisos profited with estimated benefits of 1.64 million reais ($318,500) through 253,853 cubic meters; Faurtil was granted 119,250 cubic meters of released timber in February 2014 and February 2015 worth 251,747 reais ($46,797); and Thais Cristina Teixeira Brasil, in February 2015, court records show.

IBAMA’s investigation into the scheme shows that it continued well into 2017, according to prosecutors.

On Jan. 30, 2015, Cezar forwarded an email to Zerza with the subject line “Desbloqueio de pátio” (“Courtyard unblocking”). The body of the email was left blank, but four images were attached: three with information about the company Thais Cristina Teixeira Brasil and one containing the first page of its application to release the timber stocks.

The lawsuits called for the defendants to be charged with corruption, misrepresentation and entering fake data into a government database to try to obtain “undue advantage.” It also asserted that the corruption scheme hindered IBAMA’s ability to enforce the law.

For several companies, investigators presented emails as proof of kickbacks being paid for Zerza’s actions. While none of the intercepted conversations provided evidence of bribes, the prosecutor spoke of mounting evidence against Indusparquet. Under Brazilian anti-corruption law, proof that the company’s management knew about the alleged bribery scheme is not required for the firm to be legally liable.

“First of all, the one who practiced corruption was an employee of [Indusparquet’s] financial sector,” Machado said. “Secondly, he offered a bribe [on behalf of] companies that did business with Indusparquet … either because they transferred wood to Indusparquet, or because Indusparquet transferred wood to them.”

The third piece of evidence in the case was the improper release of a huge amount of wood to Indusparquet, he added. “For this undue release, the anti-corruption law also allows the company to be held accountable even if there was no act of corruption,” Machado told Mongabay. “Why? Because it was only discovered that there was this undue release because there was this investigation. And the anti-corruption law says that when a company makes inspection difficult, it can also be held accountable by the anti-corruption law.”

The lawsuit also shows that Baurupisos, Uliana and Faurtil “maintained partnerships and/or commercial ties” with Indusparquet. In fact, court files from IBAMA show 74 transactions from 2014 to 2016 between Indusparquet and the other firms in the lawsuit, totalling 1,245 cubic meters (1,628 cubic yards) of wood worth 3,370,652 reais ($655,000).

Court documents point to further evidence that some companies are under Indusparquet’s umbrella: Ulimax and Uliana are owned by members of the Uliana family, the namesake of one of Indusparquet’s owners, Luiz Francisco “Kiko” Uliana. A similar-named company based in Paraná state, Uliana Pisos e Portas, also claims to be an Indusparquet distributor. A 2019 labor lawsuit targeted Indusparquet, Uliana and Ulimax; the suit identifies Uliana and Ulimax as Indusparquet’s subsidiaries.

Except Baurupisos and Tais Cristina Teixeira Brasil, all other companies named in the lawsuit are based in Tietê, including Indusparquet. Ulimax, Uliana and Faurtil all have registered addresses along a short stretch of road in Tietê. Demarchi is also based nearby, in a different part of town.

Confessions

When he was arrested in May 2018, Zerza told police he had used his wife’s bank account to receive bribes to release timber for Cezar. He also confessed to manipulating the Sisdof/Sisflora system long after his access should have been revoked.

His wife, Marisa, told the federal police that she thought the money transferred to her bank account referred to Zerza’s consulting work, an allegation that didn’t persuade the prosecutor. “He is the one that has to inspect and fine in case of any irregularities. But he goes and advises the company and charges for it. It is something totally incompatible [with his role],” Machado told Mongabay. “He violates the duties of loyalty to the administration. One of the duties that public servants have is loyalty to the public administration.”

In his testimony, Cezar denied paying bribes, claiming that he had deposited money in Zerza’s wife’s account because he had asked Zerza to buy a used mobile phone, but the funds were not used.

“Cezar denied the payment of bribes and when confronted with the message forwarded by Markus with bank details of his wife Marisa dos Santos Zerza, [he] presented a fanciful version that this occurred because he asked Markus to see [buy] a used mobile phone in the city of Bauru, but the deal did not work out.”

In a challenge filed in September 2021, Indusparquet said it “has no relationship with the facts narrated in the complaint, having not offered in its name or through any employee or representative an undue advantage, received an advantage from a public servant, much less caused damage to public property, which is a requirement for action processing,” adding that the MPF lawsuit was based on a “chaotic narrative.”

Further evidence came in May 2018, when Cezar was taken into custody and contacted Indusparquet’s co-owner Jose Antonio Baggio to find out if the company would appoint a lawyer, according to a Federal Police report.

In an emailed statement, Indusparquet denied the accusations and any link between Operation Pátio and the federal prosecutor’s lawsuit. The company claimed that the lawsuit lacked any environmental damage caused by Indusparquet and involved “mere questions on administrative information provided to IBAMA,” adding that it had no illegal relationship with IBAMA employees.

In an emailed response, Uliana said that it would be available to clarify the facts once the case had been processed, noting that reporting on the case “could cause irreparable damage to the company.”

In a statement, Baurupisos provided a generalized response, mostly stating that there were no new facts provided by the investigation and the lawsuit was under secrecy. Like Uliana, it claimed that “if there is any publication of information covered by legal secrecy that in any way is harmful to the company’s image, its representatives, through their legal counsel, will take the necessary legal measures in order to hold the creators of the disclosure in question civilly and criminally liable.”

In an emailed response, Ulimax said it had not yet been proven that Zerza had acted on behalf of its firm or that it had contracted Zerza’s services to commit unlawful acts. However, it did not deny that it used Zerza’s services, claiming that the hiring of the IBAMA employee took place only “to assist the company in adjusting the stock kept in the IBAMA system” and that such adjustments had not been possible to make due to inconsistencies in the system itself. Ulimax also questioned the extent of penalties required by the prosecutor, stating that if the penalties involved were properly calculated according to relevant legislation, “the amount of the fine, if due, falls considerably.”

In an email, Cezar denied the accusations, claiming he was “wrongly” included in the investigation and that some of his messages with Zerza “were interpreted out of their real context.” “I will have the opportunity to defend myself and present, directly to the judge, the evidence and documents that will demonstrate that I have nothing to do with the investigated scheme,” Cezar wrote, adding that “neither I nor the company I worked for participated in this alleged scheme.”

Zerza and his wife acknowledged the receipt of requests for comment but did respond within the deadline; the other firms named in the case did not reply to requests for comment.

Fighting corruption

The federal police inquiry into the bribery scheme is still ongoing, as it involves hundreds of companies. The pile of documents grows every 90 days, Machado told Mongabay, when updates on the police probe are sent to his office. He said he has worked through hundreds of pages of evidence to file as many cases as he could against the firms, and there was enough proof to charge them for corruption. He managed to file 28 suits against 42 companies by July this year, when the deadline to avoid the statute of limitations of five years expired.

For the criminal charges, the deadline is much longer: 20 years. Machado told Mongabay he has filed 15 criminal lawsuits targeting Zerza and his wife and 30 others involved in the scheme. And many more suits are on the way, Machado said, as Operation Pátio is now under MPF’s Special Action Group to Combat Organized Crime (Gaeco) coordinated by him in São Paulo. “He [Zerza] negotiated with all of the companies he had contact with. So he negotiated with all of them, receiving bribes from all sides.”

Machado explained that he initially filed the suits aggregating all companies that benefited from Cezar’s actions. But a June 2021 court decision by Federal Judge Marcelo Freiberger Zandavali ordered he had to file one suit for each firm.

“This separation will be bad for the public civil action,” he told Mongabay. “Why? Because there is a link between these companies: The link is Indusparquet’s employee itself [Cezar] and the link is the fact that these companies do business with Indusparquet. There is a reason why I left all of them in the same action.”

The lawsuits were initially publicly accessible, but the court records have since been sealed.

Although Machado said that IBAMA had been cooperative, he added that the agency had sat on evidence of crime for years.

Despite his confession and the evidence against him, Zerza continued to work as an IBAMA employee for almost three years, until March 4, 2021, when he was finally removed from his position by ministerial decree. IBAMA did not respond to requests for comment.

Cezar is still working at Indusparquet’s headquarters in Tietê.

Machado, however, is optimistic about punishments against the defendants, given the available evidence. “If the actions are considered to be valid, which I believe they will be … [the evidence of corruption] is consistent, this alone gives very high penalties, both in criminal and civil actions of the anti-corruption law.”

Under the anti-corruption law, he explained, the maximum sentence is 12 years. Companies can receive fines of up to one-fifth of the companies’ gross revenues and be forced to pay damages. Machado also requested the companies’ suspension from activities like trading timber and the use of IBAMA’s credits system and timber yards for at least two years, as well as a potential ban on receiving subsidies or loans from public bodies of between one and five years.

“The law wants to prevent public agents from working on the basis of receiving advantages or promising advantages,” Machado said. “So, it is understood that there is a very great gravity when this happens, so that the penalties for corruption crimes are high.”

Political ties in the Amazon

Two years ago, authorities seized in the Amazon region the largest batch of illegal timber in Brazil’s history: 226,760 cubic meters (296,591 cubic yards), enough to fill 90 Olympic-size swimming pools, worth more than $25 million at the time. The operation, code-named Operation Handroanthus, was carried out by the country’s Federal Police and IBAMA in late 2020. One year later, the minister of environment was ousted.

As part of this investigation, we discovered that Indusparquet was also implicated in that fraudulent scheme as a buyer of wood from two farms where illegal timber was seized as part of the raid.

Holding a concession in Pará, MDP Transportes had timber seized. The firm went to court to get its logs released, a move followed by other sawmills. Initially, MDP succeeded, with a judge authorizing the release of the timber in May 2021, but a Supreme Federal Court decision nullified it a month later.

However, the Federal Police in Amazonas found that MDP’s 31,500 cubic meters (41,200 cubic yards) of seized logs had disappeared or were sold to companies targeted by the operation between June and August 2021 — when the goods were guarded by Brazil’s Army (which played a collaborative role in Operation Handroanthus) — according to documents obtained by Brazilian magazine Carta Capital.

Earthsight’s analysis of official documents seen by Mongabay found that MDP sold 550 cubic meters (719 cubic yards) of jatobá logs (Brazilian cherry) in that period to two sawmills, Madeireira Moju and Madeireira Portes In. Comercio e Exportação Eirelli – EPP. Of this total, 44 cubic meters (57.5 cubic yards) of sawn jatobá entered Indusparquet’s supply chain in October 2021.

The investigation also revealed that one of the suppliers had received fines totaling nearly $200,000 between 2015 and 2019, including for entering false information in official timber databases.

The other farm that sourced was Francine II, which accounted for 41,202 cubic meters (53,890 cubic yards), or 18{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827}, of the total illegal timber seized in the crackdown.

An analysis of timber transport documents shows that Francine II sold 200 cubic meters (261.6 cubic yards) of cumaru, also known as Brazilian teak, to RSK sawmill, located near Pará’s capital Belém, 800 kilometers (497 miles)  to the east. Between June and August 2021, RSK sourced 110 cubic meters (144 cubic yards) of sawn cumaru through 11 transactions shipped to the flooring giant in São Paulo.

Like Francine II, RSK was also previously implicated in wrongdoing. Between 2015 and 2018, the lumberyard was fined 12 — about 1.59 million reais ($308,000) — for various offenses: not having the documents required to be able to prove the legal origin of its timber; not having the correct storage permits for timber; entering false information in the official timber databases for Pará state; and for discrepancies in the amount of wood the company is legally authorized to sell (timber credits) and volumes declared on harvesting permits, IBAMA documents show.

Despite all of this, RSK is Indusparquet’s biggest supplier in Pará, selling over 3,100 cubic meters (4,055 cubic yards) to the firm between 2018 and 2021 — the last year data was available — or about 20{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} of timber the company bought from its 81 suppliers in the state, according to Earthsight’s analysis of timber transport documents.

Political ties

At Francine II’s farm, authorities seized more illegal timber than at any other location in Operation Handroanthus, according to a letter sent to the Federal Supreme Court by the ex-police chief of Amazonas state, Alexandre Saraiva, who masterminded the crackdown. Accompanied by a group of local politicians, Ricardo Salles, the controversial former environment minister, visited the Francine II farm while he was in office to lobby for the timber to be released.

“We checked the tree tracking system. Tags on the logs indicate the exact location where they came from,” Salles tweeted on March 31. “We walked into the woods to check it out. The data matched just fine. Now we will confirm the DNA test of the samples.”

“There are serious people doing the job right. It is not right to demonize the entire timber sector. It is necessary to identify the criminals and punish them harshly, but without generalizing.”

A week later Salles returned to Pará. His trips to Francine II followed two meetings in March with a group of businessmen — landowners in Pará and timber dealers — and politicians lobbying for the timber to be released at his office in Brazil’s capital, Brasília. One of them was Rafael Dacroce, the grandson of Walter Dacroce, Francine II’s owner.

When questioned by reporters about the reunion, Dacroce said Salles had promised to look into his case and would ask the head of IBAMA and other politicians to do the same. “He wanted to understand, but at no time did he make a pre-judgment, look, oh, you’re right, so we’ll release the wood tomorrow,” he said.

Following Salles’ visit  to Francine II, Dacroce posted on Instagram his excitement about the official visit “to supervise the legality of the extraction of wood in the state of Pará, coming from sustainable management projects! This is the Brazil we want.”

Salles reportedly arrived in an IBAMA helicopter to one of Dacroce’s farms used for the illegal extraction of at least 43,000 logs, according to Brazilian magazine ISTOÉ.

In his letter to the Supreme Court, Saraiva highlighted the evidence of illegality unearthed by the operation, accusing Salles of discrediting police investigations and acting “like a true advocate for the logging cause.” Saraiva was removed from his position and demoted the next day.

Later that same month, Salles said he had been pressured by several politicians to act to release the seized logs, according to an interview with the Brazilian radio network CBN.

In May 2021, courts in Pará and Amazonas states responded to the timber company’s plea, ruling that the seized logs should be released. Salles proudly tweeted about the Amazonas judge’s decision. The Pará judge’s ruling was issued the same week that Salles made another trip to Pará, that time to supervise IBAMA and police operations.

But a decision from Supreme Federal Court Justice Carmen Lucia suspended both decisions in June. Later that month, the conduct of Federal Judge Antonio Campelo, the author of Pará’s ruling, began to be investigated by the National Council of Justice (CNJ), a watchdog that monitors judicial independence. Campelo was removed from his position in December, following the probe that found that he had failed to act impartially and accurately by ruling on the case during his vacation, violating the judiciary’s code of conduct.

In June 2021, Salles was ousted “upon request” after being named in an unrelated criminal investigation into alleged illegal exports of Amazon timber, especially from Pará. The same timber lobby group that had approached Salles during Operation Handroanthus was also named in the same probe.

Despite all of the activity related to previous attempts to release the seized wood in the aftermath of the operation, in January 2022, lawyer Frederick Wassef managed to release part of the seized wood of MDP Transportes, one of the timber companies whose logs had been seized. Wassef is also President Jair Bolsonaro’s lawyer,  along with other high-profile clients.

Federal Prosecutor Raquel Branquinho criticized the decision to release the timber, claiming that it should only have been made once “these precautions of proper identification of the wood are complied with, because the question of ‘legalization’ or not of these goods is precisely the object of the criminal investigation.”

 ‘A grotesque land grab’

Spanning more than 600 hectares (1,482 acres) of dense forest in Santarém municipality, the Francine II farm has over 20 species of tropical trees, including ipê, jatobá, angelim, cumaru, tauari — all are highly favored by the timber industry and some are in decline — according to its authorizations for forest exploitation (AUTEFs) seen by Mongabay and Earthsight.

Beyond the illegal logging allegations, Saraiva also accused Francine II’s owners of land grabbing. “It’s a grotesque, grotesque land grab,” Saraiva told Mongabay and Earthsight in a video interview. He referred to the means by which the Dacroce family, dubbed “’professional land grabbers” by Brazilian magazine ISTOÉ, had acquired ownership of several properties in Pará.

Saraiva’s letter to the Supreme Federal Court also challenged the legality of the farm’s logging permit, describing multiple flaws in Francine II’s forest management plan. One of them was its overlap with protected areas known as Permanent Preservation Areas (APPs), Saraiva said in a session at the Lower House of the Congress in April 2021.

In an emailed response, Francine II dismissed the accusations, claiming that generalizing the term “illegal” harmed wood producers, adding it had in hand all the documentation that proved the legality of the activity. The farm also said that it had never been notified about IBAMA’s seizure of wood from the farm in the operation. “We can affirm and prove that the woods originated from the Francine II farm are legal. Assertions of illegality are totally slanderous and tendentiously defamatory, without due proof and due process of law for ascertaining the facts.”

The company said that its forest management is developed within the parameters of sustainability, that there was no deforestation in the property and that the purpose of Rafael Dacroce’s meeting with Salles was to draw the attention of the competent authorities to the erroneous and maliciously reported information, but that Salles never visited the farm itself or the company’s yard. In response to our findings that RSK had supplied wood from Francine II to Indusparquet, they replied: “There is a Brazilian law that prohibits the sale of legal wood?”.

Francine also denied that only the Francine farm had authorization in the region.

MDP Transportes, RSK, Madeireira Moju and Madeireira Portes did not reply to requests for comment made by Earthsight and Mongabay. Indusparquet did not specifically respond to the findings of this section when reached for comment.

Uncontacted Indigenous groups at risk

In another case of apparent illegality linked to Indusparquet that we discovered, the company has acquired timber that was allegedly illegally harvested from an Indigenous reserve in the middle of the Amazon rainforest.

Between January and February 2017, the flooring giant purchased 137.69 cubic meters (180 cubic yards) of three different species of wood from the Ituna-Itatá Indigenous Reserve in northern Pará state, according to an Earthsight analysis of official timber trading documents issued by the Pará environmental department.

Covering 142,000 hectares (350,000 acres) across the municipalities of Altamira and Senador José Porfírio, Ituna-Itatá is home to Indigenous uncontacted groups, including the Asurini people. Brazil is home to the world’s largest number of uncontacted societies, considered the most vulnerable people on the planet.

Indusparquet bought cumaru, ipê and jatobá — highly valuable logs in the timber market — originating from Morro Alto Farm, a 3,829-hectare (9,461-acre) property overlapping the Indigenous reserve, accounting for 2.6{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} of its area, documents show.

Earthsight identified three shipments, with 96.67 cubic meters (126.44 cubic yards) of cumaru and ipê from Morro Alto, that were sold to Indusparquet by sawmill MadBrasil Eireli EPP; and 40.94 cubic meters (53.55 cubic yards) of jatobá that were sourced by Canoer Industria e Comercio Importação e Exportação Eireli EPP. Both lumber yards are located in Anapu, a town where the American missionary Dorothy Stang was murdered in 2005, not far from Ituna-Itatá.

Harvesting timber and building a farm inside an Indigenous reserve are illegal under Brazilian law, which protects — or should protect — the area from outsiders. So how could Morro Alto farm be built inside the reserve?

The story goes back a decade, when the federal government gave the green light to build the controversial Belo Monte hydroelectric dam — one of the biggest infrastructure projects on the planet — in Pará,prompting outrage from environmentalists and celebrities worldwide.

Amid a court battle to halt the construction of Belo Monte, in 2011 the federal government created the Ituna-Itatá Indigenous reserve, following studies assessing the impact of the dam and evidence about the existence of uncontacted groups in the area.

A September 2009 document from the country’s Indigenous affairs agency Funai acknowledged the presence of uncontacted Asurini people in the region since the 1970s. Another Funai document from July 2009 also brought evidence of Indigenous people in the north of Koatinemo Indigenous Territory, which borders Ituna-Itatá; traces left behind by the group were detected inside and outside its boundaries and in the headwaters of the Ituna River.

The acquisition of Morro Alto by Evandro Carlos de Oliveira and Wilson Paulo da Mota was agreed just one month after Funai’s last report, in October 2009. De Oliveira and da Mota had also previously claimed ownership of two other properties inside Ituna-Itatá: the Sossego and Serra Dourada farms, accounting for 6,431 hectares (15,891 acres). Morro Alto lies between them.

In order to start logging at Morro Alto, they had to go through a lengthy process to secure timber extraction permits from Para´s environmental secretariat (Semas). But documents show that they applied for these permits months before obtaining the farm’s land title and even hired an agronomist to conduct a georeferencing analysis to be filed while the process was ongoing. The permit was issued by Semas in August 2016, stating that there was “no overlap of the area with any Indigenous territory,” ignoring Funai’s decision that had denied access to outsiders since 2011. Timber exploration started soon after, records show.

In February 2017, while Indusparquet was buying wood from Morro Alto, Funai sent a letter to Semas demanding all extraction permits inside the reserve be suspended, a request that was instantly fulfilled by local authorities.

Some months later, IBAMA fined sawmill MadBrasil 673,000 reais ($131,500) for providing false information about hundreds of cubic meters of timber on its tracking system. Two of these fines were issued in April and May 2017, a period close to when it sold timber to Indusparquet, but it was unclear whether it referred to those shipments.

There was no indication of timber from Morro Alto having been sold to the flooring giant since 2017. However, MadBrasil is Indusparquet’s fifth largest supplier in Pará (of 81 suppliers), selling 587 cubic meters (767 cubic yards) of wood to the company between 2016 and 2021, documents show^..

In 2020, MadBrasil and Canoer were fined again, that time 1.72 million reais ($336,000) for lacking permits and for hiding the true origin of timber in official databases.

Court records also reveal that Morro Alto’s owners were fined $2.76 million in 2021 by IBAMA for several environmental crimes. One of the violations was clearing almost 1,000 hectares (2,471 acres) of native forest in the Ituna-Itatá reserve in March 2021 in an area not covered by their license, breaching access restrictions to an area where uncontacted Indigenous groups live. Records also show that 388.98 hectares (961 acres) within Morro Alto was sanctioned by the courts, which placed a moratorium on its use.

Although the license to build Belo Monte was only supposed to be approved after the demarcation of all Indigenous lands affected by the dam, Ituna-Itatá has yet to be officially given protected status. “And the protection measures that were supposed to come from [Belo Monte dam] environmental compensation components never got off the ground,” Ricardo Abad, a geoprocessing analyst at nonprofit Instituto Socioambiental (ISA), told Mongabay and Earthsight in a video call. “The indemnities, the construction of surveillance bases, which were to be installed, many of them did not materialize. Most were almost like paying alms to some ethnic groups that are there. But structural actions to clear the areas and promote surveillance and territorial protection were not carried out.”

But full protection of the area should be ensured regardless of that bureaucratic step, rights groups say.

“The constitution is clear. As soon as the land is recognized as traditional Indigenous land based on a Funai study, all [private] titles over it is to be considered void,” Cerqueira de Oliveira, executive secretary of the Indigenist Missionary Council (CIMI), an advocacy group affiliated with the Catholic Church, told Earthsight earlier in the year.

More than 220 settlers, including Evandro Carlos de Oliveira and Wilson Paulo da Motada Mota, have used the Rural Environmental Registry (CAR), a compulsory but self-declaratory registration of rural properties, to claim their land rights over Ituna-Itatá, according to a Greenpeace report that estimates that almost 94{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} of the Indigenous reserve has now been claimed as private land.

About 22,000 hectares (54,300 acres) of its forests have been logged since 2011, or 15{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} of its area, according to a January report by COICA, the Coordination of the Indigenous Organizations of the Brazilian Amazon, an Indigenous umbrella group, and OPI, the Human Rights Observatory for Uncontacted Indigenous People. Earthsight’s analysis of satellite imagery also found more than 700 hectares (1,729 acres) cleared inside Morro Alto since 2017, raising concerns over whether illegally harvested timber had been extracted from the site.

Satellite analysis by ISA also found in March 2019 that a road was built illegally in the south of the Indigenous territory, where isolated Indigenous groups are thought to be settled. Estimates in the COICA/OPI report suggest 289 kilometers (179 miles) of roads have been laid inside the reserve, of which 220 kilometers (136.7 miles) were built in 2019. Power lines and lampposts to new houses were also detected in the reserve in December 2021, according to ISA and the Coordination of Indigenous Organizations of the Brazilian Amazon (COIAB).

Abad said that ISA has been monitoring the region since 2017, including flyovers to detect illegal activity in the Indigenous reserve. But he said the nonprofit wasn’t able to fly over the area anymore because the only helicopter pilot “more or less” reliable was involved with land grabbing, which is led for two or three different groups within the Ituna-Itatá.

Like other Indigenous areas that are not fully demarcated, Ituna-Itatá has been protected by temporary measures restricting outsiders’ access to the area for just six months. That period was due to expire in August 2022, but the restriction was extended for another three years.

If squatters were allowed to remain in Ituna-Itatá, it would set a dangerous precedent that would contribute to “the extermination of more than 100 groups that live in isolation in other Indigenous lands and under the same condition in Brazil,” Greenpeace said in 2021.

Without denying our findings of wrongdoing about the Pará suppliers, Indusparquet stated that it had strict policies for the selection of suppliers and document collection and that it was dedicated to enhancing supplier assessment mechanisms. It said that it was implementing a compliance department to manage and map risks and was using the help of various partners to provide risk assessments and improve transparency.

In an emailed statement, Semas said that more than 260 Rural Environmental Registry (CARs) in the Ituna-Itatá Indigenous Territory were suspended, canceled or under analysis. It added that it requested that the national authority in charge of the Nacional System of Rural Environmental Registry (SICAR) modify the system to prevent the registration of CARs in the Indigenous territory.

MadBrasil, Canoer, de Oliveira and da Mota did not reply to requests for comment.

Who is the U.S. client?

In the Paraná case, the bracatinga search in União da Vitória was triggered by a U.S.-based importer, Baggio said during his court hearing in November 2021. “We had done some business with bracatinga … By request of a client in the United States who liked the wood, we went after buying more bracatinga.”

So who is this American client?

We found evidence that the buyer Baggio was referring to is Floor & Decor, America’s largest flooring retail chain, which was previously involved in illegal timber scandals with Indusparquet.

Earthsight’s analysis of shipping records reveal that Floor & Decor sold Brazilian tropical flooring manufactured by Indusparquet between 2015 and 2019 and was the firm’s largest U.S customer in the period.

Although court documents show that the defendants in the Paraná case ended up supplying Indusparquet with just 35.64 cubic meters (46.6 cubic yards) of bracatinga, well below the desired volume of 250 cubic meters (327 cubic yards), further research revealed that the flooring giant managed to get a larger amount of wood for its client.

Earthsight also found that Granatyr, the sawmill owner quoted in the calls, also purchased 10 cubic meters (13 cubic yards) of bracatinga from another lumber yard that wasn’t probed in the court case. In his testimony, Puzyna, who acted as an intermediary in the deal, asserted that the bracatinga would be used to produce wooden floor tiles.

Indusparquet exported 27,590 tons of products to the U.S between January 2017 and August 2022. By analyzing trade data, Earthsight found that only a few American companies were importing wood tiles and wood products made from a wide variety of wood species produced by Indusparquet in that period.

None of the 2017 shipments to Floor & Decor or any of the U.S. companies specified the species. There is also no indication that the retailer directly bought wood from Indusparquet and its name disappeared from shipment records in late 2019.

Headquartered in Georgia, Floor & Decor is one of the largest specialist flooring retailers in the U.S., with annual sales of $3.4 billion in 2021 and about 90 stores throughout the country. Until being delisted from shipment records, it was also Indusparquet’s largest American customer, only behind Indusparquet’s subsidiary in Miami, BRW Floors, which accounted for more than half of its products traded to the U.S.

Nonetheless, a clue was found on the company’s website: an advertisement of “bracatinga Merida” distressed engineered hardwood, a flooring product under its “Quest Exotic Hardwoods” flooring line — the same product at the center of a 2018 Earthsight report on the connections between Floor & Decor and Indusparquet. Further research indicates that it may have been one of the only two U.S. importers that specifically listed a product made from bracatinga for sale on its website.

Shipment records expose more clues: Masterpiso — Indusparquet’s subsidiary in Paraná — sent 96 tonnes of bracatinga wood flooring to the U.S. through at least four shipments to two freight forwarding companies. Although the name of the final consignee wasn’t disclosed, Earthsight found that those same freight companies had been used as intermediaries by Floor & Decor for its Brazilian imports from Indusparquet.

It also found the ‘’bracatinga Merida’’ flooring line exclusively sold by Floor & Decor in the description of the shipment records. There was no evidence that the bracatinga processed by Granatyr’s sawmill or that Aleixo had helped to source was among the shipments received by Floor & Decor.

Even though shipment records indicate that Floor & Decor stopped buying Indusparquet products in November 2019, the bracatinga merida flooring continued to be advertised on the company’s website until September 2022, when Earthsight bought a box of “bracatinga merida” flooring, manufactured in 2019, in Northern Virginia. After Monbagay and Earthsight reached Floor & Decor for comment, the page for that product suddenly disappeared.

Asked specifically by Mongabay and Earthsight about being the American client mentioned in the Paraná court case, Floor & Decor said it was committed to responsible sourcing practices and that it had not purchased any Brazilian-made flooring from Indusparquet and its affiliates since 2019. The company said its last purchase of “bracatinga merida” product occurred in 2019, adding that that line had since been discontinued. Floor & Decor said the product was now unavailable by searching its website, adding that there was a residual product page for it to be found in internet searches, which they were attempting to resolve.

Other buyers

In April 2018, the same month Indusparquet was targeted in the Paraná lawsuits and just a month before Operation Pátio, the first shipments from the flooring giant reached Floor & Decor’s archrival: Lumber Liquidators (now LL Flooring), a company that paid the highest fine in U.S. history ($13 million) for knowingly buying illegal timber.

Despite promises of compliance commitments in 2016 and its purchases supposedly being watched by independent auditors and the U.S. Department of Justice, LL Flooring started purchasing from Indusparquet in April 2018, Earthsight found.

Between May 2018 and the end of its probation period in October 2020, LL Flooring imported at least 6.3 million square meters (7.53 million square yards) of Indusparquet’s flooring, with an approximate retail value of $6 million.

The retailer’s purchases of engineered flooring from Masterpiso, Indusparquet’s subsidiary in Paraná, continued until at least October 2021, according to the findings. The goods included products made with surface layers of Brazilian oak (Tauari) and Brazilian cherry (jatobá), and sold under the product line names “Forest Hill,” “Esperanza,” “Bandera” and “Padre.”

Over the years, only one of four audit reports required in the probe has been made publicly available. Authored by law firm Grant Thornton, it did not mention Brazil for the period between January 2018 and May 2018.

LL Flooring did not respond to requests for comment.

Indusparquet’s flooring exports to the U.S. came to 6,234 tonnes — up 23{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} from 2020 and 7{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} from 2019 — with a retail value of about $50 million. Part of that growth came from Indusparquet’s new clients.

In 2019, the company started selling to Bison Innovative Products, a Colorado-based firm specialized in external decking “tiles,” mostly for rooftops. The company’s goods encompass a range of South American tropical species, including ipê, cumaru, massaranduba and garapa. Shipments until March 2021 reached 3,571 tonnes, according to Earthsight’s analysis.

Although Bison’s name disappeared from shipping records after that period, almost an equal monthly volume was shipped from Indusparquet to the U.S. until December of that year to an anonymous buyer, with the same commodity descriptions, and shipped through the same port.

In an emailed letter, Bison only acknowledged the receipt of requests for comment, saying that it would review the provided information.

In July 2019, Indusparquet’s U.S. subsidiary BRW Floors sealed a deal with Dallas-based flooring firm Fuzion to sell its products across Texas, Oklahoma, Louisiana, Arkansas, Mississippi and western Tennessee, among others. In 2021, Indusparquet signed a distribution agreement with Galleher, one of the largest flooring manufacturers and distributors in the U.S. Neither Fuzion nor Galleher responded to requests for comment.

Additionally, Earthsight’s analysis found indications that Indusparquet was supplying major U.S. DIY chain Menards, which reported $10.7 billion in revenue in 2020, one of the “big three” U.S. box stores alongside Lowe’s and Home Depot. On Menards’ website, there is one tropical species of solid wood flooring on sale branded by BRW Floors, made from what it calls “Brazilian Pecan,” the common U.S. trade name for the Brazilian tree species Guaiuvira (Patagonula americana), which, like bracatinga, grows in the remaining fragments of the Atlantic Forest.

Earthsight bought a sample of that product in September but found out that it was made in Paraguay, which is also covered by the Atlantic Forest. Menards did not respond to a request for comment.

Out of control

Over several years, a wide range of reports have raised red flags over Brazil’s control system, indicating it could not be trusted to provide proof of legality of wood considering the scale of fraud in the sector.

In 2008, it was revealed that IBAMA’s database was hacked by timber companies, which edited information that allowed them to launder 1.7 million cubic meters (2.2 million cubic yards) of illegal logs from Pará state, likely the single largest illegal timber case in history.

In 2014 and 2015, systematic fraud within the country’s timber tracking and legality assurance systems were exposed in Greenpeace reports. One of the key case studies was also in Pará, where a single licensed forest was used to launder an estimated $7 million of ipê through frauds in the DOF system. In 2018, another Greenpeace report showed the inadequacy of official documentation as a guarantee of the legal origin of Amazon timber.”

This year, some 10 million cubic meters (13 million cubic yards) of Amazon timber production was tracked for the first time, according to a recent report released by nonprofit Imazon. Pará is the largest producer of processed timber, accounting for 47{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} of the Amazon’s exported logs. The state also leads illegal logging in the biome.

Through a system called Simex, which cross-references official timber production documents with satellite images, Imazon estimated that about 70{6b977529af4b490fe19a3f85472c6203ccfa467a56646e317a890c6580e8b827} of timber extracted from Pará between 2008 and 2020 was inconsistent with official records, Dalton Cardoso, a researcher at Imazon told Mongabay and Earthsight in a video call.

Among the inconsistencies, Cardoso explained, the most common are overestimation of species of high commercial value, authorized areas in areas already exploited in the past, and logging that begins before the licenses are issued.

When Imazon’s analysis was completed, the data were sent to Pará’s environmental department (Semas), but it generally did not respond, Cardoso said. “We have pointed out where there are indications of irregularities since 2008, but until today we still observe the recurrence of inconsistencies.”

Semad did not respond to a request for comment about the inconsistencies.

Experts explained how these frauds were widespread in the timber industry.

“Illegality occurs in several links in the chain,” Leonardo Martin Sobral, forest manager at Imaflora, a nonprofit focused on sustainable management, told Mongabay and Earthsight in a video call.

In the case of overestimation of species, he explained, it was mostly used to launder timber extracted from protected areas, including Indigenous lands. “When it comes to Indigenous land, it’s all illegal because they don’t have authorization to do forest management on Indigenous land.”

He criticized the lack of data and transparency from the majority of states, which hampers traceability of the supply chain and facilitates flaws in the IBAMA system. “The system isn’t bad. … It’s subject to this kind of irregularity,” he said. “But much more than a better system … What is lacking most is the field operation. It is to confront the documentation that is being issued with the reality on the ground.”

One of the issues that made it more difficult to track the origin of the timber, he added, was when the supply chain included several suppliers, making traceability very complex. “If one buys from a supplier, but that supplier’s chain is gigantic, complex, this will make due diligence work much more difficult.”

In the last six years, Indusparquet has received wood from 416 different sawmills, according to our research. That figure only includes suppliers in four Brazilian states for which it was possible to obtain data. And the databases of Pará and Mato Grosso states — the country’s largest wood producers — are not integrated with the central system, increasing the risk of fraud.

That’s why Renato Morgado, program manager at nonprofit Transparency International in Brazil, was calling on buyers to conduct due diligence on their suppliers. “In addition to the requirement for all legal documentation [a company should have] a minimum system of verification of its suppliers,” he said. “This is important to have, to ensure or at least to have greater security in relation to the origin of that wood.”

“I wanted to reinforce this message for companies buying wood. And not just companies. We as final consumers do too. We have to worry about its origin. It’s not just going there and accepting any document, any salesperson’s speech and going out to buy,” said Sobral. “Especially for companies that buy a larger volume, it is important for them to be aware that it is a complex chain. It is a chain that has risks. And that it needs to take actions to minimize that risk.”

Corruption-led fraud

Corruption is usually a key element behind fraud in the timber sector, experts say, especially because it often involves government officials who do not conduct proper oversight and allow wrongdoing in exchange for the payment of bribes.

In the Paraná case, the state “lost total control” over environmental enforcement, Mario Mantovani, who led the nonprofit SOS Mata Atlântica for 30 years, told Mongabay in a phone interview. “Paraná is now in favor of environmental crime,” he said. He explained that the region around União da Vitória had the highest deforestation rate in the state. “And what they did was dismantle the environmental agency. … No more supervision. There is nothing else.”

There was “at the very least, a conflict of interest,” said Morgado of Transparency International. “It is expected that there will be [at least] an investigation at the administrative level to determine … if there was the use, abuse of the position for private gain.”

Paraná’s Environmental Institute (IAP) did not reply to a request for comment.

Acquittals in corruption cases and recent changes in the Brazilian legal framework have emboldened corrupt actors in the sector, experts say.

“What we are actually experiencing is a time of setbacks in the legal and institutional anti-corruption framework. This is happening very quickly,” Morgado said, referring to recent changes in the administrative improbity law, among others. “These setbacks clearly give a signal that corruption will be tolerated and not punished. … This makes private and public agents more willing to commit acts of corruption.”

In August, the Supreme Federal Court decided that the new statute of limitations provided by the new administrative improbity law was not retroactive for ongoing cases, which was seen by experts as a positive move that could potentially change the status of ongoing cases in which the new law was applied.

“Considering that the STF has understood that the new statute of limitations is not retroactive, decisions in the first and second instances that decided otherwise may be questioned and eventually reviewed,” Morgado told Mongabay.

Corruption was a “very frequent” practice in at least three steps of the process in the timber sector, Morgado said: collusion between loggers and public officials to issue fraudulent licenses, non-issuance of fines or leakage of information about inspecting operations, and changing environmental laws and regulations to make environmental crimes more viable.

Machado, the prosecutor acting in the Bauru case, also highlighted obstacles created by the recently passed abuse of authority law. “You’re always worried if what you’re doing might be [classified as] abuse of authority,” he said. “If you put the authorities that fight corruption in a situation of vulnerability, you make the corruptor stronger.”

Machado noted the importance of applying the anti-corruption law to fight impunity and make corporations accountable as “it is enough to prove that there was an act of corruption that benefited it [the company].” The only way that the company could escape penalties, he explained, was if it proved “it didn’t know and, what’s more, that it took all possible steps to prevent someone from committing an act of corruption in its name.”

He also emphasized the responsibility of importers, given international awareness regarding corruption, especially for companies listed in the U.S. stock exchange. “This also means for companies the size of Indusparquet and bigger than Indusparquet, that these companies also have to be concerned if the companies they work with commit acts of corruption.”

Banner image by Samuel Bono / Earthsight.

Karla Mendes is a staff contributing editor for Mongabay in Brazil. Find her on Twitter: @karlamendes

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