By: Philip Jacobson, Mongabay

Indonesia’s Asia Pulp & Paper, one of the world’s biggest paper producers, has been disguising its ownership of a controversial company engaged in deforestation, according to a Mongabay investigation 

The revelation comes after repeated denials by APP that it owns the company, as its opaque corporate structure has been dragged into the spotlight. However, two of APP’s ex-employees interviewed by Mongabay said management had used their names on official filings for the company, PT Muara Sungai Landak, which has been cutting tropical forest on the island of Borneo to make way for a pulpwood plantation now half the size of Manhattan.

One of the employees said he had received a monthly payment to compensate for the arrangement, and that he had been afraid to protest for fear of losing his job.

Their accounts, and that of a third ex-employee who provided insight into APP’s inner workings, contradict assertions made in recent months by the paper giant that it has “no relationship” with Muara Sungai Landak.

“Shadow companies”

The findings place APP squarely in the middle of an emerging debate about the presence of “shadow companies” among the holdings of the family-owned conglomerates that dominate Indonesia’s plantation sector. Under pressure from civil society groups, many of these business groups have promised to stop deforesting. But it is becoming increasingly clear they are using a variety of methods to conceal their control of troublesome assets.

APP belongs to the billionaire Widjaja family, which has investments in a wide range of sectors, from real estate and banking to mining and agribusiness. In 2013, APP made its own pledge to stop deforesting. Greenpeace lent the commitment some legitimacy when it agreed to advise the firm on how to implement it.

Last December, though, APP found itself embroiled in scandal when the Associated Press published an exposé of its corporate structure. Among other revelations, AP found that Muara Sungai Landak was owned through layers of holding companies by two employees of APP: a 36-year-old IT worker and a 43-year-old auditor.

The findings suggested APP was using their names as proxies to hide its beneficial ownership of Muara Sungai Landak, and to secretly profit from the destruction of a massive rainforest in western Borneo.

APP Denial

In response to the article, APP denied controlling Muara Sungai Landak, claiming in multiple public statements and interviews that its employees had formed the company themselves, without management knowing. APP acknowledged a third employee was listed as a director of Muara Sungai Landak, but it said he had been “terminated” from his position at APP as soon as his involvement in the company was discovered. The other two employees, it said, had already left APP.

However, an investigation by Mongabay provides evidence that contradicts APP’s story. In fact, the firm’s links to the forest-destroying operation in western Borneo go much deeper than it has acknowledged. Interviews with the ex-employees of APP also indicate that efforts to obscure ownership links are being coordinated from within the conglomerate.

APP has acknowledged that three of its employees were involved in Muara Sungai Landak. But a review of corporate records by Mongabay turned up the names of three more people who appear to have been employed by APP at the same time as they were listed as officers of Muara Sungai Landak.

Mongabay tracked down two of these individuals. Both said APP’s management had used their names on Muara Sungai Landak.

“The company was run by other people,” one of them said. He said he had had “no other option” but to accept the arrangement.

These six individuals worked for APP at the same time as they were listed as shareholders and/or officers of Muara Sungai Landak and its holding companies. Image by Randy Jacobson for Mongabay.

Mongabay can also reveal the company buying most of Muara Sungai Landak’s timber has similar behind-the-scenes ties to the Widjajas’ conglomerate. The company, PT Cakrawala Persada Biomas, operates a wood-pellet mill in western Borneo. Corporate records show its two directors are a pair of ex-senior executives with the Widjajas’ palm oil arm. At least one of them was employed by the Widjajas at the same time as he was listed as an officer of the milling company. Neither man could be reached for comment.

Ducks Comment

A spokesperson for Widjajas’ palm oil arm said she couldn’t comment on the milling company because “we are not involved in this entity.” The controlling stake in the company is ultimately held by a pair of firms incorporated in offshore jurisdictions — the British Virgin Islands and Labuan, Malaysia.

A third officer of the milling company has worked for several Widjaja family insurance companies as well as for a foundation co-founded by patriarch Eka Tjipta Widjaja. Reached by phone, the man acknowledged his association with Cakrawala Persada Biomas, but said he could not remember if he had been listed as a commissioner or a director. Informed he was a commissioner, he advised Mongabay to speak with the director and got off the line.