STUMPED ON STUMPAGE: Inside the investigation and possible scams
As forestry investigators searched through his company’s records, Rick Kosolofski thought he was watching an imitation of the Untouchables.
“They were all pretty serious and (Daniel) Smallacombe was acting like Eliot Ness,” quipped the owner of Pioneer Log Scaling and Inventory Management.
Ness and the Untouchables were a small group of American law enforcement officials who took on gangster Al Capone and illegal booze running during Prohibition in the 1930s.
But in this case, Kosolofski said forestry officer Smallacombe was acting like the over-achieving U.S. investigator as he and three other officers seized computer hard drives and other documents from Pioneer’s Courtenay office in the summer of 2008.
Pioneer wasn’t the focus of the ministry’s investigation. The company was contracted by Timberwolf Log Trading Ltd. to file log scaling data with the Ministry of Forests.
During an interview last Friday, Kosolofski maintained he had no knowledge of alleged wrongdoing. And following the search, Kosolofski stopped contracting for Timberwolf.
The ministry alleges Timberwolf inaccurately reported the true value of logs it received between April 2006 and December 2008. As a result, the ministry re-evaluated Timberwolf’s stumpage royalties owed at $3.44 million. The company is in the midst of appealing that ruling.
However, lawyers representing Timberwolf had the four warrants quashed following a successful hearing last December in B.C. Supreme Court. In her ruling, Justice Miriam Gropper cited Smallacombe for over-stepping his authority by obtaining the warrants as well as failing to provide full disclosure to the justice of the peace who issued them.
“…Mr. Smallacombe is not a constable or a peace officer, and his powers are more limited than those of a game warden,” she wrote in her decision.
It’s unknown why Smallacombe applied for the warrants when he was acting under Daniel Steel, a senior forestry investigator who also holds status as a special constable.
And, according to Kosolofski, Steel was one of the investigators at his office when the search warrant was carried out.
Ben Parfitt thinks he may know part of the reason why Smallacombe was doing more than he should have – it’s all due to cutbacks in the B.C. Forestry Service.
He found that forestry officers are over-worked and under-staffed in a report he wrote for the Canadian Centre for Policy Alternatives, released last December.
“At a general level, the public should be significantly concerned with cutbacks to the ministry,” said Parfitt from his office in Victoria. “The real issue is companies defrauding the government and playing loose with the facts to avoid paying stumpage.”
The allegation of wrongdoing with scaled logs and reporting sent a shockwave through the logging industry, said Otto Schulte, the vice-president of coastal woodlands for Interfor, one of the largest forestry companies in the province.
Interviewed at Interfor’s Campbell River office on Wednesday, Schulte doesn’t believe there’s widespread abuse of stumpage reporting.
“You’re not going to risk your interests or forest assets by doing something illegal. You’re not going to do that,” he stated. “If you’re going to risk your credibility, you’re not going to do business.”
Timberwolf, in fact, is not facing any charges and provincial Crown prosecutors declined to follow-up on recommendations by the forestry investigators to charge the company with fraud over $5,000 under the criminal code.
But the allegation of wrongdoing is disturbing, said Schulte. His concern is the public might perceive the investigation as a sign of widespread abuse in log scaling and stumpage reporting.
Log scaling, said Schulte, is conducted by licensed professionals who are extremely accurate when calculating the value of logs.
As proof, Interfor has the only electronic log scaler in North America at a sawmill in Delta.
Every single log boom brought to the mill is rescaled, and the difference between man and machine is usually less than one per cent, Schulte pointed out.
It’s also tough to circumvent the system, he added, because the ministry often conducts “check scales” at coastal booming grounds to re-check figures already done by the scalers.
However, speaking hypothetically, both Schulte and Kosolofski speculated on how the scaling numbers could be altered. Every scaler is provided with a digital “key” to upload their data to the ministry. If someone else had that key, they could possibly manipulate the electronic data without the ministry’s knowledge.
According to ministry media spokesperson Cheekwan Ho, that electronic “loophole” has now been fixed.