Source: http://endgame.org/lp.html
Timestamp: 2019-04-22 18:54:47+00:00

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Founded in 1927, Georgia-Pacific grew to be largest supplier of lumber to U.S. military in World War II, expanded to the Pacific Northwest, and moved its headquarters to Portland, Oregon. By 1960 Georgia-Pacific had a million acres of land; by 1968 sales had reached a billion dollars. Between 1955 and 1965, G-P expanded seven-fold, and during the 1960s acquired 45 companies owning 2.4 million acres of forest land. By 1970, G-P owned 3.5 million acres in the U.S., another million acres in Canada and Brazil, and cutting rights to another 1.5 million acres. By 1972, G-P was so big that the U.S. Federal Trade Commission (FTC) ordered G-P to divest itself of "certain acquisitions alleged to be anticompetitive and monopolistic in nature." G-P was ordered to transfer 20 percent of its assets to a new "independent" corporation, and prohibited from future acquisitions in the timber industry in the South for five years and from further acquisitions in the plywood industry for ten years. The FTC order allowed the distribution of the stock of the new corporation (Louisiana-Pacific) to G-P shareholders -- in effect, setting up two companies with the same shareholders.
Louisiana-Pacific started out big (1973 sales $270 million) and soon became a giant (1979 sales $1.3 billion). Upon birth, L-P had plants in California, Texas, Louisiana, Idaho, Washington, Oregon, Alaska, and Ohio. L-P soon bought more mills and land in California and Montana (in 1973 L-P bought Midstate Development's rights to 500 million board feet in Montana), as well as monopoly rights to five billion board feet of the Tongass National Forest in Alaska (in 1976, L-P bought FMC's 50 percent of Ketchikan Pulp's mills and rights to 4.9 billion board feet of the Tongass).
After unions struck L-P in the mid-1980s, L-P got two of them, the International Woodworkers of America and the Lumber Production and Industrial Workers, decertified.
In 1981 the 9th Circuit court convicted L-P's Ketchikan Pulp Co. and Japan's Alaska Pulp Co. of anti-trust violations. L-P's lawyer in this case was John Crowell. L-P's defense lawyer John Crowell was soon embroiled in anti-trust lawsuits over its monopoly contracts on the Tongass National Forest; Crowell's legal prowess earned him the position of overseeing the U.S. Forest Service under Ronald Reagan. Crowell, among other things, identified six million acres of national forest land to sell to corporations, and called for a doubling of the Forest Service timber cut from 12 billion to 25 billion board feet by the 1990s. Crowell's deputy was Douglas MacCleery, who had been the chief lobbyist for the National Forest Products Association.
For background on the Tongass monopoly, see Kathie Durbin's book Tongass: Pulp Politics and the Fight for Alaska's Rain Forest. (Oregon State University, 1999).
By 1982, L-P was producing 1.3 billion board feet of lumber and millions of square feet of plywood, veneer, containers, and other products. L-P had 13,00 employees running a hundred manufacturing facilities that included lumber mills in Califronia, Montana, Alaska, Washington, Idaho, and Oregon, stud mills in Wisconsin, Montana, Oregon, Wyoming, California, and Washington, plants in Louisiana, Texas, Florida, North Carolina, hardwood lumber plants in Michigan, software plywood plants (Califronia, Texas, Louisiana), a hardwood plywood plant in California, 3 waferboard plants (Wisc, Maine, Texas), a hardwood veneer plant (Wisc), particleboard plants (Calif, Mont, Lousiana), medium density fiberboard plants (Alabama, Calif), a hardboard plant (Oroville, Calif), a millwork plant (Red Bluff, Calif), pulp mills (Ketchikan & Samoa, Calif), a paperboard mill (Antioch, Calif), corrigated container plants (Calif, Ariz), window & door plants (Ohio), industrial insulation plants (Colo, Lousiana), and other facilities for maufacturing metal jacketing, printing plates, insulated glass, vinyl extrusion, and wood treating.
By the mid-1980s L-P was overextended. "The exclusive lumber distribution deal struck between Home Depot and Louisiana-Pacific in 1995 has been expanded to include all of Home Depot's stores nationwide, but has raised questions about whether L-P bit off more than it could chew. Some sources estimate the pact could be worth over $100 million per year in sales for the lumber firm. The deal is being watched by other dealers that have sought to consolidate their purchases with fewer vendors and has incited debate about the ramifications of a comprehensive pact on product availability to the rest of the industry. L-P made major investments to serve its new mega-account. It is estimated that Home Depot's stores purchase 100-112 million board feet of the region's 800 million annual redwood output. As L-P is forced to find product through other sources, the cost of what it buys rises."
By the late 1980s L-P was embroiled in legal battles, and about to become the target of massive environmental protests. Under CEO Harry Merlo, L-P mismanaged the controversies. Merlo was fired in 1995, after numerous legal convictions and fines.
In 1976, L-P bought FMC's 50 percent of Ketchikan Pulp Campany's mills and the monopoly rights to 4.9 billion board feet of Tongass National Forest timber in Alaska.
In the mid-1980s, L-P got 27 percent of its timber supply from national forests.
In the early 1980s, timber corporations were bailed out of high-priced speculative bids they had placed on U.S. National Forest timber sales in the booming late-1970s market. Much of the benefit of the buyout went to large timber companies, rather than the small outfits that were supposedly saved from bankruptcy by the bill; for example, L-P had 1.5 billion board feet ($212 million) under contract.
L-P ranks as one of the largest purchasers of U.S. National Forest Timber. For the five years 1994-1998, L-P bought 93 million board feet in Region 1 (Northern Idaho and Montana), 65 million board feet in Region 2 (Colorado, North Dakota, and Wyoming), and 28 million board feet in Region 4 (Southern Idaho, Utah, and Nevada).
In October 1997, L-P announced that over the next two years it would sell more than 25 percent ($1 billion worth) of its assets as part of its efforts to streamline its operations and focus on high-tech timber products. The assets, most of which are in Northern California, include 300,000 acres of redwood timber lands, accounting for about 23% of the firm's timberland properties; three sawmills; a pulp mill; and two distribution centers. L-P would still produce timber from 24 mills outside California. L-P also revealed plans to cut 3,500 jobs, or about 30% of its 12,000-member work force, including 1,108 workers in six Northern California facilities targeted for sale. It plans to produce a new generation of wood products using oriented strand board, which are laminated chips used as substitute for plywood and other traditional wood products.
L-P's management determined that other facilities were non-strategic and therefore would be either sold or liquidated: the Ketchikan Pulp operations, nine sawmills in various states, two OSB plants, two fiber gypsum plants, two plants in Mexico, two pulp mills located in Samoa, California, and Chetwynd, British Columbia, Canada.
In 1998, L-P "continued its transition from a forest products focus to a building products focus" by selling 300,000 acres of California redwood timberland, three sawmills, two distribution centers, and other operations to Simpson Timber and Sansome Forest Partners for $610 million. Simpson paid $16.3 million in cash and delivered promissory notes of $353.9 million. Sansome paid $240.0 million in cash.
In 1998 L-P sold its Weather-Seal windows and doors business and its Creative Point subsidiary, closed its cement fiber roof shake plant and announced its intention to sell certain sawmill and treating plant properties, primarily in the South.
Louisiana-Pacific is ceasing operations in Alaska because the federal government would not extend L-P's exclusive rights to old-growth timber in the Tongass National Forest. L-P's current contract expired at the end of 1999. In May 1999, Louisiana-Pacific Corporation announced that it is in discussions to sell the remaining assets of its Ketchikan Pulp Company subsidiary in southeast Alaska to Gateway Forest Products, an Alaskan company, which intends to operate a veneer facility in Ketchikan.
L-P is a major building products firm, operating approximately 75 facilities in the United States, Canada, and Ireland. L-P's principal products are oriented strand board, plywood, lumber, engineered wood products, exterior siding, industrial panel products, specialty products and pulp.
L-P is the largest North American producer of OSB panel products through 12 plants with a combined annual capacity of approximately 4.5 billion square feet. In addition, L-P has five plywood plants in the Southern United States with a combined annual capacity of approximately 1.2 billion square feet.
In 1986 L-P bought 650,000 acres in East Texas and Louisiana from Kirby Forest Industries (Santa Fe Southern Pacific Railroad) for $315 million.
In late 1986 L-P bought 98,000 acres of redwood and Douglas fir land in Mendocino County from Timber Realization Co. for $95 million. The deal also included a sawmill at Calpella.
In 1998, L-P sold 300,000 acres of California redwood timberland, three sawmills, two distribution centers, and other operations to Simpson Timber and Sansome Forest Partners for $610 million. Simpson paid $16.3 million in cash and delivered promissory notes of $353.9 million. Sansome paid $240.0 million in cash.
Chairman and CEO: Mark A. Suwyn, age 56, became Chairman and Chief Executive Officer of L-P and in January 1996. Mr. Suwyn was Executive Vice President of International Paper Company from 1992 through 1995. Previously, he was Senior Vice President of E. I. du Pont de Nemours and Company.
Paul W. Hansen, age 47, was elected as a director of L-P in February 1999 to fill the vacancy created by the retirement of Pierre S. du Pont. Mr. Hansen has been Executive Director of the Izaak Walton League of America (the "IWLA"), a nationally-recognized conservation organization, since February 1995. Mr. Hansen began his employment with the IWLA in 1982 as an Acid Rain Project Coordinator and served in various positions thereafter, becoming Associate Executive Director in 1994.
Donald R. Kayser, age 68, a private investor, served as interim Chairman and Chief Executive Officer of L-P from July 1995 to January 1, 1996, and then served as a consultant to L-P through April 1996. Mr. Kayser retired from his former position as Executive Vice President and Chief Financial Officer of Morrison Knudsen Corporation in 1990. He was Senior Vice President and Chief Financial Officer of AlliedSignal, Inc., until July 1988. Mr. Kayser was an executive officer of L-P until 1982 and has been a director of L-P since 1972.
Archie W. Dunham, age 60, became a director of L-P in 1996. He is President and Chief Executive Officer of Conoco Inc. and an Executive Vice President and a director of its parent, E. I. du Pont de Nemours and Company. He has served in various senior executive positions with Conoco Inc. and its parent for more than five years.
John W. Barter, age 52, a private investor, has been a director of L-P since May 1998. He served as Executive Vice President of AlliedSignal, Inc., and President of AlliedSignal Automotive from October 1994 through December 1997. From 1988 to 1994, Mr. Barter was Senior Vice President and Chief Financial Officer of AlliedSignal, Inc.
William C. Brooks, age 65, became a director of L-P in 1996. Mr. Brooks is Chairman of The Brooks Group International, a holding company involved in human resources and economic development. Mr. Brooks previously served as Vice President, Corporate Affairs of General Motors Corporation until his retirement in 1997. Mr. Brooks was Assistant Secretary of Labor for the Employment Standards Administration from July 1989 to December 1990. He is also a director of DTE Energy Company and Detroit Edison Co., Complete Business Solutions, Inc., United American Health Care Corporation, and Sigma Associates.
Patrick F. McCartan, age 64, became a director of L-P in May 1998. He is managing partner of the international law firm of Jones, Day, Reavis & Pogue, a position that he has held for more than five years. He is a Fellow of the American College of Trial Lawyers and the International Academy of Trial Lawyers.
Lee C. Simpson, age 64, served as President and Chief Operating Officer of L-P on an interim basis from July 1995 until March 1996. He also was elected to fill a vacancy on the Board of Directors in July 1995. He was an executive officer of L-P from 1972 until his retirement in 1991 and previously served as a director of L-P from 1972 until 1993.
In the late 1980s. L-P owned 15 percent of Doman Industries, Canada's tenth-largest timber company. Herb Doman and ex-B.C. Premier Bill Bennett were charged with insider trading shortly before the announcement that L-P had withdrawn its takeover bid of Doman, one of the biggest timber corporations in B.C. L-P still owned some 15 percent of Doman, and has two mills in B.C. (at Chetwynd and Dawson Creek).
In 1995, more than 200 Manitobans protested the Louisiana-Pacific's environmental license to build an oriented strand board plant.
In April 1999, Louisiana-Pacific announced plans to invest $250 million (Canadian) in to construct of four new facilities in northeastern British Columbia: an OSB (oriented strand board) mill, a veneer mill and an LVL (laminated veneer lumber) plant, and an I-Joist mill. L-P announced the project after being awarded four timber licenses totaling 995,494 cubic meters of wood per year. The announcement was made at a news conference with L-P chairman Mark A. Suwyn, Premier Glen Clark, and Forestry Minister David Zirnhelt.
Also announced was an agreement with the B.C. government on an economic plan to enhance the long-term viability of the company's BCTMP pulp mill in Chetwynd, BC. As part of this plan, L-P has finalized a management contract with an industry leader in BCTMP pulp production to manage the Chetwynd mill for up to two years, with an option to purchase. Continuing losses and difficult market conditions had caused Louisiana-Pacific to seriously consider the need for a lengthy curtailment and layoff permanent shut-down at the mill. ``Thanks to the commitment and cooperative efforts of the Ministry of Employment and Investment, the Ministry of Forests, the Job Protection Commission, the Office of the Job and Timber Accord Advocate, and the Communications, Energy, Paperworkers Union members and our salaried employees, the Chetwynd BCTMP pulp mill has renewed chances to continue to operate and succeed,'' said Suwyn. Louisiana-Pacific also committed up to approximately $25 million (Canadian) in upgrades at its B.C. mills over the next two years.
In November 1998, L-P and the Chilean timber firm Chilena Bomasil S.A. agreed to form a Chilean joint venture company to build and operate an oriented strand board (OSB) plant located on property currently owned by Bomasil in the Municipality of Panguipulli, Chile, with a majority ownership of the joint venture company to be held by L-P. It was anticipated that the plant would begin operating in late 1999.
The project will use 218,000 cubic meters annually from native forest, especially of the type Roble-Rauli-Caoigue, and in a volume of 180,000 cubic meters annually from secondary growth. The remainig volume of 20,000 cubic meters annually will come from plantations of insigne pine. The plant is designed to operate for 5 years in priniciple and at this moment they are organizing participation through the Corporation Terra Australis de Valdivia.
In 1989 L-P proposed to build a 300 million board foot per year lumber mill in Baja, Mexico, north of Ensenada at the fishing village of El Sauzal: Redwood lumber would be shipped by barge from northern California, where L-P has a mill at the town of Samoa, near Eureka. Mexican processing would reduce labor costs, as L-P is planning to pay 76 cents per hour. It also would put the finished products (decks, planter boxes, railings, and trim) near southern California, the largest market. The move, announced in late 1989, was denounced by environmentalists, labor, and legislators, some of whom called for a bill requiring lumber to be processed in the area it is logged.
Siberian larch logs were imported by L-P and others in 1989; in 1990 the U.S.Department of Agriculture quaranteened the timber, and ruled against further imports from Russia, for fear of releasing pine nematodes that could infect American forests.
L-P has access to a million acres for export to the U.S.
Asbestos: In 1988 L-P spun off Fibreboard, in part to escape liability for Fibreboard's asbestos problems.
Alaska monopoly: In 1981 the 9th Circuit court convicted L-P's Ketchikan Pulp Company and Japan's Alaska Pulp Company of anti-trust violations. Despite their 50-year monopoly contracts with the U.S. government, KPC and APC had deliberately reduced smaller mills' supply, then bought them out. Dummy corporations had been set up to make the appearance of competitive bidding.
L-P's version: In March 1995, L-P's subsidiary Ketchikan Pulp Company ("KPC") entered into agreements with the federal government to resolve the issues related to water and air compliance problems experienced at KPC's pulp mill during the late 1980's and early 1990's. In addition to civil and criminal penalties that have been paid, KPC also agreed to undertake up to $20 million in expenditures, which are primarily capital in nature, including certain remedial and pollution control related measures. While the Environmental Protection Agency (the "EPA") and KPC have agreed that the closure of the pulp mill in May 1997 eliminated the need for many of the pollution control related measures, court approval is required for relief from these requirements.
The rest of the story: L-P pled guilty to 14 criminal violations of intentionally polluting the waters of Southeast Alaska. The firm agreed to pay $3 million in criminal fines and $3.11 million in civil fines. This was not an isolated incident. State and federal agencies recorded at least 445 violations of environmental laws by Ketchikan Pulp over the last 20 years. Ketchikan Pulp also conspired to fix timber prices, rig bids and drive independent timber companies out of business, as documented in the Reid Brothers litigation decided in 1983. Those monopolistic practices cost taxpayers $60 to $80 million in lost timber revenue."
Ward Cove Alaska water pollution: As part of the agreements, KPC is in the process of studying Ward Cove, the body of water adjacent to the former mill site, to determine whether cleanup of cove sediments is necessary. KPC may be required to spend approximately $4 to $6 million in addition to the approximately $2 million already spent on this project, as part of the $20 million discussed above.
Ketchikan Pulp Alaska toxic clean-up: KPC also signed an agreement with the State of Alaska and the EPA to investigate and, if necessary, clean up the property on which the pulp mill was formerly located. KPC has completed the investigative portion of this project at a cost of approximately $1.5 million. Some cleanup has already occurred, with additional cleanup scheduled to be completed by mid-1999. Anticipated costs of previous and scheduled cleanup may be up to $1 million. Other areas may need to be cleaned up; no cost estimates of such additional cleanups have yet been made.
Thorne Bay Alaska landfill leak: KPC has completed the closure of a landfill near Thorne Bay, Alaska, pursuant to an agreement with the U.S. Forest Service (the "USFS"). Costs of the project totaled approximately $6 million. KPC is also monitoring leachate from the landfill in order to evaluate whether treatment of the leachate is necessary.
Ketchikan Pulp Alaska water pollution: The EPA and the Department of Justice have indicated their intent to seek penalties for alleged civil violations of the Clean Water Act at the KPC facility. KPC is also defending an appeal of an earlier court decision dismissing a citizens' suit by plaintiff Alaska Clean Water Alliance alleging Clean Water Act violations. KPC is actively pursuing resolution of both of these actions.
Particleboard pollution: L-P's Missoula, Montana, particleboard facility is the subject of an investigation by the EPA for alleged improper management of sander dust at the facility. L-P is also conducting its own investigation. L-P's potential liability, if any, is unknown at this time.
OSB fraud lawsuit: In June 1995, a federal grand jury in Denver Colorado indicted L-P for environmental violations and fraud for submitting false oriented strand board (OSB) product samples from its Montrose (Olathe), Colorado OSB plant to an industry product certification agency. In December 1995, the U.S. EPA suspended the Montrose facility from purchasing timber from the U.S. Forest Service. In April 1998, L-P signed a Settlement and Compliance Agreement with the EPA which lifted the 1995 suspension imposed on the Montrose facility. The agreement has a term of five years and obligates L-P to develop and implement certain corporate policies and programs, including such measures as a policy of cooperation with the EPA, an employee disclosure program and a policy of nonretaliation against employees, to conduct its business to the best of its ability in accordance with federal laws and regulations and local and state environmental laws, to report significant violations of law to the EPA, and to conduct at least two audits of its compliance with the agreement. In May 1998, L-P pled guilty to criminal violations and agreed to pay total penalties of $37 million (including making $500,000 in charitable contributions), of which $12 million has been paid, and was sentenced to five years of probation. The $25 million balance of the fine is payable in three annual installments.
Faulty OSB lawsuits: L-P has been sued in numerous class action and non-class action proceedings, brought on behalf of persons who own or have purchased or used OSB siding manufactured by L-P, because of alleged unfair business practices, breach of warranty, misrepresentation, conspiracy to defraud, and other theories related to alleged defects, deterioration, or failure of OSB siding products. The U.S. District Court in Oregon has given final approval to a settlement between L-P and a nationwide class of persons who own property on which L-P's OSB siding was installed prior to January 1, 1996, which entitles them to receive from a $275 million settlement fund a payment equal to the replacement cost of damaged siding. In addition to payments to the settlement fund, L-P was required to pay $26 million in attorney fees, as well as expenses of administering the settlement fund and inspecting properties for damage and certain other costs. The claims submitted substantially exceed the $275 million of payments that L-P is required to make under the settlement agreement. As calculated under the terms of the settlement, claims submitted and inspected exceeded $500 million at December 31, 1998. Under the terms of the settlement, L-P must make a decision regarding the additional funding by August 2000. In October 1998, L-P established an additional $125 million fund to pay all other approved claims that are filed before December 31, 1999.
Other OSB lawsuits: A settlement of a related class action in Florida was approved by the Circuit Court for Lake County, Florida, on October 4, 1995. In addition, three separate class actions on behalf of owners and purchasers of properties in which L-P's OSB panels were used for flooring, sheathing, or underlayment have been consolidated in the U.S. District Court (Northern California) under the name Agius v. Louisiana-Pacific Corporation. The actions seek damages and equitable relief for alleged fraud, misrepresentation, breach of warranty, negligence, and improper trade practices related to alleged improprieties in testing, product certification, and marketing of OSB structural panels, and alleged premature deterioration of such panels. A separate state court action entitled Carney v. Louisiana-Pacific Corporation is pending in California Superior Court (San Francisco). In February 1998, the court approved a settlement that entitles consumers to recover the cost of repair or replacement of any L-P OSB which failed to perform; the settlement agreement also provides for payment of a $1.5 million grant to the University of California Forest Products Laboratory and reasonable attorney fees of class counsel.
ABT hardboard lawsuit: L-P's subsidiary ABT (formerly Abiti-Price) is defendant in a class action law suit filed in Alabama state court and six other putative class action proceedings filed in various state courts from 1995 to 1998. Plaintiffs allege unfair business practices, breach of warranty, fraud, misrepresentation, negligence, alleged defects, deterioration, or other failure of ABT hardboard siding. ABT and Abitibi have agreed to an allocation of certain liability.
Superfund National Priorities List site no. 801 is L-P Oroville, CA.
Commencement Bay Superfund site Tacoma, Washington. L-P was partially responsible for the cleanup of this site, since it (like other forest products companies) used ASARCO smelter slag as ballast to keep its log storage/ship loading areas from sinking into the tideflats. See L-P v. ASARCO case.
L-P v. ASARCO (1990 US Dist Ct. West Wash.). L-P used ASARCO smelter slag as ballast at its log yard on Hylebos Creek on Commencement Bay at Tacoma. Wood waste went to the B&L Landfill in Milton, Wash. L-P lost its contention that ASARCO alone was responsible for cleanup.
U.S. v. L-P (1988, US Dist Ct Colorado). L-P waferboard factories in Kremmling and Olathe, Colo. L-P was fined $65,000 for willfull violation of state air emissions requirements.
U.S. v. L-P (1982 US Dist Ct Northern Calif.). L-P's bleached kraft pulp mill on Humboldt Bay was in violation of Clean Water Act regulations on pH and biochemcial oxygen demand limits that had been in place since 1977.
The long history of L-P involvement in the destruction of the redwoods can be seen in lawsuits, counter suits, and negotiations with California State and the U.S. government since the 1960s.
In 1986, L-P sold its Carlotta, California sawmill to Pacific Lumber for $7.5 million, enabling MAXXAM to process its liquidation of the remaining redwoods.
During the "Redwood Summer" of 1990, protests and civil disobedience again brought L-P and the redwoods to national attention. Residents of Elk, California were arrested for blocking timber cutting by L-P. In July the court suspended L-P logging in Mendocino County. In September, the Mendocino County Superior Court granted a preliminary injunction against cutting until the trial of a lawsuit brought by residents' group and the local water district.
In 1998, L-P sold 300,000 acres of California redwoods to Simpson Timber and Sansome Forest Partners.
L-P chairman Merlo was fired in 1995 amidst lawsuits against L-P for willful violations of the Clean Air and Clean Water Acts, for tampering with emission monitoring equipment and alteration of plant records and fraud in presenting samples of siding for certification by an industry trade group, for suits by consumers of L-P's products, by shareholders who alleged failure to disclose significant liabilities, and sexual harassment charges against Merlo and other executives.
"Harry Merlo was brought down last month by his hand-picked board because he was in the process of destroying both it and the company it was supposed to oversee. Toward the end, the 22-year chief executive officer and chairman of Louisiana-Pacific was a grotesque ruin, bellowing threats to relocate his company across the Columbia River from Portland, Ore., to Vancouver, Wash.
"Meanwhile, across four conspiracy-packed weeks, L-P board members plotted Merlo's ouster. Finally, they summoned him from his 40th floor eyrie in the tallest office building in Portland, hauled him halfway across the country to Chicago - where the timber industry was headquartered before it moved to the Northwest 80 years ago - and threw him out of the company and out of the 7,300-square-foot mansion furnished him by L-P.
"The lawsuits in which L-P was mired break into five species. First are suits reluctantly brought by a federal government yearning to ignore the company's crimes. The feds charged willful violations of environmental laws such as the Clean Air and Clean Water acts. A grand jury indictment alleged tampering with emission monitoring equipment and alteration of plant records and fraud in presenting samples of siding for certification by an industry trade group.
"Then there were civil suits brought by citizens living next to L-P's oriented strand-board mills, charging toxic emissions. There was the avalanche of suits from customers who had bought siding (Inner Seal brand, made from oriented strand board), only to find that after a year's exposure to humidity, L-P's patented siding warped, broke apart and exuded a poisonous gas. Finally, there were the L-P shareholder suits alleging manipulation and failure to disclose significant liabilities, estimated by some analysts to be as high as $5 billion. Pendant to these allegations came charges of sexual harassment against Merlo and his two top executives.
"Most of these indictments, either actual or prospective, were inconveniences that Merlo and his board had lived with for years and which they regarded as a minor cost of doing business. The environmental counts concerning air and water regulations L-P faced in Virginia, Alaska and Colorado were no different from the suit brought by the Surfrider Foundation against L-P's pulp mill in Samoa, Calif., six years ago. In that affair L-P took the fall, paid out $12 million and turned decades of flushing billions of gallons of dioxin-laced effluent into Humboldt Bay into a public relations coup, with a handsome grant from the feds to upgrade its facilities.
"As far back as 1980, L-P had been convicted of monopolistic practices in southeast Alaska, in a suit brought by a small logging company, Reid Brothers, of the Tlingit Tribe. Today, L-P is the only company buying timber off the Tongass National Forest. In the meantime, another 80 small sawmills in that region have gone under, courtesy of these same monopolistic practices.
"But under Merlo's manic autocracy, L-P had made serious enemies in recent years. As the largest logger of public forests in the country, L-P was often at odds with big timber landowners like Weyerhaeuser and L-P's own parent company, Georgia-Pacific. By pillaging the underpriced public resource, L-P drove down profits for companies taking logs from private lands. This trend began in earnest in the early 1980s when Ronald Reagan made former L-P general counsel John Crowell Assistant Secretary of Agriculture in charge of the Forest Service. Crowell promptly demanded that the national forests double their annual cut, much of it destined for L-P's mills.
"Even on L-P's own lands Merlo brought predation to a new pitch by using what had been previously regarded as non-commercial junk trees: small-in-diameter piss fir, alder, live oak, aspen, and the like, giving rise to Merlo's famous quote: "We log to infinity."
"In marketing the plywood and siding products from such timber, Merlo angered a second powerful force in the industry: the lumber wholesalers. Merlo was selling directly to national outlets like Home Depot, thus cutting out the wholesalers and stealing another edge on his competitors. Finally, Merlo infuriated trade groups such as the American Plywood Association, which L-P deliberately deceived, faking the durability of its Inner Seal siding.
"One counterattack pondered by Merlo's corporate opponents was a takeover. In the days before Merlo fell, there were rumors on Wall Street that either Weyerhaeuser or International Paper was maneuvering for such a bid. At all events, in his hours of extremity Merlo had no big-time corporate friends, despite receiving the 1990 Man of the Year award from Ron Arnold's wise-use movement.
"What terrified Merlo's board above all else was the product with which Merlo had most closely identified himself and the company, namely oriented strand board, the second generation of L-P's wafer board, which had been used in plywood. Stories in The Oregonian in June enraged Merlo: They featured plant managers, cloaked in prudent anonymity, saying bluntly that they knew the product was worthless, Merlo knew the product was worthless, but was demanding that they run the mills at 120 percent of operating capacity.
"Merlo may have thought that even $5 billion in potential liability payouts was something the company could live with. L-P has enormous cash reserves, something on the order of a half-billion dollars at any given moment. And he was planning to off-load the poisonous siding on Third World customers such as Vietnam and Bolivia.
"Whatever his private calculation, Merlo lied to his board and L-P's stockholders. It is as though the chief executive of the Ford Motor Company, back in the 1950s, had refused to abandon the Edsel and was instead determined to make it the only available model for the next decade. Such was the degree of Merlo's obsession.
"In that last week, a dark shadow fell across the path of the chief executive of L-P as he fought for survival. The shadow took the form of a corporate tyrant even more predatory and egotistical than Merlo himself: Pierre DuPont, a member of the L-P board, who had been conducting a private investigation.
"In a traditional corporate interlock, L-P was giving most of its liability suit business to the DuPont law firm. After scrutinizing L-P's second quarter report, the DuPont law firm concluded that Merlo had inflated second-quarter earnings by nearly $30 million. Merlo was forced to issue a revised statement of second-quarter earnings, thereby in effect pleading guilty to the charges - which will undoubtedly materialize - of fraud on a majestic scale. This is what destroyed him. The board, had it permitted Merlo to continue his tenure, would have been complicit in his deceptions and therefore personally liable.
"There have been some sentimental elegies in the corporate press this month about Merlo as the last of the timber barons, "rags-to-riches" giant in a Cloverdale, Calif.-to-Portland saga of rugged individualism, finally run aground by post-titan corporate America.
"With the hearty sanction of his corporate accomplices and their political flunkies, Merlo presided over the looting of the public domain, the poisoning of people with the misfortune to live next to one of his plants, and the betrayal of his workers whom he abandoned as soon as he had savaged the resource or spotted cheaper labor farther south. He presided over criminal legal harassment of his opponents in the environmental movement and over the sale of rotten, dangerous products. He flourished amid all the crimes and was handsomely rewarded for them. He fell not because of his predations on the citizenry, but because he menaced the bank balance and the peace of mind of a financial interest more powerful than himself.
"The man has gone. The corporate malpractices will survive him and Third World people will soon be breathing the fumes of Merlo's toxic legacy."
For another view of Merlo, see "Friend of the Spotted Owl" in Forbes magazine, April 30, 1990, p.144.

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