All posts by Aaron Gilland

Consulting Foresters Employee Steals $4M from Timberland Company

I ran across a very recent article (May 21, 2019) by Field Walsh from TXK Today which described a lawsuit filed in Texarkana federal court accusing a local couple of stealing more than $4 million from the wife’s employer at a forestry consultants office that was hired by a timberland management company.

I’ll go through the details of the cases below, but I want to say first that I know this is a tough issue. Fraud from employees is not only painful financially but to us as people in relationships as well. Betrayal is a personal hurt. We trust our employees. That trust is usually warranted and well earned. However, in some cases, studies show that trust just isn’t always well-founded. We’ve talked about this before, but this article reminded me that it doesn’t hurt to revisit the issue again. Remember trust is not an operational control.

In this newsletter, I’ll summarize the original case and then update you on the events following the original article.

Finally, I’ll revisit an article I presented in an earlier newsletter from Fast Casual on September 17, 2012 written by D.B. Libhart. This article addresses the issue of employees and theft and the employers who are too naïve to see it. In spite of staggering statistics to the contrary, many company owners are still convinced their employees don’t steal from them. I’ll end this newsletter with some rationales from that article about the excuses we have about our employees


The Case – Timberland Management Company and the $4M Theft by an administrative employee

A Timberland Management Company (TIMO) that provides timberland investment advisory and management services to timberland investors. The TIMO hires forestry consultants to provide “technical, administrative, and field management services” to its clients. The consultants in turn retain contractors to perform work in the field.

The direct victim of the theft was a forestry consultant working for a TIMO. The suit was filed against April and James Thompson by the TIMO. April was an employee of the forestry consultant.

Here’s how invoices are processed through these companies.

The contractor (James Thompson in this case) submits invoices for services rendered to the consultant. Personnel at consultant’s office then enter the invoices for payment through the TIMO’s electronic invoice processing system. The invoices are then paid by the TIMO to the contractors (James Thompson) from the applicable client’s funds held in bank accounts controlled by the TIMO.

Sadly, the contractor (James Thompson) did not perform any services and clients lost over $4M.

Instead, April Thompson, who worked in an administrative position, was able to use her position to submit phony invoices to the TIMO claiming that her husband, James Thompson, had performed work on properties owned by the TIMO’s clients, according to the lawsuit. April allegedly shielded her and her husband’s scheme from detection by making sure the amounts billed to the TIMO never surpassed the amounts budgeted annually for a particular client.

The complaint alleges the fraud began in 2011.

The TIMO’s clients paid the $4M through an electronic invoice processing system based on the fraudulent representations. The TIMO has agreed to make the affected clients whole for their losses suffered as a result of this scheme.

The TIMO is asking for an injunction and temporary restraining order meant to prevent the Thompsons from hiding money or other assets. The Thompsons have been asked to deposit any funds which resulted from the alleged fraud into the court’s registry for safekeeping while the suit is pending.

The TIMO has asked the federal court where the claim was filed to freeze the Thompson’s assets, pending resolution of the case. The hearing was set for Thursday, May 23 and agreement was reached to for a temporary restraining order and to conduct expedited discovery, the exchange of evidence. The restraining order will remain in effect for 30 days, but can be extended should the parties request it. Furthermore, the Thompsons have agreed to provide information to the TIMO about all of their accounts and assets. Both sides agreed to trade information.

My employees won’t steal from be because …… (and other dreams we have)

Below is a summary of the five myths proposed by D. B. Libhart in his article “Why My Employees Won’t Steal from Me: 5 Myths,” published in September 2012.

1. They Like Me. Although it seems that good relationships with the boss may deter a small percentage of employees from stealing, research has shown that dishonest employees are driven by a number of factors including motive, opportunity and low risk of detection. Even employees who genuinely like the manager or owner will often succumb to temptation to steal in spite of that friendship.

2. They are my Best Employees. Many managers equate self-motivation and hard work with integrity. Therefore, high performers are often above reproach and are not even scrutinized for compliance to the rules, nor suspected of counterproductive behavior or theft. Without that accountability, even the best employees can steal, given the circumstances.

3. They have a Clean Background. Pre-employment background checks are an important part of any loss prevention program. Oftentimes, prior behavior is a predictor of future behavior. Circumstances can change though. If there is a compelling motive and the employee has opportunity with a perception they will not get caught, integrity can suffer. Employees rationalize their actions in many ways.

4. I Show that I Trust Them. Trust is important, but that does not mean there is no need for accountability. Without checking up on employees through a check and balance process or audit system, employee perceive rightly that there is a low risk of getting caught and that is a trigger to test the system. Once an employee tries theft and ultimately gets away with it, they will more than likely keep it up.

5. I Pay Them a Higher Wage. Many employers believe that by paying a higher wage employees will be happy and happy employees won’t steal. Only about 10% of employees are morally incorruptible. They don’t bend or break the rules. Another 10% are prone to steal. The other 80% are influenced by culture and attitude. When poor practices go undetected and/or unresolved, that creates an atmosphere of tolerance and other employees are influenced.

Ultimately, employees must know and believe that compliance is not only valued and expected, but checked. They must believe that opportunities to steal are low and the probability of getting caught is high. It can be very easy for all of us to trust those around us, which is one reason to maintain good business controls and test those controls on a consistent basis.


Contract Fraud

Landowners, like many home owners, utilize contractors to do the work that is needed to manage their forest lands. Frequently they are not trained in the finer art of contract negotiations and find themselves contracting for services they need, but do not fully understand. For instance, when I contract with a plumber, I know I want water in the appropriate places in the house, but I may not know the proper method to get the water where it needs to go and keep it from damaging the house. Just because I watch HGTV doesn’t really mean I know how to plumb a house!

Many landowners I know are the same when they are contracting for the various work to be done on their forests. They know they want good and growing timberland, which is well stocked and disease-free, and they want to be able to sell for a great price at the appropriate time. Unfortunately, just because they are experts in their respective fields, does not mean they are forestry experts who have been trained in understanding the finer points of managing forests. They need to hire a contractor who does.

May 2019 — Contract Fraud Costs You Money


Timber Theft as a Global Problem

I read an interesting article recently that reminded me that forestry theft isn’t confined to the United States. It seems wherever there is a market for timber and wood products there’s the potential for legitimate business as well as for thieves and shysters.

The report was written and edited by the Environmental Investigation Agency (EIA) based out of London with the financial assistance of UKaid, the Norwegian Agency for Development Cooperation (NORAD) and the JMG Foundation.

The problems expressed in this article focused on rare woods, especially teak from Myanmar, formerly known as Burma. Rare woods are most tempting to steal because perpetrators can make good money with just the sale of a few trees. Theft becomes even more tempting when there is the possibility of illegal sales of a large number of rare trees sold on a world-wide market.

For the complete article go to   Mar 2019 — Timber Theft as a Global Problem

Is Timber Theft Really a Problem?

As the new year gets fully underway, and we begin implementing the plans we have made for the year to come, I wanted to revisit a basic question that seems to keep popping up as I travel around the country and meet with foresters and other timber industry professionals at their businesses and in conferences. Just recently, at an industry conference, I was faced with the question once more, “Is timber theft really a problem?”

The question has many variations. Some, will state they know all the players in the local procurement game and if theft happened they would know it. Some argue that timber security is only a southern forestry problem. Others don’t see timber security as a problem at all because they feel they have great controls in place to protect themselves. My personal favorite goes something like this, “We don’t have to worry about fraud or theft because we know and trust our people and have for many years.” I have seen so many examples of “trustworthy” employees who betray that trust when their personal lives get tough and they can rationalize their behavior. Regardless of the format, the underlying question remains the same as they ask, “Why should I even worry about theft and fraud? It will never happen to me.”

Read more….  Feb 2019 New — Is Timber Theft Really a Problem

Protection from Eco-Terrorists

Loggers routinely operate in remote locations that are difficult to monitor, giving potential thieves the perception that the theft is low risk. Loggers should change that perception. More recently, there have been indications that there is yet another risk to fuel and logging equipment. You may have heard about the logger who was recently vandalized in Isle of Wight County Virginia. A note was left on the equipment that stated: “Your destruction of habitat will no longer be tolerated..this is only the beginning. ELF”. Now, that note could be a deliberate attempt to mislead local law enforcement during their investigation,however, on the chance this is not a “fake lead”, I thought a brief refresher may be in order.

Read more…  Jan 2019 — Protection from Eco-Terrorists

Christmas Tree Theft? Really?

According to the National Christmas Tree Association’s (NCTA) 2017 Christmas season consumer survey, and adjusting for sample size, they predicted that 27.4 million real Christmas trees were purchased in 2017. In contrast 21.1 million new fake trees were purchased that same year.

On average the cost of the real trees is about $75 and the average cost of fake trees was about $107. The number of fake trees purchased has continued to rise along with the price for those trees.

Although the price of real trees has remained stable over the past several years, it can still be more than chump change. So….some “Grinch-like” people have decided to steal real Christmas trees instead of purchasing them.

Read More …  Dec 2018 — Christmas Tree Theft

Timber Poaching – A Growing Timber Theft Problem

This month I’m reminded that timber theft or “poaching” isn’t unique to the United States. I ran across an article by Susan Lazaruk on October 10, 2018, about the rising problem of timber poaching in Vancouver Island, British Columbia. The pattern is the same in both places.

The article quotes Luke Clarke, a natural resource enforcement officer with the Forest, Lands, Natural Resource Operations and Rural Development Ministry. He says the problem has been increasing over the last couple of years across the Island. The thieves target commercial-grade timber and are selling them to unscrupulous mills or unsuspecting mills by falsifying ownership records. Or unsuspecting individuals buy the stolen timber.

In many cases the culprits are clearly amateurs or unconcerned about the public land as they try to turn a fast buck. They are entering Crown land (Canadian government land) and chopping down old-growth trees, many of which are one hundred years old.

Nov 2018 — Timber Poaching a Growing Problem

Oct 2018 News — Con Men

As most of you know, our industry went from the big vertically integrated companies where timberland was a closely held asset for the paper and saw mills, to a world where the timberland has now been acquired by timber investment firms. That occurred in large extent in the early 2000’s, although you could draw the line even earlier than that.

Most of those transactions occurred with the purchaser also signing a wood supply agreement for the next 15, 20 or 30 years, depending on the contract and the companies negotiating. These agreements specified how much timber from the land the mills wanted back over the specified period.

Now it’s been 15 plus years and many of the agreements are expiring and/or being renegotiated. This is leading to a mixed bag of investment and ownership types. The highest and best use land has been spun into real estate deals where it made the most sense, and now high net worth individuals are investing in the smaller block deals (5000-50000 acres) while larger deals are still made by the various timberland investment organizations.

These trends are furthering a business model where major forest products companies specialize in manufacturing and look to others who specialize in land ownership to provide their raw materials.

Obviously, any change in the industry provides opportunity for those who take advantage of the system for their own gain.

This month I’m sharing a story of some con men who have bilked investors with a phony industrial park. Then I’ve put together some recommendations for those looking to invest in land, whether you are a timber company looking to reinvest cash from a prior land sale or an investor or landowner looking to purchase more land as your own investment.

And don’t forget the Forest Resources Association is having their forest products security group meeting next week in Starkville, MS, October 31 – November 1st. It’s a great place to hear more theft and fraud case studies. Hope to see you there.   Oct 2018 — Con Men

More Talk about Wildfires

I brought up the topic of wildfires last month and specifically discussed the issue of wildfire arsons. I wanted to continue the subject briefly again this month. The problem can’t be overlooked. According to Verisk’s 2017 Wildfire Risk Analysis, 4.5 million U.S. homes were identified at high or extreme risk of wildfire, with more than 2 million in California alone. Losses from wildfires added up to $5.1 billion over the past 10 years, and that number has risen in 2017 and 2018.

This month I thought I would share some statistics I found to help paint a picture of the extent of the problem. Beyond the statistics, since the subject has hit the political arena, it seems everyone has a theory about the causes and the best solutions. I don’t think our industry has had this much publicity in a long time. I thought I would share some ideas from professional foresters and forestry organizations.      Sep 2018 — More Talk About Wildfires

Arsons and Wildfires

With all the talk about wildfires in California and the Northwest these past several months I thought I would look at fire prevention and specifically at arson’s. Although we haven’t heard much about the causes of some of the biggest blazes this year, over time it is estimated that about 30% of all forest fires were started on purpose.

Arson investigations can be some of the most difficult timber security cases to solve and prosecute for two primary reasons. In the first place, the crime scene is usually isolated and remote, so finding witnesses to an arson event is rare. Secondly, most of the physical evidence is generally consumed by the fire and/or unintentionally destroyed by firefighters putting out the blaze.

Aug 2018 — Understanding an Arsonist