Profile of the Trillium Corporation

December 2003 revision
compiled by George Draffan
Public Information Network
www.endgame.org

Owners/Managers

David and Kay Syre. Former Bellingham mayor Ken Hertz and former City of Bellingham economic development director Jean Gorton have served as Trillium vice presidents.

 

History

Private, family-owned corporation founded in 1974 by David Syre of Bellingham, Washington. Profile in by Connie Day and Kevin Dwyer in March 1993 Washington CEO magazine.

 

Timberland ownership

In the late 1980s, owned 3,000 acres on Whidbey Island, and 15,000 acres in King, Pierce, Jefferson, Snohomish, and Whatcom counties, Washington. By 1990, Trillium owned about 40,000 acres. Some 17,000 acres of it was purchased from Georgia-Pacific; also bought land from Crown Pacific.

By mid-1992, owned some 100,000 acres; by 1995, Trillium claimed 90,000 acres in three northwestern Washington counties alone.

In 1993, Forestal Trillium Ltd. bought 625,000 acres on Tierra del Fuego, across the Straits of Magellan from mainland Chile; the "Rio Condor Project" was Trillium’s name for its self-proclaimed sustainable forestry project there. Rand Jack, formerly working with the Whatcom County Land Trust to transfer environmentally sensitive Trillium proiperties to Washington State, Whatcom County, and Bellingham, was hired as an "independent Steward" to monitor Trillium’s timber cutting in Chile. Trillium intended to build one or more sawmills on Tierra del Fuego. In May 1996, the Chilean Regional Environmental Commission (Corema) month approved Trillium's Rio Condor logging plan, but a few days later, two Chilean legislators filed an appeal for the Magallanes Environmental Defense Movement, and the Punta Arenas Appeals Court halted the project when it granted a protective order against (Corema) for having approved the project's environmental impact statement over the advice of its own technical commission, which said Trillium's plan was not as ecologically sound as the company purported it to be.

Involvement of University of Washington forest ecologist Jerry Franklin.

 

Subsidiaries and Facilities

Offices in Bellingham, Billlings MT, Anchorage and Denver.

 

Bayside Ltd

In 1995, Trillium had "$42 million invested in Bayside. Ltd., our South American forestry affiliate, by a Beacon Group syndicate." Beacon Group a New York-based partnership with a minority interest in Bayside. Forrestal Trillium was Bayside’s Chilean affiliate; Lenga Patagonia was acquired by Bayside in 1994. Former Plum Creek Timber vice president Robert Manne is Bayside’s head.

 

Bellingham Athletic Club

In 1995, the Bellingham Athletic Club was a Trillium affiliate.

 

Gargoyles Performance Eyeware and ProTec

Kent, WA

Trillium acquired a controlling interest in Gargoyles (manufacturer, and distributor of Adidas products) and in Pro-Tec, an affiliated sport helmet manufacturer, in 1995. Company marketing included baseball star Ken Griffey, Jr., skier Tommy Moe, and NASCAR driver Dale Earnhardt. Gargoyles went public in September 1996, offering 2.9 milion shares at $16, to raise $27 million; Gargoyle directors included Paul Shipman (Redhook Ale) and Wally Walker (Seattle SuperSonics basketball team).

 

Lenga Patagonia S.A.

Rio Grande, Argentina

Lenga Patagonia was acquired by Trillium in 1994; owns 75,000 acres in Argentina.

The Government of the Tierra del Fuego province in Argentina, authorized the settling of the multinational Lenga Patagonia (ex- Trillium), but they won't do any deforestation to the forests of Tierra del Fuego, said Pablo Havelka, the undersecretary of Natural Resources to El Sureno in Ushuaia. The project, the explotation of 130,000 hectares of lenga is estimated to be started in June. Lenga Patagonia (the Argentinean name of the company) will exploit 500 hectares a year, but they also will have to purchase wood from the sawmills of the Chilean province across the Andes and also from the South zone of Chile. Lenga Patagonia has been in Tierra del Fuego (Argentinean side) for more than 3 years, after the experience in the Region of Magallanes (Chile), where they tried to exploit more than 200 thousand hectares of lenga.

 

Commercial, recreational, and residential properties (mid-1990s)

Alaska:
Settlers Bay. Residential golf community in Alaska.

Canada:
Vancouver, BC. 16-acre development.

Colorado:
Elitch Gardens Amusement Park, Denver CO.

North Dakota, Kansas, Illinois, Utah, Nebraska
sites purchased from Burlington Northern Railroads’ Glacier Park Real Estate subsidiary in 1994.

Washington:
Bellis Fair Mall, Bellingham WA.
Cordata Business Park, Bellingham WA.
Cornwall Building, Bellingham WA.
Resort Semiahmoo, Bellingham WA.
Snowater was Trillium’s first development, near the Mt. Baker-Snoqualmie National Forest, Washington.

 

Miscellaneous Notes

Trillium developed a shopping mall and other properties in the Bellingham area. Owned and cut timberland in western Washington. Owned property and a resort in Alaska (waterfront business park in Homer; residential development at Settlers Bay on Cook Inlet across from Anchorage; property at the mouth of the Kasilof River).

In the 1980s, Trillium bought 3,000 acres on southern Whidbey Island, Washington, from Georgia-Pacific. In 1988, Trillium applied for a controversial 1500-acre clearcut with 30 to 35 separate forest practices applications; "county planners were prohibited by law from judging the applications for their cumulative effect".

Overcutting by Golden Spring, TAT, Trillium and others led to the Sustainable Forestry Roundtable mediation process between environmentalists, the timber industry, and Washington State, and to the 1992 adoption of tighter restrictions by the Washington State Forest Practices Board.

In November 1990, Trillium signed a letter of intent to buy several hundred parcels of land in WA, MT, CO, NE, ND, SD, and WY from Burlington Northern Railroad's Glacier Park real estate company. In September 1991, Trillium purchased 232 parcels in the mountain states for $50 million; in 1992, Trillium bought another 75 properties and 25 rail-served industrial parks for $50 to $60 million. The total number of acres involved was not disclosed, but in 1989, Glacier Park had announced it would sell most of its 925,000 acres of residential, industrial, commercial, and grazing lands for about $450 million.

Trillium owned land in Canyon Lake Creek, above the Nooksack River in the North Cascades; timber to be exported by Citifor of China.

 

Financial data

Revenue

1994 revenues approximately $44 million (real estate $26 million; domestic forestry $11 million; property maganagement and self-storage; and other operation investments).

Year

Assets ($ million)

Equity ($ million)

1989

85

50

1990

85

50

1991

169

69

1992

182

85

1993

275

157

1994

266

163

 

 

Trillium Faces Building Foreclosure (April 2001)

Lender seeks more than $2.65 million for empty medical building.

by Scott Ayers, Bellingham (WA) Herald, April 27, 2001

An investment firm has filed a notice of foreclosure against Bellingham's Trillium Corp. for a medical office building in Trillium's Cordata development.

In documents filed in Whatcom County Superior Court, Compass Group Inc. says Trillium officials have not made a payment on a loan for the property at 4465 Cordata Parkway since Jan. 1.

The complaint seeks a judgment of more than $2.65 million, plus interest and attorney's fees, or, if Trillium doesn't pay the judgment, the deed to the property so it can be sold at a sheriff's auction.

Compass Group serves as investment manager for the Trustees of Carpenters Trusts of Western Washington and Trustees of Western Washington Laborers-Employers Pension Trust Fund, which loaned $2.8 million for construction of the Medical Arts building in October 1991.

The Spokane attorney for Compass Group declined comment.

Trillium officials said they were surprised that Compass Group filed the foreclosure and said they expect to work out a deal with the lender.

The building was the original home of Madrona Medical Group.

The Compass Group loan was originally given to Medical Arts Cordata Inc., a partnership between Trillium and a handful of Madrona doctors, said Bruce Clawson, Trillium's chief financial officer.

Trillium bought out the partners when it built a new building for Madrona about a block north of the Medical Arts building.

Trillium bought the building in July 1998, according to court records, and assumed the promissory note on the property.

"We've been working hard for 18 months to lease or sell that building, but so far it hasn't happened," Clawson said.

"We've been talking to the lender throughout this time, so I am real surprised that they went this way."

Clawson said the trouble Trillium has had leasing the building was not a sign of problems at Cordata, but in finding a tenant for a building built specifically as medical offices.

"We've built and leased out four buildings in the last three years," he said.

"The Cordata commercial area is doing very well. This issue is very much about the nature and specific use of that building."

 

Is Trillium Solvent? (May 2001)

By Tim Johnson, Bellingham (WA) Every Other Weekly, May 3, 2001

The answer from Dun & Bradstreet and Trillium honchos is a guarded "yes," as the provider of 400 jobs here (whitecollar, this time) shifts its assets and repositions itself in the global market. Little alarms started going off at EOW and at The Bellingham Herald (which is itself now tightening its financial belt through layoffs and conveniently-timed vacations) when the timber giant began dumping its Port assets and trimming back its contracts hereabouts. Herald newshound Scott Ayers and EOW editor Tim Johnson kept stumbling across each other's scents searching for this story.

"We've been looking for this story for quite a while," chided Bellingham Business Journal Publisher John Thompson. While Trillium is certainly divesting a lot of its flamboyant local holdings-- its jet, its hangar-- it is also acquiring assets in other locales, Thompson confirmed. "That's typically not the mark of a company that's in trouble," he advised.

Much of the speculation about Trillium's health came to a head last week as visitors from Chile and Argentina attempted to raise public awareness of the timber company's plans to log in Tierra del Fuego, a remote reserve of sheep and cattle ranchers, who share the island with penguins, foxes and small, wild llamas called guanacos. Seabirds are abundant, including flightless rheas, condors, albatross, geese and ducks.

According to the Chilean government, Trillium illegally acquired 71,000 hectares of public land there for $5 per hectare while the company paid $65 per hectare for adjacent private land. The Chileans demanded Trillium pay the balance of $826,000 for the land. Two years later, the company still has not paid and continues its plans to log there.

Trillium has reportedly asked the Chilean government to waive the balance, which will be paid from profits after the area is logged. Trillium is particularly interested in lenga beech as raw material for finished hardwood products such as furniture and molding. The company stepped up operations after receiving grudging approval from the Chilean government.

An ancient subarctic forest in a harsh, windswept clime, Trillium's holdings in Tierra del Fuego are environmentally fragile and not likely to fully recover from a clearcut logging operation, according to Patricia Vera of the Defensores de Bosque Chileno. The organization, in partnership with Argentinian and North American groups, have launched an Adopt-a-Tree program to raise funds to purchase the lands from Trillium. Vera and her Argentinian colleague Alejandro Oliver of Finas Terrae flew over the company's logging operations during their visit here last week.

"It was terrible," Vera said. "From the ground, the roads, you do not see how extensive it is. If that is what Trillium does here, at home, we can only imagine what they will do in Tierra del Fuego."

Unexpectedly impromptu, Trillium's CEO David Syre met with the visitors and tried to assure them that the company will practice good forestry management there. To that end, Trillium hired Jerry Franklin, a prominent forestry professor at the University of Washington, to design an environmentally responsible harvesting plan. The company's decision to scale down its plans has "been a positive thing for the environment," Franklin said.

Environmental concerns alone may not be driving Trillium's decisions, however, as their lender on the project has gone into receivership and is being liquidated.

Delays caused by jumping through Chile's bureaucratic hoops forced Trillium to scale back and refinance its project. That's when the company turned to Capital Consultants Inc., a Portland money manager, and Portland-based Harry Merlo, the former Louisiana-Pacific Corp. chief executive who now works as an industry consultant. In February of 2000, Capital Consultants loaned Trillium $56 million for their projects, at a hefty interest rate of prime plus 5 percent. At press time it was unknown how Capital's current financial troubles might bite Trillium.

It's not the first time Merlo has found himself in hot water, though. In 1995, the U.S. Justice Department hit Merlo's Louisiana-Pacific with a 56-count criminal indictment, alleging a Colorado plant cheated on environmental laws. Consumer product problems that had plagued L-P prompted the company to oust him later that year.

UW's Franklin told The Oregonian he is not working directly with Merlo. But the irony of a forestry professor respected for his environmental awareness joining forces with Merlo is not lost upon him. "It is a strange bed to climb into," Franklin said.

 

Bid Lightens Investment Losses (Jan 2002)

by Jeff Manning, The Oregonian, Jan 25, 2002

The staggering losses suffered by clients of Capital Consultants got a little smaller Thursday.

MTGLQ Investors, an affiliate of Wall Street investment bank Goldman Sachs, outbid two other financial firms agreeing to pay $60 million for a portfolio of loans and private equity investments originally made by Capital Consultants. The proceeds will go to the union trust funds and individuals who lost an estimated $355 million in failed and allegedly fraudulent investments.

"It could not have gone better," said Thomas Lennon, the court-appointed receiver in charge of liquidating Capital Consultants. The winning bid was just less than one-third of the $183 million face value of the investments. But given the troubled status of many of the loans -- some of which are in default -- 33 cents on the dollar is a good price, he said.

"We're pleased; it's more money going toward the clients," said Steve English, lead plaintiff counsel in the landmark case.

The Goldman Sachs affiliate takes control of a diverse portfolio with borrowers ranging from The Governor Hotel in Portland to a Bellingham, Wash., timber company that had established logging operations in the southern tip of Argentina and Chile.

The sale marks the first major financial recovery by Capital Consultants investors since federal regulators seized the investment firm in September 2000. That was the month the U.S. Department of Labor and the Securities and Exchange Commission forced out the firm's two top executives -- Jeffrey and Barclay Grayson -- and accused them of concealing massive losses by means of a Ponzi scheme.

Barclay Grayson has since pleaded guilty to one count of mail fraud and in May will begin a 24-month sentence in federal prison. He is expected to testify against his father, who goes on trial in March on 22 counts of fraud, conspiracy, witness tampering, money laundering and making illegal payments to a union trustee.

Lennon, appointed to liquidate what remained of the firm, has been working on Thursday's auction for months. Last fall, he sent out 60 packets of information to interested parties who responded to advertisements placed in The Oregonian and Wall Street Journal. Eight companies visited Capital Consultants' Portland offices to conduct due diligence on the portfolio.

In November, Lennon obtained a $45.6 million bid from Republic Financial of Denver. Republic and three other bidders sent representatives to the auction. Bidding started at $46.6 million and increased in $500,000 increments.

Ninety minutes later, after repeated breaks while bidders plotted strategy and conferred with their home offices, MTGLQ entered the winning $60 million bid.

U.S. District Court Judge Garr King originally was to have ruled Thursday on the fairness of an even larger pot of money, the approximately $100 million in lawsuit settlement offers from several defendants embroiled in the Capital Consultants civil case. O'Melveny & Myers, the Los Angeles based law firm that did some work for Capital Consultants, is the latest defendant to offer a cash settlement, though the amount of the firm's offer is unknown.

But the fairness hearing was postponed to give the various parties more time to work out the details of the settlement.

The major settlement offers have come from former business allies and law firms that played a role in some of Capital Consultants' controversial business deals.

Lane Powell Spears Lubersky, the city's seventh-largest law firm and once Capital Consultants' lead firm, has agreed to pay $25 million. Stoel Rives, which formerly did work for Andrew Wiederhorn and his Wilshire financial empire, has agreed to pay about $12.5 million. Trustees of several union pension and benefit trusts, accused by union members of negligence, agreed to pay out about $16 million.

Four parties covered by the same insurance company -- Wiederhorn; his company, Fog Cutter Capital Group; Wilshire Financial Services Group; and several related entities -- have agreed to pay about $40 million.

Capital Consultants collapsed after Wiederhorn's Wilshire Credit Corp. borrowed $160 million and failed to repay the money.

A criminal investigation continues in the case.

 

In Capital Consultants settlement, Wilshire to buy back share of credit subsidiary

Business Journal of Portland, May 14, 2002

In Capital Consultants settlement, Wilshire to buy back share of credit subsidiary

As part of its settlement of civil litigation over the Capital Consultants collapse, Wilshire Financial Services Group (OTCBB: WFSG) said it will buy back the half ownership of subsidiary Wilshire Credit Corp. held by Capital Consultant's receiver.

The agreement calls for Wilshire; former Wilshire executives Andrew Wiederhorn and Larry Mendohlson and their families; and the executives' current company, Fog Cutter Capital Group, to pay $29.5 million to the victims of the Capital Consultants debacle, according to a Wilshire document filed Tuesday with the Securities and Exchange Commission. Wilshire will pay an additional $10.5 million to recover the 49.99 percent share of Wilshire Credit Corp. held by the receiver, making WCC again a wholly-owned subsidiary of Wilshire.

The cash cost to Wilshire of the settlement and stock acquisition will total about $15 million, the company said, plus a share of the proceeds from the anticipated sale of a piece of real property. Wilshire said it expects to accrue a first-quarter 2002 pre-tax expense of $3.6 million in connection with the agreement, "expected to eliminate most of the company's future costs arising from" the Capital Consultants affair.

The agreement involving the Wilshire-related parties is part of a much broader settlement negotiated between many defendants involved in the litigation over Capital Consultants, a Portland money management firm accused of losing hundreds of millions of dollars, primarily from labor union trust funds, in Ponzi-like schemes. Eleven other parties, including major law and accounting firms, joined Wilshire in settling claims.

The 12 defendants participating in the settlement, backed in large part by their insurance companies, will pay a total of $110 million, the Oregonian reported Tuesday. Combined with previous settlements and asset sales, the agreement should yield 57 cents for every dollar lost by Capital Consultants.

Among the other defendants, the law firm of Lane Powell Spears Lubersky agreed to pay $25 million, Stoel Rives law firm agreed to pay $12.5 million and accounting firm Moss Adams agreed to pay $17 million, the Oregonian reported.

The agreement requires approval by the U.S. District Court in Oregon and issuance of an order barring future claims arising from the Capital Consultants affair against the defendants who settled. A court hearing on the settlement is scheduled for June 19.

Unresolved claims include those against Capital Consultants founder Jeffrey Grayson and against two national accounting firms, Deloitte & Touche and PricewaterhouseCoopers.

The settlement has no bearing on criminal investigations or possible criminal proceedings.

 

Court Issues Settlement Order In Nation's Largest Investment Manager Fraud Case (Dec 2002)

Business Wire, Portland OR , Dec. 10, 2002

Judge Garr King, of the U.S. District Court for Oregon, has issued a settlement order governing the return of almost $300 million in settlements and other assets recovered in what the SEC called the largest investment manager fraud case in U.S. history. The court-approved funds will be distributed by the Receiver, Tom Lennon, among hundreds of trusts and private clients. Settlements will return approximately 60 percent of the at-risk investments. Settlements were approved by counsel for all parties (64 attorneys), 184 individuals and entities on behalf of plaintiffs, and 68 individuals and entities on behalf of settling defendants. The original lawsuits against Capital Consultants and other responsible parties were filed in consortium in September 2000. They contend that an elaborate Ponzi scheme concocted by the company and its advisors was responsible for a loss of nearly $500 million in investments. Many of its largest clients were Taft-Hartley funds and single employer ERISA plans. The losses bilked an estimated 100,000 ERISA plan beneficiaries out of their retirement savings and depleted funds for health benefits.

 

Tacoma VC firm linked to Capital Consultants (Aug 2003)

by George Erb, Business Journal of Portland, August 4, 2003

Tacoma, Wash. venture-capital firm Oxbow Capital Partners LLC and its owner, Daniel D. Dyer, participated in a "Ponzi-like scheme" that ended with the collapse of $1 billion Portland investment firm Capital Consultants in 2000, federal regulators allege.

The securities division of the state Department of Financial Institutions is also investigating Dyer and Oxbow Capital, said Andrea Sato, an enforcement attorney with the agency. She could not elaborate because of the ongoing investigation.

Dyer says he is trying to protect his reputation.

"I intend to defend my good name," he said. "I've been in business for 23 years, and I have terrific lawyers now who believe that the outcome will be very positive."

Dyer's attorney, Jonathan Schwartz of Los Angeles, describes his client as a decent man.

"He was taken advantage of by some of his business associates, and he was given some fabulously bad legal advice," Schwartz said. "Were it not for that, I don't think Mr. Dyer would be in the position he is in today."

Schwartz said federal regulators and Dyer may resolve their dispute with a consent decree.

Many people became aware of Oxbow Capital when, for a time, it was the lead tenant of the proposed Pacific Steps development in downtown Tacoma. But the firm pulled out of the project in 2001 because developers were unable to sign enough tenants amid weakening market conditions, Dyer said.

Ultimately, Pacific Steps never got off the ground.

The U.S. Securities and Exchange Commission accused Dyer and Oxbow Capital of fraud as well as the offer and sale of unregistered securities, according to a civil complaint the agency filed July 16 in U.S. District Court in Portland.

The regulatory agency wants a court order telling Dyer and Oxbow Capital to return any "ill-gotten gains from their illegal conduct" and to stop breaking federal securities laws. Dyer and his company also could be subject to civil penalties.

In their complaint, federal regulators paint a picture of Northwest financiers struggling to stay afloat after a $160 million loan went bad, all the while trying to conceal their troubles from their clients.

Dyer, since 1988 had known and done business with Jeffrey L. Grayson, the founder and principal owner of Capital Consultants LLC, a Portland investment firm. Capital Consultants by 2000 had about $1 billion in assets and about 340 investment clients, chiefly individuals and union pension funds.

In the mid-1990s, the Portland firm loaned $160 million of its clients' money to a subsidiary of Wilshire Financial Services Group Inc., which was based in Beaverton. But money troubles started piling up for Wilshire Financial, and the company filed for Chapter 11 bankruptcy reorganization in March 1999.

Around that time, the SEC complaint alleges, "Grayson devised a scheme to repay investors in the failed Wilshire loan by using capital fraudulently raised by Dyer and by issuing new loans" to Timothy B. Gamwell, another Capital Consultants borrower.

Under the plan, Dyer would form a new company, buy the troubled Wilshire loan from Capital Consultants and make payments with money raised by one of Dyer's subsidiaries, the complaint alleges.

Dyer in late 1998 created a company called Sterling Capital LLC that bought the Wilshire loan for $160 million plus interest, regulators contend. Sterling promised to make monthly payments to Capital Consultants, with the remaining balance due in January 2004.

But the plan was in trouble almost from the beginning because Sterling couldn't generate enough money to make payments, the SEC claims. Dyer, acting on Grayson's advice, tried to reduce his payments by selling $108 million of the Wilshire loan to Gamwell.

"At that point, the Ponzi-like scheme formed a complete circle," with money circulating between Gamwell, Capital Consultants and Oxbow Capital, the complaint said.

Meanwhile, Dyer tried to raise money by creating new funds that sold unregistered securities, federal regulators allege in court documents.

Dyer in 1999 created Oxbow Fund I, which wanted to raise $25 million but, in fact, got $4.6 million from 132 investors, according to the SEC complaint. Oxbow Capital told investors it would invest the money in equity and debt, but the money instead went to Sterling, the entity saddled with payments on the Wilshire loan, federal regulators argue.

Also in 1999, Dyer formed Washington Motorcycle Partners LLC, which over the course of 13 months raised $4 million from 204 investors nationwide, federal regulators contend. According to the complaint, Dyer told clients he would invest their money in the Indian Motorcycle Co.; instead, Dyer spent the money on himself, operating expenses and the Wilshire loan, among other things, the complaint alleges. Dyer and the SEC have been in settlement talks for months, and both sides want to resolve the complaint, said Schwartz, Dyer's attorney.

Dyer says he was misled by his previous attorneys and business partners.

"I have had bad legal advice in the last five years," he said.

Oxbow Capital in 2001 backed out of an agreement to be the lead tenant in Pacific Steps, a high-profile development in downtown Tacoma in which Oxbow was expected to lease 70,000 square feet.

 

 

Chile News Coverage

 

Timber via Tierra del Fuego (Feb 2000)

Two Portland executives help a Bellingham logging company launch a huge, controversial project in South America

By Jeff Manning, (Portland) Oregonian, February 16, 2000

Where does a Portland timber executive go after his company endures a humbling and hugely expensive court battle over the sale of defective home siding?

Tierra del Fuego perhaps.

The windswept island at the southern tip of South America is home to sprawling beech forests and a massive, contentious logging project launched by Trillium Corp. of Bellingham, Wash. It is also a focal point for two prominent Portland businessmen playing key support roles for the project.

Trillium five years ago began efforts to harvest trees on 864,000 acres it owns in Tierra del Fuego. Those efforts were stalled by fierce opposition from environmentalists and bureaucratic hoops laid by Chilean regulators.

The delays forced the company to scale back and refinance its project.

That's when the company turned to Capital Consultants Inc., a Portland money manager, and Harry Merlo, the former Louisiana-Pacific Corp. chief executive who now works as an industry consultant.

Trillium began harvesting last November, after finally receiving government approval.

Merlo played an instrumental role in helping Trillium downsize its business plan in Chile. Instead of spending "hundreds of millions" on two new sawmills, for example, Merlo convinced Trillium that it could get by with existing mills in the area, Trillium Vice Chairman Steve Brinn said. The company bought one existing sawmill on the Chilean mainland that had been mothballed.

Trillium also turned to Merlo for help with marketing. The man who was ousted after L-P siding on thousands of houses began crumbling and sprouting mushrooms hopes to sell home retail giant Home Depot on products made with unique hardwood being harvested by Trillium.

For a while, it looked as if there wouldn't be anything for Trillium to market. That's when it called Jeff Grayson, chairman of Capital Consultants, an investment advisory firm that manages about $1 billion, much of it from union pension funds.

"We were fortunate to find a lender who got firmly behind the project," Brinn said. "They've made a substantial commitment to the project."

Grayson said he has known Trillium founder David Syre since the mid-1980s and has loaned money to the company a number of times before. Capital Consultants is charging Trillium a hefty interest rate of prime plus 5 percent.

Trillium also hired Jerry Franklin, a prominent forestry professor at the University of Washington, to design an environmentally responsible harvesting plan. The company's decision to scale down its plans has "been a positive thing for the environment," Franklin said. The annual harvest volume, for instance, has gone from a projected 560,000 to 200,000 cubic meters.

Until now, Trillium's been known primarily as a Northwest timber company. But it is betting its future that better times and bigger opportunities lie far south of the U.S. border. Today, in addition to its Tierra del Fuego project, Trillium is developing an oriented-strandboard plant in Venezuela. Merlo, who had proposed building an L-P siding plant near the same site, is advising Trillium on that venture as well.

For now, Trillium is cutting the lenga beech into dimensional lumber and selling it both domestically in Chile and abroad. But the real promise of lenga is as a raw material for finished hardwood products such as furniture and molding.

"It's an excellent substitute for cherry," Brinn said. "It mills well and it takes stain well."

Grayson said Merlo wants to sell home and hardware giant Home Depot on the lenga products.

Merlo, who did not return phone calls, crashed professionally when in 1995 the board of Louisiana-Pacific dumped him after a series of public humiliations. It was a vote of no confidence in a man whose building products company foundered amid shareholder and customer revolts.

Merlo's Louisiana-Pacific was a darling on Wall Street, an innovator in a forest products industry marked by caution. But things had begun to go wrong in 1993, when pollution problems began to dog the company. By 1994, homeowners were complaining that their Louisiana-Pacific house siding was breaking apart.

In 1995, the U.S. Justice Department hit the company with a 56-count criminal indictment, alleging a Colorado plant cheated on environmental laws. The final straw was the siding disaster, which netted the company an expensive court settlement and lasting image problems.

L-P ousted Merlo in 1995.

UW's Franklin said he is not working directly with Merlo. But the irony of a forestry professor respected for his environmental awareness joining forces with Merlo is not lost upon him. "It is a strange bed to climb into," Franklin said.

Since he left Louisiana-Pacific, Merlo has quietly set up Merlo Corp., his consulting business, in downtown Portland. Merlo met Syre through the Portland-based World Forestry Center, said David Blair, an executive with Trillium. Merlo subsequently became a consultant to Trillium over the last year, focusing on forestry and wood products in South America.

Trillium owns 864,830 acres of land in Tierra del Fuego, an island about the size of Connecticut, which is split about evenly between Argentina and Chile. It has remained a remote reserve of sheep and cattle ranchers, who share the island with penguins, foxes and small, wild llamas called guanacos. Seabirds are abundant, including flightless rheas, condors, albatross, geese and ducks.

Ardent Chilean environmentalists have taken their cause international, but the presence of Franklin and promises of sensitive logging practices have assuaged some international environmental groups.

 

Adopt-a-Tree Plan Targets Trillium Land (April 2001)

Activists want Trillium to sell Tierra Del Fuego forests.

by Scott Ayers, Bellingham (WA) Herald, April 24, 2001

South American environmentalists have launched a campaign to buy Bellingham-based Trillium Corp. out of the forests of Tierra Del Fuego, split between Chile and Argentina.

Working with U.S. and international groups, the Defensores del Bosque Chileno of Chile and Finis Terrae of Argentina kicked off an "Adopt-a-Tree in Tierra Del Fuego" campaign with a concert in Bellingham last weekend.

Representatives of the two groups spoke at the anti-free trade rally in Blaine on Saturday and are scheduled to talk with environmental organizations in Seattle this week before heading home.

The group met with Trillium Chairman David Syre in Bellingham on Monday. Syre referred them to the head of Savia Holdings in California, which is running the Tierra Del Fuego project for Trillium, so that the corporation would speak with one voice on the issue.

Savia officials weren't available for comment Monday.

Environmentalists said their goal is to convince Trillium to sell the forests it has owned on the island of Tierra Del Fuego since the mid-1990s. They want to make the Trillium's forests part of a proposed intercontinental park, known as Gondwana, that would include land in many countries throughout the Southern Hemisphere.

"We're trying to get them to sit down with us and start discussions over a sale price," said Pat Rasmussen, a member of the nonprofit environmental group American Lands Alliance, who is leading the South American environmentalists in their tour of the state.

The "Adopt-a-Tree" program asks for $25 to $1,000 from donors. Rasmussen said that larger environmental groups, such as Ancient Forests International, are trying to raise money from potential large donors.

The environmentalists say they aren't sure how much money they will need to raise, but they suspect it will be more than the $30 million Trillium paid for its first chunk of Tierra Del Fuego forest in 1993.

Trillium owns more than 840,000 acres of the island, just less than two-thirds the size of all of Whatcom County. Most of the company's property is in Chile, though about 170,000 acres are in Argentina.

Trillium halted its expansive logging project in Chile last year -- a major change from a project Trillium officials have been working on since they bought the land. Contractors working for Trillium began felling the hardwood lenga trees in 1999.

Since then, the company has gotten approval to begin logging on the Argentinean side of Tierra Del Fuego, and news reports there said the company was transferring its operational base from Chile to Argentina

The company has closed its lenga mill in Punta Arenas, Chile -- Bellingham's sister city -- said Patricia Vera, the representative of the Defensores del Bosque Chileno who came to Bellingham. Defensores del Bosque Chileno translates to "Defenders of the Chilean Forests."

Vera said no one in Chile knows what Trillium's next step will be.

"We were told they were going to stop logging and focus on ecotourism and carbon sinks. Then we heard they planned to start logging again," Vera said.

Carbon sinks are areas of trees left standing so that the trees bring in carbon dioxide and help reduce the amount of greenhouse gases in the atmosphere.

The company got approval from Argentina to log 1,235 acres a year in February 2000 and began logging in February of this year, according to Alejandro Oliver from Finis Terrae. He said that Argentineans are pushing for further investigation into the plan. His group organized an e-mail letter-writing campaign that sent more than 3,000 e-mails to Trillium's offices in Bellingham asking the company not to log on Tierra Del Fuego, Oliver said.

"We are hoping by fall we can have some negotiations going so that we know how much money we need to raise so these forests won't be logged," said Rasmussen.

 

Goldman Sachs Gives Ex-Trillium Property in Tierra Del Fuego to Environmental Organizations (Dec 2003)

US Bank to Donate Land to Huge Nature Reserve in Chile

By Mauricio Rodriguez and Valeria Ibarra, La Tercera (Santiago), Dec 13, 2003

(English translation)

The bank announced yesterday that it will donate 270,000 hectares (675,000 acres) in the south of the country to create a nature sanctuary similar to Douglas Thompkins' Pumalin Park. By the end of 2004, Goldman Sachs, who will receive a tax deduction for the action, will deliver the administration of the patrimonial forest to an environmental organization.

Despite the smog and hot sun, green breezes are blowing these days in Chile. And for the first time in a long time, environmentalists are included in the fun. In a rare move, the biggest investment bank in the world, icon of financial Mecca, Wall Street, announced to the government that it will dissolve a millionth of its assets and will donate as a nature reserve lands larger in area than all of Metropolitan Santiago.

This is Goldman Sachs, who yesterday in Punta Arenas assured the authorities of Region XII that within less than one year, hopefully, a nature reserve of 272,000 hectares will be made of the lands that for the last 13 years belonged, not without controversy, to the North American forestry company Trillium. In the South and in the capital, the government is delighted.

Such an event is unprecedented in Chile, guided by the top executive of the company, a former environmental consultant of Bill Clinton´s, Larry Linden. The developments included informal conversations with the government, contacts which were aided by the ex-president of Amcham, Kathleen Barclay.

The quarter million hectares occupy one third of southern Tierra del Fuego, and is only a tiny bit smaller than Pumalin Park (300,000 ha.) of Douglas Thompkins.

Needless to say, the formation of the two parks had a big difference: the 13 years Thompkins needed to formalize his park and the one year, at most, Goldman Sachs will have to wait.

"This is a gift to the people of Chile", said Peter Rose, spokesperson for the giant company. He also admitted that the gesture will allow them to deduct the value of the donation from their taxes.

No More Trillium

The most pleased yesterday were the environmentalists. Despite Trillium promising to invest US$200 million and directly employ some 450 people, for 13 years the environmentalists battled the cutting of lenga in Tierra del Fuego, forests unique in the world. Their efforts paid off in 1997 with editorials in the New York Times and Wall Street Journal.

"The war is over" , said Nicolo Gligo, academician of the University of Chile and former coordinator of the NGO´s who saw that the Supreme Court cancel plans for timber harvesting by Trillium.

Trillium could continue, though it finally went bankrupt after finding neither markets nor investors. Not before going in debt to Goldman Sachs some $30 million, using as collateral their 272,729 hectares in Tierra del Fuego.

In November of 2002 Trillium's arrears forced the bank to foreclose, receiving the land instead of money. "December 5th of last year the title was transferred to our name", said Rose. He admits that they looked for buyers all over the world to take it off their hands. "We work with money, not trees and animals" he said.

They found none. Perhaps because the forestry indusrty has no "green seal" for fragile forests like those of Tierra del Fuego, say environmentalists. The market is slim for wood products without this certification of "quality"

"So we decided to donate it. Not to the Chilean state, this was never a theme. Besides this lets us deduct the land´s value from taxes.", said Rose. Conama has appraised its value at US$100 million, though Rose said he didn´t know for sure.

Less Than One Year

The bank already has the future of the piece defined. They´re looking for an environmental group such as The Nature Conservancy, who advised them to donate the land; or the World Wildlife Fund, of whom one of the directors of Goldman Sachs is an active member.

Achieving this in the next few months, the organization will be ready to designate an entity to administer the former property of Trillium as a nature reserve.

Compared with what happened with Thompkins, government sources have not one misgiving with respect to the plan. "It´s a very interesting project, very good, because it creates a protected area in a zone that is very fragile ecologically." Said Rodrigo Egaña, subsecretary to the President. Also sounding enthusiastic is Senator Sergio Fernandez, who already is thinking about touristic projects for the zone, in contrast to Trillium's, which would have "created a catastrophy".

Sidebars: The former owner of the forestry complex David Syre, the owner of Trillium, wanted to accomodate everyone, but in the end pleased nobody. His proposal to run a sawmill using native forests sustainably was more than the forestry industry considered appropriate nor the environmentalists could acccept.

Syre, a fan of wine and jogging, always believed his model project would change the industry forever. But his project never reached port. After trying projects in Washington State and Alaska he took a risky gamble. 270,000 hectares of lenga in the extreme south of Chile.

The product was incomparably fine quality wood for furniture making. But the business plan was very risky, despite Syre having studied the matter since 1991. He invested first $35 million, then nearly all the family fortune, some $200 million. He hoped for returns within 6 months of startup, but after nine years never made a dollar.

The Syre family still has their vinyard-now merged with another operator-and his sawmills in North America, but it will be hard to forget his bad experience in Patagonia.

The Differences with Thompkins´ Project

From afar the results look similar, but the birth of Doug Thompkins´ Pumalin Park and the path followed by Goldman Sachs are very different. Thompkins looked for and selected his lands. The North American investment bank never had any intention of acquiring the 272,000 hectares inherited from Trillium, their debtor.

And another difference: While Thompkins took 13 years to concretize his dream-with the signing this week of an accord with the government--, the second is counting on the blessing of the government.

"We certainly know of the difficulties Thompkins has had", said Peter Rose, director of communications for the bank, and one of the officials who came to Chile to announce the plan. Another is Larry Linden, former consultant of the World Bank and Clinton administration.

"For that reason, to avoid such problems, before thinking of anything else we made contact with the Chilean government with informal and confidential conversations to feel out the right way to proceed."

And that step was the right one because the government has shown their satisfaction with the bank´s decision. So said the subsecretary to the President, Rodrigo Egaña, who was told that Monday the Executive branch would be officially informed about the project, which they´d known about for three days. Yesterday Goldman Sachs announced the initiative in Region XII.

 

Goldman Sachs to create nature reserve in South Chile (Dec 2003)

Reuters, December 13, 2003

SANTIAGO, Chile - Investment bank Goldman Sachs said on Friday it would create a nature reserve in Tierra del Fuego in southern Chile in a stretch of rare forest acquired from a U.S. forestry company which had planned to harvest the timber.

Goldman Sachs obtained the land after purchasing defaulted bonds of the U.S.-based real estate and forestry firm Trillium Corporation.

The bank decided over the last week to transfer the land to its charitable fund which will work with conservation organizations in 2004 to manage the reserve.

"This was a corporate decision taken at the highest level. ... We weighed up our options and decided that protecting this ecological jewel was the socially responsible thing to do," Peter Rose, director of media relations for Goldman Sachs told Reuters by telephone from southern Chile.

The 680,000 acres of lenga forest, which is similar to beech, is on Tierra del Fuego island, which Chile shares with Argentina. Lenga is found only in southern Chile and Argentina and is considered of significant ecological importance.

Trillium met legal opposition from environmental groups when it obtained approval in 1994 from Chile's foreign investment committee to cut the trees to make wood chips and other wood products in a $200 million project.

While the company won several legal cases, it was faced with more legal battles and suspended the project in 2000.

Rose said Goldman Sachs would set up a Chilean foundation and choose an environmental organization to manage the reserve by the end of 2004.

"This is essentially a gift to the Chilean people," Rose said.

Environmentalists celebrated another victory in Chile this week when the government agreed to create a nature reserve out of a huge tract of land in southern Chile owned by millionaire U.S. businessman Douglas Tompkins.

 

Trillium Logging Plan Trimmed (Dec 2003)

by Scott Ayers, Bellingham Herald, December 16, 2003

Investment bank Goldman Sachs Inc. plans to donate ecologically sensitive land in southern Chile to create a nature preserve.

The decision ends the controversial efforts of Bellingham's Trillium Corp. to log hardwood lenga trees on more than 600,000 acres that the company owned on the Chilean part of the island of Tierra Del Fuego.

New York-based Goldman has transferred the notes to its charitable fund, which, in turn, has taken title to the land in Chile. The fund will work with international and Chilean conservation organizations to create the nature preserve.

Trillium gave the land to Goldman Sachs as part of a settlement on debt that the Bellingham company owed the bank.

Goldman Sachs took over the debts of Capital Consultants Inc. of Portland, Ore., about two years ago after Capital Consultants went bankrupt under a cloud of fraud charges against some of its managers.

Capital Consultants was a major investor in Trillium's South American logging project and was supposed to continue to be a future investor, said Wayne Schwandt, Trillium's managing director. But Goldman Sachs was not interested in investing in a logging project and decided to call in the debt, Schwandt said.

Under the agreement, Trillium kept roughly 170,000 acres of forest in Argentina on Tierra Del Fuego as part of the deal and is moving ahead with logging plans there, Schwandt said.

Environmentalists from the United States and Chile, who had argued for preservation of the Trillium-owned trees from the beginning, celebrated Goldman Sachs' announcement.

"This is exactly what we were looking for in Chile," said Pat Rasmussen, a spokeswoman with American Lands Alliance, which had organized opposition to the projects in the United States "But we are also interested in the Argentinean side. It is not OK to log there, either."

Rasmussen said her organization believes that some places should never be logged.

"This is a wilderness, an incredible forest, at the end of the earth," she said. "Some places are wild and should stay that way."

Despite all its struggles to get the logging project under way, and losing the land in Chile, Trillium remains committed to trying to prove that logging can be done in an environmentally sensitive way on Tierra Del Fuego, Schwandt said.

Chairman David Syre and company officials have discussed pulling the plug on the entire operation, including the sawmill that Trillium owns in Punta Arenas, Chile, but have decided against it, he said.

The company is slowly ramping up operations in Argentina, hiring contractors to cut some trees, and contracting with local saw mills to process the logs into lumber. The lumber is being sold in Argentina, the United States and China, Schwandt said.

"The concept Dave really had for creating a sustainable forest project in this hardwood forest still makes sense economically and environmentally," Schwandt said.

 

Good News Emerges from Local Scandal (Dec 2003)

Goldman Sachs donates land it gained through Capital Consultants' meltdown for a preserve

By Jeff Manning, Oregonian, Dec 22, 2003

The Capital Consultants scandal has led to a generous dose of human misery. Union members lost millions of their retirement dollars in fraudulent investments, careers were ended, reputations ruined and jail terms served.

Now, the case of the prominent Portland investment firm that lost $350 million in failed and fraudulent investments has generated some good news.

Wall Street giant Goldman Sachs announced last week that it will donate more than 680,000 acres of rare old-growth forest at the southern tip of Chile. The investment bank is in the process of selecting a conservation group to manage the Chilean land as a nature preserve. It hopes to complete the transfer of ownership to the conservation group by the end of 2004.

Goldman took possession of the land from affiliates of Trillium Corp., a Bellingham, Wash.-based timber company that had borrowed more than $30 million from Capital Consultants in an effort to log the massive beech forest that covers much of the land.

Goldman sued Trillium in November 2002 in an attempt to collect the $30 million debt, which was in default. On Dec. 5, Trillium handed over the land to Goldman to settle the suit.

The decision to donate the land offers a contrast to the business scandals of recent years, many of which implicated Wall Street firms -- including Goldman Sachs.

Chilean environmentalists, who had fought Trillium's plans for a decade, were overjoyed by the news.

"We are very happy," said Adriana Hoffmann of Defenders of the Chilean Forest in Santiago. "It seems very unusual that a Wall Street bank is making this decision. Things are happening here at the southern tip of the world that are unbelievable."

Trillium, headed by Chairman David Syre, made its move into South America about a decade ago. It bought its massive tract on Tierra del Fuego, the islands at the continent's southern tip. The largest island of Tierra del Fuego is split between Chile and Argentina.

Trillium adopted plans that it argued were sensitive to environmentalists' concerns. It hired Jerry Franklin, a respected forestry professor from the University of Washington, as a consultant.

But some environmentalists were implacable in their resistance. More than 200 environmental groups in Chile, Argentina and the United States allied to fight the logging project. The land is dominated by vast stands of lenga, a native strain of the beech tree that is found nowhere else. It is home to penguins, fox and guanaco, a smaller variant of the llama.

The land also supports an unusual complex of sub-Antarctic wetlands. It may be the only spot on the globe that hosts three major peat bog systems.

"This land is fragile and very beautiful," said Hoffmann, the Chilean activist. "We were very worried about Trillium's plans."

Trillium's plans were slowed by a lack of funding.

By 1998, Trillium needed additional millions to make the project happen. It turned to Capital Consultants, borrowing more than $30 million in two loans. With one of the loans, Trillium bought a sawmill in Punta Arenas, a small town on the mainland.

It was a classic Capital Consultants loan: complex, risky and, for Trillium, expensive. Jeff Grayson, former Capital Consultants CEO, charged Trillium a hefty "prime-plus-five" interest rate -- 5 percentage points more than banks charged their best customers.

The Trillium transaction was classic Capital Consultants in another way: The timber company became one of a host of borrowers to fall behind on its loan payments.

In court documents, Syre said he met with Grayson on Feb. 9, 2000, to discuss the status of the Trillium loan. Over dinner and a Trail Blazers game, Syre told Grayson that he shouldn't expect any payments until his company completed a lumber manufacturing mill in Chile. Grayson agreed to give the project more time, Syre said.

The Trillium loans languished on Capital Consultants' books until September 2000, when the U.S. Department of Labor and Securities and Exchange Commission sued Capital Consultants, accusing the firm of losing hundreds of millions of its clients' dollars and concealing the loss through a complex Ponzi-like scheme.

Grayson left the firm. He later pleaded guilty to fraud charges and has been living in a Portland nursing home since suffering a major stroke in May 2002.

In January 2002, the receiver appointed to manage what was left of Capital Consultants put up a portfolio of the firm's troubled loans for auction. An affiliate of Goldman outbid three rivals, agreeing to pay $60 million for loans totaling $180 million. Among them were the two Trillium loans.

Unlike Grayson, Goldman wasted no time taking collection actions. In November 2002, lawyers at the Ball Janik law firm in Portland filed a complaint on behalf of a Goldman affiliate in U.S. District Court in Portland seeking the $30 million from Trillium, Syre and a host of Trillium subsidiaries.

Trillium initially fought back, claiming it was not bound by the terms of the Capital Consultants loan because Grayson had breached the deal by not advancing additional millions to Trillium.

This fall, Trillium agreed to settle. On Dec. 5, the company agreed to transfer ownership of more than 850,000 acres in Chile and Argentina to Goldman in exchange for cancellation of the debt.

Goldman considered a number of alternatives for the land, including leasing it to another timber company or selling it off.

"But on further analysis," Goldman said in a Dec. 12 written statement, "given the unspoiled nature of the tract of land, the firm determined that this was a unique opportunity to permit the ecologically important key features of the land to be conserved for the future, reflecting the views of the firm's senior management."

Trillium will continue to operate, at least temporarily, on the 189,000 acres on the Argentine side of the island. It has negotiated a three-year lease on the land as well as the Punta Arenas sawmill.

Wayne Schwandt, Trillium's managing director, said Goldman's plan is not all that different from his company's.

"It was always our intention to put about 70 percent of the land into conservation zones," he said.

Environmentalists said they feel better with the land out of Trillium's hands.

"This is exactly what we hoped would happen," said Pat Rasmussen, a Leavenworth, Wash.-based activist who fought Trillium's plans. "It's a wild forest, the southernmost forest in the world. It should never be logged."

 

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