Timberland Security For Landowners Virginia Forestry Summit

Transcription

1 Timberland Security For Landowners 2015 Virginia Forestry Summit

2 5/18/15 Dendro Resource Management, Inc. 2 Timberland Security for Landowners Cover a few definitions Review the Profile of a Perpetrator How Much is Stolen? Review Timberland Owner Concerns or Issues Discuss Prevention or Control measures Summary & Questions

3 DRM, Inc. 3 Company Background Founded in 2001, DRM provides independent and confidential audit and support services for forest industry operations Provides Operational Risk Assessments or audits (scale houses, procurement, timber security systems, fiber supply chain), Contractor Risk Assessments and Design, Implement and Test Theft and Fraud Prevention Systems. Independent and Confidential Third Party

4 Past Chair of the Southern Forest Products Security Group DRM, Inc. 4 Personal Background President of DRM, Inc. B.S. in Forestry from Virginia Tech 8 years procurement forester 20 years forestry operations auditing and timber security (Canal Industries, Canal Forest Resources and now DRM) Accreditations: Cert. Fraud Examiner, FRA Board Member, SC & NC Registered Forester Association of Certified Fraud Examiners, Forest Resource Association, SAF, SC Forestry Association, Institute of Internal Auditors

5 DRM, Inc. 5 Personnel Background Employs three part time that have extensive backgrounds in forestry operations, and/or law enforcement. (ME, GA, AR, SC) Vetted to ensure no conflicts of interest Provides boots on the ground in Northeast, South Central and Southeastern regions (with plans for Western States). Clients scattered throughout the US.

6 5/18/15 Dendro Resource Management, Inc. 6 Timberland Security When discussing Timber or Timberland Security a common comment is: we ve known our folks for over 20 years and we have never had a problem. If we implement any security measures it will offend them and damage our relationship. Nobody has ever stolen from us

7 5/18/15 Dendro Resource Management, Inc. 7 Timberland Security Another common issue is depending on our area of operations we all define timber security a different way! I think it s important to cover a few basic statistics of fraud. Character, integrity, honesty

8 5/18/15 Dendro Resource Management, Inc. 8 Character, Integrity, Honesty Earlier Studies Defined (prior to 1990) One to three percent of population are common criminals. Twenty seven to thirty percent of population will steal if given a chance. Seventy percent of population are honest. John Kula, CFE (studied behavior) Thirty percent will steal or be dishonest on a regular basis. Thirty percent will steal or be dishonest depending on the situation. Forty percent will never steal or be dishonest, regardless of situation. Which leaves 60% of the population may steal or be dishonest!! (speeding tickets, tax forms, IRS, resumes, facebook)

9 5/18/15 Dendro Resource Management, Inc. 9 Profile of a Fraud Perpetrator?

10 5/18/15 Dendro Resource Management, Inc. 10 Profile of a Fraud Perpetrator Description Male, average age 36 to 45 years old, married, happy family, active church members, educated, achievers, high self esteem, highly motivated, shows empathy and kindness. Comparison to Criminal Counterpart Older, better educated, no criminal record, less likely to get caught, shorter sentences, more religious, less likely to abuse drugs. 1 out of 32 Americans are under some probationary supervision. (1 out 142 in Jail). 3%

11 5/18/15 Dendro Resource Management, Inc. 11 How Much is Being Stolen? Association of Certified Fraud Examiners 2014 Report to the Nation Typical organization loses 5% of Annual Revenue to Fraud (World GDP 3.7 Trillion Dollars) US Chamber of Commerce (.5 to 2% Retail Shrinkage) Assume Ten Million Truckloads per year. CFE Statistics $350 Million stolen each year. USCC Statistics - $37.5 to $150 Million Stolen Each Year in the Southeast. And I can make a strong argument that the Forest Industry is not Typical.

12 5/18/15 Dendro Resource Management, Inc. 12 Timberland Security Assets scattered over hundreds of square miles, with only an estimate of the inventory and a staff (or more likely contracted staff) that doesn t live near the property being managed. Securing the revenue streams and the various products requires well thought out control measures for any organization or private landowner

13 5/18/15 Dendro Resource Management, Inc. 13 Timberland Security Other Unique Challenges faced in the Forest Industry Huge cash flow Diverse operations Very valuable and accessible asset no locks, no fences, no walls Inventories are estimates until crossing the scale Absentee landowners

14 5/18/15 Dendro Resource Management, Inc. 14 Timberland Security Still More Reasons the Forest Industry is unique Timber is indistinguishable once removed from stump Small risk of detection Historically light or no jail time Low staffing levels And again, our assets are scattered over the landscape!

15 4/12/2015 Dendro Resource Management, Inc. 15 Is Timber Theft and Fraud Occurring? Keadle Case the seminal case for our industry, served as a wake up call $1.2 Million Dollar Loss, 17 indicted, classic examples of Zone Jumping, Kickbacks, Bogus Tracts, Kiting, Bribery, Prostitution and hints of Organized Crime. Cases in last few years: $600,000 - wood dealer defrauds landowner (possibly other landowners) $10 Million - Logger diverts stumpage for his own benefit over 10 year period. $300,000 Landowner discovers 125 acres cut without his permission.

16 4/12/2015 Dendro Resource Management, Inc. 16 Is Timber Theft and Fraud Occurring? $1 Million - Wood Yard operator and logger, submits loads to mill as having originated on the wood yard, when in fact the load never went to the wood yard. $1.5 Million Scaler and Logger fake ticket scheme defrauds paper mill. 4/10/15 - Montana - Man fined for stealing 1000 trees from Forest Service 4/6/15 - Malaysia Timber Revenue underreported due to timber theft. 3/23/15 - Louisiana - Man arrested for stealing over 25k of timber.

17 4/12/2015 Dendro Resource Management, Inc. 17 Is Timber Theft and Fraud Occurring? State of SC Forestry Commission since it began investigating timber theft in 1999 has investigated 2262 cases valued at $11.5 Million dollars Numbers are 96 cases valued at $406,262 and investigated 23 arson fires. And over time they have recovered ¼ to ½ of the total case value.

18 4/12/2015 Dendro Resource Management, Inc. 18 Is Timber Theft and Fraud Occurring? The GA Forestry Commission just began investigating timber theft July Since that time they have investigated 93 complaints with the timber valued at $238, 000. They have also investigated 30 arson fires

19 4/12/2015 Dendro Resource Management, Inc. 19 Timberland Security Complicating Matters! New Revenue Streams from Timberland have expanded beyond traditional sources (timber, mineral leases, oil & gas leases, hunting leases, pine straw) to include ecological service leases (carbon credits, mitigation rights, conservation easements) Fortunately the application of proper business controls can minimize the likelihood of your becoming a victim of theft.

20 4/12/2015 Dendro Resource Management, Inc. 20 Timberland Security for Landowners Of course I understand all the new revenue streams are a good thing! And the good news is with proper business controls in place all revenue streams can be protected from theft and fraud. So the question is What business controls prevent timber security issues?

21 4/12/2015 Dendro Resource Management, Inc. 21 Timberland Security for Landowners Any Questions Before we Shift Gears into Landowner Concerns and Prevention?

22 4/12/2015 Dendro Resource Management, Inc. 22 Timberland Security for Landowners Areas of Concern Timberland Management Timber Sales Contractor Security Issues Woods Arson Dumping Controlled Substances Mineral, Gravel & Fill Dirt Theft Endangered Species Concerns Hunting Leases Alternative Products (ginseng, pine straw, Christmas trees, orchards, Energy products, cell tower leases, carbon credits)

23 4/12/2015 Dendro Resource Management, Inc. 23 Control Measures for Timberland Owners Get an accurate survey of your land. This includes marking boundaries, corners etc. Then maintain the boundary line markings

24 4/12/2015 Dendro Resource Management, Inc. 24 Control Measures for Timberland Owners Post your Boundary Lines so others know where it is. Maintain the signs, just because it was posted 20 years ago doesn t mean it still is! Where did the signs you put up last week go? And if you didn t post your land, who did?

25 4/12/2015 Dendro Resource Management, Inc. 25 Control Measures for Timberland Owners

26 4/12/2015 Dendro Resource Management, Inc. 26 Control Measures for Timberland Owners A key control measure is to have an Excellent Contract with specifics Specifics include: type of work to be done or nature of the agreement, equipment and material to be used, time frame, standards or metrics for operational success, payment terms, when in doubt specify!

27 4/12/2015 Dendro Resource Management, Inc. 27 Control Measures for Timberland Owners Any work you contract on your property should be in Writing! Roadwork, site prep, planting, boundary line maintenance, chemical site prep, fire management. Work must be completed prior to payment No exceptions! (PAC timber sales)?

28 4/12/2015 Dendro Resource Management, Inc. 28 Control Measures for Timberland Owners Lacking specific details can cost money! Handshake agreement on the harvesting prices leads to a landowner being promised one thing and paid a lower price. Push a road into the tract can be interpreted several ways. To what specifications? Bicycle traffic, ATV traffic, light pickup or heavy truck? Acreage variances tree planting, chemical applications Contract specifies harvesting all timber, however, pulpwood markets become tight, so all timber becomes saw logs, anything not meeting saw log specs is left standing

29 4/12/2015 Dendro Resource Management, Inc. 29 Control Measures for Timberland Owners How much chemical are they going to apply? What guarantees do you have? Direct observation of mixing process may be called for, especially when you consider the current costs of chemicals. Tree planting how many, what spacing, what species, what generation, etc.. Boundary lines chopped, cleared and marked? Or just maintained? I may define maintained differently than you do!

30 4/12/2015 Dendro Resource Management, Inc. 30 Control Measures for Timberland Owners Remember one consequence of having multiple sources of revenue for landowners is the traffic on your property increases. In some cases this is an excellent control and in some cases this can create operational issues. It depends on the perspective.

31 4/12/2015 Dendro Resource Management, Inc. 31 Control Measures for Timberland Owners Perspective is Everything! Increased traffic increases the number of boots on the ground and can increase the likelihood of discouraging abuse But, more access can increase the wrong kind of boots on the ground! One large landowner I know found their land posted as a great location for riding an ATV (without approval) But the ATV traffic was destroying the roads

32 4/12/2015 Dendro Resource Management, Inc. 32 Control Measures for Timberland Owners Visit the property and view as much of it as possible! And Consider Hunt Clubs for more boots on the ground.

33 4/12/2015 Dendro Resource Management, Inc. 33 Control Measures for Timberland Owners Hunting Leases Benefits Can be a valuable source of predictable income Better security One contact person for the group Self-policing within the group

34 4/12/2015 Dendro Resource Management, Inc. 34 Control Measures for Timberland Owners Hunting Lease Concerns Use renewable detailed contracts that favor long-term relationships Clearly specify leased areas in a detailed contract (favor long-term relationships) Control access, no permanent structures, no interference with forestry or farming Get payment in advance Require Indemnity insurance Address ATV use Specify Cancellation rights and Recreational use

35 4/12/2015 Dendro Resource Management, Inc. 35 Control Measures for Timberland Owners Timber Sale Concerns Whom do you trust? How do I get the best value? How do I make sure I get paid for everything? What are my costs? When do I sell and to whom?

36 4/12/2015 Dendro Resource Management, Inc. 36 Control Measures for Timberland Owners Timber Sale Controls Simple answer is hire assistance (written contract) Get References Quality of work is a concern Contracts clearly stating what we want done Safeguard resources Evaluate work and contractor (look at other jobs they ve done)

37 4/12/2015 Dendro Resource Management, Inc. 37 Control Measures for Timberland Owners Timber Sale Controls Understand the terms Pay as Cut Advance then pay as cut Lump Sum Sale Diameter Limit Cut Fuel wood sale Chip n saw Saw logs Pulpwood Every Region defines these differently and Con Artists Take Advantage!

38 4/12/2015 Dendro Resource Management, Inc. 38 Control Measures for Timberland Owners Illegal Dumping a growing problem linked with increased population and increased dumping fees at landfills Landowner assumes all liability for items dumped on the land Clean-up can be expensive $1000$50,000

39 4/12/2015 Dendro Resource Management, Inc. 39 Control Measures for Timberland Owners Prevention Methods Restrict Access Clean up any and all dumps quickly (it is expensive) Monitor property Prosecute when caught. No dump diving allowed!

40 4/12/2015 Dendro Resource Management, Inc. 40 Control Measures for Timberland Owners Gate Vandalism also an increasing problem Vandalism varies from simply cutting the locks, to tearing it down. Costs vary from $50 - $ Prevention Cameras (maybe)

41 4/12/2015 Dendro Resource Management, Inc. 41 Control Measures for Timberland Owners Woods Arson Very tough to prevent. Reduce your timberlands fuel load Prevent access Maintain roads, fire breaks and fire lines Causes $1.4 Billion in property losses per year. Support your communities arson programs

42 4/12/2015 Dendro Resource Management, Inc. 42 Control Measures for Timberland Owners Controlled Substances Growing problem of marijuana grows on private land. Very sophisticated with drip irrigation, fertilizer, and 24/7 guards armed with automatic weapons. Some indications of organized cartels Other growing problem is mobile drug labs producing methamphetamine Prevention = ID & Report

43 4/12/2015 Dendro Resource Management, Inc. 43 Control Measures for Timberland Owners Prevent Access & Require Strict Accounting for all Products leaving your land! Regular visits to the property Alternative Products Mineral, gravel, sand Oil & Gas Ginseng Christmas Trees & Orchards Wind & Water Cell Tower Leases Carbon Credits Conservation Easements Palm Oil Palm Trees

44 4/12/2015 Dendro Resource Management, Inc. 44 Control Measures for Timberland Owners Endangered Species Know the species in Your Area!

45 4/12/2015 Dendro Resource Management, Inc. 45 Summary of Control Measures for Timberland Owners Have an Accurate Survey of Your Land! Clearly mark and identify your boundary lines Post your Land Get it in Writing! Whatever it is! And be detailed! More boots on the ground more often Be friends with your neighbors Know local law enforcement Limit access to your property and post your land Inspect your property on regular basis Hire help if you need it!

46 4/12/2015 Dendro Resource Management, Inc. 46 Theft and Fraud Prevention DRM, Inc. PO Box 1386 Lugoff, SC