Lebanon-Based Global Forest Partners Alleges $9 Million Theft
Lebanon — Allegations that a Guatemalan businessman stole $9 million from a giant pension fund and other investors in a Central American teak plantation project organized by an Upper Valley financial manager have led to federal criminal charges and a civil lawsuit in Grafton Superior Court that names a politically influential California entrepreneur as a defendant.
A criminal complaint filed under seal in U.S. District Court in Concord in December and unsealed Oct. 15 charges Roberto Montano, aka Jorge Roberto Montano Pellegrini, with wire fraud. The civil lawsuit, filed by Lebanon-based Global Forest Partners and an affiliate of the California Public Employees Retirement System, alleges that Montano, 49, California biofuels developer Kirk Haney, and companies they control are guilty of breach of contract, theft, fraud and other violations of the law.
The current legal fight brings into view a web of investments and businesses that extend from coast to coast in the United States as well as from rural Guatemala to Caribbean tax havens. That web connects American retirees and investment managers to Guatemalan peasants and businessmen.
Key threads lead back to Global Forest Partners, a financial firm whose management of $4 billion in assets emanates from an unobtrusive office building near the intersection of Route 120 and Etna Road.
Forest products account for a small but significant corner of the investment market where pension funds, endowments and wealthy investors seek alternatives to more conventional assets, such as publicly traded stocks and bonds. Other common alternative investments include hedge, private equity, venture capital, commodity and real estate funds.
Global Forest Partners manages an investment portfolio that is nearly as valuable as Dartmouth College’s endowment and includes about 2 million acres of timberland in Australia, Brazil, Cambodia, Chile, Colombia, Guatemala, New Zealand, Uruguay and the southeastern United States. Global Forest has 24 professional employees.
Global Forest was created in Boston in 1982, moved to the Upper Valley in 1990 and five years later was acquired by UBS, a giant Swiss bank. Peter Mertz, a former executive at International Paper, was hired by the bank to run its forest lands investment unit, and in 2003 he organized a management buyout of the firm. Mertz now owns a stake of at least 25 percent but less than 50 percent, according to a June securities filing.
By the beginning of this decade, Global Forest had amassed more than $3 billion in assets. That made it a big player in an often overlooked corner of the investment market that TimberLink, a consulting firm, estimated in 2011 comprised about $30 billion in assets.
And it was a deal in that niche that gave rise to the current controversy.
In 2007, according to an affidavit filed in court by an FBI agent, Global Forest began investing “about $45 million to $50 million” from a large pension plan to develop teak plantations in the Peten region of Guatemala.
The investor was the California Public Employees Retirement System, or Calpers, which has more than $300 billion in assets. Calpers participated using Sylvanus LLC, an affiliate with nearly $500 million invested in forest land. A Calpers spokesman confirmed the giant pension fund’s ownership interest in Sylvanus, but referred other questions to Global Forest.
Global Forest, Calpers and the Guatemalan firm that would be the frontline manager of the operations “decided to structure the reforestation projects by forming various entities … and dividing ownership interests in those entities among themselves,” according to a court filing by Global Forest and others. Several of those entities were registered in the Cayman Islands. Others were in the British Virgin Islands. Both are British territories where U.S. corporations and others frequently form affiliates to reduce tax liabilities.
Eventually, Calpers provided most of the $45 million to $50 million that was used to pay for land, supplies, equipment and labor needed to plant, maintain and harvest teak trees on a new plantation, according to the FBI affidavit, which describes but doesn’t name the giant pension fund. In 2010, investors organized by Global Forest began forking over $25 million more to fund a second plantation.
The plantations aimed to capture a slice of the global market for teak which, according to a 2012 report from the United Nations Food and Agriculture Organization, is one of “the tropical hardwoods most in demand for the luxury market and heavy duty applications.” While natural teak forests are found only in India, Laos, Myanmar and Thailand, more than 75 percent of the global supply comes from plantations.
The Guatemalan teak plantations that were financed by Calpers and other investors who ponied up tens of millions of dollars — at least $70 million, according to the FBI affidavit — covered as many as 25,000 acres. The U.N. Food and Agriculture Organization estimated that in 1998 Guatemala had had only about 4,000 acres of teak.
Montano played a key role, according to court filings. He “held himself out as the chief executive officer” of Green Millennium, the company that Global Forest and its investors hired to manage the Guatemalan project, according to the FBI affidavit.
Montano opened multiple spigots to boost his illicit personal cash flow, according to the affidavit, which alleges that he pocketed $2.6 million in operating funds, $1.4 million in subsidies from the Guatemalan government and at least $5.3 million in proceeds from loans that improperly mortgaged properties owned by Global Forest investors.
The affidavit says Global Forest “provided close financial and operational oversight of the project,” but that Montano admitted he had “engaged in a scheme to defraud (Global Forest) dating back to 2010 or 2011.” Yet it was only on July 30, 2014, that Global Forest managers sent a letter to Montano asking why some contractors hadn’t been paid, according to the affidavit. The next day, in a recorded Skype conversation with Mertz and other Global Forest executives, Montano described his actions as “embezzlement” and admitted that he had “cooked the books” and fabricated bank statements, the affidavit said.
Mertz declined to comment on that time sequence or on any other specifics of the case, which is the subject of ongoing prosecution and litigation, but noted that Montano and the former chief financial officer of Green Millennium also face criminal charges in Guatemala.
A spokesman in the Guatemalan embassy in Washington, D.C., was unable to confirm that such charges had been filed. A news release from the U.S. Attorney’s Office in New Hampshire said Guatemalan prosecutors had filed charges against Montano in September.
Montano is also a defendant in a civil lawsuit filed in Grafton Superior Court in November by Global Forest, Sylvanus and other investors seeking to recover more than $10 million that was allegedly stolen. The lawsuit also names Haney, a San Diego investor and entrepreneur, as a defendant. Haney and Montano were the co-owners of Green Millennium, the lawsuit says. Haney and Montano did not respond to messages seeking comment. “Montano is presently a fugitive from justice,” according to the U.S. Attorney’s news release.
Haney is best known as a director, founder and, until a year ago, chief executive of a San Diego biofuels company called SGB Inc. with a website at http://www.sgbiofuels.com. On his LinkedIn page, Montano says he is a “co-founder” of SG Biofuels.
SGB aims to use the inedible seeds of jatropha, a tropical plant, to produce biofuel for jet aircraft, electric power plants and industrial furnaces. Jatropha and SGB have been the subject of at least two positive stories in Th e New York Times since January 2012. Two years ago SGB announced plans to spend $76 million to develop a 25,000-acre jatropha plantation in Guatemala. The Inter-American Development Bank agreed to consider lending up to $31 million for the project.
SGB’s major investors include a unit of Koch Industries, the privately held energy and industrial company whose wealth has funded the philanthropy and political support for conservative causes by Charles and Edward Koch.
In 2010, SGB and its chief executive, Haney, were the focus of less-glowing coverage from the Times based on information from U.S. State Department documents made available by WikiLeaks. The Times reported that Haney had accompanied California Rep. Dana Rohrabacher, then the ranking Republican on the U.S. House Foreign Affairs Committee, on a trip to Honduras. There, Haney, who donated to Rohrabacher’s campaigns and once worked for him as an intern, met with the president and promoted SGB’s jatropha business, according to a State Department report cited by the Times .
Several threads connect Haney to the Guatemalan teak project. His LinkedIn page says he was president and chairman of Green Millennium, the project manager, from 2005 until 2007, and that he led an “effort to restructure, recapitalize and drive new institutional strategy for the company,” secured $120 million in financial backing and sold a majority stake to a $3 billion private equity firm.
Haney also lists his role, from 2001 until 2007, as chairman of Cloud Break Advisors, a self-described “boutique private equity firm that bridges the gap between the untapped markets of Central America and the Caribbean with the global institutional community and private investment networks.”
On its website, Cloud Break says it “seeks to capitalize on local market inefficiencies, political change and cultural nuances through a relationship-driven strategy that is founded on the principles of quantification, sponsor qualification and deal transparency.” The firm’s website lists offices in Las Vegas, Costa Rica and Guatemala City.
Guatemala seems a natural destination for Haney and other investors looking for market inefficiencies and political change. The World Factbook of the U.S. Central Intelligence Agency says: “During the second half of the 20th century, (Guatemala) experienced a variety of military and civilian governments, as well as a 36-year guerrilla war. In 1996, the government signed a peace agreement formally ending the internal conflict, which had left more than 200,000 people dead and had created, by some estimates, about 1 million refugees.”
The country, which is scheduled to go to the polls today to select a new president, is still recovering, said Kate Doyle, director of the Guatemala Project of the National Security Archive, a nonprofit organization that operates an investigative journalism center, international affairs research institute, library and archive of declassified U.S. documents.
“Guatemala is right this very minute in the middle of this huge internal upheaval around issues of impunity and corruption,” she said. “Guatemala remains a country steeped in impunity (with a) faltering justice system.”
The website of Haney’s small investment firm contains an expression of satisfaction with the results of the Guatemala venture. “The success of Cloud Break’s investment in Green Millennium established the firm as a credible and reliable partner for institutional investment in Central America,” says the website, which asserts that Green Millennium’s “professional and scientific capabilities” enabled it to develop “the single largest teak plantation in Central America.”
Rick Jurgens can be reached at email@example.com or 603-727-3229.