Global Policy Forum

The Mahogany King's Brief Reign


By Joseph Kahn

New York Times
September 14, 2000

This South Pacific archipelago is best known for its fine-grained white beaches and cloudless vistas of cobalt sea. But a cockscomb range of steep-sided mountains divides the main island of Viti Levu, and nothing looks the same on the far side.

The rains come two days out of three in the southeast, dumping 10 feet a year. Suva's hills have a rain-forest coat of green — bamboo, palm, cocoa, eucalyptus and, most temptingly and troubling for Fiji, more than a hundred thousand acres of high-grade mahogany, worth hundreds of millions of dollars.

A coup here a few months ago toppled the government. For a relatively bloodless political uprising in a small island nation of 830,000, the event attracted some attention. Many accounts told of how ethnic tension involving Fiji's natives, ethnic Melanesians, had once again exploded into a public confrontation with Indo-Fijians, who trace their roots to indentured laborers the British brought here from India a century ago, when both India and Fiji were crown colonies.

But behind the cries for ethnic solidarity and native Fijian supremacy was a struggle over land, money and mahogany, a competition that involved American and British as well as local business interests.

Like diamonds in Sierra Leone and oil in Nigeria, Fiji's mahogany helped prompt a struggle for political power, inflicting damage to the nation's economy and political system well in excess of the riches the commodity once promised.

Fiji's struggle began with two men, who each searched for a pot of gold and wound up stirring a cauldron of ethnic discontent.

Marshall W. Pettit, a Seattle-area real-estate developer drawn three years ago to Fiji by its forests rather than its resorts, said that he aspired to transform the way developing nations manage their forests — and make a tidy profit. He also plunged into Fijian politics to fight the former government's opposition to his plans, though there is no evidence he backed the coup.

Mr. Pettit did, however, have ties to the Fijian who led the revolt, an American-educated, bald-headed former government forest manager named George Speight. The two men had once worked together to shake up the local timber industry — and were so close that Fiji police are investigating whether Mr. Pettit paid bribes to Mr. Speight. Both men deny the allegations, saying the payments were for legitimate business expenses.

When Mr. Speight stormed the parliament building and overthrew the elected government last May, he carried not only an AK-47 rifle but his own blueprint for becoming Fiji's timber king.

"Some people used the mahogany issue to raise the emotions of landowners and as an excuse to topple the government," said Anup Kumar, who was ousted as minister of commerce in the coup. "They thought they could get rich from green gold."

Mr. Pettit, 57, is tall and silver- haired, with courtly manners and a tendency to talk in 15-minute spurts, like a salesman wary of letting a customer interrupt him. He has spent most of his career financing real estate projects in California, Texas and Washington State.

He says that it was a missionary impulse, more than money, that prompted him to search for timber investments abroad. He wanted to provide poor nations with the capital and the technology to make the most of their forests, reducing their reliance on multinational companies that do not have their best interests in mind.

"Our big companies tend to take the resources of developing countries without giving them any value," Mr. Pettit said in a breakfast interview near his Seattle home. "It's the last vestige of colonialism in my opinion."

The ‘Laboratory' Landowner: Ire Finds an Audience

Mr. Pettit said he had explored doing business in Russia and Africa. But when a group of Fijian landowners contacted him in 1996 through a mutual friend, he found what he called the perfect laboratory: a poor but seemingly stable nation with little foreign investment, a place where a small American businessman could make a big splash. But as he weighed in, Mr. Pettit found that his prospective partners were drawing him deeply into a domestic struggle over land rights. The landowners wanted to buy out government leases on their ancestral lands, letting them harvest the timber and get rich turning it into veneer and furniture.

Nearly all the land in Fiji belongs to familial groups of indigenous, ethnic Melanesians, much as crown property in England belongs to the queen. Though land is often leased long-term for public and private uses, the holdings are a birthright of native Fijians, a situation that sets them apart even from multigeneration Indo-Fijians, who represent half the population and who dominate Fiji's commercial sector.

In the 1950's and 60's, the British colonial administration leased land to plant trees, including pine, which is a fast-growing softwood, and Honduran mahogany, a slow-growing hardwood. The leases paid landowners only a nominal rent — an average of about 4 cents an acre each year — for what was seen as an experiment. Many, but not all, of the leases gave landowners the rights to share profits if the planting proved successful.

When the pine began maturing in the 1980's, a decade after the British left, the new Fiji government established its own company, Fiji Pine, to harvest the trees. But the company mostly shredded the logs into chips and exported the chips to Japan at low prices, usually at a loss.

Landowners, after realizing no profit from pine, scrambled to make sure they made money on mahogany, which is just now ready to start cutting.

Fiji has 125,000 acres of high-grade hardwood, probably the world's largest stock of the species. And, unlike Brazil and other countries with a lot of indigenous mahogany, there are no environmental limits on harvesting from tree farms.

Mr. Pettit agreed to help, by proposing to sell tens of millions of dollars in bonds to finance the development of a forest-products industry, then repay the bonds from the proceeds of the sales of the timber products. If carried off, it would have been Fiji's first bond sale of any kind. It would also have earned Mr. Pettit millions in fees before a single tree was felled.

There were obstacles from the start. The biggest one was that Mr. Pettit met resistance from Fiji Pine, which had no interest in seeing landowners buy back their property and set up a competing business.

The setback might have prompted some people to withdraw — Mr. Pettit said that he considered "just getting out." Instead, he and his partners began a private investigation into the operations of Fiji Pine, compiling a report that claimed to show how powerful officials had used dubious accounting to profit at landowners' expense.

And Mr. Pettit rallied landowners to do something about it. "I told them, ‘You people have to get up and take on your own system or it will never get fixed,'" he said.

The Alliance: An American Finds A Local Partner

Mr. Pettit, an American outsider, soon recruited an ally in his fight. Through his local partners, he met George Speight, then the managing director of Fiji Heath, an insurance brokerage firm. The two discussed insurance — any bond deal on the trees would require an insurance package — but also timber politics.

Mr. Speight, in his early 40's and trained in business at Andrews University in Michigan, was a protégé of powerful native Fijian political figures in the then-ruling party. Burly, boxer-chinned and full of loud charm, Mr. Speight lived in a small apartment above JJ's, a bar and nightclub that he partly owned and had turned into a gossipy watering hole for local businessmen and government officials.

Unlike anyone else Mr. Pettit met in Suva, Mr. Speight understood financial markets. And unlike the Americans, Mr. Speight could communicate those concepts in Fijian.

"He's a godsend," Mr. Pettit wrote in a memo at the time. He committed to a broad arrangement with Mr. Speight, agreeing to pay his company a monthly fee for a variety of services, including insurance advice, office space and consulting.

When Mr. Pettit visited Fiji, Mr. Speight became his key contact and his liaison with landowners. Mr. Pettit said that he and Mr. Speight developed a shared vision for a unified timber industry, stripped of turf-conscious bureaucrats who did not understand American finance.

Before long, Mr. Speight was hooked on timber. He was boasting to friends that government patrons had secured him the leadership post at Fiji Hardwood, a new, government- owned entity set up to exploit the maturing mahogany plantations. By late 1998, Mr. Speight was also appointed chairman of Fiji Pine, the first step toward fulfilling his ambition to unite the timber industry.

By early 1999, the deal of Mr. Pettit's career seemed within grasp. Mr. Speight had shaken up Fiji Pine, clearing out many bureaucrats opposed to Mr. Pettit's plan. Mr. Speight also selected Mr. Pettit's company, Timber Resources Management, as one of two finalists seeking to harvest the mahogany groves.

If both deals materialized, the underwriting commissions, management fees and long-term profit sharing to Mr. Pettit's team would total, by some estimates, $100 million.

In March 1999, as both deals hung in the balance, Mr. Speight submitted an invoice to Mr. Pettit on his own letterhead that asserted he was owed $26,000 for rent and consulting services over several months in 1998. He specified a personal Australian bank account for payment. Mr. Speight had sought compensation before, but Mr. Pettit, while acknowledging he owed some past-due bills, said he held off paying. He disputed Mr. Speight's estimates and questioned why Mr. Speight asked to be paid to his own bank account instead of to Heath. Mr. Pettit also acknowledged that Mr. Speight's demand came at a difficult time — after Mr. Speight had assumed powerful government posts.

Despite those qualms, Mr. Pettit said he paid Mr. Speight $10,000 himself and arranged for one of his partners in Fiji to pay another $5,000. Those payments, shy of what Mr. Speight had demanded, are currently under investigation by the Fiji police.

Whether the payments might have swayed Mr. Speight to award the timber contracts to Mr. Pettit is not known. Not long after the issue arose, the party that backed Mr. Speight lost parliamentary elections to a coalition headed by Mahendra Chaudhry. Within a short time, Mr. Speight lost his government posts.

The Politics: Sugar Interests Are An Unseen Player

Mr. Chaudhry's new government promised a quick decision on timber sales. Even without Mr. Speight's help, Mr. Pettit felt he had the superior bid. His main challenger was the Commonwealth Development Corporation, a British concern with a 40-year track record in Fiji. But Mr. Pettit had a much more ambitious proposal that valued the mahogany crop at $210 million versus about $65 million for the British company.

What Mr. Pettit apparently did not know at the time was that Mr. Chaudhry, the first ethnic Indian prime minister in 13 years, needed the backing of Fiji's former colonial patron in negotiations with the European Union over export supports for sugar. Sugar is Fiji's No. 1 industry and a business dominated by ethnic Indians; Britain could help with sugar subsidies, but the British wanted Commonwealth Development to get the timber concession. Moreover, the new Fijian government — unlike Mr. Speight — seemed to have an instinctual distrust of foreign bonds.

As promised, Mr. Chaudhry decided the matter quickly. He told the British company that it was the "preferred bidder," subject to final talks. Mr. Pettit, having already invested about $2 million in Fiji, sensed disaster. He recruited the American Embassy to intervene.

After repeated diplomatic requests, Mr. Chaudhry agreed to reconsider the American plan. He also agreed to send a group of top government officials to visit Fahnestock & Company, the Wall Street investment bank Mr. Pettit had signed up to underwrite the bond. The State Department paid for the trip.

The intervention appeared to work. Two of Mr. Chaudhry's cabinet members overseeing the mahogany bid wrote a glowing report after the New York visit that signaled strong support for the Americans. But by late 1999, the action in Fiji had started to shift outside Suva, to villages scattered among the mahogany plantations. There, Mr. Chaudhry's initial support for the smaller British bid had inflamed landowners already fuming about not being consulted on land-use issues. Mr. Pettit said he hoped the landowner unrest would help him. After all, he had been lured to Fiji by disgruntled landowners representing 250 village chiefs, many with both pine and mahogany on their land. He cultivated support, drawing up tables showing how landowners could pocket far more from his plan than the British alternative.

At the same time, Mr. Speight was fanning landowner discontent for his own purposes. Stripped of his positions, he had returned to his family farm but he had not abandoned his plan to unite — and run — the timber industry. He crisscrossed the main island, Viti Levu, mobilizing landowners to form their own company, with him as the head. Their demand: full control of plantations be returned to ancestral chiefs.

Mr. Speight's plan found a receptive audience. "My response was, ‘Get the government out of this. This is my land,'" said Ratu Nd Tawakelevu, 69, the chief of Naimasimasi Village and a mahogany landowner. Mr. Tawakelevu, whose modest home is built on mahogany stilts, said the chiefs had named Mr. Speight executive of a new land trust.

The Coup: From Parliament To an Island Prison

Events came to a turning point last spring. Mr. Chaudhry, who had included projected revenues from a timber deal in the government's budget for the year, pushed for a decision on a foreign partner. Going into a decisive cabinet meeting in March, Mr. Pettit believed he had won the concession. But Mr. Chaudhry surprised some members of his own administration when he swung firmly behind the British company, participants in the cabinet meeting said. That set off a dizzying succession of charges and countercharges that made mahogany front-page news in Fiji for weeks.

Shortly after the cabinet decision, the American ambassador, Osmand Siddique, went public with a scathing broadside, complaining in a speech about a "government reversal" that he called "nontransparent," and warned that unless the decision was revoked, American investors would flee Fiji. A local consultant who had earlier worked for Mr. Pettit also stirred things up, accusing the Chaudhry government of selling out landowner interests to curry favor with the British and protect sugar cane farmers.

To complicate matters, Fiji TV in April reported on Mr. Pettit's payments to Mr. Speight. Though both denied the money was a bribe, the report gave Mr. Chaudhry, who sensed a growing political threat from landowners, ammunition to support his mahogany decision. He accused Mr. Pettit of being a carpetbagger with a scheme to extract grand profits from timber but no money of his own to invest. "You will not be able to develop the mahogany industry on hot air," he scolded.

But the uproar in the capital seemed to solidify landowner opposition to Mr. Chaudhry. Some 10,000 indigenous Fijians marched through Suva in late March, calling on the government to cease making decisions on two key land issues: the mahogany and renewal of leases on land used to grow sugar cane.

Mr. Speight's landowner coalition was encouraging the protesters, in language that became overtly racist. They asserted that ethnic Indians could not be trusted to reach crucial decisions on native land matters.

On May 19, landowners again marched on Suva, this time 20,000 strong. While the march degenerated into a riot that destroyed some ethnic Indian-run businesses, Mr. Speight took over the parliament building with seven paramilitary troops and captured Mr. Chaudhry and his cabinet. The rebels held them as hostages for almost two months.

The coup was haphazard, with disparate supporters and a changing list of demands. Fijians speculate on the identity of its mastermind, often dismissing Mr. Speight as a front for powerful political interests. But it does seem likely that Mr. Speight intended to emerge from the coup as the mahogany king. While he kept the Chaudhry administration locked up, he ordered supporters to fan out and gather signatures of village chiefs on a "Deed of Sovereignty," according to people told to do that.

The deed would have abrogated government leases and vested control over Fiji's natural resources in a Speight-led entity. Had the army not turned decisively against Mr. Speight in late July — its officers eventually arrested him despite having earlier granted him amnesty — his plan might have come to fruition, the police said.

Mr. Speight is now in prison on the tiny island of Nukulau off Suva, surrounded by shark-infested waters and awaiting trial, charged with treason. Mr. Pettit, who has given up all hope of reaching a timber deal in Fiji, has filed half a dozen lawsuits in local courts against the government to recover some of the money he lost. He is also waiting for the Fiji police to decide whether to take action on his payment to Mr. Speight.

The coup left just one physical monument in Suva. On the third night of the hostage-taking, Speight supporters raced down Gladstone Road in four-wheel-drive vehicles and threw gasoline bombs into Fiji Hardwood's headquarters.

Whether intended to cover a theft of documents or simply as a symbolic act of terror, the fire left the twisted tin roof of the colonial-era building resting precariously on a few charred timbers.

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