The Forest Mafia: How Scammers Steal Millions Through Carbon Markets

When the product is invisible, the cons are endless.
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A forest village of the indigenous Matses tribe in the Amazon. (Rebecca Spooner/Survival International)

When the balding Australian first stepped off the riverboat and into the isolated pocket of northeastern Peru's Amazon jungle in 2010, he had what seemed like a noble, if quixotic, business plan.

An ambitious real estate developer, David Nilsson hoped to ink joint venture agreements with the regional government of Loreto province and the leaders of the indigenous Matses community to preserve vast thickets of the tribe's remote rainforest. Under a global carbon-trading program, he wished to sell shares of the forest's carbon credits to businesses that hope to mitigate, or offset, their air pollution.

The product is invisible, poorly understood, and regulation is extremely limited.

Located a six-day ride from the frontier city of Iquitos, the jungle’s vegetation, soils, and looming trees store an immense amount of carbon dioxide—roughly one ton, the equivalent of one UN-backed carbon credit, per tree.

In an ideal scenario, this is how it's supposed to work: A community in a developing country works with an NGO or developer to design a plan to protect a large swathe of forest and thus prevent the release of the harmful chemical compound into the atmosphere, in accordance with the United Nations’ program called REDD (Reducing Emissions from Deforestation and forest Degradation). Then, it can get the emissions reductions certified by a third-party auditor and sell the resulting carbon credits to corporations in developed countries interested in reducing their own carbon footprints. (Deforestation accounts for roughly 17 percent of all global greenhouse gas emissions.)

Nilsson's Hong Kong-based company, Sustainable Carbon Resources Limited, planned to help the indigenous community set up the Peruvian carbon credit project in exchange for sharing the profits once they were sold. If Nilsson’s plan worked, in theory the forest would be spared from loggers, his company would net some profit, and the indigenous community would receive millions of dollars in funding for education and medical care from investors and corporations interested in expanding sustainability and social responsibility efforts.  

Nilsson recruited Dan Pantone, an Iquitos-based American ecologist with close contacts in the Matses community, as a guide to show him around the jungle, and, more importantly, introduce him to the right decision-makers.

"[Nilsson] told me, 'You're going to be a millionaire in a year,’" Pantone said of his earliest phone conversation. "He said he was going to help the indigenous people."

Early on, Nilsson didn't seem particularly interested in hammering out the details of a potential forest project. "He didn't talk about REDD; he just wanted the contact," Pantone said of Nilsson’s early conversations with Angel Dunu Maya, a Matses chief.  "Once he had the contact, he had everything he wanted from me.” In meetings with Peruvian lawyers, Nilsson was also advised about the difficulty of proving the risk of emissions, as REDD requires, in such an isolated area that was already designated as a reserve by the federal government. He also faced other, more obvious challenges. "The government asked him to show his sources of income, and he was unable to do that," Pantone added. "So that was a dead-end for him."

Nilsson flew back to Australia for Christmas, but he was not deterred. In February 2011, he reappeared in the jungle wearing what would become his signature, Crockodile Dundee-style Akubra cowboy hat.

Unable to broker a deal with regional government officials, he met with Matses leadership in Iquitos in March and presented a PowerPoint that detailed the incredible profits he claimed the tribe would receive. He was granted permission for a meeting in Matses territory, where the community would decide whether or not to sign the contract he had presented. According to Indian Country Today, a news service that caters to a Native American readership, the leaders were told that the agreement had to be written in English because “the World Bank and the UN only recognize the English language.” The contract, according to the indigenous rights organization Interethnic Association for the Development of the Peruvian Rainforest (AIDESEP), which advises the Matses and other tribes, gave "considerable control and powers to [Sustainable Carbon Resources Limited] for an indefinite period. Effectively this would reduce the Matses to the role of forest 'gatekeepers' rather than playing an active part in the administration or co-management of the Project."

By this point, Pantone’s relationship with Nilsson had soured, and his suspicions had boiled over into a full-fledged investigation into his past. In late March, Pantone was able to reach two of Nilsson's former associates, who claimed that they and indigenous communities in the Philippines had been victims of his deceit. Cecille Villanueva, who worked at an Australia-based energy consultancy company called Ienergy, sent the following to Pantone in an email:

We have known him to be deceitful, but also careful in covering himself from possible legal repercussions. But his character certainly shows a trail of … false claims to further his financial objectives, which
in the past involved illegally selling land and running with the monies of
vulnerable people. We hope this does not happen to the Matses.

She was referencing spurious land deals Nilsson had allegedly made with residents of the small South Pacific island nation Nauru. In the 1990s, according to transcripts of meetings in the Queensland Parliament, Nilsson had sold six rural lots in a coastal area development for $70,000 each. However, the lots did not exist and the investors in Nauru never received anything.

In addition, Nilsson's supposed carbon-credit firm began looking more and more like a shell company. It didn't have a functioning website or a physical office, according to a report from The Sydney Morning Herald.

After Pantone and the Matses shared theses details with AIDESEP and the Peruvian human rights monitor Defensoria del Pueblo, as well as the local newspaper, critics quickly labeled Nilsson a "carbon cowboy," and his plans began to unravel.

According to reporting by GlobalPost's Simeon Tegel, Defensoria del Pueblo instructed the Matses against signing a contract they couldn't read. After learning this, Nilsson stormed into the group’s office. 

“He shouted. He insulted us, and we told him to leave,” Lizbeth Castro, the director of the office, told GlobalPost. “He said he was going to sue us and this would not stand. We told him, no problem, sue us. But we will keep on doing our work.”

In April, the Matses general assembly rejected the project.

But Nilsson continued to search for ways to get it off the ground, setting up meetings with another impoverished indigenous group, the Yaguas. He also dropped the Sustainable Carbon Resources Limited moniker and began operating under a new entity called Amazon Holdings. 

By October 2011, he had convinced Javier Fasenando, the president of a Yagua federation, to sign a deal that would allegedly provide profits to the community "in return for rights to the 'wood' on their land." 

According to GlobalPost

Fasenando said that he understood the terms of the agreement. “Those who criticize it come from other communities,” he said. “They are envious.”

But at the end of our interview in Spanish, Fasenando struggled to confirm even the spelling of his own name. Other indigenous leaders confirmed to GlobalPost that he is unable to read or write.

Fasenando also was unable to tell me where FEPYRA’s copy of the agreement was.

Nilsson declined to provide a copy of the contract to GlobalPost, saying that he needed written permission from the Yagua communities involved in the deal.

Then, in an undercover operation led by investigative journalists with 60 Minutes Australia that aired in July 2012, Nilsson explained the real extent of his plan for the carbon deal to a producer posing as a potential investor as they sat over a huge map of the territory. 

David Nilsson: It’s going to be billions.

Producer: Beg your pardon?

David Nilsson: Billions. I just, I’m scared to quote it, because it’s fucking huge, put it that way.

...

David Nilsson: My contracts are 200-year contracts, etched in stone, so when the carbon’s gone, people can come through and harvest the rainforest there. We’d have a forest management plan they can reforest, they can plant palm oil, they can cut all the timber. No one can stop them. No one can stop them.

Producer: But by doing this carbon plan, you’re stopping that happening?

David Nilsson: Yeah, but the carbon plan only goes for 25 years. The contracts still run and there’s enough timber there to supply the world down there. China will love it.

The project would profit not only from carbon credits, but also from felling the very forest it was allegedly protecting. Once the lead investigator, Liam Bartlett, revealed himself, Nilsson simply said that it wasn't a scam, and declared the interview over. 

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Ryan Jacobs is a former producer for TheAtlantic.com.

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