From the Forest Stewards Guild list:



By Bradley Meacham and Hal Bernton
Seattle Times staff reporters

For nearly a quarter century, Weyerhaeuser has steadily built a dominant
position in the business of turning alder — a hardwood once scorned as a
weed tree — into lumber used for expensive furniture, cabinets and
Fender guitars.

The company says a blend of efficiency and innovative technology has
allowed it to control more than 70 percent of Pacific Northwest alder
production.

But two former rivals — in a lawsuit scheduled to go to trial this week
in U.S. District Court in Portland — allege that Weyerhaeuser's path to
success included illegal market manipulation as part of a long-term
campaign to drive competitors out of business. They contend Weyerhaeuser
achieved monopoly control over the $400 million alder market, and then
violated antitrust rules intended to regulate such monopolies.

Legal experts say the case may have broad ramifications for Weyerhaeuser
— which denies the allegations — and could force it to pay damages or
sell assets.

"The stakes are enormous," said Ernest Gellhorn, a law professor at
George Mason University who has followed antitrust challenges to
Microsoft and other companies. "We want large companies to compete
vigorously so consumers benefit, but they can't cross the line. And that
line is fuzzy."

Weyerhaeuser officials have characterized the lawsuit as a "thinly
veiled attempt at distortion," and in January attempted to get the
lawsuit dismissed. They say that alder is a part of a broader market for
U.S. hardwood trees, and since it doesn't control that market, there are
no antitrust violations.

"We think we are on solid ground and are going to vigorously contest the
allegations," said spokesman Frank Mendizabal, noting that the company
rejected a settlement offer from the plaintiffs.

In an early legal setback in January, Judge Owen Panner, after reviewing
some of the depositions and the plaintiff's arguments, denied a motion
by Weyerhaeuser's lawyers to toss out the case. "I am satisfied that
plaintiffs have stated claims upon which they may be entitled to
relief," he wrote.

The trial, which is expected to last for several weeks, will take place
in Portland, which was the headquarters city of Willamette Industries
until Weyerhaeuser acquired it through a hostile $8 billion takeover
last year.

Weyerhaeuser has been accused of antitrust violations before. The
company was indicted by the Justice Department for price-fixing in the
1940s and eventually agreed to pay a fine, according to a company
history. It settled an antitrust challenge in the 1970s for $35 million
before the case reached the U.S. Supreme Court.

The latter lawsuit helped prompt former Chief Executive George
Weyerhaeuser to formulate a set of ethics policies and to create a
committee to oversee corporate practices. The group, which includes
executives and hourly employees, celebrated its 25th anniversary in 2002.

The first pages of the company's annual report outline the company's
core values of respect for customers and the community. Every employee
goes through ethics training and has a copy of a 36-page booklet of
ethics guidelines.

The current lawsuit was filed by Ross Simmons, a longtime Weyerhaeuser
rival in the alder industry who closed his Longview mill in 2001. The
Siletz Indians, an Oregon tribe that was involved in a failed joint
venture with Simmons, also joined the lawsuit as a plaintiff. They seek
millions of dollars in damages and are asking that Weyerhaeuser be
forced to pare back its role in the alder industry, which employs more
than 6,000 people in Washington and Oregon.

One of the plaintiff lawyers, Michael Haglund, formerly had a stake in a
company that competed with Weyerhaeuser's alder business.

For Weyerhaeuser, with global sales of more than $18.5 billion, alder is
a small but important niche.

A skinny, fast-growing tree, alder used to be scorned by loggers
pursuing bigger softwood species such as fir, cedar and pine. "Most of
the time, they didn't even bother to bring it out of the woods," said
Paul Ehinger, an industry consultant based in Eugene, Ore.

Beginning in the 1960s, a new generation of mills began to experiment
with new techniques to turn alder into lumber. Today alder is considered
a premium wood and can sell for more than six times the price of
softwood lumber. "It's looked at as a premium cash crop now," said Dave
Sweitzer, of the Washington Hardwoods Association. "It's a paradigm shift."

Weyerhaeuser jumped into the industry in 1980 with the purchase of
Northwest Hardwoods in Southwest Washington. It retained Arnold Curtis,
the mill's president, to head a new hardwoods division, where he
remained until retiring in 1997. During that period, the number of alder
mills operating in the Northwest shrunk by two-thirds, to less than 15.

The lawsuit alleges Curtis was involved in a deliberate long-term effort
to try to grab control of the regional alder supply and drive rivals out
of business. Weyerhaeuser denies the allegations, saying that instead
the demise of the mills reflects broader consolidation that continues to
sweep the forest-products industry.

In depositions, several former Weyerhaeuser employees say Curtis wanted
to bid for alder on the open market, hoping to force the price so high
that rival mills couldn't afford to operate. As early as 1989, the
company sometimes bought far more alder than it could use, according to
a deposition by Cliff Chulos, who spent 12 years as a sales official for
the hardwood division.

Some of the alder logs sat around the mill so long that they were
stained by rain, cutting their value. When company employees questioned
the bidding strategy, Chulos said in his deposition, managers answered
that it would eventually pay off. "The statement was made, well, if we
pay more today, and somehow some of our competitors go away, we can
recoup the cost because the price of logs will go down if there's less
competition," Chulos said.

Eugene Novak, a former Weyerhaeuser controller, said in his deposition
that the aggressive bidding on logs heated up during a three-year period
ending in 2000. He says he questioned that practice, noting that it was
dramatically increasing the cost of raw materials. But he was told by
his boss, controller Vicki McInnally, that the strategy was part of a
long-term effort to hold up log prices, according to a summary of his
deposition.

During a tense 1997 meeting at Weyerhaeuser's Federal Way headquarters,
the company threatened to cut off supply to Grant Wheeler, an Oregon
customer, if he went ahead with plans to build his own alder mill to
supplement what he bought from Weyerhaeuser, according to Wheeler's
deposition.

Executives gave him one week to decide, he alleges. They later backed
away from the threat and continued to sell alder to Wheeler's firm. But
Wheeler said he took the threat seriously, and opted to double the size
of his mill so that he wouldn't be so dependent on Weyerhaeuser.

Weyerhaeuser, during the trial, is expected to call to the witness stand
its own long list of former and present corporate officials. These
witnesses include numerous past and present executives of the hardwood
division who will declare that there was no effort to drive up alder
prices, and no threats made to Wheeler or other customers, according to
a summary of witness statements.

Ultimately, for the jury, it could end up to be a case of dueling
witnesses — and whom to believe.

Bradley Meacham: 206-515-5066 or at ; Hal
Bernton: 206-464-2581 or

Copyright © 2003 The Seattle Times Company