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Investigation shows 'shadow companies' linked to Indonesia palm oil giant First Resources

Mongabay - November 23, 2023

One of the world's largest palm oil companies appears to have overseen a network of companies responsible for deforestation of tens of thousands of hectares, according to a new investigation published by The Gecko Project, a London-based investigative journalism organization.

Indonesian conglomerate First Resources, like many agribusinesses, has announced voluntary commitments to guarantee no new deforestation for plantations. These "zero-deforestation" commitments have since expanded to account for the majority of the plantation industry, which experts credit in part for the reduction in forest loss in Indonesia for palm oil.

However, there is growing evidence that some major oil palm conglomerates have established networks of smaller "shadow companies" that are not themselves subject to no-deforestation commitments in order to circumvent their own sustainability policies.

In 2018, Mongabay reported on a similar network under the Asia Pulp & Paper conglomerate, owned by the billionaire Widjaja family.

First Resources was founded by Indonesia's Fangiono family. Martias Fangiono, the founder of the group, was sentenced to prison for corruption in December 2007. In the same month, First Resources was listed on the Singapore stock exchange, with Martias' oldest son, Ciliandra Fangiono, as CEO.

First Resources has consistently denied operating shadow companies. However, The Gecko Project gathered insider testimony and corporate documents linking the company and the Fangiono family to plantations clearing rainforest in Indonesian Borneo.

Gecko Project reporters interviewed 14 people who either worked for First Resources or the firms alleged to be "shadow companies."

"We thought it was normal," one shadow company employee told The Gecko Project. "Because I knew from the beginning: it's all First Resources."

Six interviewees were graduates of First Resources' corporate training complex in Riau province who were then sent to work for separate companies.

"It's just one big group," one of the former First Resources graduates told The Gecko Project. "We were taught that way. That it's all part of First Resources."

Employees interviewed said they saw brothers Ciliandra and Cik Sigih Fangiono visiting two plantations under PT New Borneo Agri, a company alleged to be associated with First Resources.

Documents obtained by The Gecko Project showed a company named Honor Ace Enterprises Ltd., registered in the British Virgin Islands, assumed control of New Borneo Agri in 2017.

The British Virgin Islands, a corporate secrecy jurisdiction, does not require disclosure of the owners of companies registered there. However, evidence gathered by The Gecko Project supports the case that the beneficial owners may be the Fangiono family.

Legal documents show that in 2019 a woman named Aprinia Anggela was granted authority to act as the representative of Honor Ace's shareholders. According to Aprinia's LinkedIn profile, she was employed as a legal officer for First Resources at the time the documents were signed.

The sole director associated with New Borneo Agri was Desmon Pangestu, an employee of First Resources, and, according to a notice in Indonesia's newspaper of record Kompas, Martias Fangiono's nephew.

First Resources adopted a zero-deforestation policy in 2015. That same year, companies under newly formed New Borneo Agri cleared 4,000 hectares (9,900 acres) of rainforest.

The Gecko Project calculates that companies controlled by the group have cleared more than 95,000 hectares (235,000 acres) of forest since First Resources announced its zero-deforestation pledge in 2015.

"We need to hold these huge palm oil groups to account," Forest Peoples Programme researcher Angus MacInnes told The Gecko Project.

"They can't just have one arm of their operations that sign up to all these human rights standards, sustainability standards, zero-deforestation and all of that," MacInnes said, "but then have this other arm of their business, which is basically completely unaccountable and involved in really egregious human rights violations."

Procter & Gamble and PepsiCo were listed among consumer firms sourcing palm oil from First Resources in 2018, when civil society group Greenpeace published allegations of shadow companies associated with First Resources.

Supply chain data show First Resources continues to supply both companies today. Neither PepsiCo nor Procter & Gamble commented on The Gecko Project findings.

First Resources, Ciliandra Fangiono and Cik Sigih Fangiono did not respond to The Gecko Project following detailed questions on the findings.

Source: https://news.mongabay.com/2023/11/investigation-shows-shadow-companies-linked-to-indonesia-palm-oil-giant-first-resources