By MICHAEL JAMISON of the Missoulian

KALISPELL - Shareholders have asked Plum Creek Timber Co. to abandon a deal struck with the U.S. Forest Service, saying short-term gains won through backroom negotiations could result in long-term losses.

“I don’t know if this reaches the level of scandal, but it’s certainly very close,” said Shelley Alpern. “And scandal has a way of diverting a company’s attention and resources. Ultimately, that’s not good for shareholders.”

Alpern is vice president of Trillium Asset Management, a Boston-based investment firm - mid-sized, controlling about $1 billion in assets - with offices throughout the United States. One of those offices is in Boise, Idaho, where company representatives have been getting an earful about Plum Creek’s controversial talks with Undersecretary of Agriculture Mark Rey.

For nearly two years, the company and Rey met - unbeknownst to the public and stockholders - hammering out a deal regarding forest-road easements.

Dating back several decades, the easements allow Plum Creek access across Forest Service lands. Historically, the easements have been considered narrowly, for logging purposes only.

But in recent years the company - now organized as a real estate investment trust - has turned increasingly toward residential development and real estate land sales.

The company and Rey now contend the easements are broad, enabling a throughway for any purpose, including residential development.

County governments and local residents in western Montana have expressed concerns the easement deal could pave the way for a wholesale conversion of timberland into neighborhoods, and worry taxpayers will be stuck with the costs of providing urban services, including wildland firefighting, to distant subdivisions.

They also claim the easement change was negotiated illegally, without required public involvement. Sen. Jon Tester, D-Mont., has requested a Government Accountability Office investigation into that claim.

And although the easement amendment surely would increase the assessed value of Plum Creek’s lands - and thus the company’s stock - at least some shareholders are alarmed by the controversy surrounding the deal.

In an Aug. 1 letter, Trillium and the Seattle-based Newground investment firm asked Plum Creek officials to “repudiate the secret negotiations held to date with Mark Rey.”

The financial investment houses also asked the company to hold additional meetings with local officials on the matter, and to take steps ensuring transparency during future negotiations.

The steps are critical, stockholders wrote, “to protect shareholder value and rehabilitate our company’s reputation.”

That reputation, increasingly, is defined as “a former timber company, now a builder of McMansions, that is unconcerned with its impact on sensitive landscapes and local communities,” Alpern said.

Which is not, of course, how Plum Creek sees itself.

“We will be responding to the letter,” said company spokeswoman Kathy Budinick, “but we haven’t yet done so.”

As to the specific requests, Budinick would not say whether her company might back away from the current road easement deal; she did, however, say Plum Creek will not implement the plan in counties opposed to the change.

But that, argues Bruce Herbert, is not the point. The point is that the deal was crafted, perhaps illegally, outside the established federal rules governing public participation, and it will have access implications for other companies - companies that might not care what counties think.

“There’s a very serious precedent here,” said the president of Newground. “If this turns into a lawsuit and Plum Creek gets pulled in, which it will, then that cannot be good for business.”

Already, Alpern said, Plum Creek executives are busy cooperating with the GAO investigation, “which is a perfect example of the company’s time and resources being drawn into a situation that never should have happened in the first place.”

And Herbert worries that a protracted fight for short-term gains could hurt Plum Creek’s long-term strategies to develop and sell vast swaths of real estate in other markets, including Maine, Georgia and the Upper Peninsula of Michigan.

As an investor, Herbert’s certainly has nothing against making a bunch of money, “but it has to be done honestly and ethically and legally.”

“Plum Creek is much bigger than this one issue,” Herbert said, “and the company can’t afford the brand risk of too much negative publicity.”

Alpern agrees, adding that “walking straight into legal costs, if not liability, seems careless, and makes shareholders question the judgment of a company’s leadership. It undermines confidence when a scandal like this erupts that could have so easily been avoided.”

Herbert’s Newground, which focuses its investments on “socially responsible” companies, has taken on Plum Creek in the past. Most recently, he said, his shareholders used their clout to force proxy votes on issues such as company disclosure of political actions and contributions.

“I have to wonder if their continued reluctance to embrace corporate best practices in terms of political transparency is because of these private negotiations with Rey,” he said.

Budinick insisted the two are not connected in any way, however, and stressed that her company “regards these concerns very seriously. We have been working to be more transparent, meeting with counties and local officials. We’re out talking with people, and listening to them, and conversing and engaging.”

But it will not be enough, Alpern said, until the company completely abandons the deal struck with Rey.

Should Plum Creek officers choose to ignore the investors’ letter, she said, Trillium and Newground have sufficient stockholders to force a vote on the issue. They would like to avoid taking such a proxy measure, however, “because that could disrupt things even further. What we’re seeking here is resolution, not more confrontation.”

Because conflict, she said, is rarely good for business.

“We’re long-term investors,” Alpern said, “interested in the long-term health of our investment. What we have here are decades of precedent, and now that’s in jeopardy because of secret negotiations with Mark Rey - a Bush administration executive who is a former timber-industry lobbyist. That’s pretty plain. And Plum Creek is tainted by that.”

“Shareholders cannot view this situation as narrowly as the bottom line in the next fiscal quarter,” she said. “Not if they’re invested for the long haul.”

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