WA's second largest native forest saw mill Nannup Timber Processing breached its contract with the Forest Product Commission by exporting unprocessed marri logs overseas.
WA Forest Alliance uncovered the news which resulted in the commission launching an independent investigation.
FPC business services director Andrew Lyon said the investigation found significant irregularities in the Nannup Timber Processing's records of marri log receival and exports.
"The investigator also recommended that the FPC consider further investigations be undertaken into the movement of jarrah supplied by the FPC to NTP," he said.
The company had its marri log contract with the FPC terminated and is now being investigated a second time to determine the movement of jarrah supplied by the FPC.
"Jarrah is currently not being delivered to NTP and jarrah deliveries will not resume prior to the conclusion of the independent investigation into allegations of Jarrah exports," Mr Lyon said.
Nannup Timber Processing general manager Vince Corlett did not respond to a request for comment.
WAFA convener Jess Beckerling said this was the latest scandal surrounding native forest logging involving massive waste of high value logs and secret exports.
Ms Beckerling said conclusive evidence of the deliberate destruction of endangered wildlife habitat had been repeatedly dismissed.
"It exposes the fact that there is a fundamental failure of regulation of the native forest logging industry," she said.
"It's not just about the logs that have been exported this time. It is also about how and why the FPC has failed to enforce the conditions of the contract.
"Native forest logging has no social licence and it really adds insult to injury when the logs taken from our forests aren't even being sawn locally into usable timber products.
"Native forest logging is pushing forest black cockatoos, western ringtail possums and other forest wildlife to the brink of extinction and releasing huge volumes of carbon into the atmosphere.
"The only justification that the industry gives for continued logging is that it creates local jobs and timber for West Australians.
"It is outrageous that this mill has been sending its workers home and secretly loading logs into sea containers for export.
"It's time for our forests to be protected and for the McGowan Government to put ordinary Western Australians who love the forests ahead of profit-seeking companies."
Forestry Minister Dave Kelly said the government took these issues very seriously.
"We expect everyone in the timber industry to play by the rules to ensure we are protecting the WA forestry industry and local jobs," he said.
South-West MLC Diane Evers said she would continue to seek the end of logging and clearing of our native forests and as Greens spokesperson for forests, supported WAFA's calls for an inquiry.
"The example seen in Nannup - and also in Greenbushes, where thousands of tonnes of high-value jarrah were sold by Auswest to Simcoa for low-value use - show systemic failings," she said.
"These are WA's two largest mills and their highest-value assets have become their state contracts, partly because they are not able to sell logs for the price it costs to process them.
"It is a real shame that we are not, instead, placing more value on the health of forests as they stand.
"We must change how we look at our forests and start looking at forest regeneration, as more forests will help to stop the demise of our planet through climate change.
"I am far from alone in being concerned about our native timber industry and for our native forests.
"As native forests are cut and then sold, the industry loses money - this includes all native forests, not just marri.
"Right now the industry is operating at a $1.6 million loss before tax and investigations should not be limited to a single species."
Environment minister Stephen Dawson said the Forest Management Plan 2014-2023 was a robust policy framework that struck a balance between conservation, forest timber harvesting, honey production, tourism and recreation.
"Nearly 62 per cent of forest ecosystems on public land in the area are in existing or proposed conservation reserves or otherwise protected areas," he said.
"All old-growth forest, around 334,000 hectares, continues to be protected under the FMP, and there will be no harvesting of old-growth forest.
"Old-growth forest is defined in the Australian Government's National Forest Policy Statement, signed in 1992 and this same definition has been carried forward into the FMP.
"The assessment, identification and demarcation of areas of old-growth forest has been conducted since 2000.
"The latest procedures for assessment, identification and demarcation of old-growth forest were finalised in 2017 in consultation with the Conservation and Parks Commission."