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The Lunch

Carson Block: The man who felled a forestry giant Add to ...



August, 1998: Moved to Shanghai, where he tried to start a Chinese equity-focused research firm. He soon abandoned the plan and moved back to California.



1999: Worked at the L.A. office of CIBC World Markets for seven months.



1999-2001: Joined father William Block’s firm WAB Capital, which links micro-cap companies with potential institutional investors in exchange for warrants or preferred stock.



2005: Returned to Shanghai to join the corporate practice of U.S. firm Jones Day.



2007: Left the law firm with plans to start a Singapore-based wealth management business for wealthy Chinese. Stayed in Shanghai to co-author Doing Business in China for Dummies.



2008: Launched troubled Shanghai self-storage business, Love Box.



Muddy Waters’ first report:



June 28, 2010: Muddy Waters publishes a report on Orient Paper Inc., alleging the Chinese company is a fraud. Before publishing, Block and his business partner Sean Regan buy $4,000 worth of Orient Paper “put” options.



“I think the total profits on the trade were like $5,000 to $7,000. I didn’t make shit on that,” he says.

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Verbatim



On his newfound notoriety.





“It is a very strange moment in my life. When I look in my inbox there are probably about 10 interview requests. It would be nice to be able to spread that out over a lifetime and not just have this one period of intense interest and then fade back into obscurity.”





On analysts:



“This is the problem that a lot of these analysts have. I can tell from experience that you don’t know what you don’t know. I have been there. I, at least know what I don’t know. You versus me when it comes to China, I’m sorry... you can’t hold a candle.”





On wiping out billions in stock market value:



“I didn’t wipe it out. Management that commits fraud wipes it out...People lost some real money. I understand that and I feel sympathy for them but I protected them against losing more money and that is what I feel good about.”





On Canadian retail investor reaction vs. Americans:



“I don’t think you guys have sent me any death threats. I don’t know, maybe it’s because you don’t have enough guns in your country. I haven’t got the death threats I usually get.”





On the sensational language his reports use:



“I’m not in the business of being equivocal. Once I know that this is an overstatement of several hundred million dollars that is F-R-A-U-D.”





On his future opportunities:



“Manage other people’s money or keep it the way it is? Publish or don’t publish? These are questions I’m trying to answer right now. If there were a time to evolve this into something more than doing single stock research, I guess this would be the time.”



On disguising himself in a one-on-one meeting with Sino-Forest’s head of investor relations:



“I even combed my hair forward for a “Dumb and Dumber” kind of look. I tried to sound really dumb and speak even more slowly than usual. I went in with a rumpled appearance. I just tried to seem like an idiot.”



On why investors and firms need China:



“For both retail investors and the professional service firms, China was the panacea to cure the doldrums of the burst internet bubble. As soon as the tech bubble burst the professional service firms all rushed into China. Then we saw all these financial products coming out of China. It is not a coincidence. You keep interest rates low and liquidity on like the central banks have done and you’ve got too much money that is chasing too few solid investments.”





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