When New Zealand-born billionaire Richard Chandler began buying shares of Sino-Forest Corp. shares last month, he published a paper calling for corporate leaders to act with “integrity, transparency and accountability.”
Despite internal probes, regulatory investigations and a swooning stock price at Sino-Forest, Mr. Chandler continued to accumulate a large stake in the forestry firm until the day before the Ontario Securities Commission issued allegations of fraud against the company on Friday and halted trading in the stock.
By that point, Mr. Chandler’s Singapore-based Mandolin Fund had acquired about 48 million shares of Sino-Forest or 19.5 per cent of the company. Since mid-July, Mandolin paid between $4.05 and more than $7.50 a share for a total of about $195-million for its stake. Much of that value disappeared on paper Friday after Sino-Forest’s stock tumbled 72 per cent to $1.38 a share on New York’s over-the-counter market. The shares peaked in late March at just over $25.
The carnage prompted market watchers to wonder why such a successful investor would bet so aggressively on such a troubled company. A spokesman for Mr. Chandler told Bloomberg News in July that Sino-Forest “represents an excellent deep-value investment opportunity.” But another explanation may lie in the billionaire’s eccentric interest in fighting corporate wrongdoing.
Mr. Chandler is in his early 50s and rarely grants media interviews. He is not shy, however, about trumpeting on his website what he calls the “noble” business of raising capital and fighting fraud.
In a report posted on his website last month, Mr. Chandler outlined his company’s strategy of targeting “unethical managements” so that “impediments” to the capital-raising process are removed.
“The Richard Chandler Corporation believes it has a responsibility to speak the truth, stand up for principles and confront injustice where we encounter it,” the report said. “We will act in cases where management’s activities are egregious enough that they hurt our economic interests in the company and regulators are either unable or unwilling to intervene.”
Spokespeople for Mr. Chandler could not be reached Tuesday.
Mr. Chandler was recently dubbed by the New Zealand press “the second-richest Kiwi” (his brother Christopher took fifth place). He and his brother amassed most of their estimated $4-billion fortune after they founded Sovereign Global Investment in 1996 to bet on Hong Kong’s booming real estate market, at a time when many investors feared values would plunge after China’s takeover of the British-ruled region the following year.
Sovereign also made lucrative contrarian bets on emerging markets in Brazil, India and China, and the brothers attracted international attention when they won reforms at South Korea’s largest oil refiner, SK Group, in 2005. After a two-year campaign against the South Korean company, Sovereign’s investment increased fivefold.
The brothers amicably ended their partnership in 2006 to run separate funds.
Richard Chandler focused on corporate governance at an early age, writing his thesis at Auckland University about the corporate practices of directors at New Zealand’s publicly listed companies.
His life story is perhaps best told in a 2006 article in Institutional Investor, Mr. Chandler’s first media interview. According to the report, the Chandler brothers increased their family fortune from $10-million to billions by delving into troubled markets and pushing for economic and governance reform.
Although there have been “several bruising governance battles,” he said the fights delivered financial and moral wins.
“We do have altruistic motives … ,” Mr. Chandler said. “But we don’t want to be defined by our corporate governance battles. We are value investors with a sense of responsibility, not activists.”
The Chandler brothers’ parents made their money in New Zealand, where the brothers were raised, by founding a high-end department store. A third brother, George, is a retired accountant who reportedly moved to Canada while his high-flying investment siblings made Monaco their main home.
A few years ago, Richard Chandler lent his mother millions of dollars to stage an exhibition of her paintings in New York.
He is not the only investor who decided to gamble on Sino-Forest after short-seller Carson Block alleged the company was a “multibillion-dollar Ponzi scheme” in June. Boston-based institutional fund manager Wellington Management Co. LLP has also amassed a significant stake, making it Sino-Forest’s third-largest shareholder.Report Typo/Error
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