Glencore chairman caught up in Sino-Forest saga
Simon Murray, adventurer and outspoken chairman of commodity trader Glencore
The company denies allegations made last week by a short seller and research group, Muddy Waters. Sino-Forest has said it may take defamation action and has hired a consultant and an independent committee to investigate the matter.
But shares in what was until recently one of the largest forestry companies on the Toronto exchange are down nearly 70 percent since Muddy Waters called the business model a 'ponzi scheme' that had exaggerated the value of its assets.
Whether or not the allegations prove to be true, the saga has put Murray back in the headlines, just weeks after his less-than-smooth appointment to the Glencore job and subsequent comments to a British paper about asylum seekers and women, which brought the commodities giant unwelcome attention.
Should there be any truth in Muddy Waters' allegations, which include a claim that Sino-Forest overstated its Yunnan timber investments by $900 million, the finger pointing would aim at not just founder and Chairman Allen Chan, but the company's board as well, which includes Murray.
We have to wait to see who is shown to be correct but if Muddy Waters is proved right then it does raise questions about the board's oversight, said Jamie Allen, Secretary General of the Asian Corporate Governance Association.
Murray joined Sino-Forest in 1999, becoming an independent director. He is also a non-executive director and major shareholder in its subsidiary Greenheart Group <0094.HK>, through his private equity fund GEMS (General Enterprise Management Services International).
I first got to know him in 1995 when he was chairman of the Asia-Pacific
We were very small and we had a short-term loan facility with Deutsche Bank in Hong Kong. Simon was there at the signing ceremony when we signed for a very small loan. He was a very nice guy to support such a small company.
A forestry official in Yunnan province indicated that Sino-Forest was a substantial player, though she did not clarify the size of the investment there.
It's not just one plot of land, they have many, said an employee surnamed Chen at the Gengma autonomous region forestry administration office in Yunnan, near the border with Myanmar.
They (the plantations) have been developed step by step, they acquired (the land) bit by bit, she told Reuters by phone.
Sino Forest's 2009 annual report cites Murray as one of the parties involved in a significant business transaction to acquire 60.3 percent of equity interests in Greenheart in 2007, with an option to acquire the remaining equity interests within 18 months after that.
There is no indication that Murray, as a director, was privy to any potentially sensitive business decisions. Chan told the Globe & Mail that Murray's close support was vital to help Sino-Forest drum up credibility and investor interest.
We became friends and when he set up his own fund he called me and said he would interested in investing in our company as a support. I think that was 1999, Chan was quoted as saying.
Murray, a former Foreign Legionnaire and a close associate of Hong Kong tycoon Li Ka-shing, did not respond to attempts to reach him by email and telephone.
Glencore, which irked some investors by not confirming its appointment of Murray as chairman until eight hours after filing its intention to float, said it had confidence in its choice.
We are happy with Simon Murray as our chairman, a Glencore spokesman said. He declined to comment further on the saga, which comes just weeks after the giant commodities trading and mining group became a listed blue chip company in London and Hong Kong.
Murray's credentials have already been questioned by some investors, and he is likely to face direct questioning at Glencore's first quarter results next week, their first earnings release since the listing.
Chan, 58, a Hong Kong newspaper columnist and entrepreneur, started the company in the mid-1990s. The company is accused by Muddy Waters of widespread fraud including siphoning off funds and massively exaggerating assets including forestry investments in Yunnan by over $800 million.
Sino Forest dismissed the claims as inaccurate, spurious and defamatory while stressing its finances had been thoroughly scrutinized by auditor, Ernst & Young
Murray, a seasoned Asia hand, was paid HK$575,000 ($73,900) last year by Sino Forest to act as an independent director.
Sino-Forest counts some major North American funds as its investors, including one run by legendary hedge fund investor John Paulson.
($1 = 7.779 Hong Kong Dollars)
(Additional reporting by Rachel Armstrong in Singapore, Xavier Ng, Elzio Barreto and Justina Lee in Hong Kong, and Clara Ferreira-Marques in London; Editing by Michael Flaherty and Andrew Callus)
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