The Globe & Mail continued its coverage of the Sino-Forest story by sharing a few beers and a Cobb salad with Carson Block.
In a “dude”-laced interview with Andy Hoffman published Saturday, Block reiterates his belief that Sino-Forest is a “fraud”.
“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.”
Amid a lunch portrait to make John Gapper proud there are a few new comments from Block, such as this one hinting that he’s prepared for the legal risk stemming from his investigation:
“This is the big leagues,” says the former high-school baseball and football player. “These guys have a lot of money.” In addition, he notes, “[Canada] is a totally different market where nobody knows us and we don’t have credibility. We know there will be immense pressure for somebody to be prosecuted so we have to be very careful to make sure we do not overstep. We know with some bad breaks we might be looking at the wrong end of that gun, so to speak. We went into Sino-Forest prepared to go to war.”
For us, Block’s most interesting admission was that he made only a few thousand dollars through his put options on Orient Paper. Remember that his accusations were subsequently disproved. It’s interesting to consider that venture, now, as a trial run for Sino-Forest.
“I think the total profits on the trade were like $5,000 to $7,000. I didn’t make shit on that,” he says.
Unfortunately though, the Globe & Mail didn’t (or couldn’t?) press Block on some of the alleged inconsistencies in his report — such as those pointed out by Metal Augmentors in this excellent post.
The burden of proof remains with Sino-Forest but given the Orient Paper saga, Block’s analysis deserves to be probed, too. The Muddy Waters report is a confusing document and the price action thus far on Sino-Forest is in part driven by the fear engendered by Block’s reputation and past performance.
It would be naive to expect that Sino-Forest’s “independent” report on the scandal will clear everything up. There will still be disputed points of analysis. Sino-Forest, in keeping with its erratic if forceful responses to date, will likely put on a full offensive, complete with share buybacks if possible.
Thus the more both sides receive scrutiny now, the more able investors will be to make a clear decision when the report is published. For if there’s one thing we’ve learned throughout this merry dance with scandal, it’s that nothing is ever clear when it comes to Chinese trees.
Related links:
Chinese fraud accusations set to continue, says Fitch – FT Tilt
Carson Block: The man who felled a forestry giant – The Globe & Mail
Sino-Forest coverage – FT Alphaville