Sino-Forest Insiders Sold C$81 Million Shares in Four Years

Sino-Forest Corp. insiders, including former Chief Executive Officer Allen Chan, sold C$81 million ($83 million) of shares since the end of 2006, regulatory filings show.

Chan, who stepped down Aug. 28 after the Ontario Securities Commission suspended trading in Sino-Forest, sold C$3 million of stock, the filings show. Kai Kit Poon, with whom Chan founded the tree-plantation company in 1992, sold more than C$30.1 million. Chief Financial Officer David Horsley sold C$11.2 million of shares. Simon Murray, a director and also chairman of Glencore International Plc, sold $10.8 million.

The OSC, Canada’s main securities regulator, said Aug. 26 that officers and directors of Hong Kong- and Mississauga, Ontario-based Sino-Forest may have engaged in acts “related to its securities” that they “knew or should have known” perpetuated a fraud. Two days earlier billionaire investor Richard Chandler, the company’s biggest shareholder, increased his stake, filings also show.

Sino-Forest has tumbled 67 percent in Toronto since short seller Carson Block’s Muddy Waters LLC research firm said in a June 2 report that the company was overstating its assets. Shareholders have lost C$3.3 billion. Hedge-fund firm Paulson & Co., formerly Sino-Forest’s biggest shareholder, told clients that it sold its entire stake in June after losing C$462 million on the investment.

Stan Neve, an external spokesman for Sino-Forest in New York, declined to comment.

Independent Committee

The company has denied Muddy Waters’ allegations and established an independent committee of directors to examine and respond to the accusations. The company said Aug. 16 the probe would take until the end of the year to complete. The OSC on Aug. 26 demanded Chan and four other executives resign, before rescinding the order later that day because the regulator needed to hold a hearing first.

Four of the five Sino-Forest executives named -- Chan, Albert Ip, Alfred Hung and George Ho -- sold a combined C$11.6 million of common shares since the end of 2006, filings show.

In announcing Chan’s resignation on Aug. 28, Sino-Forest also said three other employees had taken leave after “certain information” was uncovered by the committee.

Chandler, a New Zealander who Forbes said last year had a net worth of $3.1 billion, bought 1.2 million shares of Sino-Forest Corp. on Aug. 24 at C$4.65 apiece, filings show. The purchases increased his holdings to 48 million shares, or 20 percent of the company.

Shares Halted

Richard Barton, an external spokesman for Chandler, declined to comment.

Sino-Forest closed at C$4.81 on the Toronto Stock Exchange on Aug. 25, the last day before trading was halted. The shares plunged 72 percent to $1.38 in U.S. over-the-counter dealing on Aug. 26, the last day of trading before they too were halted, giving the company a market value of $338.4 million.

The value of Sino-Forest’s bonds has fallen to about 17 cents on the dollar in a base-case scenario and 1-cent in a downside view, Annisa Lee, a Nomura Holdings Inc. credit analyst, said in a report, according to the Globe and Mail newspaper.

Standard & Poor’s said yesterday that Sino-Forest no longer qualifies to be a constituent of the benchmark S&P/TSX Composite Index. The company will be removed from the index at zero price after the close of trading on Sept. 16, S&P said in a statement.

(Updates with Nomura report in 12th paragraph.)
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