A small Wyoming hedge fund is taking on a big issue: the growing number of Chinese firms trading on U.S. exchanges and their allegedly questionable corporate governance.
In particular, Absaroka Capital Management has taken aim at a member of the board of directors of China Shen Zhou Mining & Resources, Gene Michael Bennett. The Cheyenne-based hedge fund alleges that Bennett, who has been accused of no other wrongdoing, lied about his background.
Bennett, head of the American General Business Association non-governmental organization, is on the board of at least four Chinese companies, and is a former member of at least two others. He earned some $300,000 for his troubles in 2008 and 2009, including $190,000 from four firms that find themselves facing scrutiny, Bloomberg News reports.
His China Shen Zhou biography says Bennett earned a law degree from the University of Michigan and worked at prominent accounting firm Grant Thornton. Neither, it turns out, is true. Bennett worked at Gerbel & Butzbaugh, which he said once negotiated—unsuccessfully—to merge with a firm that eventually became Grant Thornton. But Gerbel & Butzbaugh, now Gerbel & Co., said it never had any talks with Grant Thornton or its predecessors.
Nor is he a Michigan-trained lawyer. Instead, he’s got a bachelor’s degree and M.B.A. from Michigan State University.
“Bennett was part of the reason why we initially got concerned about China Shen Zhou,” Kevin Barnes, an analyst at the hedge fund, said. “We don’t understand how he can have this track record and still be on the board. We would expect a candidate with a higher duty of care for public shareholders to be the audit committee chairman.”
Absaroka is not alone in its skepticism about China Shen Zhou: The firm’s stock is the most shorted on the NYSE Amex exchange, with short interest accounting for 62% of shares available for trading. Absaroka is among the shorters.
Bennett blamed his “error in not correcting a misconception” about the Michigan claim. But he told Bloomberg, “When I left Gerbel & Butzbaugh, they were negotiating with Alex Grant to merge. That was over 30 years ago. To clarify in the future, all references will be to Gerbel & Butzbaugh CPAs as employer.”
“I have done nothing wrong, and I do not believe the company has, either,” Bennett told Bloomberg. He said he will remain on the firm’s board.