Chapman Badgers, Calls Out Building Material Co.

Jul 27 2007 | 11:12am ET

Indelicacy is a specialty of the some activist hedge fund managers. Even so, the forthrightness of Chapman Capital’s Robert Chapman, in a letter to the general counsel of a portfolio company, is truly breathtaking.

“You are poorly trained, and apparently incapable of making sound legal and ethical decisions as it relates to the advisor to the largest owner of the company paying your excessive salary and other compensation,” Chapman wrote to Paul Street of the Building Materials Holding Corp. “My strong advice to you is the following: Remove your head from the dark orifice in which it seems naturally to find itself, and thereafter find a means of distinguishing material, non-public information from a widely available e-mail address being used to communicate a public document with Mr. Wilson.”

Chapman ended his missive, apparently triggered by Street’s refusal to provide Mr. Wilson’s e-mail address, with a cheerful, “Happy Memorial Day.”

That gem comes from a veritable treasure trove of activist glory included in a long filing with the Securities and Exchange Commission Wednesday, detailing Chapman’s communication with BMHC, a San Francisco-based building products company in which Chapman’s El Segundo, Calif.-based firm has a 9.6% stake.

Chapman and BMHC got off on the wrong foot, with Chapman complaining that BMHC CEO Robert Mellor had failed to return his calls. “Needless to say, such disregard and disrespect is not what one would expect from a Fortune 1000 CEO.” But things got progressively better over the dozen communications described in the filing, with Chapman lauding Mellor for taking the “respectful response” route to dealing with him suggesting that Mellor was “exhibiting proper regard for his fiduciary duties of loyalty and due care.”

In any event, by May 25, Chapman got down to brass tacks: He was annoyed by what he deemed excessive compensation for and free-spending by company executives, who he was otherwise quite happy with: “Our behavior is the direct response to your responsible, accountable, fiduciary-duty cognizant reception to Chapman Capital’s initial accosting of, and ensuing dialog.”

Still, the conclusion was familiar: “corporate and divisional overhead can be restrained by a realistic, practical management team” and the ever-popular strong recommendation “that the Company engage financial advisors to explore the complete or divisional sale of the Company.” Some just do it with more style.

EXCERPTS OF CHAPMAN'S LETTERS TO BMHC


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