BC Securities Commission investigating strange Western Forest Products trades

UPDATE (April 14th 2008): Due to the possible financial consequences associated with revealing who or who isn’t being investigated, the BC Securities Commission does not confirm or deny who they are investigating at any given time. The article below was written following a conversation with two BCSC staff – a subsequent conversation clarified that, for the record, the BSCS have only conducted a ‘review’ of the situation.

After more than a year of speculation, the BC Securities Commission (BCSC) is now investigating the possibility that large purchases of Western Forest Products stock in January 2007 were in fact ‘insider trades’, in which information leaked to one or more shareholders allowed them to make huge profits. The ‘insider information’, in this instance, was confirmation that Minister of Forests Rich Coleman would indeed be granting the company their tree farm licence deletion.

Image: Location of the TFL 25 portion of the Western Forest Products deletion, much of it valuable coastal forest land between Sooke and Port Renfrew.

The deletion decision is potentially worth billions to Western Forest Products. It removed some ~28 000 Hectares of WFP’s private land from their tree farm licences on Vancouver Island, Haida Gwaii, and the Central Coast – the same private land that had been used to secure decades of access to Crown timber.

Following Coleman’s decision, WFP will continue to log Crown land, but are now free to more intensively log their private lands, export more logs, and sell the choicest bits to real estate developers. The sale of ~ 2,000 Ha of deleted land between Sooke and Port Renfrew on southern Vancouver Island to a Vancouver-based developer was slated to be finalized by the end of this March, and was rumored to be worth ~ $50 million alone.

The decision amounted to a gift, from the Minister of Forests to the largest coastal forestry company in BC; and to WFP shareholders, whose stock increased by 25% in the months following the Jan 2007 decision.

Anybody who bought WFP shares before Coleman’s gift and sold them shortly thereafter made a lot of money.

The fishy part is that it seemed like there were a lot of people buying WFP shares before Coleman’s giveaway became public. In fact, the trade volume was nearly 6.5 times greater than the 2006 monthly average.


Harbert Management Coporation, WFP’s 2nd largest shareholder and a corporate ‘insider’ by the fact that they owned greater than 10%  of the company, picked up an extra ~ 3 million shares, increasing their ownership to ~ 20% [WFP’s largest shareholder, real estate mega-company Brookfield Asset Management, owned ~ 70% of the company at the time of the decision].

Needless to say, eyebrows were raised; the obvious question being:

Was confirmation of Coleman’s decision leaked prior to it being made public, and did this inform an insider trade (e.g. Harbert Management Corporation’s large January purchase(s), or any other trade)?

For anything to come of the current BCSC investigation, it would have to be proven that someone leaked confirmation of Coleman’s decision prior to it being made public, and that this information was the basis upon which Harbert or another shareholder decided to pick up extra shares at a bargain. Given the difficulty of proving this it is unlikely that charges will ever get laid.

However, two things are certain:

(1)    Minister Coleman’s TFL deletion decision was worth a lot of money to Western Forest Products and their shareholders.

(2)    In the absence of insider information, a third party following the company would have little reason to bet in advance that Coleman would have granted the windfall deletion – in fact, based upon the information that was publicly available, there was good reason to bet against the deletion being granted – namely:

a.    The public had unequivocally and overwhelmingly voiced their opposition to the removal of private lands from tree farm licenses during the high profile Perry Commission of 1999.

b.    The government’s hand had been publicly slapped by the BC Supreme Court for not properly consulting First Nations the last time they removed private land from a TFL (click here to read related bulletin).

BC’s forest companies are becoming more interested in real estate than in forestry, and as forestry assets swing from one holder to another, we’re going to see more applications and deliberations over tree farm licence deletions. These are worth a lot of money to the big forestry companies and their investors, but ultimately serve to undermine the long-term interests of BC’s forestry communities.

rich coleman can’t explain his decision (Click here to read more)

Join us in asking for Rich Coleman’s Resignation at wWW.BC4SALE.ORG


Read Dogwood’s submission to the Auditor General regarding tree farm license deletions.

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