Zach George and his fellow pirates used to talk tough to CEOs. Their battle cry: “Surrender the Booty!”
That was more than a decade ago, when George, then in his 20s, was helping Pirate Capital LLC keelhaul companies that didn’t make investors enough money. Flaunting its motto, Pirate Capital swashbuckled its way to a fortune -- that is, until it foundered.
Today George, 39, is still agitating for corporate change, now at his own hedge fund, FrontFour Capital Group. But the pirate of old seems less combative with age, at least when it comes to his father.
FrontFour has held onto one key position, with nary a rattle of its saber, even as the stock has plummeted almost 90 percent since the firm started buying it more than four years ago. The company: Penn West Petroleum Ltd., the energy producer where George’s father, the oilman Rick George, happens to be chairman.
FrontFour hasn’t been quite so forgiving with other companies of late. Just last week, the firm won a proxy fight, and three board seats, at Granite Real Estate Investment Trust and got ILG Inc., a timeshare operator, to agree to explore a merger. In May, it landed two seats at ClubCorp Holdings Inc., which runs more than 200 golf and country clubs. Those companies are stock-market high-flyers next to Penn West, based in Calgary.
Given the potential conflicts, FrontFour sought outside counsel to revise its compliance rules as soon as Rick George joined the Penn West board in 2013. The fund has told its clients that Zach George will have no say in the investment and no contact with the company or his father in his capacity as chairman. What’s more, neither Zach nor his partners are allowed to speak to Rick about other Canadian energy producers, according to people familiar with firm.
Rick George didn’t return emails seeking comment. Zach George declined to comment, citing FrontFour’s compliance rules.
Still, the investment doesn’t sit well with Brad Allen, founder of Branav Shareholder Advisory Services Inc, a Toronto-based firm that advises companies on corporate governance issues.
"It’s not ideal to have the son running a hedge fund where one of the largest holdings is dad’s public company," Allen said. "It does seem quite unusual.”
FrontFour partner Stephen Loukas said in an interview that the company has established “robust policies” to address any appearance of a conflict.