The man who would be chairman of the state's Board of Regents has cut a wide swath through the Maryland business and political landscape over the past 15 years, leaving an impressive list of accomplishments and not a small amount of controversy.
Nathan A. Chapman, 41, once viewed as a Wunderkind broker at Alex. Brown & Sons Inc., now heads two publicly traded financial companies of his own. About to assume his most important public role, Chapman has his share of detractors -- as well as a legion of supporters.
Prominent among the supporters is Gov. Parris N. Glendening. Tomorrow -- with a nod from the governor -- the Board of Regents of the University System of Maryland is expected to elect Chapman its chairman, the first African-American to hold that post.
The high-profile post is one more product of the ambition, drive and creativity that have taken Chapman to his office on the 28th floor of the World Trade Center from Edmondson Village, where he grew up in a working-class home.
"I have a lot of ideas," says Chapman, who is the regents' vice chairman and refuses to assume that he will be elected chairman. "I think out of the box."
If Chapman sees a steady ascent in his career, others see a roller coaster ride, an indication that he is not the right person to head a body that oversees 13 public institutions with 105,000 students in Maryland and an overall budget of $2.2 billion.
Low points in his business career include an attempt to get Baltimore to invest $10 million in city pension funds into his brokerage firm, the Chapman Co.
The effort was championed by Jacqueline F. McLean, the city comptroller, who left that job under a cloud of criminal charges. After her departure, the plan to bolster Chapman's brokerage collapsed.
In addition, he and his firm have faced several disciplinary actions by financial regulatory bodies.
Privately, many key state legislators oppose Chapman's election. "I hold no ill will toward Mr. Chapman, but someone should be thinking of the potential consequences if this doesn't go well," says Robert R. Neall, a Republican senator from Anne Arundel County.
"I am afraid controversy surrounding this appointment will have a detrimental effect on the efforts to build up the programs and the reputation of the University of Maryland," Neall says.
"There are lots and lots of qualified people who could serve on the Board of Regents in this state without this type of controversy around them."
Others defend the choice of Chapman.
"I think his appointment is an excellent idea," says Calvin Burnett, president of Coppin State College. "He's a brilliant person, really. You can tell by the way he has built his business.
"I think he is one of the outstanding members of our community."
Swift rise in business
Chapman's rise in the financial world has been swift.
He graduated from the University of Maryland, Baltimore County in 1980 after only 2 1/2 years and spent two years at KPMG Peat Marwick as an accountant.
In 1983, he moved to Alex. Brown, the nation's oldest investment banking house, which was trying to hire more black brokers.
"We obviously wanted to hire people from African-American backgrounds because there were so few in the business at that time," said Joseph Hardiman, then a top Brown executive and today a private investor.
"Nate clearly stood out among the candidates we saw. We thought he would be a success, which he turned out to be."
But his hard-charging style stepped on some wingtips at the clubby investment banking firm.
"He had a very high opinion of himself," says a former colleague. "He was going to have [Alex. Brown Chairman] Bart Harvey's job in a year. I just stayed away from him. I thought he was pushy."
Some at Alex. Brown accused Chapman of careless recordkeeping, and a few questioned some of his trades.
He was cited for making trades without the permission of two clients, including Baltimore developer Otis Warren, according to brokerage records filed with the state. He paid a $4,037 fine.
Chapman declines to discuss the incident. But even Warren backs Chapman, saying the incident might have been a misunderstanding.
"In our community, we are always looking for role models," Warren says. "I wouldn't mind my son seeing him as a role model."
After three years at Alex. Brown, Chapman left to start Chapman Co. -- with $500,000 in backing, including $50,000 from Alex. Brown.
To hear Chapman tell the story, from then on the ride has only been up.
"How many African-American-controlled firms [in the nation] are publicly traded?" he asks. "Maybe seven? And I'm being generous with seven. I've taken two companies public and I'm about to take a third."
The statement is essentially true -- there are only nine such companies. But such bold pronouncements are also typical for Chapman.
"He is the ultimate salesman," says a former colleague at Chapman's brokerage. "He takes sour milk and can make it a frothy latte. He has the confidence of a raging bull."
Eye on 'emerging markets'
Chapman has put his eggs in the basket he calls "domestic emerging markets," a term he has trademarked. He argues that the same investment possibilities found in overseas emerging markets are available in the United States in businesses controlled by minorities, without the risks of overseas investments -- such as currency fluctuations and government takeovers.
"If you are interested in investing in Africa, why not look at African-Americans? If you are interested in Asia, why not look at Asian-Americans?" he says.
"We are the right company in the right place at the right time to take advantage of this."
But there have been bumps along the way.
A 1993 attempt to get Baltimore to invest $10 million in pension money in his firm collapsed not long after McLean, one of its main sponsors, left the comptroller's office amid accusations that led to her conviction for theft in 1994.
The failure to get that money forced a major contraction at the Chapman Co. By the end of 1993, its posh World Trade Center offices were half-empty and the company reported a $438,000 loss.
Chapman now says the collapse of the city deal is the best thing that ever happened because the young firm would have taken on huge debt in the transaction.
"It is a blessing," he says. "I would have been strapped under the debt. It would have been an awful deal."
Around the time the city deal crumbled, Chapman Co. fell out of compliance with capital rules set by the National Association of Securities Dealers (NASD), the parent of the Nasdaq Stock Market and an industry regulator.
In 1996, the firm paid a $30,000 fine to the NASD for failing to maintain sufficient capital -- money in reserve to protect customers -- while it bought and sold stocks in 1993 and 1994.
As a result of these problems, Chapman also drew a 10-day suspension from performing financial and operational duties at the firm, though he neither admitted nor denied the allegations stemming from the NASD's complaint.
'It Can Be Done'
Chapman's World Trade Center office -- overlooking Harborplace and Camden Yards -- is the picture of success.
It is furnished with overstuffed chairs and couches; a print by African-American artist Romare Bearden; a sculpture of a Masai tribal tableau; a TV constantly playing the CNBC financial channel; books by and about successful African-Americans; and pictures of his wife, Valerie, and their three daughters, ages 9, 7 and 6.
A sign on one shelf reads, "It Can Be Done."
Yet, even with the current bull market, Chapman's two publicly traded companies lost more than $1 million last year.
Much of the loss came when he liquidated his closed-end Domestic Emerging Markets fund -- which sells shares of its stock to investors -- and started a new conventional mutual fund focused on the same markets.
Chapman says the losses are also due to the firm's rapid expansion.
In February, it shelled out $219,000 for a San Francisco brokerage firm, and in October he acquired a struggling Memphis, Tenn., insurance company -- a purchase that will expand his firm from about 60 employees to 200.
"You have to put money out to make money," he says. "You grow a business by investing."
Chapman took his flagship company, Chapman Holdings, public in February 1998. The stock was offered at $8 per share.
The offering netted the company $6.8 million and immediately made Chapman's 61.9 percent share of the firm worth $18 million. Now the thinly traded stock sells in the $5-to-$6 range.
Six months later, he took a second company, Chapman Capital Management Holdings Inc., public, raising $5.5 million.
The investment management firm, of which Chapman owns about 68 percent, manages some $650 million in money for states, cities and individuals using the DEM strategy.
He also plans to take a third firm, Chapman Insurance Agency, public in the near future.
Chapman's vision is to become a one-stop financial company, selling stocks, mutual funds, insurance and other products, while attracting large numbers of African-Americans to investing.
Building a company that offers many financial services under one roof will be no easy task, experts say. The strategy requires a lot of capital and time from the top executive.
"Generally, small firms have not been successful in offering one-stop financial shopping," says Michael Flanagan, a brokerage analyst at Philadelphia-based Financial Service Analytics.
"We are seeing firms 20 times the size of Chapman limiting their services and focusing on their strengths."
Chapman envisions one day appointing presidents to run each of his companies. But for now, with his company expanding and making additional demands on his time, some question whether this is the right time for him to take on the job of chairman of the Board of Regents.
"Being the chairman of the board is different than being a member," says Donald Langenburg, chancellor of the university system, who backs Chapman. "His life will change. It will take more time."
Says Coppin State's Burnett: "There's an old saying, 'If you want to get a job done, give it to a busy man.' People who are very busy find time to organize their priorities.
"I just think he has the intelligence and management skills to handle that."
Questionable loans
But as Chapman works toward his vision, some question his management skills, pointing to an item in Chapman Holding's latest proxy statement.
The proxy -- an annual statement filed with federal regulators listing the top executives and directors of the firm, their share of the company and compensation -- revealed low-interest-rate loans from the company to Chapman totaling more than $638,000, representing 11.6 percent of the company's total cash.
Chapman says the loans were made to him so he could buy back shares from investors in the firm and are guaranteed by his signature.
"I've already paid back around $100,000 of it," he says, indicating that he could pay it all off. "I'm thinking about it. I might just do it."
Experts who reviewed the proxy said there is nothing wrong with borrowing from one's company, but they questioned why Chapman Holdings didn't buy back investors' shares itself.
They also wondered whether the company -- which has five directors, three of whom work for the firm -- has sufficient independent oversight to ensure that such loans aren't abused.
Chapman admits he has yet to attract legions of small investors to his funds and relies on large institutional investors, many of them public pension funds whose managers look to support minority firms.
He says his reputation in cities across the country that invest with him is better than in Baltimore where politics muddies the waters -- Chapman was treasurer of the campaign of former Mayor Clarence H. Du Burns when he lost to Kurt L. Schmoke in 1987.
"I didn't have a great relationship with the mayor," Chapman says of Schmoke. "I paid a heavy political cost for it in this city.
"In other parts of the country -- Atlanta, Memphis -- you go up to the mayor and they say, 'I know Nate.' "
Chapman Capital manages about $43 million for Memphis, achieving a return of 36 percent in 1998 when Chapman started managing the money.
"As far as his relationship with the city of Memphis, it has been a very positive one," says Roland McElrath, director of finance for that city.
Politics and money
Though he maintains it might have hurt his reputation in Baltimore, Chapman remains very active in politics.
"I think getting involved in politics means you get involved in your community," he says. "I have no political ambitions myself right now, though I have been on the short list for a number of offices."
His fund-raising prowess got him invited to a coffee with Vice President Al Gore. He was credited with opening doors for Glendening in the African-American community during both of his gubernatorial races.
"I don't know a finer man than Parris Glendening," says Chapman, who first met the governor when he was county executive in Prince George's and that county gave Chapman's firm some business. "He is truly color blind."
Chapman says that shortly after Glendening's first election, the governor asked whether he was interested in any state positions.
Chapman mentioned the Board of Regents, citing his interest in education.
"I looked at it as a tremendous honor and responsibility to be on the board of the system that you graduated from," he says.
He is vice chairman of the regents' finance committee and on the advancement committee that oversees fund raising.
Now on the brink of leading the regents and the state's higher education system, Chapman credits someone who never went to college for his drive -- his deceased father, who unloaded rail cars for a living and rarely turned down the opportunity to get time-and-a-half working overtime and holiday shifts.
"People think I work hard," Chapman says. "It's nothing compared to my father [Nathan Sr.]. All those kinds of things drive you. You want to be like your father in some ways."
He says he learned other lessons from his mother, Ida, who is still alive.
"My father was a strong man physically, my mother spiritually. She was the one who got us up for church. I consider myself a blessed person. I really do."
Chapman went to Baltimore Polytechnic High School, taking three buses to get there, wrestling and playing lacrosse.
Then he spent two years in the Air Force in Texas.
"I was really striving to figure out how to be a man and how to make my parents proud of me," he says of those years.
When he came back, he entered UMBC and got his degree in economics and political science with a minor in accounting in 2 1/2 years, serving as president of the student government his last year there.
"I loved school and took a lot of courses," he says. "Before I knew it, it was over. But I did a lot of growing at UMBC."
He credits UMBC professors for taking an interest in him and helping get his career started. He has pledged a $10,000 contribution to the school, though he has not finished paying it off.
UMBC President Freeman A. Hrabowski III acknowledges the controversy around the impending election of Chapman as chairman but has high hopes.
"I think at this point we have to respect the governor's choice," Hrabowski says. "I just hope people will give Nate a chance to show what he can do in the job."
Sitting in front of the expansive view from his office, Chapman appears unfazed by his critics, saying he doesn't understand those who question his abilities and motivations.
"If you look at my life," he says, "I come in, I work hard every day, and then I leave."
Pub Date: 7/08/99