Here is an article from bloomberg that's quite interesting. Dan Loeb and the rest of gang were short selling Fairfax and claiming that Fairfax's dealings in finite reinsurance was a complete sham. Dan claims that his Fairfax short was one of the most thoroughly researched investments in the history of company. Of course that begs the question .... Why then, did he have to admit in his deposition that he didn't have a clue about what finite reinsurance was?
= Financial Terrorism.
Daniel Loeb, head of hedge fund
Third Point LLC, “lied” to his investors when he told them
that extensive stock research led him to bet against Fairfax
Financial Holdings Ltd. (FFH), the Canadian insurer alleged in court
documents obtained by Bloomberg News.
In a letter to investors “Loeb represented that the
decision to short Fairfax-related positions was one of the ‘most
thoroughly researched investments in the firm’s history,’”
lawyers for Toronto-based Fairfax said in documents filed late
last year in state court in New Jersey.
“Loeb could not identify any such research,” Fairfax
lawyers wrote in the documents. “Third Point has never produced
any such internal research, and Loeb was forced to admit in his
deposition that he did not know what finite reinsurance was,
despite the fact that he cited this as one of the bases for
believing Fairfax was a fraud.”
The accusations are the latest salvo in a five-year court
fight between Fairfax and a group of hedge funds including Third
Point, SAC Capital Advisors LP, Kynikos Associates Ltd. and Exis
Capital Management Inc.
The hedge funds have previously denied Fairfax’s
“Third Point stands by its investment research process and,
specifically the years of research it conducted on Fairfax
Financial Holdings,” the hedge fund said in an e-mailed
statement today. “Third Point’s research regarding Fairfax was
borne out when the company was forced to restate its financial
statements, erasing over $235 million of shareholder equity just
one day after this lawsuit was launched in 2006.”
Fairfax sued the group in 2006 in New Jersey Superior Court
in Morristown. It seeks more than $8 billion in damages from the
hedge funds, saying their activities depressed its credit
ratings, diminished its ability to make acquisitions, and
reduced the amount it could raise in debt and equity offerings,
according to the new documents. An amended complaint filed in
2008 pegged the damages at $6 billion.
The group sold Fairfax shares short, then conspired to
drive them down through a campaign that allegedly included
harassing Chief Executive Officer Prem Watsa, intimidating
executives, and distributing slanderous research to investors,
Fairfax claims in court papers.
In a short sale, a trader borrows shares of a company from
an investor and sells them, speculating that the price will drop
so he can buy the shares back at a lower price, repay the loan,
and keep the difference as a profit.
“One can also only conclude that Loeb lied to his
investors -- including his New Jersey investors -- in order to
cover up the illegal conduct in which he participated,” Fairfax
claimed in the documents.
Loeb has $5.7 billion in four funds. His biggest, the Third
Point Offshore Fund Ltd., returned 33.5 percent last year.
“This frivolous litigation was an obvious attempt to
deflect attention from the company’s own financial
shortcomings,” Third Point said in its statement. “Third Point
adheres to the highest standards of investor transparency, and
any suggestion otherwise is an irresponsible attempt to
disparage Third Point and distract from the glaring deficiencies
in this more than five-year-old litigation.”
The case is Fairfax Financial Holdings Ltd. v. SAC Capital
Management LLC, L-2032-06, Superior Court of New Jersey, Morris
To contact the reporters on this story:
Thom Weidlich in Brooklyn, New York, federal court at +1-
Anthony Effinger in Portland, Oregon, at
To contact the editor responsible for this story:
John Pickering at