Canadian Company Fairfax Financial Attacked From Down Under

More on Madoff too. Bud Burrell just dropped in and Treason is on his mind. Judd Bagley is hot on the trail of the Wall Street crooks. He has over 1000 pages of discovery documents from the Canadian company Fairfax Financial lawsuit against "the enterprise" that set out to destroy the company.

We just got another early Christmas present with this Deep Capture post by Judd.

(Scroll to bottom for updates)

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Introducing John Hempton: the Plunderer from Down Under

December 17th, 2008 by Judd Bagley

While an examination of the recently-unsealed products of discovery in the Fairfax Financial (NYSE:FFH) vs. SAC Capital, el al, lawsuit reveals the extensive involvement of most all the usual players — both in the world of hedge funds and business journalism — one name, mostly unknown to those outside Fairfax circles, appears quite prominently: John Hempton of Sydney Australia.

Hempton, it appears, conceived of and initially orchestrated the entire Fairfax fiasco. At the time, he was a senior analyst at Australia’s Platinum Asset Management hedge fund. Last year he left Platinum to join Global Value Investors, though on May 15 of this year, Hempton started a blog and began calling himself semi-retired; leading me to presume that some time in early May, Hempton and GIV parted ways.

Though possibly mere coincidence, Herb Greenberg abandoned his MarketWatch gig on May 1, 2008 while Bethany McLean announced her departure from Fortune three days later. Greenberg and McLean, as it turns out, both play notable roles in the apparent Hempton-inspired conspiracy.

A reading of Hempton’s early efforts to win converts to his thesis that Fairfax was a ticking time bomb waiting to implode suggests his conclusions were based on what he viewed as sound principles; he really was convinced, and composed multiple, lengthy missives outlining his reasoning. I suspect Hempton’s mistake was then convincing some of the worst people on Wall Street, whose methods fill the pages of this blog, and whose influence probably turned his project from a speculative to a criminal enterprise, dragging Hempton down with it.

That’s not to say that any of this absolves Hempton of blame.

For one, a 2002 email sent to Rocker Partners employee Monty Montgomery makes it clear that Hempton is prominent stock message board poster Brolgaboy (and brolgaboy1 on Yahoo Finance).

I asked Hempton to comment on or clarify this email, but he refused.

That may be because he knows that, thanks to the Yahoo Dissembler Sorting Algorithm bug, it’s possible to know with certainty that in addition to brolgaboy1, Hempton is also Yahoo posters jamiewoodford1, scudzy_short, zipperdydoodah, and (my favorite) mr_byrnes_sith_lord.

Between them, these accounts have many hundreds of posts on Yahoo Finance, to say nothing of the hundreds more posted to several other boards.

Here’s where I really begin to lose patience with John Hempton.

On August 15, 2005, Hempton created and began posting taunting messages under the name mr_byrnes_sith_lord. This was three days after DeepCapture.com contributor and Overstock.com CEO Patrick Byrne announced a lawsuit against Gradient Analytics and Rocker Partners hedge fund for conspiring to get rich by destroying his company. At that time, Byrne further announced that he had evidence of a central figure — whom Byrne metaphorically compared to the shadowy “Sith Lord” of the Star Wars series — coordinating these attacks in ways nobody had previously considered possible.

continued

AntiSocialMedia with Judd Bagley

Analysis of the abuse of social media — blogs, Wikipedia, message boards, etc — for the purpose of enabling illegal stock market manipulation.

 http://www.deepcapture.com/introducing-john-hempton-the-plunderer-from-down-under/

Posted in AntiSocialMedia with Judd Bagley

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You can read the entire Fairfax Financial Lawsuit here.

http://www.fairfax.ca/Assets/Downloads/Press/fpr2006-07-26.pdf

Rocker Partners has been dropped from the suit but can be brought back in. (see Liquidity Thy Name Is Madoff — Full Court Captured Press & SEC by RoryKearney | December 17, 2008 at 05:26 am  751 views, for more on Rocker Partners and the Fairfax lawsuit http://my.nowpublic.com/tech-biz/liquidity-thy-name-madoff-full-court-captured-press-sec-0

FAIRFAX  News Release
Stock Symbol:  FFH.SV (TSX); FFH (NYSE)
TORONTO, July 26, 2006
 
FAIRFAX ANNOUNCES FILING OF LAWSUIT 
ALLEGING STOCK MANIPULATION

Fairfax Financial Holdings Limited announces that today it filed a lawsuit seeking $5 billion in damages from a number of defendants who, the complaint alleges, participated in a stock market manipulation scheme involving Fairfax shares.

The complaint, filed in Superior Court, Morris County, New Jersey, alleges violations of various state laws, including the New Jersey Racketeer Influenced and Corrupt Organizations Act (RICO), pursuant to which treble damages may be available. Defendants include: S.A.C. Capital Management, LLC, S.A.C. Capital Advisors, LLC, S.A.C. Capital Associates, LLC, S.A.C. Healthco Funds, LLC, Sigma Capital Management, LLC, Steven A. Cohen, Exis Capital Management, Inc., Exis Capital, LLC, Exis Differential Partners, L.P., Exis Integrated Partners, L.P., Adam D. Sender, Spyro Contogouris, Max Bernstein, Andrew Heller, Lone Pine Capital, LLC, Lone Pine Members, LLC, Lone Pine Associates, LLC, Rocker Partners, L.P., Copper River Partners, L.P., David Rocker, Third Point LLC, Daniel S. Loeb, Jeffrey Perry, Trinity Capital Of Jacksonville, Inc., Trinity Fund, Ltd., Morgan Keegan & Company, Inc., John D. Gwynn, and Christopher Brett Lawless.  Fairfax Financial Holdings Limited is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance, investment management and insurance claims management.

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More on the Fairfax Lawsuit

The sordid tale of the hedge funds ill conceived plan to destroy Canadian Company Fairfax Financial Holdings (FFH)

Re: Hedge Fund Hit Man Hired by Cohen,Loeb,Sender Says Insurer Bloomberg.com

http://www.bloomberg.com/apps/news?pid=20601084&sid=aaza4TiCAtxE&refer=stocks

Excerpt

``Dear Father,'' the note begins. ``The attached documents are being sent to you out of my concern for the Church's finances.''

The letter goes on to say that the allegedly wayward parishioner, an insurance executive named Prem Watsa, was bilking shareholders of Toronto-based Fairfax Financial Holdings Ltd.

``I am perplexed by the mystifying, spectacular rise of this insurance medusa,'' the typed letter reads. ``Be aware, Father, be skeptical and ask Mr. Watsa to make a full confession.'' The note was signed P. Fate. The return address was that of St. Patrick's Cathedral in New York.

Stranger still is what Fairfax says is the source of the letter: A cabal of hedge fund managers -- among them James Chanos, Steven Cohen, Daniel Loeb, David Rocker and Adam Sender -- hoping to profit from a slump in Fairfax stock. Fairfax, which has a history of accounting lapses, sued eight hedge fund firms for racketeering in July 2006, demanding $6 billion in damages.

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I will repost this snippet from Judd Bagley's exposé on the plot to destroy Fairfax http://www.deepcapture.com/bethany-mclean/ for those who missed it.

From: Marc Cohodes
Sent: Thursday, December 7, 2006 3:21:12 PM
To: Bethany McLean
Subject: ffh

FFH is the Canadian Enron and it could even be worse…We are sending you stufff.. I suggest since [Copper River employee and former SEC attorney Richard] Sauer is on the East Coast (for now) that you 2 meet, and soon… there is an “enterprise” here and he can lay it out clear as day.

It bears noting that, according to filings in the Fairfax suit, the various participants in the attack on Fairfax stock referred to their effort collectively as “the Enterprise”. Whether or not this is what Cohodes was alluding to when using the term — which might not otherwise belong within quote marks in this context — is not clear, but certainly suggestive.

From: Bethany McLean
Sent: Thursday, December 7, 2006 3:48:43 PM
To: Marc Cohodes
Subject: Re: ffh

Makes sense. Send me whatever you can think of - the more documents the better Without Cohodes offering a bit of proof to back his Enron/Fairfax comparison, McLean finds it “makes sense” and commits to move ahead.

From: Marc Cohodes
Sent: Thursday, December 7, 2006 3:51:37 PM
To: Bethany McLean
Subject: Re: ffh

don’t you worry…where do you want the stuff fed-exed to… I would set up a time for Sauer to come and see ya.. His code name is “Lavaman”…
Cohodes then forwards this exchange to employee Rick Sauer, who schedules a meeting between himself and an unusually eager McLean, set for one week thence.

The outcome of that process was McLean’s scathing March 6, 2007 Fortune piece: The inside story of a Wall Street battle royal.

How can I be certain that this particular story was the direct result of the Cohodes’s efforts? The answer to that question is where the situation becomes particularly disturbing…sufficient to leave me feeling physically ill, and prepared to officially add Bethany McLean to the short but distinguished list of truly captured and corrupt journalists.

read on here http://www.deepcapture.com/bethany-mclean/

Posted in 9) The Deep Capture Campaign |  | 48 Comments »

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Patrick Byrne's December 16 comment letter to SEC
re: Amendments to Regulation SHO (Interim final temporary rule)

http://www.sec.gov/comments/s7-30-08/s73008-53.pdf   * * * * *  No surprise here. Short Seller Jim Chanos weighs in at the SEC.   Everytime I witness the short attacks, they destroy the price of the stock before the investor even had wind of "a bad quarter". The short seller is not there to help the investor imo. They are there to enrich themselves.  

James S. Chanos Chairman Coalition of Private Investment Companies

http://www.sec.gov/comments/s7-30-08/s73008-48.pdf

You gotta love this:

“As the Commission is well aware, fundamental short sellers, in the process of discovering fraud, hidden risks or just poor management, correct inefficiencies in the market and can prevent other investors from losing money. ln situations such as those presented by the current environment for financial institutions, the role of short sellers is perhaps more critical than ever. Short sale transactions help to bring share prices to levels supported by the fundamentals, decreasing the likelihood of price bubbles. Short selling also improves market quality and efficiency by narrowing spreads. improving the speed of price adjustments based on new information, and pumping liquidity into the market. If short sellers can not pursue their strategies in conventional markets, they may seek to employ them elsewhere, such as in the relatively opaque over-the counter market for credit default swaps, where the benefits that they provide to the securities markets would be diminished.”   * * * * * 
Madoff fraud could burn those who pulled out early

Wed Dec 17, 2008 12:59pm EST

By Jason Szep - Analysis

snippet

BOSTON (Reuters) - Disgraced money manager Bernard Madoff's suspected $50 billion fraud scheme looks set to burn even those who pulled their investments out long before the scandal rippled into the global financial system.

Such investors may have counted themselves fortunate, withdrawing their money years ago to buy a house or to pay for a daughter's education, and may have even sighed with relief because they ended ties with Madoff long before the scandal erupted late last week.

But they, too, could face trouble, lawyers say. Because of a legal concept known as "fraudulent conveyance," they could be forced to return their profits and even some of their initial investments to help offset losses incurred by others entangled in the long-running Ponzi scheme.

read the rest of the article here

http://www.reuters.com/article/newsOne/idUSTRE4BG0DT20081217

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I see the Spitzer family made the list of Madoff's victims 

http://www.finalternatives.com/node/6354 

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According to CNBC, Madoff was able to sell to European investors at ski competitions organized by stock exchanges.18

http://encyclopedia.vbxml.net/Bernard_Madoff

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Do the math

Morgan Stanley Pay Expense Drops 26%; Some Bonuses Cut by Half
By Christine Harper

snippet

Dec. 17 (Bloomberg) -- Morgan Stanley, which today reported its lowest full-year net income since 1995, cut annual compensation expense 26 percent to $12.3 billion as most employees had their year-end bonuses trimmed in half on average.

Total compensation and benefits for the company’s 46,964 employees was an average $262,030, down from $339,556 a year ago. Excluding the 8,426 financial advisers in Morgan Stanley’s wealth management unit, the bonus pool for employees was reduced by 50 percent, the New York-based firm said in a statement today. The company cut 1,782 jobs during the year. 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aIus5wFD9LOY&refer=home

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SEC staff saw Madoff as a voice of authority
 
 
Wed Dec 17, 2008 3:08pm EST
 
 By Karey Wutkowski

snippet

WASHINGTON (Reuters) - The alleged $50 billion fraud by Wall Street veteran Bernard Madoff may have escaped the attention of U.S. Securities and Exchange Commission staffers for one simple reason -- they saw him as one of their own.
The former Nasdaq Stock Market chairman regularly made appearances at the SEC, serving on agency advisory panels, where he was widely regarded as a sage markets expert and jovial voice representing his brokerage firm, Bernard L. Madoff Investment Securities, and the securities industry as a whole. "When it came to Bernie, people paid more attention. This was a guy who really knew how markets worked," said Georgetown University Law School professor Donald Langevoort, who served on an SEC advisory committee with Madoff in the early 2000s.

http://www.reuters.com/article/businessNews/idUSTRE4BG6US20081217?sp=true
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Bud Burrell's Sanity Check Blog

Treason!

The Worst is still a long way from us. Madoff may well turn out to be the death knell of the SEC and the NASD. Good riddance.

--> Location: Blogs Bud Burrell - Front and Center     Posted by:   bburrell 12/16/2008 4:45 PM Snippet It seems that the scandals we couldn't believe in the last half of last year were nothing more than a precursor to the overwhelming corruption now sitting on a trip wire like a perverse Occam's Razor over the throat of this nation and the globe. There are many more huge hits headed at the US now, beginning with the mortgage crises of many forms headed at us like a armada of speeding Jets beginning by the middle of next year.  2009 will be a tough year, and if it isn't managed properly, 2010 could be even worse.  Everyone that I speak to is tested to the limit with regard for their patience with the incompetence of our legal systems.  The good news is that more and more people everyday see this pandemic of corruption to be what it really is, Treason.

http://www.thesanitycheck.com/Blogs/BudBurrellsBlog/tabid/84/EntryID/734/Default.aspx * * * * * 

Here are some of Madoff's public comments over the years:

Snippet

- On his trading approach: "It's a proprietary strategy. I can't go into it in great detail." - Barron's, May 7, 2001

- Speaking on a panel called "The Future of the Stock Market" at the Philoctetes Center for the Multidisciplinary Study of the Imagination in New York on Oct 20, 2007, Madoff said:

- On regulations: "In today's regulatory environment, it's virtually impossible to violate rules ... but it's impossible for a violation to go undetected, certainly not for a considerable period of time."

http://uk.reuters.com/article/companyNewsMolt/idUKTRE4BG0C120081217

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Obscene Bonuses on Wall Street

  December 18, 2008 The Reckoning On Wall Street, Bonuses, Not Profits, Were Real
By LOUISE STORY

snippet

“As a result of the extraordinary growth at Merrill during my tenure as C.E.O., the board saw fit to increase my compensation each year.”
— E. Stanley O’Neal, the former chief executive of Merrill Lynch, March 2008

For Dow Kim, 2006 was a very good year. While his salary at Merrill Lynch was $350,000, his total compensation was 100 times that — $35 million.

The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill’s mortgage business.

Mr. Kim’s colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.

But Merrill’s record earnings in 2006 — $7.5 billion — turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.

Unlike the earnings, however, the bonuses have not been reversed.

http://www.nytimes.com/2008/12/18/business/18pay.html?_r=1&hp=&adxnnl=1&adxnnlx=1229575733-e32sLZNWF7C1I9nLZImmPA&pagewanted=all

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Madoff collapse has global impact
By Jean Shaoul
18 December 2008

snippet

As the scandal unfolds, it sheds a revealing light on the social connections and financial relations between institutions and moneymen, and the reckless and semi-criminal methods employed by some of the most prominent banks.

Far from being sober, well run operations, many more closely resemble gambling syndicates driven by self-enrichment at the expense of their clients and society as a whole. They have placed their clients' money wherever they could get the best commission, barely bothering to check the books of shady outfits such as that run by Madoff.

The Madoff scandal is, moreover, an exposure of complicity and corruption on the part of government regulatory agencies, which have, on a world scale, been transformed by years of "free market" deregulation into partners and facilitators of financial skulduggery on the part of the financial elite.

http://www.wsws.org/articles/2008/dec2008/mado-d18.shtml

• • • • •
Madoff's auditor... doesn't audit?The three-person firm that apparently certified Madoff's books has been telling a key accounting industry group for years that it doesn't conduct audits.
By Alyssa Abkowitz Last Updated: December 18, 2008: 8:17 AM ET

snippet

(Fortune) -- The three-person auditing firm that apparently certified the books of Bernard Madoff Investment Securities, the shuttered home of an alleged multibillion-dollar Ponzi scheme, is drawing new scrutiny.

Already under investigation by local prosecutors for its potential role in the scandal, the firm, Friehling & Horowitz, is now also being investigated by the American Institute of Certified Public Accountants, the prestigious body that sets U.S. auditing standards for private companies.

The problem: The auditing firm has been telling the AICPA for 15 years that it doesn't conduct audits.

http://money.cnn.com/2008/12/17/news/companies/madoff.auditor.fortune/?postversion=2008121808

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Read more on Madoff

Mad Dog Madoff Steals 50 Billion, Gets Bail - Tip of the Iceberg
by RoryKearney | December 14, 2008 at 07:47 am  2055 views
http://my.nowpublic.com/tech-biz/mad-dog-madoff-steals-50-billion-gets-bail-tip-iceberg