David Einhorn (hedge fund manager)

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David Einhorn is President of Greenlight Capital, a "long-short value-oriented hedge fund", which he began with $1 million in 1996. Greenlight has historically generated greater than a twenty-five percent annualized net return for partners and investors.^[1][2] Einhorn is also the Chairman of Greenlight Capital RE, Ltd, a Cayman Islands-based reinsurance company and one of its major shareholders.

Born in 1968, he lives in Westchester with his wife, 2 daughters and son.

His name is most closely associated with short selling, namely borrowing a stock for a period of time and selling it, with the intention of later buying back the shares at a lower price.

His two most famous short positions are Allied Capital and Lehman Brothers.

He is a critic of current investment-banking practices, saying they are incentivized to maximize employee compensation. He cites the statistic that investment banks pay out 50 percent of revenues as compensation, and higher leverage means more revenues, making this model inherently risky.^[1]

Einhorn is a major contributor and board member of The Michael J. Fox Foundation. He is also a contributor to several charities in the New York area, including the Ira Sohn Foundation. He pledged profits from his investments in Allied Capital to this organization.

Contents 1 Education 2 Allied Capital 3 Lehman Brothers 4 Greenlight Re 5 World Series of Poker 6 References 7 External links

[edit] Education

David Einhorn graduated summa cum laude with distinction in all subjects from Cornell University, where he earned a BA in Government from the College of Arts and Sciences in 1991.

[edit] Allied Capital

In May 2002, at the Ira W. Sohn Investment Research Conference, Einhorn made a speech about a mid-cap financial company called Allied Capital, and recommended shorting it. The stock opened down 20% the next day.

Einhorn claimed that Allied was involved in lending practices that actively defrauded the Small Business Administration in the US, and therefore, indirectly, the US taxpayer. Allied said that Einhorn was engaged in market manipulation. To prove this, Allied fraudulently accessed his phone records using pretexting.

The U.S. Securities and Exchange Commission (SEC) investigated Einhorn for market manipulation. Eliot Spitzer announced that he intended to start another investigation.

Einhorn has published a book, Fooling Some of the People All of the Time^[3] regarding his battle. FoolingSomePeople.com, the website to promote the book, has information on his angle of the dispute, including a press release from Allied in February 2007 admitting that an agent of the company obtained Einhorn's phone records fraudulently.

His battle against Allied Capital lasted 6 years in all.

In late 2008, the Office of the Inspector General of the Securities Exchange Commission announced that it is investigating some of the charges that Einhorn has made about the SEC's mishandling of this matter, including the possibility that "a former SEC attorney may have taken confidential investigative materials with him when he left the Commission and provided those materials to a company he went to work for as a lobbyist."

[edit] Lehman Brothers

Starting July 2007, Einhorn became a short seller in Lehman stock. He believed that Lehman was under-capitalised, and had massive exposures to CDOs that were not written down properly. ^[4] He also claimed that they used dubious accounting practices in their financial filings.^[1]

When Bear Stearns had to be bailed out by the Federal Reserve in March 2008, Lehman was widely considered to be in a fragile state. Lehman's CFO was Erin Callan, hailed by the Wall Street Journal as "Lehman's Straight Shooter". But she had been on the job for just six months and her background was as a tax lawyer, not in finance.^[1]

In a speech at a conference in April, Einhorn started talking publicly about his Lehman short positions. Lehman called Greenlight and asked for a copy of the speech, which was sent over.^[1]

In May 2008, Lehman CFO Callan had a private call with Einhorn and his analysts.^[5]. The conversation with Callan was to give her a chance to explain discrepancies he had uncovered between the firm’s latest financial filing and what had been discussed during its conference call about that filing.

Ms. Callan is said to have fumbled some of her responses to questions on Lehman's asset valuations. When Einhorn later went public with the conversation, the declining Lehman share price took a further knock. Callan was fired a few weeks later, when Lehman reported a worse than expected $2.8bn second-quarter loss.

Lehman went bankrupt in September 2008.

[edit] Greenlight Re

Einhorn is also the Chairman of Greenlight Capital RE, Ltd, a Cayman Islands-based reinsurance company and one of its major shareholders. As of 2009, Einhorn beneficially owned 6.25 million shares of Greenlight RE, which was worth $148 million as of November 12, 2009.

[edit] World Series of Poker

In 2006, Einhorn placed 18th in the Main Event of the World Series of Poker, winning $659,730, which he donated to the Michael J. Fox Foundation for Parkinson's research, where he serves as a Director in memory of his grandfather, who suffered with the disease for many years. ^[6]

[edit] References

[edit] External links

• The David Einhorn Page
• Einhorn Speech on Lehman
• 'David the Goliath'^{[dead link]} Worth Magazine interview with Einhorn
• "The End of the Financial World as We Know It," New York Times
• "Einhorn bets on major currency 'death spiral'" Marketwatch.com