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Msg  40938 of 44363  at  3/7/2011 10:51:42 AM  by


The following message was updated on 3/7/2011 10:52:47 AM.

Financial Terrorism lives within your own borders.

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.


Fairfax Financial Claims in Suit That Third Point's Loeb Lied to Investors

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 accusations.

“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.”

2006 Lawsuit

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.

“Loeb Lied”

“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 County (Morristown).

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


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Msg # Subject Author Recs Date Posted
40945 Re: Financial Terrorism lives within your own borders. Retief 0 3/8/2011 11:15:07 PM

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