Spitzer Examining Gotham Partners' MBIA Report, People Say
New York, Jan. 10, (Bloomberg) -- New York Attorney General
Elliot Spitzer is examining allegations that Gotham Partners
Management LLC, a New York hedge fund, issued research reports
designed to drive down bond-insurer MBIA Inc.'s stock price,
people familiar with the matter said.
The inquiry, made at MBIA's request, follows the publication
on the Internet last month of a Gotham report that said MBIA
didn't have the capital to back its obligations, failed to
disclose some off-balance sheet transactions and didn't deserve
its AAA credit rating. MBIA shares fell 3 percent after the
report, which MBIA denied and said was ``patently wrong.''
Wall Street firms have faced increased scrutiny from
regulators, including Spitzer, who claim brokerages have been
issuing tainted research to win investment-banking fees. Gotham,
run by William Ackman and David Berkowitz, has published several
reports of companies in which it holds positions.
``Since the development of the Internet, a larger number of
managers are publishing their opinions on the viability of various
investments,'' said Ron Geffner, a former SEC attorney now with
the law firm Sadis & Goldberg in New York. ``It appears that
Gotham did everything in its power to disclose that they were
betting the stock would fall.''
Gotham `Bearish'
Spitzer declined to comment through a spokeswoman. In the
press release Gotham issued in conjunction with posting its
research, it said ``funds managed by Gotham and its affiliates own
investments that are bearish on MBIA's prospects. These
investments include credit default swaps, equity put options and
short sales of common stock.'' Ackman declined to comment through
a spokesman.
In response to Gotham's report, MBIA Chairman Jay Brown said
in a statement that MBIA ``will take all actions necessary to
protect our shareholders, policyholders and constituents.''
Spitzer's inquiry comes as Gotham, facing a cash crunch from
investors redeeming their stakes, closes down three funds.
While hedge funds as a rule tend to keep a low profile and
often don't disclose their returns or performance, some of them
publish reports and talk to the press about their positions.
`There is nothing wrong with publishing reports if you are
presenting an objective case with all facts,'' said Morton Cohen,
chairman of Clarion Group, a Cleveland, Ohio-based hedge fund
group that sends out press releases periodically discussing its
bets on companies or industries.
--Katherine Burton in the New York newsroom at (212) 318-2335 or
KBurton@Bloomberg.net. Editors: Mirabella, Urban. |
