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To: orkrious who wrote (213589)	1/10/2003 11:08:31 AM
From: ild	Respond to of 436258

January 10, 2003 New York Examines Research By Gotham Partners on MBIA By HENNY SENDER and GREGORY ZUCKERMAN Staff Reporters of THE WALL STREET JOURNAL The New York Attorney General's office is looking into allegations that Gotham Partners Management Co., a once-highflying hedge fund, acted improperly in connection with a bearish position in bond-guarantee firm MBIA Inc., say people familiar with the matter. The informal inquiry comes as part of a new focus on the part of the attorney general, Eliot Spitzer, on smaller hedge funds in general and whether they appropriately conduct research and value securities, these people said. The inquiry, still in its early days, was inspired by numerous complaints from investors. Gotham has told its investors that it plans to shut down its two principal funds following difficulties with a real-estate investment. People familiar with the inquiry said Mr. Spitzer's office plans to ask Gotham to submit information regarding its dealings with MBIA of Armonk, N.Y. William Ackman and David Berkowitz, Gotham's founding partners, declined to comment. Gotham Partners isn't related to another hedge fund, Gotham Capital LLC. A broader look at hedge funds comes as the Securities and Exchange Commission continues to scrutinize the industry on the heels of a recent spate of fraud cases involving hedge-fund managers. The SEC has interviewed a number of hedge-fund managers and investors, focusing on how hedge funds -- which cater to wealthy individuals and institutions and sometimes make risky investments -- value their securities and report their returns. The preliminary investigation into hedge-fund research marks a new initiative for Mr. Spitzer, who has just finalized a settlement with major Wall Street firms on conflicts of interest between their research arms and their investment-banking operations. "It isn't the research in itself that is the problem," says Robert Chilstrom, a lawyer with Skadden, Arps, Slate, Meagher & Flom. But, "if you put in a lot of trades and then publish research, and you are using your own research to help you make money, that could be an issue." Others, though see it differently. "You may try to influence prices, but since you are disclosing your position, how is it manipulation?" says John Olson, a lawyer with Gibson, Dunn & Crutcher in Washington. "It is important not to chill people from expressing negative views. That is different than spreading false rumors." Gotham published a 62-page research report on MBIA in December, noting it was making negative bets on the stock. Gotham had asserted that MBIA's triple-A credit rating was "undeserved" due to the company's leverage; MBIA shot back that the report was "a negative advocacy piece."