Former Einhorn Target Settles Fraud Charges

A small business lender once targeted by David Einhorn has agreed to settle fraud charges by Justice Department for $26.3 million. The settlement, from Ciena Capital (once part of Allied Capital Corp.,) also resolves a whistleblower lawsuit by Einhorn’s Greenlight Capital.

Author:: Zachery Kouwe
Updated:: Jan 14, 2019
Original:: May 7, 2010

A small business lender once targeted by David Einhorn agreed today to settle fraud charges by the Justice Department for $26.3 million. The settlement, from Ciena Capital (once part of Allied Capital Corp.,) also resolves a whistleblower lawsuit by Einhorn’s Greenlight Capital.

Greenlight, and co-plaintiff James Brickman, will receive $4.3 million as part of the settlement. The feds charged Ciena with defrauding the Small Business Administration when they sought payments on federally-backed loans they made and serviced. The loans, which eventually defaulted, violated SBA rules and underwriting standards.

"The United States will not tolerate fraud in lending programs designed to assist small businesses," Assistant Attorney General Tony West said in a statement.
One former Business Loan Center executive vice president has pleaded guilty to conspiring to defraud the United States and was sentenced to 10 years in prison, the department said.
Allied was acquired on April 1 by Ares Capital Corp.

In fact, consider the numbers 2, 0, 1, and 5 banned from Greenlight Capital's offices.

Greenlight Capital investors are standing by their man.

Remember how David Einhorn got in trouble in England for insider trading on Punch Taverns stock and he was all "what?" and we were all "what?"? Well, you can judge it for yourself because now the entire disputed call with Punch is available online (at the back of this). So go read it, or read the highlights here. The FSA still thinks it's insider trading, but the count of people confused by the whole thing is rising, and now includes the Merrill banker on the call. There's lots of insider traderiness on this side of the pond today too so we should talk about that in a bit. For now, though, two other things. One is quick - no one can resist one part of the call and I can't either so here it is: DAVID EINHORN: Hi, I’m sorry I didn’t get to see you when you were in New York. PUNCH CEO: No, no, we -- well, we’ve -- we’ve only had the chance to speak once, although we have seen [reference to Greenlight Analyst] a few times since then. DAVID EINHORN: Oh, you’re -- you’re -- you’re getting more than -- than I could help with anyway. So, this is good. PUNCH CEO: Okay. That’s fair enough. Well, one day we’ll get you around on a pub crawl around some English pubs. DAVID EINHORN: Oh, that sounds fun. PUNCH CEO: It is. You’re right. English readers: Is it? I just assumed that Punch Taverns are rather grim places, like TGI Friday's but with more ... punching? ... but maybe I'm totally off base here. Also, here is a hypothesis: vice investments do well because, for the same level of profitability, they get more analyst/investor coverage and enthusiasm. Wouldn't you rather go on a pub crawl instead of like a tour of an auto parts factory in Queens? Would that influence your stock recommendations / money allocations? Someone should do a study.

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In other words, Greenlight Capital remains short Tesla.

The Greenlight Capital founder just got up to speed on the last season and has feelings about it.

Back in February, in his annual letter to investors, Berkshire Hathaway chief Warren Buffett spent a good bit of time discussing why one shouldn't own gold. Beyond the fact that, according to WB, gold doesn't "change in size and [is] incapable of producing anything," and you'd be much better off buying farmland (which "a century from now will have produced staggering amounts of corn, wheat, cotton and other crops and will continue to produce that valuable bounty") or shares of Exxon Mobil (which "will probably have delivered trillions of dollars in dividends to its owners," the Oracle of Omaha had one incontrovertible, be all end all reason for eschewing the metal: its unfuckability. Oh sure, you can do things to a cube, you can fondle it, you can talk dirty to it, you can send nude pictures of yourself, you can even drill a hole in it and fuck it senseless, but, the thing is, the cube will not respond. No reciprocation, no gratitude, not even a sign it enjoyed itself. For Buffett, no further argument was necessary as to the worthlessness of the commodity. (Silver, on the other hand, will make you feel like you're 18 again.) Anyway, David Einhorn sort of feels the same way about the dollar. Greenlight Capital 1Q2012 Letter To Investors [PDF] Related: Don't Think He Hasn't Tried

In other GL updates, sources at Brovada say the investment team has swung from two point underdogs to 13.5 point favorites in the annual interoffice basketball game and the Greenlight baby-making machine continues to work overtime. Greenlight Capital 3rd Quarter Letter 2012 [PDF] Related (-ish): The Search For Einhorn's Gold