Dirty Tricks at Lehman?

Thursday, June 05, 2008 | 06:46 AM

Today's must read commentary: naked capitalism calls shenanigans on Lehman Brothers illegal leak of an insider memo to CNBC's Charlie Gasparino:

"On the issue of Lehman supposedly deleveraging (particularly to such a dramatic degree), The New York Times reported that Lehman had reduced its leverage from 31.7x to 25X via a $100 billion asset sale. Note even that claim demands more explanation. How was so much unloaded? What losses were taken? And (most probable) was this done the way recent disposals of leveraged loans have been accomplished, via part of the proceeds being financed? If so, the "sale" is far less meaningful than a true sale and involves the risk that the supposed buyer might try to put the asset back in the future (in this environment of high financial stress, do not underestimate the odds of extreme measures).

And of course, it's also intriguing (to put it way too politely) that the leak to the Times is considerably at odds with the "internal memo" that got into Gasparino's hands. 25x and 12x leverage are hugely different numbers.

Now to the tactics, which stink to high heaven. Why, pray tell, is Lehman resorting to leaks and whispers rather than the proper procedure of public disclosure via a press release?"

I usually love Charlie Gasparino's work, but at this point he has been fed more disinformation propaganda and inside info. 

Regardless, leaking an internal memo with non-public, material financial information to CNBC is an SEC violation. Of course, the toothless tiger in charge of regulatory enforcement is too busy chasing down who spread what rumors about Bear Stearns (that turned out to be true) to be bothered with such obvious and blatant illegality.

More naked capitalism:

Don't tell me this may have been an unauthorized employee leak; if this memo was circulated broadly to employees, it was done with the full intent that word would get outside the firm. That happens predictably with mass employee communications. And if it was limited distribution, the recipients, as anyone who has passed a Series 7 exam ought to know, selective disclosure of material information is a big no no under SEC Rule FD.

Would someone please tell me how this could be leaked to a major news organization without an immediate SEC investigation being opened? Or is Cox & Co. to busy investigating David Einhorn to look into his?

Color me disgusted . . .


>

Disclosure: no position in any stock mentioned.


Sources:
Dirty Tricks at Lehman? (And a Defense of Shorts)
Yves Smith
naked capitalism, JUNE 5, 2008
http://www.nakedcapitalism.com/2008/06/dirty-tricks-at-lehman-and-defense-of.html

Video:
Future of Lehman
CNBC  Wed. Jun. 4 2008 | 1:00 DT
http://www.cnbc.com/id/15840232?video=761190267

Thursday, June 05, 2008 | 06:46 AM | Permalink | Comments (26) | TrackBack (0)
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Comments

I am truly disgusted at the way companies play fast and loose with SEC disclosure and investor communications generally. There have been so many cases of leaks at CNBC (in particular) in lieu of normal communication that it drives me nuts.

I have no idea whether it offends you as much as it disturbs me, but it really does everyone in the industry a disservice and confirms the bad image the public now has about securities markets.

Posted by: Yves Smith | Jun 5, 2008 6:48:43 AM

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