Market Manipulators

[rrufff]

http://communities.canada.com/financialpost/blogs/francis/archive/2007/10/23/fairfax-financial-cop-a...

http://www.canada.com/nationalpost/financialpost/story.html?id=4b28e374-6dee-444d-b9d0-0cc46274ff18

Fairfax Financial Wins over S.A.C. Capital Management et al
National Post
Diane Francis
October 23, 2007

S.A.C. Capital got the equivalent of a "yellow" card, or official wrist slap, in court recently when an American judge refused to dismiss a US$6-billion lawsuit by Toronto’s Fairfax Financial Holdings Ltd. against S.A.C. and 22 other defendants.

Fairfax is suing S.A.C. and others for financial damages which resulted from the creation of a short-selling, disinformation conspiracy designed to drive down Fairfax stock.

S.A.C. and other lawyers claimed that there was no conspiracy, no wrongdoing and that their trading was legal.

But Judge Deanna Wilson did not agree.

“I hope that this didn’t happen because it’s a scheme of tremendous proportions,” said Judge Wilson in the hearings two weeks ago. She rejected motions for dismissal and ordered the matter should proceed to trial under RICO, or organized crime, and other statutes.

Fairfax claims that S.A.C. and various affiliates, with US$40 billion in assets under management, attacked the company after it was listed in 2002 on the New York Stock Exchange. In the first few weeks, Fairfax stock was driven down by 15% or US$14 per share.

By spring 2003 it had rebounded from US$50 to US$96, then was attacked again in summer 2006. It currently trades in the $230-range and has a market capitalization value of US$4 billion. The insurance conglomerate is Canada’s 49th largest corporation by revenues.

The attacks were invalid and caused financial damage to shareholders over the years and to the company’s reputation, said the company.

“It was a massive and fraudulent disinformation campaign”, reads Fairfax’s statement of claim which used “dirty tricks”, fronts, aliases and bear attacks to ruin the company’s reputation and price.

One defendant is an “analyst” called Spyro Contogouris who Fairfax claims had no credentials and a career of lawsuits and legal hassles.

He and others were hired to spread disinformaton to journalists, online chat rooms, regulators, auditors, rating agencies and even harassed Prem Watsa, Fairfax CEO and Chair and other officers.

“The amended complaint alleges a shocking scheme against a prominent Canadian company and its American subsidiary,” said Fairfax lawyer Marc Kasowitz in a telephone interview yesterday. “The decision, denying the motions to dismiss, is very important because it confirms that the legal challenges to the amended complaint are without merit and that this case can now proceed aggressively to discovery and trial.”

It’s interesting to note that S.A.C. was accused of another “bear raid”, short-selling conspiracy by Canada’s Biovail Corp. which has also sued the hedge fund and others for US$6 billion. That matter is on hold in a New Jersey court, said Mr. Kasowitz.

And Mr. Rocker’s firm is implicated in a similar case in California.

Short-selling is a legitimate strategy, but the whispering campaign against Fairfax spread false information which, if proven, would be illegal. Judge Wilson remarked on Fairfax’s resilience.

“First of all… this company obviously could withstand a whole lot of junk being thrown at it, because at what the stock price is now…and it kept going back up.”

S.A.C. and the others claimed that Fairfax’s lawsuit was frivolous and not rooted in any law.

“Am I swallowing them [the pleadings] in whole or in part?” said the Judge, “no. I’m not supposed to do that.”

Her decision meant that the next step is for examinations for discovery to be conducted under commercial libel, interference in contracts and under organized criminal activity, or RICO, statutes.