Another day, another Lehman smackdown

Over the past few days, more questions have surfaced about Lehman Brothers and what their next earnings report will reveal. There have been suspicions that the profit that Lehman reported last quarter were generated from one time, unrealized gains.  Now the drum beat is getting louder, with Greenlight Capital chief David Einhorn's speech  --  critical of Lehman -- at the well-attended-by-Wall-Street-elite Ira Sohn conference on Wednesday.  There he outlined why he's short Lehman Brothers.  The WSJ's 'Heard on the Street' column details Einhorn's short thesis where he takes aim at Lehman and their well accessorized CFO, Erin Callan....

In his comments, Mr. Einhorn squared off in particular against Erin Callan, Lehman's chief financial officer and the executive who has led the public charge against the firm's critics. Mr. Einhorn met with Ms. Callan last week to discuss his research.

In a statement, a Lehman spokeswoman said: "We will not continue to refute Mr. Einhorn's allegations and accusations. Mr. Einhorn cherry-picks certain specific items from our quarterly filing and takes them out of context and distorts them to relay a false impression of the firm's financial condition which suits him because of his short position in our stock. He also makes allegations that have no basis in fact with the same hope of achieving personal gain."

In attacking Lehman, Mr. Einhorn took issue with large, unrealized gains the firm booked in the first quarter from marking up equity positions that don't trade in public markets. Like other brokers, Lehman has large amounts of illiquid assets that it values using management-driven financial models.....

In his speech, Mr. Einhorn also questioned the values Lehman put on many of other financial assets. In particular, he said Lehman hadn't sufficiently written down $6.5 billion of complex debt securities called collateralized debt obligations, or CDOs.

He added that these holdings were only recently disclosed, even though other banks and Wall Street firms disclosed similar holdings months ago and took massive write-downs on them.....

A Shorter Slams Lehman - WSJ

Comments

[Marc Authier]

Ah! Lehman Brothers. What a funny name. It reminds me of a circus outfit.