Institutional Investor's Alpha Magazine - May 2008 - (Page 59)

“No. I heard those stories, too, and I was surprised when I heard that. I wouldn’t have expected people to be calling from the conference.” “So in making this presentation,” Braswell asked a few minutes later, “you had no intent to try to convince the listener that your analysis was in fact correct?” “I thought my analysis was correct. And I thought I gave an analysis that I thought was correct, and I attempted to tell people things that I thought were correct.” “And so isn’t it reasonable to say that you intended to —” At that point, Hiler had had enough. “Look, I really think, if you want him to say he was trying to move the stock, he’s not going to say that,” Hiler said. “No, that’s not what I’m asking him.” “You’re going over this question six times. This witness has said that this was a charitable event that he was asked to attend and give an idea on a stock. He wanted to give a good idea, he said, because he felt people there deserved it because it’s a charitable event.” “He’s not saying he worked backwards from ‘let me intend to do this,’ and go forward to the speech. He’s told you as much as he can,” Hiler said. “‘I went in there to give them what I thought was a good idea and to give them my thoughts on that. They can decide whatever they want to decide.’ And that’s all.” “I am not asking this witness to jump in the mind of anyone who was listening to that speech,” Braswell said. “I am simply trying to understand.” “He has told you what his intent was, what his purpose was and what he did,” Hiler ﬁnished. “Actually, Bruce, you’ve told me more of what his intent was than the witness has. And I would appreciate it if you wouldn’t testify.” “I’m not testifying, but I do not want this witness badgered because this has been gone over six times,” Hiler said. “It’s obvious you want some answer you’re not getting, and I think we should be done with this topic.” Braswell persisted, “Did you have any intent that your speech would have an effect on the market price of Allied securities?” I answered, “That was not the purpose of the speech.” “That was not the purpose. Did you have an intent?” Now, I was confused. “What’s the difference between a purpose and an intent? . . . My intent was to do what the organizers of the charity asked me to do. . . .” Then Braswell got back to the Blackberries. “While you were giving the speech, did you witness people in the audience using their Blackberries?” “I did not witness that, no.” “When did you ﬁrst hear that others had been trading Allied securities during the course of your speech?” This wasn’t correct. My speech occurred after the close of trading. The Blackberry messages were requests to borrow shares in anticipation of shorting them the following day. I answered, “Some weeks later I had a meeting at Goldman Sachs and they told me that they were receiving questions during the meeting about the availPhoto by Alden Gewirtz for Alpha ability to borrow Allied shares, that that had happened during the meeting.” Then suddenly we broke for lunch. I was dizzy and sick to my stomach. I felt that my testimony was not going well. Braswell was confrontational, and I didn’t know how many more arguments over the difference between purpose and intent I could stand. I was not looking forward to going back into that depressing room. They were hammering at me, and I knew I had to somehow get through the rest of the day and the following day. During my SEC testimony, the lawyers also asked repeated questions about my speech and why I had issued a written report a month later. I answered, “Allied had several conference calls and several press releases and was saying various things to the media and so forth. And I felt that a lot of what they were saying was untrue. I felt a lot of what they were saying was misleading. I felt that some of what they were saying was defamatory, and I felt that they were misstating what we had said. I felt that they were mischaracterizing our analysis, and they were accusing us of a whisper campaign. And I felt it was important to set the record straight and to say what we thought the facts were and see if we could put some real facts out there to clarify things.” Periodically, Kilroy asked softball questions, possibly because she may have seen merit in Greenlight’s criticisms, which allowed me to defend myself easily and even turn the question back toward Allied. For example, “Were you more often than not able to ask questions on [Allied’s conference] calls or did you get a sense that you were being screened out of their calls?” Near the end of the ﬁrst day of testimony, Kilroy asked me a question, the answer to which had become obvious: “At the time that you made the speech, did you anticipate that your position on Allied would become so public, or was it your thought that you would give this speech, say what you thought about the company, and then that would sort of be it, and what would happen to the stock would happen to the stock?” “If what you’re asking is did I feel that the reaction was much, much greater than I would have anticipated? The answer is yes.” Excerpted with permission of publisher John Wiley & Sons, from Fooling Some of the People All of the Time, copyright 2008 by David Einhorn. This book is available at bookstores and online booksellers and from the publisher’s Web site, www.wiley.com, or by phone at 1-800-225-5945. MAY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 59 http://www.wiley.com

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - May 2008

Institutional Investor's Alpha Magazine - May 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Send in the Clones The Good Guys: Outside the Box Cover Story: Welcome to Oz Interview: The Tipping Point Regulation: When Sentinels Go Astray Strategies: Taking Credit Research Center: The Hedge Fund 100 Book Excerpt: Shoot the Messenger Alpha Bytes: VaR Enough? Unhedged: Commentary: Not Your Father's Activist

Institutional Investor's Alpha Magazine - May 2008

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