Morgan Keegan & Co, owned by Region's Financial Corp. (NYSE: RF), fired analyst John Gwynn last month for leaking information about his calls on shares of Fairfax Financial (NYSE: FFH) prior to their publication.
This is the latest chapter in an ongoing battle that includes a lawsuit filed by Fairfax accusing Morgan Keegan, Gwynn and a group of hedge- fund managers of conspiring to short the company's stock and then profit by spreading false rumors. Mr. Gwynn has since filed a libel suit against Fairfax.
Keegan stands by the quality of Gwynn's research, with a spokeswoman telling Bloomberg that "The evidence shows that Mr. Gwynn strongly believed in the accuracy of the facts in his report. The apparent advance disclosure of coverage has no bearing on the content or accuracy of the report. We continue to believe that the lawsuit is completely without merit.''
Nevertheless, this will give the proponents of a short-selling conspiracy theory some ammunition because it demonstrates that Mr. Gwynn was perhaps less than honest and it begs the question, assuming the allegations are correct -- what was his relationship with the person or people that he leaked the information to, and what did he get in return?
If Gwynn simply gave his research to someone in advance in exchange for money, that's one thing -- unethical and deplorable, but probably not altogether uncommon. But if he was paid for producing a certain viewpoint, it has the making of a major scandal.
Of all the naked short-selling crybabies, Fairfax appears to be the one that has produced the most evidence of actual wrongdoing, and this will be an interesting case to watch.
Last updated: February 13, 2012: 12:36 PM
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Reader Comments (Page 1 of 1)
9-12-2008 @ 6:41AM
Unknown said...
Zac, it must have been hard to report this. Even when the news is all bad regarding your opinion you find a way to trash the victors.
First of all, take your blinders off and really think about this.
Analysts move markets, well known fact. Upgrades/Downgrades on a market have instant reactions. To get first hand knowledge of such information, and then trade on that non-public information, is frontrunning and illegal.
Second, ask yourself why Gwynn would risk his job and possible securities enforcements to provide hedge funds with advance reports? It was against company policy correct? why risk it unless there is incentive to do so. That incentive seems to come from those who would trade off this information for profit - the short sellers who you claim repeatedly are innocent.
if this were a case where the "crybabies" as you call them were involved in similar wrongdoing you would be all over this with a vengence. In this case you sugar coat the bad with a trashing of the victim.
10-06-2008 @ 11:37AM
Say WHAT said...
The victim?? There is literally a growing list of Morgan Keegan wrongdoings and investigations. Although "Unknown" makes a compelling argument for this particular case, one only has to look at the growing number of ongoing investigations and past violations involving Morgan Keegan and subprime CDO's that makes your referring to them as any kind of victim, laughable.
http://www.morgankeeganfundloss.com/morgan_keegan_current_investigations.html
http://www.morgankeeganfundloss.com/morgan_keegan_past_violations.html