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.