Contents
Foreword
Who’s Who
Introduction to This Edition
Introduction: The Spark of a Speech
Part One: A Charity Case and Greenlight Capital
Chapter 1: Before Greenlight
Chapter 2: Getting the “Greenlight”
Chapter 3: Greenlight’s Early Successes
Chapter 4: Value Investing through the Internet Bubble
Chapter 5: Dissecting Allied Capital
Part Two: Spinning So Fast Leaves Most People Dizzy
Chapter 6: Allied Talks Back
Chapter 7: Wall Street Analysts
Chapter 8: The You-Have-Got-to-Be-Kidding-Me Method of Accounting
Chapter 9: Fact—or Maybe Not
Chapter 10: Business Loan Express
Chapter 11: Disengaging and Re-engaging
Chapter 12: Me or Your Lyin’ Eyes?
Chapter 13: Debates and Manipulations
Chapter 14: Rewarding Shareholders
Chapter 15: BLX Is Worth What, Exactly?
Part Three: Would Somebody, Anybody, Wake Up?
Chapter 16: The Government Investigates
Chapter 17: A Tough Morning
Chapter 18: A Spinner, a Scribe, and a Scholar
Chapter 19: Kroll Digs Deeper
Chapter 20: Rousing the Authorities
Chapter 21: A $9 Million Game of Three-Card Monte
Part Four: How the System Works (and Doesn’t)
Chapter 22: Hello, Who’s There?
Chapter 23: Whistle-Blower
Chapter 24: A Naked Attack
Chapter 25: Another Loan Program, Another Fraud
Chapter 26: The Smell of Politics
Chapter 27: Insiders Getting the Money Out
Part Five: Greenlight Was Right . . . Carry On
Chapter 28: Charges and Denials
Chapter 29: Charges and Admissions
Chapter 30: Late Innings
Chapter 31: The SEC Finds a Spot under the Rug
Chapter 32: A Garden of Weeds
Chapter 33: A Conviction, a Hearing, and a Dismissal
Chapter 34: Blind Men, Elephants, Möbius Strips, and Moral Hazards
Part Six: Epilogue
Chapter 35: Looking Back: As the Story Continued
Chapter 36: The Lehman Brothers Saga
Chapter 37: If They Asked Me, I Could Write a Book
Chapter 38: Just Put Your Lips Together and Blow
Chapter 39: Some Final Words to and from the SEC
Chapter 40: The Last Word
Glossary
Acknowledgments
About the Author
Index
Fooling Some of the People All of the Time
Copyright © 2008, 2011 by David Einhorn. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Cataloging-in-Publication Data
Einhorn, David.
Fooling some of the people all of the time : a long, short (and now complete) story/David Einhorn; foreword by Joel Greenblatt.
p. cm.
Includes index.
ISBN 978-0-470-07394-0 (cloth); ISBN 978-0-470-48154-7 (paper); ISBN 978-0-470-37149-7 (ebk); ISBN 978-0-470-37158-9 (ebk); ISBN 978-0-470-89329-6 (ebk)
1. Allied Capital—Management—Evaluation. 2. Allied Capital—Accounting—Evaluation. 3. Small business investment companies—United States—Management—Evaluation. I. Title.
HG3729.U5E44 2008
332.6'20973—dc22
2008011992
In honor of my parents, Stephen and Nancy Einhorn, who demonstrated business success while maintaining high standards of personal integrity and good humor.
Foreword
You don’t have to be a financial expert to read a great detective novel. But since this story involves billions of dollars and an elaborate plan, it does help to have one of the world’s greatest investors around to lead you through all the twists and turns. In the end, the story is simple. It’s also thrilling and scary—even more so because, sadly, this isn’t a novel. It all actually happened, and as I write, the story continues.
I read this book in two sittings. If eating and sleeping hadn’t gotten in the way, it would have been one. I was drawn into a world that few of us have experienced other than at the movies. It really is hard to believe how the legal system, government regulators, and the financial press can all come together and fail so miserably. Most great stories have good guys and bad guys. In simplest form, there are black hats and white hats, and you can tell which side the players are on. Not so in Fooling Some of the People All of the Time. Our hero is never quite sure whom he can trust.
But that’s okay. As long as you can experience the excitement and intrigue vicariously in the comfort of a bed or couch, it doesn’t seem so bad. It’s also not so bad to lose some innocence about how the world sometimes works. In the short run, the good guys may get dragged through the mud and the bad guys may get away with millions. But in the long run, the good guys may get dragged through the mud and the bad guys may get away with millions. In the meantime, I will have to give the movie version of the book an R rating. I just don’t want my kids to lose their innocence too soon.
Joel Greenblatt
SEC lawyer: “At the time that you
