fooling some of the people all the timeI reached out recently to David Einhorn for an interview. Einhorn had done several interviews promoting his updated book, Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New Epilogue. Almost all authors promote their book, but this case was very unique because Einhorn does not need the money, and he donated 100% of the proceeds of the book to charity. Einhorn conducted


several great interviews with Charlie RoseConsuelo Mack Wealth TrackKing World News, and my favorite Deal Breaker.

Below is a brief bio of David Einhorn:

DAVID EINHORN is the co-founder of Greenlight Capital, a long-short value hedge fund, which he started with $900k   in 1996. The fund now has over $8 billion AUM.  Greenlight has been closed to new investors for several years. Since 1996, Einhorn’s fund has generated greater than 30% gross returns per annum.

In 2008 Einhorn came out with his book Fooling Some of the People All of the Time: A Long Short Story. In the book, Einhorn described his short of Allied Capital. Einhorn alleged massive fraud at Allied Capital, which mostly consisted of the company declaring their assets far above their real value, and not confirming with GAAP (Generally accepted accounting principles, which must be used by public companies in the US). Einhorn went public with his short in 2002, in this speech heard around the world. Over the next six years, Einhorn tried without avail to go to every Government agency and explain the fraud going on in the company. Einhorn contacted the SBA, FBI, SEC, Congress and other Government agencies, to no avail. Einhorn published the book in 2008, while the fraud was still taking place but had not yet been proven.

Einhorn released an updated version of his book in December 2010, Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New Epilogue (after the updated edition came out, Einhorn did several interviews promoting his book, as described above), where he adds an epilogue detailing even more  fraud at Allied, which could not be revealed at the time of original publication due to pending investigations. The book also discusses the collapse of Allied Capital and the buyout of the company by by Ares Capital. David also devotes several pages to his other famous short call, Lehman Brothers in 2007. Lehman collapsed in 2008, after the Federal Reserve and Treasury refused to bail out the insolvent investment bank.

To read my review on David’s book click here.

I asked Einhorn for an interview recently, and although he stopped his interviews promoting the book, he was kind enough to agree to answer two questions about the book. As I told Einhorn I could probably think of a million questions to ask him, but I had to pick my top two, so below are my two questions and his answers.

 

Me:  Most people write a book when the story is over. The first edition of your book came out while Allied capital was still trading at $20 a share. How did you have the confidence to publish a book when it was possible things would not work out as you expected, were you thinking this might be the next “Dow 36,000?

David Einhorn: I didn’t know how or when the story would end. I did know that our research was correct, so I remained optimistic.  I believed it was necessary to publish the book even without an ending because the broader story was important.

Me: The amount of research you did on Allied is staggering.  How much time of initial research did you perform before shorting Allied, and subsequently from 2002-2008 how many hours, days, months did you spend investigating the company?

David Einhorn: More than I care to count.

 

Very succinct answer to the second question, but I liked it!


To learn more about David Einhorn see my David Einhorn Resource Page.