According to the financial regulator, Einhorn was alerted to the fact that the leading British pub operator, Punch Taverns PLC, was on the verge of raising money by issuing new shares, only minutes before he began selling millions of the company’s shares on June 9, 2009. As the value of Punch shares would have fallen following the announcement of the share issue, Greenlight was able to shield itself from taking a significant loss by selling them early. The Financial Services Authority said that although it accepted that Einhorn did not believe he was breaking the rules, the tip-off “was inside information and Einhorn should have appreciated this,” an especially severe error given Einhorn’s prominence. “Einhorn is an experienced professional with a high profile in the industry,” said Tracey McDermott, the authority’s Acting Director of Enforcement and Financial Crime. “We expect someone in his position to be able to identify inside information when he receives it and to act appropriately. His failure to do so is a serious breach of the expected standards of market conduct.” and publicly shorting the stock prior to the bank’s demise.
Einhorn issued a statement affirming his belief that he did nothing wrong, but noting that he and Greenlight Capital had decided to let the matter go, rather than persist in fighting the charges. “We doubt our chances of having a fair hearing,” he said, “although this resembles insider dealing as much as soccer resembles football.” He added that the large fine would not be absorbed by Greenlight funds.
The Greenlight CEO has crafted a formidable reputation for publicly criticizing overvalued companies, such as Lehman Bros., which he accused of placing the entire financial system at risk several months before the investment bank’s stunning collapse. His book, “Fooling Some of the People All of The Time,” examines the ways in which weak regulators and compromised officials have allowed Wall Street companies to operate without constraints.
Einhorn is a charismatic personality who has achieved recognition beyond the world of finance as an expert poker player, winning a major 2006 tournament. He also unsuccessfully attempted to obtain minority ownership of the New York Mets.