Einhorn's call on Lehman seen as right

BOSTON (Reuters) - Hedge fund manager David Einhorn has been called a lot of things in his career. Now “right” may be the one that comes to mind first.

The boyish looking, 39-year old investor, who has battled with some of Wall Street’s toughest executives and Washington’s most prominent regulators, was among the first to say something was terribly wrong at Lehman Brothers Holdings Inc.

Now that the 158-year old investment house is racing toward liquidation, Einhorn’s polite, persistent, but very public questions about Lehman’s balance sheet will likely cement his reputation as one of the industry’s shrewdest managers, other investors and industry analysts said.

Some on Wall Street call him a “visionary,” but others call him a “villain” for having repeatedly questioned how Lehman, particularly former chief financial officer Erin Callan, valued its assets at a time the housing crisis was deepening and rival investment houses were taking enormous losses.

In December, when Lehman’s shares were trading over $65, Einhorn told Reuters the company was not taking proper write-downs. It seemed clear Einhorn’s $6 billion Greenlight Capital was shorting, or betting against, Lehman and the stock’s decline accelerated.

“Like all good short sellers, he’s a skeptic who can look through the noise on Wall Street,” said hedge fund manager Douglas Kass, who heads Seabreeze Partners Management.

As Lehman’s troubles mounted, Einhorn, who is also known for his 18th place finish in a high-powered poker tournament in Las Vegas last year, has been studiously silent, unwilling to display any sense of Schadenfreude.

What he may have won or lost on Lehman is secret and people who know him say only that his fund has returned an average 25 percent a year from 1996 to 2007.

Einhorn did not set out to take on Wall Street’s sacred cows or become an industry icon when the summa cum laude Cornell graduate got into the investment management business, people who know him said. He does not even short stocks most of the time.

What he likes is researching an idea so meticulously that no one knows more about it than he does, people who have put money with him said.

When Einhorn trips over corporate missteps and possibly fraudulent accounting, however, he can become so angry he stands up and speaks up.

“His attention to detail and his compulsion to stay with his convictions have given him an edge,” said Philippe Bonnefoy, who invests in hedge funds as chairman of the asset allocation committee at Cedar Partners.

“People have to remember, he’s not the bad guy,” Bonnefoy said, echoing Lehman CEO Richard Fuld when he reportedly told his own employees that they and not Einhorn were responsible for Lehman’s losses.

Long before Lehman, Einhorn, a father of three who makes it a priority to get home in time for dinner, battled other companies, including Allied Capital Corp, after suspecting that the lender’s accounting practices were misleading.

In retaliation to his claims, Einhorn said he was accused of stock manipulation and someone hacked into his telephone records. Eventually, regulators acted on the matter, but never demanded a big penalty.

Instead of stewing in private, Einhorn wrote a book “Fooling Some of the People All of Time” about his six-year ordeal with Allied.

On his website, he said he wanted to “expose the grim realities about unchecked corporate misconduct by a bad company.” Book proceeds are going to charity.

“He’s got a thick skin, you have to,” Kass said.

Still Einhorn has no plans of becoming an author full time.

“I love my day job as a fund manager,” he wrote.