By Patrick Fitzgerald
Of DOW JONES DAILY BANKRUPTCY REVIEW
Lehman Brothers Holdings Inc. (LEHMQ) says Och-Ziff Capital
Management (OZM), one of the worlds' biggest hedge funds, has
information about efforts to "short and distort" the investment
bank's stock before its collapse in September 2008.
According to a bankruptcy court filing, Lehman's lawyers say an
investigation into the source of "false rumors" that helped bring
down the investment bank indicate Och-Ziff "was involved with, or
has information that pertains to 'short-and-distort' efforts"
regarding Lehman securities.
"Och-Ziff has already begun aggressively stonewalling" to
prevent the information from coming to light, according to papers
filed Wednesday in U.S. Bankruptcy Court.
Specifically Lehman says Och-Ziff "likely disseminated and/or
was the recipient" of an inaccurate rumor that the bank had spun
off debt to two Lehman-controlled hedge funds to reduce is
leverage.
A spokesman for Och-Ziff declined to comment.
Lehman's lawyers have been looking into the source of the rumors
about Lehman's financial troubles so they can be reported to the
Securities and Exchange Commission.
They have subpoenaed a half a dozen Wall Street firms as part of
the probe, but Och-Ziff is the only one to object in court and the
hedge fund has refused to hand over a single document.
Lehman was targeted by a number of short sellers, perhaps most
famously by David Einhorn's Greenlight Capital, prior to its
collapse. While the practice, essentially betting that the stock's
price will fall, isn't illegal, so-called naked short
selling--selling the stock without having the borrowed shares to
deliver to the buyer--is out of bounds in the U.S.
Lehman filed for bankruptcy, the biggest ever, in September
2008. The SEC temporarily banned short selling of many financial
stocks following Lehman's bankruptcy.
Och-Ziff was founded in 1994 Daniel Och, a veteran of Goldman
Sachs' risk-arbitrage team, with an initial investment from the
Ziff family. The hedge fund, with early $26 billion in assets under
management, is one of the world's largest.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Patrick Fitzgerald; Dow Jones Daily Bankruptcy Review;
202-862-3544; patrick.fitzgerald@dowjones.com