Spitzer, SEC Examine if Hedge Funds Are Manipulating Stocks

NEW YORK -- The New York Attorney General and the Securities and Exchange Commission are examining complaints that hedge funds could be working together to manipulate stock prices in a bid to bolster their trading positions, the Wall Street Journal reported on Wednesday.

Citing people familiar with the matter, the newspaper said Attorney General Eliot Spitzer and the SEC’s enforcement staff are examining complaints from companies whose stocks were hit after negative research by hedge funds. The companies include MBIA Inc.; Federal Agricultural Mortgage Corp., known as Farmer Mac; Allied Capital Corp.; Greenlight Capital LLC; Aquamarine Fund Inc.; and Tilson Capital Partners LLC, the people said.

The companies said various hedge funds were working in concert at times with Gotham Partners Management Co., to spread negative information about their stocks, according to the article.

Late last week, Gotham sent a memo informing its investors that the SEC and Spitzer have asked for information about its holdings in MBIA and Farmer Mac and one other stock. Spitzer's office has upgraded an informal inquiry into Gotham's research, focusing on possible inaccuracies, to a formal investigation encompassing the allegations about the other hedge funds, the report said.

-- NYSSCPA.org News Staff

Posted on 01/22/03