An Incisive Look at Market Antics Regarding Lehman from the Naked Capitalist

From the "we wish we had written this department..." is a brief excerpt from a much longer original (with updates) that is well worth reading from a favorite site Naked Capitalism.

"...leaking an internal memo with non-public, material financial information to Gasparino is an SEC violation, although I am highly confident it was done in such a way the the firm has plausible deniability if questioned. Don't tell me this may have been an unauthorized employee leak; if this memo was circulated broadly to employees, it was done with the full intent that word would get outside the firm. That happens predictably with mass employee communications. And if it was limited distribution, the recipients, as anyone who has passed a Series 7 exam ought to know, are fully aware that selective disclosure of material information is a big no no under SEC Rule FD.

So why wouldn't Lehman disclose the sort of information it has been leaking to the Times and Gasparino (or more charitably, handled in such a way so as to guarantee that it would get out), particularly since they are favorable to the firm? Ah, the firm would be liable for the accuracy and completeness of any such disclosures.

So that says that these leaks are highly likely to be less than what they appear to be on the surface. More bluntly, Lehman doesn't dare say in public the stories it is presenting privately because they are not fully accurate. Otherwise, they'd be broadcasting them.

This stinks to high heaven. I spent a few years in the industry a long time ago, and the SEC requirements were taken pretty seriously. Now skirting around the edges, particularly the ruse of using plants with the likes of Gasparino in lieu of proper disclosure has become common. And it's a favored device with embattled companies. To me, this fact pattern alone is enough reason to be short the stock. Management is acting as if all is not well in Denmark."

Dirty Tricks at Lehman? - The Naked Capitalist