Open Book: Einhorn on Short-Selling

I want to explain why I wrote Fooling Some of the People All of the Time. After all, I am not an aspiring author and I love my day job as a fund manager. Further, I will not benefit from telling my story, as I have pledged my share of any profit from this book and the investment in Allied Capital (ALD Quote) to charity.

The story you are about to read exposes the grim realities of unchecked corporate misconduct by a bad company and the failures of proper regulatory oversight. The story should have particular interest for individual investors, because those are the folks Allied preys upon. Allied offers the lure of an attractive "dividend" (which is really an annual tax distribution divided into four neat quarterly pieces and smoothed out over time) and makes simple claims like "you never have to restate a dividend" and "we are the victim of a short attack."

The story sounds good and the management comes across simpatico. The book shows how these investors are willing to be the some of the people, who are fooled all of the time and how Allied takes advantage of them -- and the new investors it finds to take its habitual stock offerings. ...