David Einhorn Slams SEC, Says Its Culture Of "Lawlessness" That Allowed Allied Capital's Fraud Cannot Continue

First David Einhorn gets invited to Congress to teach lawmakers how to deal with the Lehman problem of fraudulent reporting (which it is certain was not confined to Lehman), and now the Greenlight founder slams the SEC for its crooked culture and lack of enforcement that allowed the Allied "wrongdoing" to persist for years. As was reported earlier by the Washington Post, the SEC's inspector general found that the agency had failed to properly investigate allegations of wrongdoing at the financial firm. Now Reuters reports that Einhorn is demanding Mary Schapiro release the full version of the Allied report. After the shame associated with the Madoff affair, we wonder just how much abuse can the SEC take before it is finally disbanded for being the most worthless regulator ever to grace capital markets.

Allied harmed investors even more because the SEC failed to act, Einhorn said on Tuesday. Now he wants the agency, which has faced sharp criticism for having missed the Madoff Ponzi scheme and other investment frauds, to show the public everything it has on the Allied case.

"We call upon the SEC to immediately release the non-redacted version of the report," Einhorn said. "The government-sanctioned culture of lawlessness that allowed this fraud to occur cannot continue."

Einhorn, who runs New York-based Greenlight Capital, started to bet against Allied Capital in 2002 by selling the company's shares short after saying that he thought the company was overvaluing its holdings.

SEC spokesman John Nester said, "We agree with each of the report's recommendations, have already implemented several of them and expect to complete the process in June."

The battle between Allied and Einhorn became intensely personal when the company acknowledged three years ago that it may have obtained Einhorn's phone records.

Einhorn said that someone impersonating his wife and using her Social Security number had directed the phone company to send copies of his home phone to an online account.

A few years from now, comparable reports will be made, investigating wrongdoing and fraud at the very top echelons of our financial world, likely implicating none other than the Federal Reserve itself, once the current most recent version of the bubble implodes and there is nobody left to bail us out. In the meantime, we can simply take solace that those who called the fraud during the recent credit bubble are finally being taken seriously. As for Einhorn's claims that Allied was going through his phone records, well that is just the price on must pay when going against the grain of manipulation and fraud, and exposing the criminals for what they are. And in the meantime, the SEC has just been relegated from being a merely incompetent agency looking at tranny porn all day, into a criminal one, expanding into the not so ripe field of child pornography.