St. Joe Says SEC Is Investigating Financial Reports, Berkowitz

The U.S. Securities and Exchange Commission has started a formal investigation of St. Joe Co., Northern Florida’s largest landowner, and Chairman Bruce Berkowitz, its biggest shareholder, the company said.

The probe “covers a variety of matters” including securities-law anti-fraud provisions for corporate officers and board members, internal controls and financial reports, the Watersound, Florida-based company said in a filing with the SEC made after the close of regular U.S. trading yesterday.

“The order designates officers of the SEC to take the testimony of the company and third parties with respect to any or all of these matters,” according to the filing. St. Joe said it’s cooperating with the agency.

Berkowitz, whose Fairholme Capital Management LLC owns about 29 percent of St. Joe’s shares, was named chairman in March. Chief Executive Officer Britt Greene and three other board members resigned Feb. 28 after Berkowitz criticized their spending and corporate governance.

Berkowitz didn’t respond to an e-mail, telephone call to Fairholme’s Miami office or request for comment left for an outside spokesman yesterday.

In October, David Einhorn, who runs hedge fund Greenlight Capital Inc., accused St. Joe of failing to write down the value of its developments after the Florida real estate crash. In January, St. Joe said the SEC was conducting an informal investigation of its real estate impairment practices. The company received a “related order of private investigation” on June 24, it said yesterday.

Documents and Testimony

A formal investigation, such as the one St. Joe disclosed yesterday, enables the SEC to subpoena documents and testimony, according to the agency’s enforcement manual.

Einhorn, who had an undisclosed short position in St. Joe, declined to comment yesterday. Short sellers sell borrowed stock in the hope of buying the securities later at a lower price and returning them to the lender.

St. Joe also announced yesterday that it ended a $125 million revolving credit facility with BB&T Corp.’s BB&T Capital Markets, effective yesterday, and will begin a stock repurchase program. The company has $103.8 million available under the program, it said.

St. Joe rose 14 cents to $20.87 yesterday in New York Stock Exchange composite trading. The shares have declined 4.5 percent this year.

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