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Einhorn, Greenlight Fined $11 Million in U.K. for Punch Sale

David Einhorn
David Einhorn, president of Greenlight Capital Inc. Photographer: Peter Foley/Bloomberg

Jan. 25 (Bloomberg) -- David Einhorn and Greenlight Capital Inc. were fined 7.2 million pounds ($11.2 million) by the U.K.’s financial regulator for trading on inside information in Punch Taverns Plc in 2009.

Einhorn, Greenlight’s 43-year-old chairman, was told of Punch Taverns’s plan to sell equity by a broker representing the company, the Financial Services Authority said in an e-mailed statement today. He then sold more than 11 million Punch Tavern shares over the following four days, avoiding losses of about 5.8 million pounds for the fund, the regulator said.

“The big name and the big number” are what the FSA wants, Louise Hodges, a financial-crime defense lawyer at Kingsley Napley LLP in London, said in a telephone interview today. “It looks like it’s more a case of he should have known, rather than he did know,” his actions were illegal.

Greenlight said the market abuse was “inadvertent” and the regulator agreed it wasn’t deliberate or reckless. The fine won’t come out of Greenlight funds, the New York-based firm said in a statement.

The FSA is imposing stricter supervision after being criticized for failing to prevent the U.K.’s worst financial crisis since the World War II. The fine against Einhorn, 3.64 million pounds, is the second-largest civil penalty levied against an individual by the FSA after a $9.6 million fine against Dubai-based investor Rameshkumar Goenka in November.

‘Arduous Fight’

“We believe that this action is unjust and inconsistent with the law and with prior FSA enforcement,” Einhorn said in the Greenlight statement. “However, rather than continue an arduous fight, we have decided to put this matter behind us.”

The $7.8 billion Greenlight Capital LP fund returned 2.9 percent last year and has produced annualized returned of 20 percent since the fund started in May 1996, according to a letter sent to investors.

Einhorn, who profited from a bet against Lehman Brothers Holdings Inc. before the firm collapsed in 2008, called for Microsoft Corp.’s board to replace Chief Executive Officer Steve Ballmer in May. He offered $200 million for a 33 percent stake in the New York Mets baseball team last year before withdrawing the bid and finished 18th in the World Series of Poker’s main event in 2006.

“Einhorn is an experienced professional with a high profile in the industry,” said Tracey McDermott, the FSA’s acting enforcement chief. “We expect someone in his position to be able to identify inside information when he receives it and to act appropriately. His failure to do so is a serious breach.”

Matter of Minutes

Einhorn heard in a June 2009 telephone conference call that Punch Taverns was about to sell additional equity, the FSA said. Einhorn gave instructions to Greenlight to sell Punch shares “a matter of minutes” after the call ended, according to the regulator. The hedge fund reduced its holdings in Punch shares from 13.3 percent of its outstanding shares to 8.9 percent over the next four days.

Greenlight, wholly-owned by Einhorn, had around 31 employees in 2009, according to the U.K. regulator.

An outside spokeswoman for Punch declined to comment on the FSA fine and refused to provide her name citing company policy.

To contact the reporter on this story: Ben Moshinsky in London at; Lindsay Fortado in London at

To contact the editor responsible for this story: Anthony Aarons at

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