Fairfax Financial Adds Chanos to Short-Sellers Suit

Portfolio holding Fairfax Financial (FFH) has added James Chanos to the list of defendants in its private lawsuit against short-sellers. The Financial Times reports (free link via MSN Money):

In an amended complaint filed late last week, Fairfax alleged that Mr Chanos's hedge fund, Kynikos Assoc, was part of a group of funds that used underhanded tactics to drive down its share price. The Securities and Exchange Commission has been looking into Fairfax's allegations.

The amended complaint includes statements from Spyro Contogouris, the operative allegedly at the heart of the campaign against the Canadian insurer, saying Mr Chanos employed him as a consultant. Mr Contogouris was indicted by a federal grand jury in March on four counts of wire fraud that are not related to the Fairfax case.

Mr Chanos said he had not yet read the complaint and therefore could not comment.

Regular readers know I am long Fairfax Financial. And that I have been dismissive of Chanos declaring Fairfax to be "a zero" -- especially when one of his supportive points in making that claim was that Prem Watsa has been referred to as the "Warren Buffett of Canada."

I further remind readers that I am not a lawyer and have no idea whether or not Fairfax's suit has merit. Though it surely looks like some folks were up to lots of sleazy activities. Whether or not these activities are illegal is the question we'll eventually see answered.

FFH 1-yr chart