Fairfax $5B Suit Alleges Stock Manipulation

Fairfax Financial Holdings Ltd. said Wednesday it has filed suit against several financial players alleging $5 billion in damages from a stock manipulation scheme.

The Toronto-based financial services holding company filed the suit in Superior Court, Morris County, N.J. It alleges violations of various state laws, including the New Jersey Racketeer Influenced and Corrupt Organization Act.

Defendants include: S.A.C. Capital Management, LLC; S.A.C. Capital Advisors, LLC; S.A.C. Capital Associates, LLC; S.A.C. Healthco Funds, LLC; Sigma Capital Management, LLC; Steven A. Cohen; and Exis Capital Management Inc.

SAC spokesman Jonathan Gasthalter said in an interview the lawsuit was "baseless."

The suit alleges that the defendants undertook a "massive and fraudulent disinformation campaign, attacking Fairfax and other targeted publicly traded companies," he said.

SAC Capital Management was at the center of the scheme, the suit alleges, along with several hedge funds including noted hedge fund investor Steven Cohen.

"These hedge funds have immense power in the financial markets," the suit said. "Mr. Cohen alone, through his control over and interests in SAC Capital and other hedge funds, controls at least $7 billion in capital, with his trading activity regularly accounting for 3 percent of the daily volume of trading on the New York Stock Exchange."

After Fairfax's stock was listed on the NYSE in December 2002, SAC Capital launched the attack.

"In furtherance of their scheme, defendants, after having taken short positions in Fairfax stock, engaged in an organized effort to damage severely, if not destroy Fairfax and affiliated companies," the suit alleged.