.... and Erin Callan lied like a finance minister on the eve of devaluation. Einhorn Vindicated on Lehman, Beating BlackRock, Putnam Bulls By Michael Patterson and Eric Martin Sept. 13 (Bloomberg) -- The tally is in and hedge fund investor David Einhorn beat BlackRock Inc. and Putnam Investments LLC by betting against Lehman Brothers Holdings Inc. Einhorn's Greenlight Capital LLC disclosed in April it was short Lehman, a bearish bet that would have returned about 90 percent through yesterday. The trade has made the most this month, followed by June, when BlackRock bought Lehman shares and Kevin Cronin, Putnam's head of investments, said ``they're going to be winners.'' Once the fourth-largest U.S. securities firm, Lehman plunged every month since April and fell to as low as $3.17 yesterday. The shares dropped as devalued real estate assets led to $5.6 billion of third-quarter writedowns and negotiations to sell a stake broke down. Moody's Investors Service said it may cut Lehman's credit rating, a move that would increase borrowing costs and endanger its ability to trade with other Wall Street firms. ``Guys like Einhorn were very prescient and did their research,'' said Scott Rothbort, who invests money for wealthy individuals as president of Millburn, New Jersey-based Lakeview Asset Management LLC and said he isn't buying or selling Lehman shares. ``The guys who were early to the trade were really the brightest. I don't think you can categorize it any other way.'' Einhorn, 39, wrote in an April report to shareholders that New York-based Greenlight was shorting Lehman's stock, or selling borrowed shares in the hope of buying them later for less. `Performance Smoothing' ``There is good reason to question Lehman's fair value calculations'' for mortgages and other rarely traded assets, Einhorn wrote. ``That Lehman has not reported a loss smells of performance smoothing.'' Einhorn declined to comment. Einhorn's book ``Fooling Some of the People All of the Time,'' published in May, describes his six-year battle with Allied Capital Corp., a Washington-based company that invests in, and makes government-backed loans to, small businesses. Einhorn has been shorting Allied since at least May 2002. Since then, the stock has lost about two-fifths of its value. Einhorn also was a member of mortgage lender New Century Financial Corp.'s board before mounting losses from loans to riskier borrowers sent the Irvine, California-based company into bankruptcy in April 2007. He resigned in March 2007, and declined at the time to discuss his reason for quitting. Callan Spat Einhorn's critique of Lehman included a speech in May at an investing conference in New York, where he said the former chief financial officer, Erin Callan, changed her description of how the firm valued a private equity investment. Callan left the company two months later and now works for Credit Suisse Group AG. At the time, Lehman dismissed Einhorn's comments as having ``no basis in fact.'' The New York-based bank said in an e-mailed statement in May that Einhorn ``cherry-picks certain specific items from our 10-Q and takes them out of context and distorts them to relay a false impression of the firm's financial condition, which suits him because of his short position in our stock.'' Lehman spokeswoman Monique Wise declined to comment. ``When short sellers discuss publicly their reasons why they don't like something, it's no different than a guy that recommends buying a stock,'' said Ted Weisberg, president of the New York-based brokerage Seaport Securities Corp. Robert Kapito, BlackRock's president, said in a June 13 interview that his firm bought Lehman shares that week and he had ``confidence in the firm, in the leadership.'' Kapito declined to say how much his firm invested in Lehman. `Strong Franchise' BlackRock's New York-based spokeswoman Bobbie Collins said the firm couldn't comment, citing discussions with Lehman over the sale of U.K. mortgages. Putnam, the Boston-based mutual fund firm that oversees about $163 billion, said in June it bought Lehman bonds, stock and convertible shares in previous offerings this year and that Lehman was a ``strong franchise.'' ``We're holders of all levels of their capital structure,'' Cronin said on June 13. ``The market has unfairly punished the price of their stock and bonds. We know they're going to be winners in the long run.'' Cronin didn't return phone and e-mail messages seeking comment. ``It turned out to be a smart trade to be short Lehman,'' said James Gaul, a money manager at Boston Advisors LLC, which oversees about $1.8 billion in Boston. ``The proof is in the price.'' To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net. Last Updated: September 13, 2008 00:02 EDT