February 02, 2007
The January 29, 2007 issue of the Wall Street Journal (subscription required) reported that Greenlight Capital, a hedge fund, has filed a whistleblower lawsuit claiming that Business Loan Express (BLX) defrauded the Small Business Administration.
One wrinkle is the Greenlight has taken a short position on the stock of BLX’s parent company, Allied Capital Corp., essentially betting that the value of the stock will fall.
Allied Capital has been under investigation for more than two years by the U.S. attorney for the District of Columbia in connection with a criminal probe of BLX, but the government has declined to intervene in Greenlight’s case.