Paul L. Caron

Tuesday, March 22, 2022

WSJ: Short-Seller Kingpin Tries To Torpedo Tenure Of Columbia Law Prof Whose Research Guides Federal Prosecutors Investigating Market Manipulation

Wall Street Journal, Carson Block’s Latest Short Target Is a Columbia Law Professor:

MittsA federal criminal investigation into short sellers has spawned a behind-the-scenes feud between a law professor whose research is helping to guide prosecutors and one of the most prominent investors in their sights.

Carson Block, known for public broadsides against companies he suspects of fraud, has been waging a campaign to discredit Joshua Mitts [right], a Columbia University law professor who has been aiding the U.S. Justice Department in its investigation into whether short sellers use illegal trading tactics to drive stock prices down. ...

Mr. Block wrote last month to Columbia’s head of human resources urging the school to investigate Mr. Mitts’s research, as well as his paid consulting work for companies targeted by short sellers.

In the letter, viewed by the Journal, he attacked a paper Mr. Mitts wrote in 2018, which found that bearish posts on the investor website Seeking Alpha were often accompanied by unusual trading activity [Short and Distort]. The paper has helped guide prosecutors in their investigation, the Journal has reported.

Mr. Mitts’s research “lacks academic integrity and is wholly wrong,” Mr. Block wrote. He also said Mr. Mitts’s consulting work may violate the university’s ethics policies. ...

Mr. Mitts is up for tenure next month, and Mr. Block appears bent on ensuring he doesn’t get it. ...

In addition to the formal request to Columbia, Mr. Block sent an email last month to John Coffee, a chaired professor who has taught at Columbia Law School since 1980. He called Mr. Mitts’s research “outright deceptive and misleading” and attacked his work for companies that have been targeted by short sellers. 

“You have been bamboozled into assisting him in is campaign that serves his clients’ interests,” Mr. Block wrote in the email. 

“I do not think you are a fraud and I like what you have done,” Mr. Coffee replied, citing Mr. Block’s work exposing accounting problems at a Chinese coffee chain. “I also do not think Joshua is a fraud. Maybe I am just soft-headed.”

In an interview, Mr. Coffee called Mr. Mitts “one of the best young scholars in the country” and his case for tenure was strong. He also praised Mr. Block as “an entrepreneur par excellence.” 

“They’re both talented people,” he said, “but now they’re like the Capulets and the Montagues.” ...

The two men were once friendly, at least professionally. In 2019, Mr. Block visited Mr. Mitts’s class at Columbia, where he spoke admiringly of the professor’s work, according to correspondence between the two viewed by the Journal. They discussed co-authoring an article about short selling, agreeing that it was key to policing corporate fraud and raising concerns about the possibility of manipulative trading. ...

Last week Eric Talley, another Columbia Law School professor specializing in corporate law and finance, waded into the spat by publishing a short paper concluding that Mr. Mitts’s research on the price movements of shorted stocks was on sound theoretical footing [Short Sellers, Persuasion Games, and Predicting the 'V'].

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