Lehman’s management has spoken with some analysts about Mr. Einhorn, but they have declined to comment publicly beyond a statement that says Mr. Einhorn “cherry picks” and misconstrues information.
“They’re furious,” Mr. Hintz said. “If you get distrust of your accounting, then it affects the valuation of the company forever going forward.”
Within Lehman, workers are calling Mr. Einhorn’s strategy “short and distort.” Many hedge fund managers talk freely with one another about companies, but they typically shun publicity. Mr. Einhorn, by contrast, is working with a financial public relations firm, the Gordon Group, to promote his book and views on stocks.
“His position on shorting Lehman is only going to get traction and be successful if he can succeed in convincing people to drive down the stock,” said Michael Claes, a managing director at the public relations firm Burson-Marsteller. “That’s best accomplished with media exposure.”
But Mr. Einhorn’s public approach leaves him open to being criticized himself. Mr. Hintz of Sanford Bernstein said in a report on Monday that supporters of Mr. Einhorn’s latest arguments are “piling on” against Ms. Callan. And Buckingham Research Group said his concerns were “just wrong.”
“These recent criticisms also seem will-timed to take advantage of the market’s concern around weak second-quarter results that we expect for Lehman,” the Buckingham analysts wrote in a report.
Lehman, to be sure, will have to explain its second-quarter earnings to be announced in the next two weeks. Ms. Callan has said the bank will take more write-downs and that some hedge trades were not effective.
Lehman, like its counterparts, is racing to use less leverage. The bank had a gross leverage ratio of 31.7:1 at the end of the first quarter, meaning it had borrowed $31.70 for each dollar of equity. Lehman has whittled that ratio down to 25:1 through its more than $100 billion in asset sales, said the person close to the company who was given anonymity because he was discussing a pending financial filing. A small amount of the sales were to two hedge funds set up by former Lehman executives.
Mr. Einhorn likes to point out that Lehman’s management has incentives to be positive since compensation is tied to performance. Short sellers, he said, receive undue skepticism, and he said he thought he would be getting far less attention if he were discussing a positive view on a company.
Aside from Lehman, Mr. Einhorn would not say if he is long or short other financial companies. But Greenlight Capital has twice as much money invested in long positions across its entire portfolio than it does shorts, he said. So a collapse of Lehman that turned into a broad economic panic could hurt Mr. Einhorn, too.
He said he would keep the Lehman trade going until he is proven right — or wrong.
“The faster the better,” Mr. Einhorn said, “but the world doesn’t work on my schedule.”