NEW YORK, Jan. 22 /PRNewswire/ -- Greenlight Capital sent the
following letter to the Board of Directors at Allied Capital [NYSE:
ALD] this morning. January 22, 2007 To the Members of the Board of
Directors: The federal indictment of a senior officer at BLX for
loan fraud and his admission of the fraud compel me, once again, to
call upon the Allied Capital Board of Directors to act for the
benefit of the company and its shareholders. Specifically, the
Board should exercise its duty of care by removing the present
management team that has presided over the metastasizing fraud at
BLX and Allied and by quickly moving to take remedial steps to end
the dishonest culture perpetuated by current management. To the
numerous particular examples of fraud that the Board has already
seen, and willfully ignored, you can now add the indictment of a
senior BLX executive and the confirmation that more than $76
million in loans were fraudulently originated in a single BLX
office. Unfortunately, the fraud is not isolated or limited to a
single person or office. You have received and ignored evidence
that the fraud extends to numerous other BLX offices around the
United States, contrary to what Allied management is telling
investors, rating agencies and research analysts. There is evidence
that BLX has engaged in similar fraudulent lending in Alabama,
Arizona, Arkansas, Colorado, Georgia, Illinois, Louisiana,
Maryland, Mississippi, Missouri, New Jersey, New York,
Pennsylvania, South Carolina, Tennessee, Texas, and Virginia.
Allied's culture of fraud has and continues to divert hundreds of
millions of dollars from the SBA's loan program and other
government programs. It appears that BLX is the largest SBA fraud
in history. And Allied's potential liability for a pattern of fraud
goes well beyond Allied's public announcements, as you know. The
Board's Cursory Dismissal Of My Prior Letters To The Board On two
prior occasions, I wrote directly to you about the continuing
misconduct of Allied's management and specifically identified the
fraudulent issuance of government loans as an urgent issue for the
Board's attention. Almost two years ago, in my March 11, 2005
letter, I wrote you the following: Allied has falsely maintained
and increased its valuation of BLX through a scheme dependent on
the commission of systematic fraud against the Small Business
Administration and, as a result, against the taxpaying citizens of
the United States. I have learned that BLX has maintained its loan
origination volume only by knowingly approving loan applications
that fail to comply with SBA regulations. These applications, among
other things, have fraudulently inflated property and collateral
values, failed to verify equity injections, contained impermissible
property splits and property flips, and other violations of SBA
rules that were concealed from the agency. Additionally, many of
these loans were the subject of improper loan brokering
arrangements. Your response was cursory and dismissive, stating
merely that the information you had received from Allied's
management and outside counsel, for which you provided no detail,
"has not supported [my] accusations of misconduct." To avoid
focusing on the factual merits, your letter attempted to deflect
these serious, substantiated issues by suggesting that they should
be disregarded because I had, consistent with my research, taken a
short position in Allied stock. Indeed, the only noticeable action
taken by Allied after my letter was the swift and suspicious
elimination of the summary financial disclosure of BLX's
performance from Allied's SEC filings. I am now writing an open
letter to you because Allied's pattern of fraud continues and
because your responses to my prior private letters demonstrate that
the Board refuses to confront the hard cold facts and has opted,
instead, to impugn my motives, and management has publicly
mischaracterized the specific instances of fraud which I have
brought to your attention. The Harrington Indictment Confirms
Misconduct On December 14, 2006, a grand jury in the Eastern
District of Michigan indicted Patrick Harrington, a former
Executive Vice President of BLX and head of its Detroit office, for
originating more than $76 million in fraudulent loans. The
indictment charges that Harrington often originated these loans
through loan brokers, and did so by falsifying information
concerning the buyers' financial status, work experience, the true
owner of the property, and the value of the property. He is also
being indicted for witness tampering and making false statements to
a grand jury in 2005 among other things. Fraudulent loan
origination through loan brokers and falsification of information
is the exact conduct that I described to you in my March 11, 2005
letter which you summarily dismissed. Furthermore, as explained
below, it is evident that Allied knew or should have known long ago
about these issues and similar fraud occurring elsewhere at BLX.
Prior Red Flags Informing the Board and Allied Management of
Ongoing Fraud at BLX In its previous responses to my letters, the
Audit Committee of Allied's Board sloughed off its responsibility
by shifting the burden to me to provide additional "specific"
relevant information. As recent events have plainly shown, you
should not have required any additional information; the
information I had already provided was specific and could have been
confirmed if even a basic, independent investigation had been
performed. Indeed, over the past several years, you have received
from me and from others mounting evidence that BLX has engaged in
widespread loan origination fraud -- fraud that extends far beyond
the scope of the Harrington Indictment. Yet, you have repeatedly
ignored this evidence of continuing misconduct by BLX's and
Allied's management. A few examples follow: 1. 1999-2003: Allied
transfers disqualified SBA loans off-balance sheet to BLX but
agrees to take the loans back pursuant to an undisclosed oral
agreement. In 1999, the SBA audited a number of loans originated by
Allied Capital Express, Allied's pre-BLX small business lending
arm, and disqualified those loans from its guarantee program. Joan
Sweeney, your current COO, was directly responsible for Allied
Capital Express(1). The disqualified loans included loans
originated by the now-shut-down Detroit office. Allied did not
disclose the negative findings of the audit to the public or
reflect the adverse impact on its financial statements. Instead,
when Allied formed BLX, Allied swept the problem under the rug by
shifting the loans from Allied's balance sheet to BLX's, which
Allied did not consolidate. The effect was to "park" the
disqualified loans at BLX. In connection with the transfer of these
disqualified loans to BLX, Allied orally agreed with BLX to bear
the ultimate cost of this obligation. Allied made no provision on
its financial statements to reflect this liability and did not
publicly disclose this agreement. Ultimately in 2003, Allied
unwound the parking arrangement and took back more than $9 million
of the disqualified loans. The SBA was reimbursed more than $5
million for related guarantee payments. As I described in my March
11, 2005 letter, when Ms. Sweeney was asked during Allied's fourth
quarter 2002 conference call about SBA investigations only weeks
after she personally executed the loan transfer agreement that
unwound the parking arrangement, she denied, contrary to the
evidence, any knowledge on that call. 2. 2001: Allied's attorneys
learn of Harrington's misconduct in a deposition of a loan
recipient. During a deposition in a civil lawsuit brought by
Allied's former small business lending unit, Allied Capital SBLC
Corp., in the Eastern District of Michigan(2), Allied's own
attorneys obtained the following sworn testimony from one recipient
of loans from the Detroit office: (1) her loans from Allied were
originated and supervised by Mr. Harrington, head of the Detroit
office; (2) because she had previously borrowed the SBA maximum of
$1 million, Allied suggested she form a new corporation and use her
brother to sign the loan documents; (3) after her two SBA loans
defaulted, Allied instructed her to set up a new company in her 20-
year-old daughter's name to borrow additional money; and (4) she
ultimately obtained the loan in the name of a different brother who
lived in California, and signed her brother's name on the loan
documents at the direction and in the presence of Allied personnel.
This should have been clear evidence to Allied that Harrington was
engaged in misconduct. 3. 1999-2006: Matthew McGee, a felon
convicted of securities fraud and a BLX Executive Vice President
who headed the Richmond, Virginia Office, directed the fraudulent
origination of shrimp boat loans in the Gulf region. Greenlight
recently served a federal lawsuit on BLX, its wholly-owned
subsidiary Business Loan Center (BLC) and several individuals with
claims arising under the federal False Claims Act relating to tens
of millions of dollars of fraudulent SBA 7(a) shrimp boat loans
extended through the General Purpose Lender Program(3). The
complaint seeks treble damages and other remedies. These loans are
particularly noteworthy because BLX's Richmond, Virginia office
generated many if not all of them. Mr. McGee, head of this office,
plead guilty in 1996 to a criminal violation of the federal
securities laws, was incarcerated and was separately barred by the
SEC from ever working with any investment company (such as Allied).
BLC subsequently obtained permission from the SBA, but not the SEC,
to employ Mr. McGee, in a limited capacity where he would not be
included in BLC's financial affairs or have credit approval or
responsibility(4). Mr. McGee subsequently participated in or
supervised: (a) the preparation of documents for credit approval,
(b) guiding loans through the credit committee, (c) submitting
fraudulent loan applications containing false information to the
SBA, (d) obtaining SBA guarantees, (e) closing fraudulent loans and
(f) disbursing loan funds. When Allied management was questioned
about Mr. McGee's employment and role in 2002, they defended his
status and conduct. 4. 2002: SBA audit of BLX loan in Georgia
uncovers lender violations of SBA policies and procedures(5). In
1998, BLC issued a loan to Kalindi LLC in connection with the
purchase and renovation of a Warner Robbins, Georgia motel. After
Kalindi defaulted on its loan, BLC issued a second loan, which went
to a related company, Magnet Properties, LLC to pay off the
defaulted loan and buy the hotel from Kalindi. In 2002, the SBA
Office of the Inspector General audited these two loans and
discovered that the loans violated numerous SBA policies and
procedures. Among other things, BLC failed to supervise
distribution of loan proceeds, did not verify a required $410,000
equity injection, and violated change of ownership and refinancing
criteria thereby transferring BLC's loss to the SBA. The SBA audit
determined that these deficiencies were "egregious acts and warrant
SBA action to seek civil fraud remedies against the lender," and
"the lender's failure to follow prudent lending practices and
materially comply with SBA requirements undermined the integrity of
the Section 7(a) business loan program." The audit recommended
consideration of suspension of BLC's preferred lender program
status in the Georgia District Office and civil enforcement
remedies under the False Claims Act. 5. 2004: Allied management
announces that the SEC and the Department of Justice are
investigating Allied's valuation practices and Business Loan
Express. These are two separate investigations, being conducted out
of the United States Attorney's Office for the District of Columbia
and the SEC in Washington D.C. These investigations of potential
criminal violations and violations of the securities laws,
respectively, are in addition to the criminal investigation by the
U.S. Attorney's Office in Michigan. 6. 2005: My letter informs the
Board of the scale and depth of fraud at BLX. As noted above, my
March 11, 2005 letter described exactly the kind of fraudulent loan
origination found by the United States Attorney's Office to exist
in BLX's Detroit office, found by the Department of Agriculture in
Arkansas, and occurring in BLX's shrimp boat loans in the Gulf
region. 7. 2005: Allied becomes aware that the United States
Attorney's investigation into fraudulent loan origination at BLX is
ongoing. As set forth in the Harrington Indictment, Mr. Harrington
testified before a grand jury in 2005 in connection with an ongoing
United States Attorney's investigation into BLX's fraudulent loan
originations. Thus, Allied should have known in 2005 through the
grand jury investigation of allegations of serious criminal
wrongdoing at BLX. 8. 2005: United States Department of Agriculture
recommends debarring BLX from the Business & Industry
Guaranteed Loan Program. The Office of the Inspector General at the
USDA found that BLX misrepresented property values and other
information to the government in connection with a small business
loan guaranteed by a division of the USDA. The audit of a BLX loan
to an oil and gasoline distributor in Arkansas published in
September 2005 found that "the lender misrepresented information to
RBS [Rural Business-Cooperative Service], did not comply with key
provisions of the guaranteed loan, and used loan funds for
unauthorized purposes." Among other things, BLX misrepresented the
value of the collateral property and the operational status of the
property, and hid the existence of environmental violations. The
audit recommended that RBS debar the lender and its subsidiaries
from the B&I Guaranteed Loan Program(6). Debarment from the
program results in automatic debarment from the SBA lending
programs pursuant to a government-wide debarment policy(7). In
short, you have stayed remarkably silent in the face of mounting
evidence that BLX's business is a portfolio of fraud. Failure to
disclose material information relating to ongoing fraud poorly
serves Allied, its shareholders, and the taxpayers whose dollars
have supported BLX. Additionally, it appears that after many years,
Allied is finally preparing to write down or even write off its
investment in BLX. It also appears that Allied management is
positioning itself for an "ostrich defense" by claiming that they
had no reason to believe that Allied's investment in BLX should
previously have been written down. This is ludicrous since Allied
has exercised complete control over BLX and Allied's top
management, including CEO William Walton, COO Joan Sweeney, and
Managing Director Christina DelDonna, were the majority of managers
of BLC(8). As the above facts demonstrate, Allied management knew
about the fraud at BLX for a very long time and allowed it to
continue. Separate and apart from the fraud at BLX, Allied's
valuation of BLX has lacked any reasonable basis for many years.
The Continuing Misrepresentations of Allied Management in Response
to Recent Events In my prior letters, I noted that Allied
management has typically employed two tactics in response to
criticism: (1) misrepresentations; and (2) ad hominem attacks
against the critic. Allied's most recent response to the Harrington
Indictment is more of the same. In response to the Harrington
Indictment, Allied management has misled research analysts, rating
agencies and other market observers by portraying Mr. Harrington's
fraud as bad behavior by a single employee in a single office.
Allied also claimed that it only recently learned of the
investigation and Mr. Harrington's malfeasance and acted quickly
and decisively by closing the office, dismissing Mr. Harrington and
fully disclosing the events promptly in its November 2006 10-Q.
Finally, Allied claimed that its exposure is limited to its $285
million investment in BLX. None of this is true. Allied's Claim
That It Only Recently Learned of the Fraud is Not Credible Allied
has had direct knowledge of Mr. Harrington's fraudulent conduct for
years. Allied's claim of prompt disclosure is belied by Mr.
Harrington's perjury charge, which indicates that the United States
Attorney's investigation began at least in 2005, a fact of which
Allied was well aware -- and did not disclose. It is simply not
credible that Allied and BLX could not detect the fraudulent
behavior in 2001 when Allied's attorneys heard sworn testimony of
Mr. Harrington's misconduct or at least in 2005 when the companies'
attention was being pointed directly at those loans by the U.S.
Attorney's Office. Though Allied had already closed the Detroit
office and dismissed Mr. Harrington, it deliberately decided not to
mention either material event in its Form 10-Q(9), quarterly
earnings release or in its lengthy presentation on its conference
call. Although those significant events were not worthy of Mr.
Walton's attention, apparently I was. Mr. Walton used the
opportunity to engage in yet another round of ad hominem attacks
against me, stating that I was merely "an individual with a motive
to depress Allied Capital's stock" and that he "wish[es] that Mr.
Einhorn would give up his quest for a big payday." You as a Board
member owe a duty to Allied's shareholders to fully investigate the
substance of my message -- that there is fraud in your company --
not condone attacks on the messenger who delivers the incriminating
evidence. Allied's Claim That the Fraud Involves Only One BLX
Office and One Employee Is False Allied's claim that the fraud
involves only a single BLX office and a single BLX employee is also
demonstrably false. According to a sworn affidavit by a Senior
Special Agent with the SBA, Mr. Harrington "has admitted that
between approximately 2000 and July 2006, he, and other BLX
employees working at his direction, originated and issued
approximately 96 SBA- guaranteed loans knowing ... [that they were]
falsely and fraudulently documented.(10)" Indeed, if in fact the
loan origination fraud was limited to a single BLX employee, why
would Allied have found it necessary to close the entire Detroit
office? Most importantly, we have found evidence that BLX has
engaged in fraud in many other states. In addition to the frauds
cited above from Arkansas, Georgia, and the fraudulent shrimp boat
loans (mostly in the Gulf States), we have identified improper
loans in Arizona, Colorado, Illinois, Maryland, Missouri, New
Jersey, New York, Pennsylvania, South Carolina, Tennessee, Texas,
and Virginia. This widespread fraud has gorged BLX and artificially
inflated Allied's earnings with undeserved revenues, but gouged the
SBA and other government agencies at the expense of United States
taxpayers. According to publicly available SBA records obtained
under the Freedom of Information Act, BLX originated $1.05 billion
of loans during the calendar years 1999-2001(11). BLX has caused
the SBA to make guarantee payments on an astounding 23% of those
loans. As 44% of these loans remain outstanding, the final
reimbursement rate will be even worse. The SBA has made guarantee
payments on over $370 million of loans issued since 1999.
Additionally, publicly available information obtained through the
Freedom of Information Act shows that the USDA has paid out on 42%
of the guaranteed portions of BLX's loans outstanding under USDA
guaranteed lending programs at a cost to the government of $41
million. These facts are well known to BLX and Allied management.
Given the astronomical guaranteed purchase rate and demonstrable
evidence of fraud, it is likely that a large percentage of these
payments have been made on fraudulent loans. Because there remains
a large portfolio of loans outstanding, the taxpayer exposure to
future guarantee obligations for fraudulently originated loans is
enormous, potentially in the hundreds of millions of dollars.
Allied's Claim That It Faces Relatively Limited Exposure From BLX's
Fraud Understates the Risks Allied has claimed that it faces only a
relatively small exposure because BLX is only a $284.9 million
investment, and only one of Allied's approximately 140 portfolio
companies. Allied conveniently omits that BLX is Allied's largest
investment, and -- in contrast to its other investments -- is 95%
owned by Allied (with the remaining 5% owned by insiders). This is
a far different circumstance from providing a mezzanine loan to a
company owned by a third party, a description that fits most of
Allied's investment portfolio. Given Allied's control over BLX, any
finding that it has actively participated in the fraud could lead
to legal liability far beyond its direct investment in BLX. In
addition, Allied's potential exposure plainly exceeds its $284.9
million valuation of BLX: * Allied has guaranteed the first 50% of
loss on BLX's credit line, a guarantee worth $188 million; * Allied
has guaranteed letters of credit supporting BLX's securitizations
worth $29 million; * BLX's banks may sue Allied directly for
knowing about the extent of the fraud at the time the banks issued
the lines of credit; * BLX has collected hundreds of millions in
guarantees on defaulted loans from the SBA. The SBA has indicated
it will seek restitution for fraudulent payments. The government
may also seek treble damages and other penalties through the False
Claims Act; * BLX currently maintains a $2.7 billion portfolio of
loans, many if not most of which are similarly guaranteed by the
SBA. BLX's historical loss patterns indicate that an alarmingly
high percentage of these loans will default, triggering the SBA's
guarantee payment obligation. To the extent that any of these loans
were fraudulently originated, the SBA may look for BLX/Allied to
absorb the loss; * The SBA data also shows that approximately 75%
of the loans for which the SBA made guarantee payments between 1999
and 2005 still have outstanding balances. These loans are
effectively in liquidation and are neither charged-off nor
resolved. Although it should be relatively simple to promptly
liquidate such straightforward small business loans, it often takes
BLX several years to complete this process, if the process is
completed at all. Delaying the resolution of the loans allows BLX
to defer losses on its own books, continue to collect servicing
fees, and skew the statistics used by the SBA in its analysis of
lenders. We believe that should the SBA determine that BLX is not
properly servicing loans in liquidation(12), the SBA would have to
assume control of the servicing to protect the taxpayer, thereby
depriving BLX of its most significant asset. The SBA may also seek
reimbursement for previous servicing fees to the extent they have
been earned improperly(13); * Allied's inadequate disclosures could
result in liability to its shareholders for potential violations of
federal securities laws. Since 2002, Allied has raised more than
$900 million in equity, including $200 million since the end of the
second quarter of 2006; * The government could pursue further civil
or criminal actions and seek fines and penalties. Indeed, this
apparent corrupt, fraudulent enterprise could expose Allied and/or
BLX to criminal RICO liability in which the government could seek
forfeiture of assets, including all the BLX property involved in
the conduct and fines of twice the gross profits or other proceeds.
Civil liability under RICO could also lead to, among other things,
treble damages. Allied's Claim That BLX is Financially Strong is
Belied by Its Weak Balance Sheet, Growing Debt and Falling Profits
In its January 15, 2007 press release, Allied indicates BLX is in a
strong financial position with $190 million of equity and "a
substantial cash flow stream from its residual interests and
servicing assets." In particular, Allied notes, "If scheduled loan
payments were to be received as stated in the loan agreements with
no future losses or prepayments, BLX would receive future cash
flows of over $1 billion over time." Obviously, it is not realistic
to make these assumptions. This statement appears to be a
misleading attempt to give investors an unrealistic impression of
BLX's value. The truth is that BLX is in a precarious financial
position and has limited financial resources. Over BLX's life it
has been a steady user of cash. When Allied provided summary
financial disclosure of BLX in the Form 10-Q in the second quarter
of 2002, BLX had borrowed $96 million on its credit line. Even with
the benefit of the residual interest cash flow, four-and-a- half
years later that figure has steadily grown to $322 million. Allied
has taken numerous steps to prop-up BLX including converting its
debt investment into equity and increasing its equity investment.
Even prior to this latest crisis, BLX's operations had
deteriorated, as demonstrated by the steady reduction in income
Allied receives from BLX. Tellingly, Allied did not disclose BLX's
EBITM(14), which used to be the key metric Allied highlighted when
describing BLX's performance. Allied has cited higher loan
prepayments and scaled back originations in its most recent filings
to explain the deterioration(15). Putting aside the obvious
valuation questions from the growing debt and falling income, it is
unlikely that BLX can make significant restitution without further
financial support from Allied. As I have stated to you in my prior
letters, I continue to have concerns about your company entirely
apart from BLX. We have both statistical and anecdotal evidence
that Allied has similarly overvalued other investments in its
portfolio and engaged in performance smoothing and other improper
behavior. As for the recent illegal accessing of my phone records
and those of other Allied critics, we note your carefully worded
and now familiar denial that you have "found no evidence" to
support my accusation that management or its agents improperly
accessed telephone records. We believe that the government has been
investigating whether Allied or its agents accessed those records
and whether the acts were related to our criticism of Allied. * * *
* I cannot fathom how the Board has ignored such a wide-scale and
continuing fraud by BLX and Allied. A serious investigation would
have confirmed what we told you years ago. Yet each new revelation
about the fraud -- whether from the Department of Justice, other
government agencies, analysts, or the investigative media -- is met
with escalating denials from Allied's management and deafening
silence from the Board. This must end. It is time to get serious
about cleaning up the dishonesty within Allied. Allied has spent
tens of millions of dollars of shareholder money defending current
management. Instead of further defending them, your duty to Allied
and its shareholders mandates that you dismiss responsible
management and conduct a full, complete investigation into all of
the issues currently facing Allied, including BLX's loan
origination fraud, Allied's misleading valuation of BLX, Allied's
misleading valuation of other investments, and its continued
efforts to mislead the public about these issues. Your continuing
silence and inaction does a serious disservice to Allied, its
shareholders, the capital markets and taxpayers. Yours, /s/ David
Einhorn _______________ David Einhorn 1. Allied Capital Form N-14
filed with the SEC on December 11, 2000, page 93. When the loans
became a public issue, despite her direct responsibility, Ms.
Sweeney blamed the originations on "a prior management team" in the
New York Times on April 27, 2004. 2. Allied Capital SBLC Corp. v.
Debaeke Properties L.L.C., et al., Civil Action Nos. 00-74574 and
00-74649. 3. United States ex rel James R. Brickman and Greenlight
Capital v. Business Loan Express, et al., 05-CV-3147 (JEC). This
complaint does not include loans under the Preferred Lending
Program (PLP). 4. Based on the written correspondence between BLC
and the SBA seeking permission to employ Mr. McGee, it appears BLC
did not disclose to the SBA Mr. McGee's lifetime SEC ban, which
bars him from associating with any broker, dealer, municipal
securities dealer, investment adviser or investment company. 5.
Available at http://www.sba.gov/ig/2-35.pdf. 6. Available at
http://www.usda.gov/oig/webdocs/34099-07-TE.pdf. The Rural
Business-Cooperative Service ("RBS"), an agency within the
Department of Agriculture's "Rural Development mission area,"
guaranteed 80% of the loan as part of the "Business & Industry
Guaranteed Loan Program." Though the report does not identify the
lender, the USDA has confirmed that it is BLX. 7. Executive Order
12549, 51 F.R. 6370, February 18, 1986 and 13 CFR 145. 8. According
to BLC state filings, Mr. Walton and Ms. Sweeney stepped down as
managers of BLC in January 2006. We find the timing of this change
suspicious. 9. The limited disclosure made in the third quarter
2006 Form 10-Q was buried and inadequate. The disclosure of the
Office of the Inspector General of the SBA and the Department of
Justice investigations was not made in the normal place for
significant legal developments, where the other government
investigations were disclosed. Instead, the disclosure was buried
on page 82 under a section called "Change in Unrealized
Appreciation or Depreciation" under the subsection "Business Loan
Express, LLC." When management was asked to elaborate on the
significance of these new disclosures, rather than offer that fraud
had been found and that Allied had taken corrective measures by
dismissing Harrington and closing the Detroit office, management
declined to comment. 10. Emphasis added. 11. We chose the 1999-2001
period because sufficient time has passed for us to be able to
definitively analyze the performance of these loans. Not
surprisingly, loans in more recent years are less seasoned, but
also appear to be tracking to excessive losses. The SBA has already
paid guarantees on 15%, 9% and 4% of loans issued in 2002, 2003 and
2004, respectively. 12. 13 CFR 120.453 requires use of generally
accepted commercial banking standards employed by prudent lenders.
13. The unusual period it takes BLX to resolve defaulted loans may
explain why Allied claims that BLX suffers losses in its loan
portfolio of only 1-2%. The delays defer the recognition of losses
and charge- offs, artificially lowering BLX's reported loss rate
and skewing SBA statistics. 14. Earnings Before Interest, Taxes and
Management Fees. 15. Allied Capital Form 10-Q for the quarter ended
June 30, 2006, page 80. DATASOURCE: Greenlight Capital CONTACT:
Steve Bruce, or Mary Beth Grover, or Monica Everett, all of
Abernathy MacGregor, +1-212-371-5999, for Greenlight Capital
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