The Finova Report April 2009

By G.D. Hawaya

grdmilton@gmail.com

As of April 1 2009, here’s my take on Finova. This report intends to be

a combination of fact and theory. I hope to demonstrate what is verifiable
and true in the present, and then fantasize about what might be possible in
the future. You can print the report, and carry it around on eco-unfriendly
paper, but it is better read on the PC, so you can follow the links to all of
my sources. If you’d buy me a cup of coffee, I’ll even come over and show you
how to use EDGAR…which people still don’t seem to get.

EDGAR and I have become Virtual Siamese Twins over these last twelve
months. Now I understand why Christopher Cox called EDGAR “cumbersome” and
“only really for experts” but I get it…you just gotta spend the time. (Chris
Cox EDGAR tutorial link below; I strongly encourage you to sit down and watch
this presentation).

I’ve used italics when I’m directly cutting and pasting someone else’s
words, like quotes from 10-K’s and 10-Q’s, and then I’ve added my own
thoughts in normal, ‘un-italicized’ typeface. You’ll get the hang of it.
Please pay attention to the dates of these documents and filings; I’ve
emphasized them in red. I’ve tried to assemble, or ‘string together’, a
chronology, a pattern, that demonstrates Leucadia’s technique.

I’ll also flip my wig from time to time, especially when Major Events
take place, like Leucadia’s spring 2009 revelation about the $44.9M
“distribution” from Empire Insurance. This brand-new story is almost
unbelievable, because Empire has been (supposedly) “liquidating” since 2001!
Or the idea that Finova may skip the May 2009 interest payment on the Senior
Notes…unbelievable!!! More bombshell details below…

In short, this crazy Finova story has absolutely nothing to do with

airplanes anymore. This is a story about Leucadia capturing, preserving, and
ultimately utilizing NOL’s. (Some of which I will show here in excruciating
detail). I believe they have the same plan for Finova. Remember that Finova
was a Chapter 11 case, where the intent is to reorganize and emerge, and not
a Chapter 7, where the intent is liquidation. Now that the brand-new Finova
10-K has finally come out, the debate can begin in earnest. My goal is to
establish a base set of facts, so that as we escalate on this project, we can
all be informed instead of wandering around in the dark. We don’t want to be
blindsided nor undersold by Mr. Cumming, if we can help it. For example, what
if he tendered tomorrow for two cents? What would you do? Would you fight, or
capitulate?

I may also end up being completely wrong, so don’t take me too

seriously. I basically don’t know jack-shyt, and Ian Cumming certainly
doesn’t call me with any details. We may get wiped out and go to god-damn
zero, for all I know, so take it easy on me, please? I’m just trying to start
a dialogue among the curious.

(And yes, this is sort-of an open letter to Mister Cumming.)

There are two catalysts that have finally caused me to ‘go public’ with
this story. First is that Finova’s Senior Notes mature this coming November
(2009). With all the recent news about the renegotiation and forebearance of
so many corporate bonds*, we can only imagine that Finova might undergo
something similar. Leucadia/Americredit recently allowed Fairholme to turn
notes into stock of Americredit, for example (link below). This despite
Mister Cumming’s exhortations about hating dilution…

*(See these examples: Ocwen, Station Casinos, Harrah's, Sirius XM, GM,
SoftBank, Citi, Ford Motor, Macy's, American Media (National Enquirer),
Glencore, General Growth Properties, Blockbuster…etc.)

So who knows what will happen with Finova’s Senior Notes between now
and November? One point we would love to establish, but do not yet know, is
just how much of Finova’s remaining debt is already owned by Berkshire and/or
Leucadia? If you have the answer, I’d love to hear it.

There is also a brand-new part of the tax law and the ‘stimulus’ bill
that allows companies to buy back debt at discounts-to-par, but defer the
income tax for five years. Look into this for yourself; I think this will be
something significant. I don’t know that this will affect Finova, but it sure
is interesting anyway. (Harrah’s has the best description I’ve seen so far;
link below)

I urge you all to sit down by the fire with the Indenture that governs
these Finova Senior Notes, and read it carefully. Once you’ve got a
blistering headache from all the confusing boilerplate, throw the indenture
into the fire, and call me so we can go out for beer. Then I will quiz you on
Section 6.05 of the Indenture, “Control By Majority”, and we can fantasize
about an internal coup by Leucadia and Berkshire. After all, they both own
some of the Senior Notes. We just don’t know how many, or how much. Do you?

You can also dial the Trustee of the Senior Notes, The Bank of New York
Mellon, at this number: 1-800-275-2048. They can confirm that Finova hasn’t
missed an interest payment, in case you don’t believe me. You can also ask
them whatever else you have on your mind regarding the bonds. Oh, and in case
you were wondering, the beer is on you. (Indenture link below)

Is this what they mean by “Indentured Servitude”?

The second ‘catalyst’ for me to launch this public survey of Finova was
Leucadia’s acquisition of 30% of Jefferies common stock, as it unfolded in
the spring of 2008. As I searched backwards through the filings, I tried to
understand why Leucadia was buying Jefferies… until I realized that the real
story was who was buying Jefferies. Then it got really exciting, as we
learned how. This became the basis for my ‘theory’ about Finova and its
future, as I’ll detail below.

Let me be clear about one important point; I do not make any of this
stuff up. This story is not a figment of my wild imagination. I merely
AGGREGGATE stuff that’s all public on the web, then add my own opinions…which
are sometimes very, very silly, I admit.

Please remember that this story is evolving as we speak; it is far from

over. That’s why I must be forgiven for saying “I have no idea” a million
times. For starters, you should read the 10-k.

Just don’t ask me what I think is going to happen to the share price,
pretty please ?!? Burton Malkiel still sells far more books than Charles
McKay, so who am I to doubt the millions of lemmings and their real-time
quotes?

So, without further BS from me, may I present my ‘dovetail’ story of

Finova and Leucadia, starting with these factoids:

1) The appeal of the Clarification Motion is now under consideration at

the Third Circuit Court of Appeals. Our case number is 08-3990. The
link below allows you to check these ‘lobster traps’ every day,
whenever you’d like. I have no idea when our decision will come, and I
have no idea what the decision will say. I have no idea what ‘will
happen’ as a result of this decision.

2) “On November 4, 2008, the Third Circuit granted the equity committee’s
motion for a stay pending appeal.”

This means that Finova, despite having won on the Clarification

Motion in the Delaware Bankruptcy court, still cannot spend the $82
million until (at least) the Third Circuit rules on the appeal
mentioned above. This is detailed in the new 10-k.

3) As of the most recent 10-k, for the period ended December 31, 2008,
Finova has $148,406,000 in assets, $1,400,000,000 in face amount of
outstanding principal of Senior Notes, and “federal NOL carryfowards of
$1.7 billion…”

4) At the close of business on Monday, March 30, 2009, the share price of
Finova, FNVG.OB, was $.005.
 5) On Tuesday, March 31 2009, the price of the Senior Notes, FNV.GA /
CUSIP: 317928AA7, was 8.375 (eight-point-three-seven-five cents on the
dollar, or $83.75 per $1000 of principal)

6) From the Finova 10-k,dated December 31 2008, released on March 30 2009:

“A hearing on the merits of the TLP Action was originally scheduled to

be heard in September 2008, but was rescheduled for mid-January 2009 due to
one of the members of the arbitration panel having a scheduling conflict. The
mid-January 2009 hearing was postponed due to the death of one of the three
arbitrators scheduled to hear the matter. The parties have agreed upon a new
third arbitrator and a hearing on the merits of the TLP Action is expected to
be heard in the second quarter of 2009.”

This arbitration case is really the last legal challenge that Finova
faces. All others have been defeated or “expunged” over the last three
years or so. The amount at stake in the TLP Action is $18M, and maybe
subject to trebling and fees, but who knows?

7) Neither Ian Cumming, nor Warren Buffett, nor Leucadia, nor Berkshire
Hathaway, nor ‘Berkadia’, have ever sold a single share of Finova
common stock; they’ve retained their entire positions since 2001.

8) HERE’S THE HINT THAT THEY MIGHT NOT MAKE THE MAY 2009 INTEREST PAYMENT:

From the Finova 10-k for December 31 2008, released on March 30, 2009:

“In accordance with the terms of the Indenture, we are required

to use any excess cash…to make…payments on the Senior Notes…however,
due to the uncertainty of cash requirements associated with the wind-up
of our affairs…we anticipate maintaining cash reserves to cover these
potential and uncertain expenditures, which is likely to limit our
ability to make…our next interest payment, which is scheduled for
May 15, 2009. Failure to make the May 15, 2009 interest payment would
not be an event of default under the Indenture, which requires the
Company to fail to pay two consecutive interest payments before an
event of default would occur.”

To me, this sounds like Finova is setting up to withhold the $53

million in May, instead of paying it as scheduled. So let me ask you
this, good people: If the goal is to ‘wind down the operation’ and
‘maximize the return to the “creditors”’, why would you deliberately
hose them out of their $53 million May 2009 interest payment? Maybe
because Leucadia and Berkshire already are the “creditors”, and they
can afford to leave the money ‘in’ Finova for the greater good? I don’t
know, but this language makes me very curious…
 Since I think that this story is all about the future of Finova’s
NOL’s, let’s look at the history of Finova’s NOL’s, in their own words.
This segment begs that a question be asked; ”What exactly are they
doing that generates this ever increasing NOL?” For example, what was
done to generate $100m of NOL in the 4th quarter of 2008? Finova has
only four employees left, and no airplanes, nor any other ‘operations’
to speak of, so what do they do to generate ‘losses’??!!

If you know, would you please tell me?

From the Finova 10-k for the year ended December 31, 2001:

“The Company estimates for its tax year ended December 31, 2001 it will be
able to utilize a significant amount of its NOL carryforwards and alternative
minimum tax credits to offset the recognition of taxable income from
cancellation of debt (“COD”) under Section 108 of the Internal Revenue Code
of 1986 (the “Tax Code”). Under this Section, the Company will recognize
approximately $800 million of COD income. Should the amount of COD exceed the
sum of NOL carryforwards, current year NOLs and other tax credits, then the
Tax Code provides that such excess be applied to reduce the tax basis of the
Company’s assets. Based on current estimates, the Company does not expect
that it will have to reduce the tax basis of its assets. As of December 31,
2001, the Company generated approximately $68.5 million of NOLs related to
foreign operations with expiration periods beginning in 2008 including some
NOLs with an indefinite expiration period.”

And the Finova 10-k for the year ended December 31, 2002:

“No liability was established in 2002 and 2001 due to the

Company's current tax position, which includes substantial net operating loss
carryforwards (see Note J "Income Taxes").

“As of December 31, 2002 federal NOLs of $859.4 million are available
for carryforward, which expire between 2009 and 2023.”

And the Finova 10-k for the year ended December 31, 2003:

“As of December 31, 2003…, the Company had federal NOL

carryforwards of $851.6 million…none of which expire prior to 2009.”

And the Finova 10-k for the year ended December 31, 2004:
 “As of December 31, 2004…, the Company had federal NOL
carryforwards of $1.1 billion…none of which expire prior to 2009.”

And the Finova 10-k for the year ended December 31, 2005:

“As of December 31, 2005…, the Company had federal NOL

carryforwards of $1.2 billion…none of which expire prior to 2009. For a
discussion of the impact of the Plan on the NOL carryforward, refer to
previous SEC filings.”

And the Finova 10-k for the year ended December 31, 2006:

“As of December 31, 2006…, we had federal NOL carryforwards of

$1.3 billion...none of which expire prior to 2009.”

And the Finova 10-k for the year ended December 31, 2007:

“As of December 31, 2007…, we had federal NOL carryforwards of

$1.6 billion…none of which expire prior to 2009.”

And the Finova 10-k for the year ended December 31, 2008:

“As of December 31, 2008…, we had federal NOL carryfowards of

$1.7 billion…which begin to expire in 2009.”

From the New York Times, February 28, 2001:

“Two investors with a reputation for buying troubled companies on the

cheap have agreed to take control of the Finova Group, an ailing lender to
companies. Leucadia National and Berkshire Hathaway…will lend $6 billion to
Finova after it files for bankruptcy reorganization…”

''Berkshire has historically invested in financially attractive

businesses, but I don't remember a case where it has taken a majority
position in a bankruptcy workout,'' said Keith Trauner, head of research for
the Fairholme Fund, a mutual fund that owns shares in Leucadia and Berkshire.
''That's been Leucadia's expertise.''

''You've married one of the smartest providers of capital with one of

the smartest companies that does workouts,'' Mr. Trauner said.”
Chapter 1: The Leucadia M.O.

So just what does Leucadia do !?!?!

From the Leucadia 10-K for the year ended December 31, 2008, released on
February 27, 2009:

“In February 2009, the Board of Directors authorized the Company, from
time to time, to purchase its outstanding debt securities…The amounts
involved, individually or in the aggregate, may be material.”

It’s true that Leucadia dabbles in wineries, copper, prepaid phone

cards, subprime car loans, (no, I’m not kidding), and even fake blood, but
what Leucadia really does is vacuum. Leucadia goes around sucking up all
these precious little bits of financial dust called “Tax Loss Carryforwards”
and “Net Operating Losses”. (“NOL/TLCF”).

These scraps are left behind after periods of corporate duress and
maladjustment, especially in the wreckage of Chapter 11 filings. Finova is
exactly one of these types of basket cases.

It is these “post-reorganization” tax advantages that are Leucadia’s

true specialty. I’m sure Mister Cumming makes a delicious Pinot Noir-and-leg-
of-lamb (link below), and that’s all nice and everything, but since he
appointed himself the day-to-day Chairman of Finova, and Finova has now
accumulated $1.7 billion in NOL/TLCF under his watch, we’d like to figure out
what’s going on over there. My opinion? I think Finova is being set up the
same way all its predecessor entities were within the Leucadia ‘umbrella’.

From the Leucadia Letters from Chairman and President for 2005, posted April
18,2006:

“We long for the pre-SFAS 109 days when the NOLs rested peacefully in
the footnotes until sometime in the future when they would be called upon to
deflect taxation.”

From the Utah State Bar (link below):

“One of the ironies of the modern business world is the fact that a
company’s biggest asset may not be its client list or its intellectual
property, but its tax losses. Those losses can be carried forward for up to
twenty years and can be offset against the company’s future taxable income
and tax liabilities…”
I keep thinking of Leucadia as the interlocking and never-ending feet of a
toy robot; a succession of overlapping entities, “subsidiaries”, of 20-year-
long NOL expiration periods, with new NOL’s always being added ‘at the
front’, while old NOL’s either get used or die expired ‘at the back’. Go
ahead, lock your fingers together in front of you, and then ‘walk’ them
forward, perpetually, like the feet of a little toy robot.

Here are some examples of these almost absurd Leucadia arrangements:

From November 12, 2003:

“…Leucadia National Corporation ("Leucadia") and its subsidiaries, Phlcorp,

Inc., WMAC Investment Corporation, 330 MAD. PARENT CORP., Baldwin
Enterprises, Inc., BELLPET, Inc. and Empire Insurance Company
("Empire")(collectively, the "Controlling Entities")…”

Or this one, from August 22, 2008:

“BEI-Longhorn is a wholly-owned subsidiary of BEI Arch, BEI Arch is a wholly-

owned subsidiary of Baldwin, Baldwin is a wholly-owned subsidiary of Phlcorp
and Phlcorp is a wholly-owned subsidiary of Leucadia.”

Or this doozy, from July 28, 2008:

“In March 2008, Baldwin transferred its 29,336,440 shares of Common Stock
(including 3,250,000 shares of Common Stock acquired on March 14, 2008 upon
exercise of the Lehman Options) to its indirect subsidiary, BEI-Longhorn, LLC
(“BEI Longhorn”). BEI Longhorn is a direct subsidiary of BEI Arch Holdings,
LLC (“BEI Arch”), which in turn is a direct subsidiary of Baldwin. As a
result, RCG Baldwin is no longer a Leucadia Reporting Person and BEI Longhorn
and BEI Arch are Leucadia Reporting Persons.”

Here’s how Leucadia summarizes its own NOL’s, from the 10-K of December 31,
2007:

“As of December 31, 2007, the Company had consolidated federal NOLs of
$722,000,000, none of which expire prior to 2023, that may be used to offset
the taxable income of any member of the Company's consolidated tax group. In
addition, the Company has $4,719,000,000 of federal NOLs that are only
available to offset the taxable income of certain subsidiaries. None of these
expire prior to 2017.”

…and again from the 10-K of December 31, 2008:

“As of December 31, 2008, the Company had consolidated federal NOLs of
$1,002,600,000, none of which expire prior to 2023, that may be used to
offset the taxable income of any member of the Company's consolidated tax
group. In addition, the Company has $4,743,000,000 of federal NOLs that are
only available to offset the taxable income of certain subsidiaries. Except
for $3,941,000 that expire in 2012, none of the other NOLs expire prior to
2017. The Company also has various state NOLs that expire at different
times…”

So, now, let’s get to the chronology of these “subsidiaries”, and you will
see how they work together over time, and have worked up through the present,
right smack into the middle of Jefferies.

Chapter 2: ‘Buying into’ the losses:

Let’s look at this helpful grid that Jefferies recently provided. As you can
see, Jefferies now has six consecutive quarterly losses. Yet this is exactly
when Leucadia makes its big moves into Jefferies common stock, in the spring
of 2008. Apparently profit is not the motive here for Mr. Cumming:

(And here is the latest ‘Jefferies Grid’, showing the total loss
for the year:
But now, let’s look at this form 4(one of many)that was jointly filed by
PHLCorp, Baldwin Enterprises Inc., and Leucadia; as you can see, these two
ancient, long-forgotten “subsidiaries” are the actual buyers of Jefferies !
 So in this example, Leucadia is using these fifteen-year-old ‘shells’
to buy JEF stock in the present (2008/2009), because the ‘shells’ are STILL
IN POSSESSION OF THEIR OWN NOL’S, WHICH HAVEN’T EXPIRED YET! Of course this
means that JEF is just another NOL-generator to add to the pile, right?

And on it goes, with this continual, almost perpetual, succession of

‘loss entities’, through which Leucadia can (almost) indefinitely keep buying
more companies! And this is what I think is going to happen to Finova…

What do you think? Am I right about this, or is it all just a

delusional fantasy? You be the judge…since Mister Cumming certainly won’t
answer any of my questions.

Allcity/Empire:

“December 28, 2001: BROOKLYN, NY-- ALLCITY INSURANCE COMPANY

(ALCI-NASDAQ)(the "Company") today announced the decision of the Empire
Insurance Group, which includes the Company, its parent, Empire Insurance
Company, and its affiliate, Centurion Insurance Company (collectively, the
"Empire Group"), to conduct a complete and orderly liquidation of all of its
operations.

“…the Empire Group has explored options for developing a new business
model and strategy. After evaluating these options, the Empire Group has
determined that it is in the best interest of its shareholders and
policyholders to commence a complete and orderly liquidation of all of its
operations.”

From the Allcity 10K, for the fiscal year ended December 31, 2001:

“The Company has paid no dividends on its common shares since 1975.”

“As of March 8, 2002, the Group was rated "F" (in liquidation) by A.M.
Best Company ("Best") and rated "BB-" (marginal) by Standards & Poors
Insurance Rating Services…”

“BROOKLYN, NEW YORK, JULY 25, 2002-- ALLCITY INSURANCE COMPANY (ALCI-
OTCBB) (the "Company") announced today that its Board of Directors has
approved a $0.335 per share cash dividend payable on August 14, 2002 to
shareholders of record at the close of business on August 5, 2002 (the
"Dividend"). The aggregate amount of the Dividend will be $2,371,340.”

As of 31 Dec 2002:

“Allcity Insurance Company ("Allcity" or the "Company") is a property

and casualty insurer. Empire Insurance Company ("Empire"), a property and
casualty insurer, owns approximately 84.6% of the outstanding common shares
of the Company. Empire's common shares are 100% owned and controlled, through
subsidiaries, by Leucadia National Corporation ("Leucadia"). Additionally,
Leucadia indirectly owns an additional 6.7% of the outstanding common shares
of the Company.”

“January 15, 2003. Allcity Insurance Company (ALCI-OTCBB) ("Allcity")

announced today that it had received a proposal from its indirect parent
company, Leucadia National Corporation ("Leucadia"), the beneficial owner of
approximately 91% of the outstanding Allcity common stock, for a possible
tender offer to acquire all the outstanding shares of common stock of Allcity
not already owned by Leucadia for $2.00 per share.”

“March 25, 2003. Allcity Insurance Company (ALCI-OTCBB) ("Allcity")

announced today that a Special Committee of the Board of Directors formed to
consider a proposal by Leucadia National Corporation ("Leucadia") to acquire
all of the outstanding common stock of Allcity not already owned by Leucadia
and its affiliates, has advised the Company that, in response to negotiations
conducted by the Special Committee, Leucadia has increased the consideration
for its proposed tender offer to $2.75 per share.”

From Leucadia’s form SC TO-T, Dated 30 APR 2003:

“WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?

On January 15, 2003, the last trading day before Leucadia's initial
proposal to possibly acquire the shares of Common Stock not already owned by
Leucadia…for $2.00 per share was publicly announced, the last sale price of
the shares reported on…(the "OTC BB") was $0.19 per share.
On March 24, 2003, the last trading day before Leucadia's proposal to
possibly acquire the shares of Common Stock not already owned by Leucadia…for
$2.75 per share was publicly announced, the last sale price of the shares
reported on the OTC BB was $1.80 per share.”

From Allcity’s 10-Q for the period ended 31 Mar 2003:

“In December 2001, the Company and…("Empire"), the Company's parent…

referred to as the "Group") announced that it had determined that it was in
the best interest of its shareholders…to commence an orderly voluntary
liquidation of all of the Group's operations… The voluntary liquidation of
its operations is expected to be substantially complete by 2005. Given the
Group's and the Company's current financial condition, the expected costs to
be incurred during the claims runoff period, and the inherent uncertainty
over ultimate claim settlement values, no assurance can be given that the…
shareholders will be able to receive any value at the conclusion of the
voluntary liquidation of its operations.”

!!!!!!! And people, Just when you began to think that some six-year-
old insurance company story was irrelevant in the present, can you
believe this brand-new bombshell, just released in the spring of 2009,
that I think is un-fucking-believable !?!?!?:
From the Leucadia 10-k, for the period ended 31 December, 2008:

“During the fourth quarter of 2008, the Company received distributions

totaling $44,900,000 from its subsidiary, Empire Insurance Company
("Empire"), which has been undergoing a voluntary liquidation since 2001. The
Company had classified Empire as a discontinued operation in 2001 and fully
wrote-off its remaining book value based on its expected future cash flows at
that time. Although Empire no longer writes any insurance business, its
orderly liquidation over the years has resulted in reductions to its
estimated claim reserves that enabled Empire to pay the distributions, with
the approval of the New York Insurance Department. Since future distributions
from Empire, if any, are subject to New York insurance law or the approval of
the New York Insurance Department, income will only be recognized when
received.”

“The distributions were recognized as income from discontinued

operations; for income tax purposes, the payments are treated as non-taxable
distributions paid by a subsidiary.”

Dudes, are you fucking’ kidding me !?!?!?!?!?!

Empire has been “liquidating” since 2001…and here in 2008/2009,

brand fucking new, it comes up with $44.9 Million(tax-free)
dollars to ‘distribute’ to Leucadia!?!?!

Are you fucking kidding me!?!?!?!?

And this is the same Empire/Leucadia that tendered for the

remainder of Allcity back in 2003 !?!?!?!

Chapter 3: Pianos, Bankruptcy, and Two Empty Mailboxes

So if I told you that PHLCorp and Baldwin Enterprises Inc. (formerly

Baldwin Pianos) were the actual buyers of Jefferies (JEF), Americredit (ACF),
and Level Three (LVLT), would you believe me? I know what you’re thinking,
especially the investors that were around almost twenty years ago. You
thought that Baldwin and PHLCorp had long since gone out of business, right?

Wrong! It turns out that these two ‘empty mailboxes’ are still alive
and well!

From Fortune Magazine, March 30, 1987:

“Phlcorp Inc. …bankrupt Baldwin-United has risen from the grave…Controlled

since last November by Leucadia National Corp. …the rechristened insurance
and trading stamp company remains a mystery… No financial results have been
released since 1985, during the bankruptcy reorganization. Those stale
projections called for 1987 revenues of $419 million and operating profits of
$26 million. Says a security analyst who watches the company: ''Steinberg and
Cummings [sic] don't seem to want anyone to take a good look at this. But it
appears undervalued.'' Phlcorp stock recently sold for $9 a share, about what
Leucadia is estimated to have paid for it. Among the assets: roughly $16 a
share of tax-loss carry-forwards, 53 cents a share of operating earnings
from…Empire Mutual Insurance, a likely $1 a share in cash from the rumored
sale of a travel business, and undisclosed cash reserves left over from
Baldwin-United. The company may come to life at its first shareholder
meeting...”

From the Leucadia 10K, 31 DEC 2007:

” In April 2007, the Company and Jefferies & Company, Inc.

("Jefferies"), expanded and restructured the Company's equity investment in
Jefferies Partners Opportunity Fund II, LLC ("JPOF II") and formed Jefferies
High Yield Holdings,LLC ("JHYH"). Through its wholly-owned subsidiary, JHYH
makes markets in high yield and special situation securities and provides
research coverage on these types of securities.”

From the Jefferies/Leucadia SC 13D/A, 22 May 2008:

“(i) Following Leucadia’s contribution to Baldwin on May

14, 2008 of 26,585,310 shares of [Jefferies] Common Stock previously held of
record by Leucadia, Baldwin may be deemed to beneficially own an aggregate of
47,142,100 shares of [Jefferies] Common Stock, representing approximately
29.11% of the shares of [Jefferies] Common Stock outstanding as of the date
of this Amendment.

(ii) By virtue of its ownership of all of the outstanding

shares of Baldwin…Phlcorp may be deemed to be the beneficial owner of all of
the shares of Common Stock beneficially owned by Baldwin.

(iii) By virtue of its ownership of all of the

outstanding shares of Phlcorp…Leucadia may be deemed to be the beneficial
owner of all of the shares of [Jefferies] Common Stock beneficially owned by
Baldwin. Therefor, Leucadia may be deemed to beneficially own an aggregate of
47,142,100 shares of [Jefferies] Common Stock, representing approximately
29.11% of the shares of Common Stock outstanding...”

From the Jefferies/Leucadia Form 4, 22 May 2008:

“1. Reflects shares of Jefferies common stock directly

owned by Baldwin Enterprises, Inc. ("Baldwin") and indirectly owned by
Phlcorp, Inc. ("Phlcorp") and Leucadia National Corporation ("Leucadia").
Baldwin is a wholly-owned subsidiary of Phlcorp and Phlcorp is a wholly-owned
subsidiary of Leucadia.”
 “Who was that madman?”

-the last time Finova held an annual meeting, in 2005, some freak
ended up in a shouting match with Ian Cumming. We always wondered just who
exactly was that guy? At the time, he said something about owning a
substantial amount of the Senior Notes…and we’ve always been curious, since
then, to find out more about this asshole…TBC…

Inexplicable, substantial volume in the senior notes:

Are these just random computers, trading bonds back and forth all day
automatically? Or are these deliberate, informed purchases, by someone who
knows exactly what these bonds are?

Why on Earth would anyone care, or be interested at all, in this smelly

old dung !?!??!?!?! Doesn’t eight-and-half-cents on the dollar tell the whole
story !?!?!?!

13F-HR shows nothing

EDGAR full text search finds nothing

…so who owns them?

And who keeps buying them, and why !??!?!

Chapter 3: “Weasel Words”

I must admit, I can’t take credit for the hilarious phrase

“Weasel Words”. That credit goes to Mr. Silverschotz (link below). But I
cannot think of a better way to describe the slippery, opaque, inconclusive
language of the Finova filings and statements over the years. Now, this isn’t
meant to be a funny joke here; no, sir, we are deadly serious. The whole
Finova story actually depends on one of those very same Weasel Words:
“Substantially”.

It turns out that Mr. Silverschotz hit the nail right on the head,
maybe in more ways than he originally imagined. With our skeptical eyes now
focused intently on these crafty words, we discover new meaning in such fuzzy
Finova phrases as: “previously not anticipated”, and “our board may abandon
the plan of liquidation”.

This Weasel-Phrase, for example, leaves open infinite possibilities: “…

we did not attribute any net realizable value…there is the possibility that
some net realizable value will be attributed to these assets in the future”.

Unfinished ideas/stuff:
 Homefed, Allcity NOL info,

LINKS:

Christopher Cox's EDGAR/IDEA Tutorial

Harrah's take on the new tax break

Americredit debt-swap press release

A basic summary of Finova that will be helpful to laypeople

The Indenture governing Finova's Senior Notes

American Arbitration Association Finova Case

Utah State Bar Article

NYT Article

Mr.Silverschotz of "Weasel Words" fame

Mr. Cumming's Leg Of Lamb

Third Circuit Court of Appeals Decisions

Finova EDGAR Filings

Leucadia EDGAR filings

Allcity EDGAR filings

Jefferies Group Inc/DE/ EDGAR filings

Finova Senior Note Quote

Fortune Article

Forbes Article

Jefferies; Listen to Webcast