Matthew Goldstein of Reuters reports that several business journalists are caught up in the crossfire between Fairfax Financial and hedge funds.

Hedge fundie Daniel Loeb sent subpoenas (since rescinded) to Bethany McLean and Joe Nocera, Peter Eavis was subpoenaed by Morgan Keegan, and Fairfax says it may subpoena Roddy Boyd.

Fairfax alleges that Loeb, who manages Third Point LLC, teamed up with famed short-seller James Chanos and SAC Capital Advisors founder Steven Cohen to spread disinformation about the insurer to a number of business journalists. The Toronto-based company claims the hedge fund managers organized a campaign to drive down the prices of Fairfax’s shares because they were shorting, or betting against, its stock.

Needless to say, if the journalists are forced to testify, it would have a chilling effect on newsgathering. This one’s worth watching.

— McClatchy’s Kevin G. Hall is good to point out that public pensions aren’t the only ones in trouble. Corporate pensions insured by the Pension Benefit Guranty Corporation are way in the hole.

Single-employer plans had promised more than $121 billion in benefits, but only had assets to pay out $99.4 billion. Multi-employer plans held assets valued at $1.6 billion to cover $3 billion in promised benefits.

That 20 percent shortfall is about where public-sector pensions were in 2009 (these are the latest numbers I found, but that 78 percent funded number is probably higher now as markets have risen sharply since. ).

However, in a hard-hitting report to Congress on Dec. 1, the Government Accountability Office designated both PBGC insurance programs as at a “high risk” for failure. The GAO said that even if financial markets rise in value and lift investments made by pension plans, the PBGC is “likely to remain at financial risk” because of structural issues.

— David Weidner says the Galleon trading case is the biggest since the 1980s—a test of whether hedge funds and traders will be called to account for insider trading run rampant on Wall Street—and explains why:

Information passing among the clubby elite of the financial world is as common as Hermès ties and vacation homes.

The Rajaratnam case is a “crucially important case for retail investors and the SEC’s crackdown on what has become a widespread problem in the U.S. — hedge funds trading on material, nonpublic information,” said Andrew Stoltmann, a securities attorney based in Chicago who is not involved in the case…

“If prosecutors can’t win this case with the extremely strong set of facts and evidence against the defendant — wiretaps, cooperating witnesses and an unsympathetic defendant — prosecutors and SEC’s latest crackdown on insider trading will be effectively stopped in its tracks,” Stoltmann said.

But if the prosecution wins, the results will shake the financial industry.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.