A major campaign bundler for President Barack Obama is betting on the failure of one of the top federal contractors responsible for the disastrous rollout of the website for the federal government’s insurance marketplace.
James Chanos made his fortune by short-selling companies before the value of their stock plummeted, most notably the defunct energy firm Enron.
His latest target is CGI Group, which is the parent company of CGI Federal. CGI Federal is the lead contractor responsible for Healthcare.gov, the glitch-plagued website of the federal Obamacare insurance exchange.
Chanos "has placed potentially lucrative bets that CGI shares will fall in value," Newsweek reported on Wednesday, citing "persons briefed on the matter."
CGI is "among his ‘largest short positions,’" Newsweek reported.
Chanos cited "the PR mess" created by CGI’s handling of healthcare.gov as reason to believe that its stock price will fall in a memo circulated to clients of Kynikos Associates, the hedge fund he founded and currently leads.
Problems with the website could "reduce the likelihood of future government contracts" for the company, Chanos wrote. It may even be required to return funds to the federal government.
Chanos’ memo suggests that even major Obama backers are betting against the president’s signature legislation.
Chanos bundled between $200,000 and $500,000 for the president’s reelection campaign. He also donated $5,000 directly to Obama and another $100,000 to a political group working to elect House Democrats.
He has given nearly $100,000 to arms of the Democratic Party since 2009.
Chanos has been among the president’s most prominent supporters in the financial sector. He attended a $10,000 per-plate fundraiser for Obama and the Democratic National Committee in 2011.
Billionaire investor Warren Buffett, another Obama supporter, hosted the event at the Four Seasons in New York City.
After the president was reelected, Chanos dismissed the notion that a post-election market sell-off was a reaction to Obama’s victory.
Kynikos is the largest hedge fund on Wall Street devoted exclusively to short selling, according to the Globe and Mail.
The company recently bet against construction equipment giant Caterpillar and iron ore companies in Australia and China.
"Chanos, 53, is the most renowned, or, if you prefer, notorious, short seller on Wall Street," the Globe and Mail wrote in a 2011 profile.
His personal life came under scrutiny after it was revealed that he personally knew Ashley Dupre, the high-priced prostitute that brought down disgraced Gov. Eliot Spitzer (D., N.Y.).
Chanos said she was his house sitter. Dupre reportedly called him "Uncle Jim."
"I know her. She’s a nice person," he admitted to the New York Post.
"She is one of many young ladies I have spent time with around town. I have had her to my home, but I never dated her and I never introduced her to Eliot Spitzer. I had no idea she was a high-priced call girl."