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Jim Chanos (Trades, Portfolio) specializes in sniffing out fraud. In the early 2000s, he was one of the few people betting on the collapse of Enron. More recently, he has made headlines with his well-publicized short position on Tesla (NASDAQ:TSLA) and his criticism of Elon Musk. In a Sept. 19 interview with CNBC, Chanos discussed another one of his shorts - dialysis provider DaVita Inc. (NYSE:DVA).
Insurance fraud?
DaVita is notable for the fact its biggest shareholder is Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B). We will discuss why this seems strange in a little while; for now, let's talk about Chanos' short thesis.
The suit alleges (and Chanos agrees with these allegations) that DaVita has been targeting Medicare and Medicaid patients and pushing them into signing up for expensive commercial insurance through the Obamacare exchanges. DaVita promises better service and shorter waiting times to those on the more expensive insurance. Many of these patients cannot afford commercial insurance; however, the company points out that The American Kidney Fund, a charity, will cover some of the premium payments.
DaVita has always said it does not direct the fund's spending. However, a whistleblower from the fund recently came forward and said this was not the case, and that DaVita plays a direct role in determining where the money goes.
Where does Berkshire come in?