Comment: Woodford found guilty of more bad judgement after Burford attack by Muddy Waters

Another day, another disaster for Neil Woodford’s messed-up investment portfolio.

This time, it’s Burford Capital’s time in the limelight. With its shares consisting of around 6% of Woodford’s gated Equity Income Fund, Burford makes its money (or tries to) by funding litigation in the courts. The idea is, it pays for the legal fees and takes a slice of the winnings if the case succeeds.

Given that lawyers, like undertakers, will never go hungry, it should be a lucrative field. If you pick the right cases.

Burford claims it overwhelmingly does, and values ongoing actions prudently in its accounts. Others beg to differ. Notably Muddy Waters, the research-heavy US hedge fund.

Today, it claims Burford has been “egregiously misrepresenting” its investment returns, pointing out that since 2012, two-thirds of Burford’s actual realised profits have arisen from only four cases. One, Muddy Waters says, only turned a profit after being bailed out by Woodford’s old shop, Invesco, at the behest of his protégé Mark Barnett. Invesco is Burford’s biggest shareholder with 14%, while Woodford has 7%.

If that didn’t strike you as peculiar, consider this: of all the finance directors in all the world, Burford’s is the wife of the founder and chief executive Christopher Bogart. Nothing like a bit of independent scrutiny at a £2.4 billion company.

Burford denies anything’s wrong and says its litigation finance returns are at their highest ever levels — just ask our auditors EY, it says.

It’s too soon to take sides on the accounting issues; brickbats will now fly in both directions. But on corporate governance alone, Burford is distinctly whiffy. In other words, a classic Woodford investment.