When the authority figure on one side of a controversial trade is the widely admired investing icon Warren Buffett and on the other a Wall Street refugee posting on Seeking Alpha on behalf of short-sellers, the nearly overwhelming temptation is to scoff indignantly and order more of whatever Mr. Buffett is having.

Never mind that Buffett might have had no role in his company’s investment, or that his relentless folksiness masks a killer instinct more predatory than any short seller’s. This is Buffett! He can afford more due diligence than anyone else, so anything he buys must have passed a rigorous inspection.

When Buffett’s Berkshire Hathaway (NYSE: BRK-B) revealed in May of last year that it had bought a stake then worth nearly $400 million in Chicago Bridge & Iron (NYSE: CBI), I wrote that it bolstered my confidence in an investment I had recommended a couple of weeks earlier. The market must have agreed, because the stock soon took off and at its peak in March had generated a return of nearly 50 percent.

Then came an underwhelming quarterly report and complaints from several (at least three that I can now count) researchers aligned with short sellers, all of them pointing out that CBI’s reported earnings had been propped up by reversals from a reserve for legacy contracts from the Shaw Group, CBI’s costly 2012 acquisition.

That reserve, moreover, had been bolstered throughout 2013 by a cumulative $1.56 billion in fair value adjustments. Not only did the critics call CBI’s reported earnings and claimed rude health into doubt, they suggested that the adjustments reflected the excessive price CBI paid for Shaw and ongoing risk from Shaw’s troubled nuclear construction contracts, which were responsible for the bulk of the reserve increases. 

On the uncontestable facts, the critics were right. CBI did indeed bolster earnings by reversing some of its contracts in progress liability, made up largely of the recent fair value adjustments. It was a noncash bolstering however, that left cash flow from operations negative in both fiscal 2013 and the first quarter of 2014, even as the company reported a 67 percent jump in reported earnings to nearly $5 a share in 2013 and promised even better results this year.

The research shop that finally got through to the market on this score last week, Prescience Point, then went on to make the laughable suggestion that the cookie jar accounting might actually cause CBI to lose its access to credit. (In this banker yield chase? Yeah, right.) Nevertheless, the stock dropped 7 percent the day the report was published and has now declined 19 percent since June 9.

CBI management has maintained that cash flow in its business is unpredictable, and it is also true that justified fair value adjustments within a year of the acquisition are its right.

But the company did a poor job of flagging the role of the fair value adjustments in generating a third of its reported earnings last year, and its refusal to answer the short sellers’ charges in detail will only reinforce the impression that CBI has something to hide.

I find this arrogant behavior more troubling than the recent trading action. In the long term today’s cash flow and nuclear construction issues could very well be trumped by the profits from the $12.3 billion in contract awards landed last year, with much more to come for the leading nuclear, petrochemical and energy infrastructure builder. We’re in a bull market, energy is hot and several Wall Street analysts immediately rushed to CBI’s defense. But there’s no right price point for a company one can no longer quite trust, and on that basis alone we’re downgrading CBI to a Hold.

Why not a sell, then? Because those bullish long-term factors remain in play, and because there’s every likelihood that after a period of slumming CBI will bounce, and the few short sellers involved move on (Only 2.4 percent of the float was sold short as of the end of May.)

The bottom line is that the short-sellers have a point about the misleading earnings, and CBI’s fans are right that these could soon be fortified by an infusion of cash from lucrative new projects. But management is definitely wrong not to address the critics’ claims head on, and not to make the non-cash boost to reported earnings as clear as possible given the complexity of its industry’s accounting.

In any case, there’s no need to take action now. While management’s contempt for transparency can only be termed unfortunate, there should be better exit opportunities down the road. But CBI is now a rental rather than a Best Buy, and a much riskier one than it was before management chose to obfuscate rather than inform.