Washington's Premiere Corporate Lobby Embraces Naked Short Selling Cause

In previous posts I've described how the U.S. Chamber of Commerce, the premiere lobbyist for the interests of Corporate America and against the public, has embraced the cause of money losing CEOs blaming their misfortunes on "naked short selling."

The Chamber sent an impassioned comment letter to the SEC and even put the former chief mouthpiece of the naked shorting clowns, the now-imprisoned Universal Express CEO Richard Altomare (right), on three Chamber committees.

Now comes word that another major Washington lobbyist that aggressively fights against the public interest, the Washington Legal Foundation, has aligned itself with the anti-shorting forces in a comment letter to the SEC.

As you can see from reading the letter, the WLF takes an extremist view against all short-selling, not just the much-exaggerated scourge of naked shorting, even suggesting that shorting be ended for penny stocks -- something that would make stock fraud even easier than it now is.

As I described in Wall Street Versus America, short selling is the only market force that can impede the inflated pricing of hyped stocks. Countless studies of short selling have proven that shorting improves the liquidity of the market, and is the only means by which negative information is incorporated in stock prices.

That obviously is not something that would please the WLF. The group supposedly supports "free markets," but not, I guess, when the markets work against the interests of bad companies.

Note, by the way, that the WLF is supporting the anti-naked shorting nonsense as part of its "investor protection program." That's not surprising, given that anti-naked shorting campaigners frequently cloak their anti-investor initiatives in such language. But in the case of WLF this is particularly hypocritical, as the WLF fights against a wide range of investor interests, such as by arguing against the very existence of the Public Company Accounting Oversight Board on flimsy technical grounds.

It's not just the fight against investor interests that spur the WLF to action. Look at the WLF website. Wherever there is a fight of Corporate America vs. the public, the WLF wades in, fists flying, fighting for corporate interests.

In fact, the WLF's "investor protection" record consists mainly of screwing investors by making it harder for them to sue bad companies. So obviously, making it easier for companies to screw investors by pumping share prices, and promoting phony "counterfeit stock" conspiracies, is right up WLF's alley.

As can be seen from this Sourcewatch article, the WLF has taken up the cudgels of Big Tobacco in the past, and is fighting doggedly against lawyer trust accounts. So this latest cause, in favor of corporate crooks and inept CEOs, is very much consistent with the WLF's record of fighting for the sleaziest elements of Corporate America.

The naked shorting nuts, and the cynical corporate benefactors who manipulate them, have clearly found a suitable champion.

© 2008 Gary Weiss. All rights reserved.

Another Publicity Coup for Overstock.com CEO Patrick Byrne

Visiting hours at Overstock.com corporate headquarters

I see that some of my friends at CNBC reflected this morning on one of the more embarrassing blatherings of Overstock.com CEO Patrick Byrne: that there's a "fax machine" at CNBC where reporters take instructions from "hedge funds" (presumably not the hedge fund that his brother operates, or the one through which Byrne owns Overstock shares).

"Did you see that total whack job at Overstock says there's a fax here or something?" asked an amazed Joe Kernan. "We now know he is not above blatant lying."

We now know? Mr. Kernan, with all due respect, where have you been?

Still, I think it's pleasing to see Byrne described accurately for a change, and not with weasel words like "eccentric." The media, I think, has a hard time coming to grips with the possibility that a CEO could be, as one blogger artfully put it the other day, "nucking futs."

True, the "crazy act" could be just that. But I have to admit, it works. Byrne has certainly managed to divert attention from his company's financial woes by behaving like a clown. But is the price that he is paying -- the demolition of his credibility, the damage to his company's reputation, and the humiliation of being an object of fun on national TV -- worth that laudable objective?

© 2008 Gary Weiss. All rights reserved.

Biovail Pleads Guilty: World of Baloney Mourns

The Baloney Brigade stock market conspiracy theorists lost yet another team leader today. The Canadian drug company Biovail, which has bravely fought against the truth about the company for many years, pleaded guilty today to federal kickback and conspiracy charges.

This is terribly upsetting for CEO blame-shifters such as Overstock.com CEO Patrick Byrne (see separate item on his latest publicity coup), who have dedicated their lives to concealing their incompetence behind "naked short selling" and other market conspiracy theories. This is also a bad day for the cause of bad journalism, such as the awful 60 Minutes segment that naively took up the causes of this sleazy company.

I'm still waiting for the CBS News program to tell viewers what an awful job it did in reporting on this company.

Biovail was already nailed recently with SEC fraud charges that are similar to what a few brave analysts, such as Gradient Analytics, have been saying about the company for years. I believe that a junk lawsuit Biovail filed against Gradient is still pending.

Fortune's Roddy Boyd points out that

Biovail's plea bargain doesn't just close an ugly chapter in the Toronto-based company's history. It also pulls the rug out from under a multiyear quest by the company's former management, led by onetime CEO Eugene Melnyk, to blame an alleged conspiracy of hedge funds and research analysts for Biovail's financial and legal woes. . . . Unfortunately for Biovail, federal prosecutors from Massachusetts didn't agree that the [analysts'] assertions were unfounded.

Actually I'm kind of sorry that the feds let Biovail cut a plea bargain. I think the Richard Altomare Wing of the Metropolitan Correctional Center would have been a more fitting new corporate GHQ for this company.

Zac Bissonnette comments: "Moral of story: when a company starts suing people and lashing out at its critics, sell the stock. That philosophy would have saved people a ton of money on Biovail."

© 2008 Gary Weiss. All rights reserved.

PricewaterhouseCoopers Abets Overstock.com Deceptions

The latest Sam Antar blog item item today is a shocker. While it's scarcely news that the slo-mo train wreck Overstock.com is a serial deceiver, both in its public statements and in its SEC filings, it now appears that the accounting firm PricewaterhouseCoopers had a hand in the chicanery, by failing to catch egregious errors.

The firm was paid $611,000 in 2006 and $761,000 in 2007 to help Overstock grapple with SEC inquiries.

Sam points out:

PricewaterhouseCoopers LLP either missed Overstock.com's deliberate noncompliance with GAAP in reporting revenues or colluded with the company to report non-GAAP revenues. In addition, PricewaterhouseCoopers LLP helped Overstock.com provide erroneous responses to information requested by the SEC Division of Corporation Finance. What's worse is that despite Overstock.com's deliberate noncompliance with GAAP in revenue reporting and errors in responses to the SEC, under PricewaterhouseCoopers LLP's supposedly watchful eye, Allison H. Abraham claims that "The Audit Committee has had substantial opportunity to evaluate the work of PricewaterhouseCoopers and has found it to be consistent and of high quality."

The only question is whether Overstock's deceptions, as detailed by Sam, are going to be swallowed by the SEC.


© 2008 Gary Weiss. All rights reserved.

A Cure for the Bad-CEO Blues: Sue Your Shareholders

Stephen Taub has an intriguing brief article in CFO.com on the latest hot new trend among blame-shifting CEOs: Suing unruly shareholders.

Vaalco Energy is trying an unsual tactic to stave off a proxy fight: suing its shareholders.

The independent oil producer filed an action against New York City-based hedge fund Nanes Delorme Partners I L.P., and Pilatus Energy SA, of Zug, Switzerland, in federal court, alleging they violated securities laws by sending misleading information to shareholders in an effort to install three of their nominees on Vaalco's board, according to the Associated Press.

One of the targets of this imbecilic junk lawsuit responded as follows:

Julien Balkany, a Managing Member of Nanes Balkany Partners LLC, the General Partner of Nanes Delorme Partners, stated: "We believe that VAALCO has great potential, but that the company will continue to materially underperform without new independent representatives on the Board. In addition, rather than provide a clear strategic plan to rebuild stockholder value, the company has chosen to evade the critical issues facing Vaalco by filing a desperate and baseless lawsuit aimed at disenfranchising stockholders and 'chilling' the democratic process and to defend its failures by launching a campaign rooted in misleading facts and unnecessary scare tactics designed to distract stockholders from the company's poor performance."

Just goes to show you how far we've come from Enron. Nowadays, bad companies add insult to the injury they inflict on shareholders by lashing out at analysts, the media, and now investors. The SEC and other regulators, meanwhile, are snoring loudly in the background.

As perfected by Overstock.com's wack-a-doo CEO Patrick Byrne, the name for this kind of toxic blame-shifting is known as "issuer retaliation." That was also the theme in David Einhorn's great new book Fooling Some of the People All of the Time.

Einhorn chronicled his battle royale with a scuzzy company called Allied Capital. Here's a cogent review by Jesse Eisinger in Portfolio.

UPDATE: A rep for Vaalco wrote to say that this item gives this company a bum rap. I asked for a reply that I could post verbatim, and was sent the following:

VAALCO’s Board and management team are active, engaged and successfully executing on the Company’s strategy. Nanes Delorme Partners’ claim to the contrary simply ignores the facts:

· VAALCO has delivered superior stock price performance. VAALCO has outperformed its peer group and the broader market as a whole over the last six month, one, three and five year periods. Indeed, our stock performance has exceeded our peers[1] by 25%, 20%, 23%, and 167% in each of those periods, respectively[2].

· VAALCO’s operating performance is among the best in the industry. Since 2000, 80% of the exploration and appraisal wells drilled by the Company have been successful. We also have a 100% success rate with our development wells on the Etame Block, our principal producing asset. These are exceptional drilling success rates in our industry.

· VAALCO’s financial performance is strong. Revenues, cash flows and earnings per share have consistently increased in nearly every year. VAALCO’s average return on invested capital (ROIC) over the last five years is 30.7% and in the top 5% of our industry.

We are confident in our ability to build on this strong operating and financial track record. We believe 2008 will be a break-out year for your company and for the value of your VAALCO shares.

· VAALCO’s exploration program, which includes seven planned exploration wells, will expose the Company to in excess of 50 million net barrels compared to VAALCO’s current 6.2 million barrels of proved reserves. This represents an eight-fold potential increase. We have rigs arranged to commence drilling this summer.

· We expect continued significant increases in stockholder value in the near-term. VAALCO’s stock price historically surges when the Company moves from the property acquisition and seismic phase to the drilling phase – and this is precisely where we believe we are now.

THE PUBLIC RECORDS OF nanes delorme partners and Pilatus energy ARE
RIFE WITH CONFLICTS AND SCANDAL

Nanes Delorme Partners and Pilatus Energy appear to be concealing what the public record makes clear – Nanes Delorme Partners and Pilatus Energy are conflicted and their ethics tainted by a scandal involving corruption, kickbacks, fraud and embezzlement. You deserve to know the following:

The Public Record on Nanes Delorme Partners*	The Public Record on Pilatus Energy*
Nanes Delorme Partners only recently purchased its VAALCO shares and more than half of its shares were transferred from Pilatus Energy on 02/14/2008. Source: Nanes Delorme Partners definitive proxy statement filed with the Securities and Exchange Commission on 05/07/2008	Pilatus Energy is a limited partner of Nanes Delorme Partners. It recently purchased 2,700,000 shares of VAALCO between 11/28/2007 and 01/30/2008. Source: Nanes Delorme Partners revised preliminary proxy statement filed with the Securities and Exchange Commission on 05/05/2008. (Notably, Nanes Delorme Partners’ prior preliminary proxy statement filed on 04/25/2008 did not mention Pilatus Energy by name, but only referred to an unnamed “limited partner.”)
Nanes Delorme Partners I LP is a New York based hedge fund that invests primarily in the oil and gas exploration and production sector. Source: Nanes Delorme Partners press release, 04/24/2008	Pilatus is comprised of Pilatus Energy and Pilatus Ressources (sic) which are two companies based in Zug, Switzerland. Pilatus has positions in the majority of the African and Middle East countries. Source: Pilatus Energy press release, 01/31/2008
Julien Balkany, a 27-year old French citizen, paid Nanes Delorme Partners employee, and nominee to your board is leading Nanes Delorme Partners’ proxy campaign. Source: Nanes Delorme Partners revised preliminary proxy statement filed with the Securities and Exchange Commission on 05/05/2008; Nanes Delorme Partners press release, 05/08/2008	“…Pilatus Energy and Pilatus Resources, two companies run from behind the scenes by France's Loik Le Floch-Prigent…” Source: Africa Energy Intelligence, “Abbas I. Yousef Al Yousef,” 12/19/2007 “The name of the former Elf CEO doesn't appear on their list of executives but it is he who makes all of their investment decisions.” Source: Africa Energy Intelligence, “Le Floch-Prigent's New Incarnation,” 12/05/2007
Nanes Delorme Partners is paying its two other nominees $25,000 simply to stand for election and additional monies if they fail. Source: Nanes Delorme Partners definitive proxy statement filed with the Securities and Exchange Commission on 05/07/2008 (While Nanes Delorme Partners’ nominees may have no affiliation with your company, these payments show that they are by no means independent from Nanes Delorme Partners.)	“France's mammoth Elf corruption case, probably the biggest political and corporate sleaze scandal to hit a western democracy since the second world war.” Source: The Guardian, “Gigantic Sleaze Scandal Winds Up as Former Elf Oil Chiefs Are Jailed,” 11/13/2003 “Le Floch-Prigent, 60, and a former Elf director, Alfred Sirven, 76, are both already serving time after losing appeals earlier this year against separate convictions over corruption at Elf, since absorbed into the Franco-Belgian oil company Total. Both have admitted some of the charges against them during the four-month trial.” Source: Associated Press, “Verdicts Expected in France's Biggest-Ever Graft Scandal,” 11/12/2003
Nanes Delorme is a broker for the sale of oil and gas assets, including those of VAALCO’s competitors. “In recent years, Nanes Delorme advised Afren on buying up the stake of Gulf Energy Resources in Angola’s Cabinda Central concession and on acquiring Heritage’s interests in Congo-Brazzaville.” Source: Africa Energy Intelligence, “The New African Oil Trail Blazers,” 02/20/2008	“In a matter of months, the small Swiss group Pilatus Energy has built up an African portfolio with the help of a few middlemen who can knock on presidential doors…In September, it was awarded the Ngoki concession in the Mossaka region thanks to the advice of the former chief executive of Elf, Loik Le Floch-Prigent, who negotiated with the Congolese officials on Pilatus’ behalf.” Source: Africa Energy Intelligence, “Pilatus Has Right Connections,” 11/29/2006 (These activities are competitive with VAALCO’s core operations.)

Ask yourself: If this information is available simply from the public record, what else about Nanes Delorme Partners and Pilatus Energy has yet to be revealed?

---

[1] VAALCO peer group as defined by the independent governance and proxy advisory firm RiskMetrics (ISS)

[2] Based on closing stock prices on May 13, 2008

* Permission to use quotations neither sought nor obtained.

So there! The formating of the chart ain't so good, but I can't seem to fix it.

Incidentally, it's nice to get a dignified response to an item, one that takes issue with the facts and does not engage in mudslinging. A refreshing change, even while I disagree with their actions here.

© 2008 Gary Weiss. All rights reserved.