Thursday, December 28, 2006

Another Accolade

Veteran journalist Ben Silverman, now with FindProfits.com, awards the "Richard Nixon Final Days Award" to... well, why not read it at the source. A distinctive accolade. Richly deserved, too.


© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Tuesday, December 26, 2006

The Hedge Kings Are Rich, but Will They Be Noble?

Ben Stein raised that question in the New York Times over the weekend, in a thoughtful article. Here's the part I liked best:

They are stars in the financial firmament. But clearly their social utility to the nation and to the world is hard to see when compared with the social utility conferred by an Andrew Carnegie, an Andrew Mellon, a Henry Ford or a John D. Rockefeller, who genuinely built a nation and a world. Providing liquidity for different kinds of variable-rate mortgages simply does not compare, at least as I view it.

But there is a vast ocean of opportunity for these new plutocrats to make their marks. Four out of 10 Americans live modestly, at best. Tens of millions are in poverty. It would be a marvelous legacy of the hedge fund era if these players endowed the hospitals and art galleries and scholarships that made possible a better life for Americans with slower reflexes than theirs. Some are already doing it, and it’s a fabulous gift of their talent and decency.



© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Patrick Byrne's Merry Christmas


Illustration courtesy of Wall Street Folly


(Note: A few weeks after appearance of this item, Overstock's "director of social media" Judd Bagley confessed to being the anonymous slimeball who runs Overstock.com antisocialmedia.net smear site. See this item and others tagged "Judd Bagley.")

Overstock.com CEO/conspiracy theorist/short-and-analyst suer/journalist-taunter/Worst CEO-wannabe Patrick Byrne spent Christmas day "focused," not on his company, God forbid, but on vilifying his critics on a stock message board.

Byrne responded with a carefully worded non-denial when asked about evidence that his new "director of social media," Judd Bagley, runs a website called antisocialmedia.net that posts vicious lies about myself and other critics of Byrne and Ovestock.

"Technically, I do not 'know' who out there is behind it (the person who is behind it has made an effort to shield me from that knowledge), though admittedly, I have a very good idea," says Byrne. This kind of corporate doubletalk is an immense, waving red flag. Regulators, I hope, will pay attention.

The attack site's latest targets are a couple of Internet critics of Byrne, publishing their supposed personal details in a brazen attempt to silence and intimidate. One is a software engineer who just happens to dislike Overstock, and the other is an Internet anti-fraud activist who has actually received a lot of publicity for his good work. The identity of the software engineer was obtained through pretexting, according to an account posted by him on a Yahoo message board.

The obvious purpose of such cyberstalking is to silence people who don't happen to think Overstock is a very good company -- a sentiment shared by the market over the past two years. What makes these tactics even more curious, particularly if they are being employed on behalf of Overstock, is that anonymous Internet stalking is prohibited by a recently enacted federal law.

Critics of Overstock are not, however, stooping to the tactics that have been employed against them. After it was noted that Bagley apparently had once likened abortion to "slavery," it was suggested that this be disseminated on the Internet. After all, most Overstock shoppers are women, etc. etc. That suggestion was rebuffed, and correctly so.

However, at about the same time another Internet detective found that someone at Overstock.com had rewritten Overstock's entry in Wikipedia, turning it into a corporate press release. That is relevant, and raises troubling issues of transparency and disclosure.

CORRECTION: In a previous post I identified Judd Bagley as a "Jeb Bush speechwriter." He actually worked for a minor Florida agency. My apologies to Jeb Bush.

(I've had to substitute a Google Cache link for one of the links above. A few weeks after this post appeared, InvestorVillage deleted all of the posts from the Internet skeptic who had been giving Byrne such a hard time. This display of partisanship -- rare outside the worst stock-pumper message boards -- was doubtless prompted by complaints from Overstock.)

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Friday, December 22, 2006

A Very Merry Xmas


On behalf of my wife and the entire gary-weiss.com creative team, I wish you all a very Merry Christmas!

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

Take Up a Collection for This Poor Man

Jimmy Cayne, CEO of Bear Stearns, received a pittance for his annual bonus -- just $14.8 million (plus options). How can he survive on so little? Well, he is over 65, so there's always Social Security I guess.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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A Shareholder Cautionary Tale

Check out the Forbes website for a terrific story on a radiation treatment center chain. Just the kind of hard-hitting markets coverage the public needs, but usually doesn't get.

Speaking of coverage, the company filed a Form 8-K complaining about the story. I won't pass on the merits of its beef against the story, but I will say this: public relations geniuses they are not.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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'I Would Have Loved to Work For You'

Former Crazy Eddie chief financial officer, convicted fraudster Sam E. Antar, originally attempted to post this as a comment to a previous item but was cut off by the Haloscan system.

With his permission I've posted it in full below:

"Dear Patrick Byrne:

As an ex-felon and admitted fraudster, I really have to admire you and the way you handle yourself. Being that I feel a special bond with you because you remind me of my youth. I hope you can take some of my advice as a person who has “been there, done that.”

About you as a CEO, I would advise you that your job should be focused on the underlying business and not the stock price.

In short I would summarize my point from someone who tried to teach me but I was too stupid to follow.

He said to me, “It’s all about the business stupid, and not the stock price.”

If you believe as an educated man you are that markets are efficient and rational as many high esteemed scholars say it is, than the stock price will ultimately follow the fundamentals of your business.

I know Pat (if I may call you that because I feel a close kinship with you) those evil short sellers, negative journalists, and other analysts are distorting the market’s perception of you and your company for their own evil ends.

Well, you must fight back.

Your choice of Judd Bagley as the Director of Social Media for Overstock.com is a wise one. According to Gary Weiss in his blog he quotes Judd as saying:

“I do PR mostly. I’m especially good at strategic messaging.”

You need a guy like this as Gary Weiss said who uses “strategic messaging” meaning “code to embarrass the opposition in the press.”

It is especially thoughtful that he does not post comments in his real name but uses “writerjudd” as his internet handle. May I suggest that you employ an army of anonymous handles to put your spin across on the blogs?

I have found that an effective tool as a criminal is that a strong offense is the best defense. When you cannot respond to the substance of someone’s criticism it is best to attack their intentions even if you have to create some theory. American’s love conspiracy theories anyway. It is a great way to deflect criticism about you and to change the focus of the debate. You are artful at that.

Find some issue like naked short sellers and blame them. Take a seeming legitimate tangential issue and blame it for your perceived low stock price. We both know that the press loves negative news. Continue blaming them as self interested journalists trying to sell copy.

Another thing you are correctly doing is that you have taken steps to increase your stature in the eyes of the public. As a criminal myself I always tried to build walls of integrity around me by showing my interest in good causes. It makes your attacks on others appear more legitimate. I admire your work on education issues.

As a criminal I understood how to exploit the gratitude of others. The recipients of your largess make a great support group for you. They will defend you to the bitter end. Many such persons are great sources of helpful letters to a sentencing Judge should you need it at a future date.

An important item is that you must appear to be a “stand up guy.” Continue offering apologies for your company’s recent weak performance. At the same time you must continue your attack on the skeptics through your surrogates to show you have a large base of support.

Another area that I admire you and your company is its compensation and selection of members for your so-called independent Audit Committee. It’s a great move to have your buddy Gordon Macklin on that important committee. As a criminal I learned that an effective tool is to keep your friends close and your enemies closer. Is he a real friend or does Gordon just think he is your friend?

Another great thing is that you award stock options to Audit Committee members. It is a completely legitimate way to defeat their professional skepticism and objectivity and align their interests in a high stock price and aggressive accounting.

Do not worry Pat, no one will question your great credentials if you follow the herd as other companies have done in your compensation and selection of Audit Committee members. I like how you use people who majored in economics rather than people with educational backgrounds in accounting and fraud to be on the Audit Committee. They have great resumes but at the same time do not have a real clue about fraud. After all look at the great work you have done in education. You are beyond reproach in many people’s eyes.

Your recent successful placement of about $40 million in stock with some very astute institutional investors shows the great stature you have built for yourself. I can tell you from my own experience that they are not a smart bunch anyway. My cousin Eddie would tell me that “people live on hope” and therefore it was our duty to feed such hope with spin and lies. You are just as good as Eddie in getting the masses to drink “Kool-Aid.”

One constructive criticism I have for you if I may. When the spinning stops working it may be time to shut up. You don’t want to be accused of making false statements and manipulating your company’s stock price. Remember, everything you say will be used against you if those self serving ambitious prosecutors decide one day to go after you.

It is best to have them on your side as I said earlier “keep your friends close and your enemies closer.” Give them conspiracy theories to investigate. Let them investigate your enemies and not you. You are artful at that.

I wish you were around years ago. I would have loved to have worked for you instead of my cousin Eddie.

One last thing, Pat, do you stay up late at night like me. Try not to let the guilt get to you. It’s not worth losing sleep over. I learned that losing sleep does not solve anything. However, such advice about guilt and sleeping is easier said than done.

My hopes for your continued success,

Sam E. Antar (former Crazy Eddie CFO & ex-felon)"

This is a terrific letter, but I have one quibble. Based on my lengthy experience with people like him, I strongly doubt that Patrick Byrne feels guilt or remorse about any of his vile behavior.

Bagley later confessed to running Overstock.com's antisocialmedia.net smear site. See this subsequent post.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Thursday, December 21, 2006

The Worst Stock For 2007

Seth Jayson has an excellent article in Motley Fool on the "worst stock of 2007," which just happens to be the Baloney Brigade poster child, Overstock.com.

It's no surprise to me that Overstock is having such difficulties. Companies that shift blame to short-sellers are almost invariably dogs. It is one of the most flaming-red flags there is.

Meanwhile, more interesting details have emerged on Judd Bagley, hired in August as "Director of Social Media" by Overstock.com CEO/conspiracy theorist/ journalist-taunter/short-and-analyst-suer/miscreant-blamer/ Worst CEO-wannabe Patrick Byrne.

In an October 2005 post by "writerjudd" (Bagley's Internet handle as you can see from the URL to this link), Judd described himself as follows: "I do political PR mostly. I'm especially good at 'strategic' messaging, which is code for embarass the opposition in the press."

Bagley materialized again, in tandem with Byrne, on the "sanitycheck" conspiracy theory website to demonize and taunt Business Week reporter Tim Mullaney. Bagley's and Byrne's comments (as "writerjudd" and "Patrick") can be found here. Mullaney was researching a critical article on Byrne and Overstock that Byrne successfully countered -- by taunting and personally attacking Mullaney. I have no idea if these vile tactics worked, but I do know that the article never appeared.

I noted previously that this former radio traffic reporter used his dirty-tricks talents on behalf of Byrne earlier this year. He is the creative brain behind two nauseating websites that ridiculed Byrne's critics via digitally manipulated videos.

Obviously Byrne is putting his money where his obsessions are. Too bad his shareholders have to suffer because of it.

Seth's Motley Fool article makes the following good observation:

We're talking about a CEO who lashes out at anyone critical of his performance. Once, on our Fool boards, he suggested -- without so much as a thread of evidence -- that I was taking bribes from some member of the anti-Overstock conspiracy. When that post was removed by our moderators, he then lashed out at all of Fooldom, and bid us adieu, writing:

"More and more I came to feel that the Fool had been infiltrated by representatives of the bad guys & I figured I would do a last poll to ask, how many others suspected that the Fool had been corrupted as well? There were several shills on the board at that time I posted the poll, adn [sic] they all immediately answered that I was a nut (one of the possible poll responses). But as the evening wore on, we got around to the point that well over 50% believed the Fool had been cirrupted [sic.] and my antagonists there were shills. Sometime the next day, as I knew would happen, the shills were able to organize getting as many of the shills to come vote against the propoisition [sic.] that the Fool board had been corrupted (the disparate voting by time of day was astonishing and not statistically likely), but even with that, fully 36% of the Fools now believe their environment has been corrupted by shills."

See how nifty that works? When people voted with Byrne, it was evidence he was right! When the tide turned, it was evidence of a shill conspiracy, so Byrne got to be right either way!

I'm sure this kind of mental exercise is a wonderful way to justify aberrant behavior, but it's no way to run a company. On viewing these antics, one of my Fool colleagues -- who was once long the stock, as I was -- put it thusly: "This guy isn't qualified to run a lemonade stand."


That's just one issue, albeit the most obvious one. There are several others, including a total absence of board oversight while this CEO runs amok, making wild charges, and generally making a mockery of the concept of "corporate ethics."

Update: Bagley later confessed to running Overstock.com's antisocialmedia.net smear site. See this subsequent post.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Wednesday, December 20, 2006

Overstock's Latest Bargain: Common Stock


Chart courtesy of Wall Street Folly

A bunch of the stock of this anti-short-selling poster child has just been sold at a below-market price, as this cash-hungry anti-shorting poster child grapples with a true "Sith Lord." It's called reality.

Wall Street Folly has a good analysis, entitled: "More money for Patrick Byrne to piss away."
Good chart, too.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Is NASD Mending Its Ways?

One of the perennial insanities of Wall Street regulation is the "consent decree," in which a Wall Street firm agrees to a wrist-slap fine in return for agreeing to stop doing what it was accused of doing, without admitting or denying that it did that thing in the first place.

So I am pleased to report that NASD is suing Morgan Stanley for using a really sick excuse for not producing mails in arbitration cases. The Wall Street Journal (subscription required) reported that "NASD alleges that the brokerage arm of Morgan Stanley falsely claimed millions of its emails were destroyed in the Sept. 11, 2001, terrorist attacks on the World Trade Center, where Morgan Stanley had a large brokerage operation. The complaint alleges that the firm recovered most of those emails within days of the attacks."

Morgan Stanley called NASD's settlement demands "disproportionate and unprecedented." Sounds good to me.

I hope this isn't just showboating, and that NASD continues to take a hard line with Wall Street in the future. I also hope other regulators will follow suit with their own "disproportionate and unprecedented" settlement demands, and make the consent decree a thing of the past. All pretty slim hopes, I admit.

Incidentally, I hate to be picky, but I noticed that the Journal reported that the regulator taking this action was the "National Association of Securities Dealers." In fact, the NASD formally changed its name to just the initials "NASD" a few years ago. The New York Times account
didn't use the incorrect "National Association" nomenclature but incorrectly put the word "the" before NASD.

It was an ill-advised renaming, but if "NASD" wants to not be "the NASD," that is its affair.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Tuesday, December 19, 2006

The Latest From Bonusland

A study out today from Alan Hevesi, the New York State Comptroller, shows that Wall Street bonuses hit a record $23.9 billion, surpasssing last year's $20.5 billion. A Reuters story on the subject is here.

I think it's great that the Street is doing so well. Really. But can't at least some of this largesse be generated to the shareholders, in the form of special dividends perhaps? Or maybe, God forbid, even the public? Just a thought.

UPDATE: I made much the same points tonight on CNBC's On the Money. Seems to be a popular subject -- the third time I've been on the air concerning this issue in less than a week's time.

Here's another take on the bonus issue, from Andrew Ross Sorkin.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Department of 'Ugh'

From the wild and woolly world of stock fraud comes word of a particularly nauseating pump-and-dump scheme. This one combined the worst features of Internet hacking and securities fraud. So says the Securities and Exchange Commission, which just took emergency action to shut it down.

The crooks were based in Estonia. Here's the SEC complaint.

I've been critical of the SEC, but this time it acted swiftly to smother a particularly noxious group of hoods.

Their scheme is fascinating in a repulsive kind of way.

In a typical pump-and-dump, the scamsters take a position in the stock, pump it on the Internet or through some other price-inflation method, and then dump their shares on the unwary. This time, the hoods pushed the stocks up by hijacking accounts and buying the shares through them. Then they dumped whatever position they had in the stock, purchased for pennies.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Fly in the Indian Ointment

The India-America nuclear deal was signed by President Bush yesterday, but there's a fly in the ointment -- a Congressional provision requiring the president to make annual reports to Congress on India’s ties with Iran’s nuclear program.

Not surprisingly, that has royally annoyed India, and Manmohan Singh has put his foot down on the whole thing. Note the headline in the Financial Express: "We will not give up our nuclear swaraj, says Manmohan." Roughly translated from the Hindi, "swaraj" means "self-rule."

I really wonder whether Singh believes that. The congressional concern is totally reasonable. Posturing like that helps no one, except maybe Iran, and hurts U.S.-India relations.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Monday, December 18, 2006

Patrick Byrne's No. 1 Fan is Hired By..... Guess Who?

A reader email caused me to ponder the following: If you were running an Internet closeout retailer that was gushing red ink, what kind of top executive would you hire?

A. A marketing specialist with extensive experience in closeout retailing?
B. A wiz at Internet commerce?
or
C. A guy who runs websites that attack your personal enemies and push your "stock market conspiracy" fantasies?

If you're Overstock.com CEO/conspiracy theorist/ journalist-taunter/short-and-analyst-suer/miscreant-blamer/ Worst CEO-wannabe Patrick Byrne, this is what you call a "no brainer."

Seems that in August 2006, in the midst of Overstock's disastrous third fiscal quarter, Byrne reached out to the gentleman pictured above, Judd Bagley. Bagley is highly qualified to be "Director of Social Media." He runs a slimy website called "businessjive.com," and an even grimier, now defunct blog called "Trailer Park Rave."

In both sites, this obscure flack and ex-traffic reporter has pushed Byrne's paranoid "stock counterfeiting" conspiracy theories and engaged in juvenile attacks on Byrne's enemies. Here's an apparent Bagley post on a Yahoo message board in March ("Big Idea PR" is a Bagley enterprise) spamming a moronic "businessjive" video ridiculing Byrne's enemies.

Another post from "bigideapr" encouraged people to click on a paid Google ad from Overstock critic James Cramer that appeared on the "sanitycheck" stock-conspiracy website. The aim, as you can see, is to soak Cramer while benefiting an ally of Byrne. Such antics are discouraged and, sometimes, prosecuted by Google.

More apparent Bagley message board spewing can be found here. Those with a strong stomach can peruse a particularly revolting Bagley-created attack video from June, this one employing Bagley's grade school sense of humor to mock Herb Greenberg. It can be found at www.businessjive.com/nss/marketshuffle2.wmv (if it hasn't been yanked).

As you can see, Bagley is responsible for some awfully sophomoric, mean-spirited stuff. "Garbage," you might say. A perfect "director of social media"!

Oddly, this appointment wasn't announced by Overstock when it happened last August. Seems like a great hire to me, filled with all kinds of synergies, and a fine use of Overstock's ample (as long as those secondary offerings keeping coming!) cash.

UPDATE: After this item appeared, Internet sleuths found evidence that Bagley runs an anonymous website that stalks Byrne's Internet critics and publishes vicious smears about me. See this subsequent post.

In an article on January 2, the New York Post identified the stalker website as "aided and supported by the management" of Overstock.com, including Bagley. See this update.

Wall Street Folly has a cute illustration that sums up the foregoing (sans update):



Update: Bagley later confessed to running Overstock.com's antisocialmedia.net smear site. See this subsequent post.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Thursday, December 14, 2006

'The Audit' Continues its Trivial Pursuit

I've noted in the past that CJR Daily's "Audit" section, ostensibly devoted to intelligent critiques of the business press, is frequently off-base and obsessed with trivia.

That impression has been reinforced by this item yesterday afternoon flaying "cliché-ridden" coverage of the United-Continental merger.

"Fasten your seatbelts: Deal discussions in the airline industry are moving into high gear," went one report singled out by the Audit.

Stop the presses! An article written on deadline used inelegant language!

Was the coverage fair, balanced or accurate? The CJR has nothing to say on that, probably because it doesn't know enough about the subject to make a substantive comment. Instead, as usual from the Audit, we get smarmy potshots.

Trivial pursuit is not media criticism. There's a lot wrong with the business press -- sychophantic converage, superficiality, bias. Trite expressions in deadline reports is not one of them.

UPDATE: A reader points out in the comments something I missed, which is that the Audit appears to be rudderless at the time, and is seeking an experienced person to run it. That may indeed account for the poor quality of the content.

However, the Audit was run by an experienced business journalist before he quit recently, and the magazine still ran rubbish such as this.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Wednesday, December 13, 2006

Dem Dweadddddful Bonuses!

I was on CNBC for the second day in a row tonight -- always a pleasure! -- this time On the Money to talk about bonuses on Wall Street, which are getting a bit out of hand.

I'm not begrudging all those great guys and gals at Goldman Sachs their rightful earnings, but jeez! Some of 'em are reportedly pulling in up to fifty to a hundred million bucks!

Can't Goldman set aside some of its fantastic earnings for a more worthwhile cause than the Wall Street BMW dealership?

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Sharesleuth Shows (Again) Why It's Not Journalism

Sharesleuth.com slammed Xethanol for the third time the other day, proving yet again the difference between a billionaire's private insider-trading tinker-toy and a genuine investigative reporting outlet.

A genuine investigative reporting vehicle on the stock market (or a genuine investigative markets reporter like Herb Greenberg or Chris Byron) would have found more than two interrelated, marginal stocks to "investigate" in a four-month period.

A billionaire's private insider trading vehicle, caring not a fig about the public interest, is free to pursue its owner's profit to its heart's content -- in this case by again slamming a company it has already beaten into the ground.

Sharesleuth is apparently wearing on its readers, judging from the snippy comments on the site. This one hit the nail on the head:

Does the company have to go belly up before you write an article that deals with something else? I understand that this appears to be a shill corporation, and I think that any info you've discovered should be turned over to the SEC so they can perform a formal investigation into the company. If it is a shill, it should be delisted.

When I signed up for this site, I was hoping to see an article at least every other week on different companies and industries so that the top brass across Wall Street would start to feel the squeeze of investigative journalism and start to bring their activities more towards honesty than profit.

The flaw in the above logic is that it swallows Cuban's propoaganda that this is some kind of new journalism "business model." Wall Street is not "feeling the squeeze of investigative journalism" via Sharesleuth, because investigative journalism serves the public interest -- not the portfolio of a billionaire.

The comments (one called for an SEC investigation of Sharesleuth) were a far cry from the sycophantic stuff previously posted on the site. They prompted Mark Cuban to say defensively that he hasn't traded any more shares of Xethanol or Utek.

Woop-de-do.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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The Mob Never Left the Street

At the end of my book Born to Steal I pointed out that the protagonist of my tale, Louis Pasciuto, was still being asked to join boiler rooms as late as 2000, after he started cooperating with the government.

An federal indictment handed up yesterday in Brooklyn provies further evidence that the mob is still chugging along on the Street.

As you can see from the press release announcing the charges against two reputed Gambino members, the two were allegedly engaged in a stock fraud scheme in 2003.

While the extent of mob activity is probably not as high as it was in the late 1990s, this is a sign of how microcap stocks continue to attract lowlifes and hustlers.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Tuesday, December 12, 2006

Byron's Exit

Apparently Chris Byron has departed from the New York Post, where his Monday column was a must-read. So says Greg Newton's Naked Shorts blog, confirmed by Talking Biz News.

This is sad but not too surprising, as Chris focused on small cap fraud issues that have become a declining priority for the media in recent years. He was also a harsh critic of the SEC.

As Greg pointed out, "his departure will raise cheers in boiler rooms from Boca Raton to Broad Street, at a regulatory agency or two, and probably on the floor of The World’s Most Unnecessary Securities Exchange™." The latter is, I presume, a reference to the dreadful American Stock Exchange.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Hedge Funds vs. Indexes

I was on CNBC's Squawk Box this morning to talk about the latest hedge fund vs. index performance numbers, which are discouraging (10.1% through Nov. 30 vs. 14.2% for the S&P 500).

This is yet more evidence that the $1.3 trillion hedge fund industry is increasingly resembling actively managed mutual funds, but with much higher fees.



© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

Labels:

Monday, December 11, 2006

The Phenomenon of the Stupid Investor

Or as Herb Greenberg put it more diplomatically in Saturday's Wall Street Journal: "Carefree Investors Fail to Heed Warning Signs." Good article!

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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More From Antar on the Naked Shorting Con Game

Reformed scam artist Sam Antar, who was mastermind of the Crazy Eddie stock fraud, has been making some astute comments about the naked short selling con game and its mouthpiece, Overstock.com CEO/conspiracy theorist/journalist-taunter/short-and-analyst-suer/"miscreant"-blamer/Worst CEO-wannabe Patrick Byrne.

I sent Sam an email asking "whether you guys at Crazy Eddie would have screamed 'naked shorting' if that excuse had been as widely accepted then as it is today."

With Sam's permission, I've excerpted his emailed response below:

"It should be obvious from my posts and my web sites – YES! As the admitted heartless criminal that I was, I would have followed the rules of spinning included in your commentary.As the admitted heartless criminal that I was, I would have followed the rules of spinning included in your commentary. . .

He then made some rather emphatically unflattering comments concerning Byrne that I will omit for reasons of taste. He continued:

"Many people do not understand that white collar crime is basically a crime of persuasion. A white collar felon (due to the nature of the crime) uses the victim’s good personal traits like inherent trust in others as a weakness to be exploited. When I see guys like Byrne spinning and distracting the public from the real underlying issues of his business I see in many ways my former self in the mirror. I admire the fact that still many people 'trust' and defend him.

"I just cannot understand how anyone would put their money with Byrne given his past actions."

Sam further noted in his email, and in a phone conversation, that con men seek to build up a "wall of integrity" -- something that investors need to keep in mind when companies and CEOs seek to shift blame or divert attention from their actions.

"Remember, being that white collar crime is a crime of persuasion the criminal will always look for weaknesses in the humanity of his victims to exploit. The favorite tool of the criminal is spinning information. If there is any excuse that may seem the slightest bit plausible, the criminal will use it for his advantage. Just the name 'naked short sellers' is a great starting point to attack them."

Sam's comments on this blog and in his website should be required reading not just for investors, but for regulators. Especially for regulators.

More recent comments from Sam can be found on Herb Greenberg's blog and Floyd Norris's blog. The recent exchange between Herb and Sam on the Overstock audit committee is particularly good.

I'm glad Sam has weighed in on this issue and hope he continues to do so. It will certainly be a major step toward in paying back his debt to society.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Saturday, December 09, 2006

... and Speaking of Absurd Compensation....

Sam Antar, former chief financial officer of Crazy Eddie and a convicted fraudster, brings a keen eye to the always fascinating issue of executive wrongdoing and boardroom ineptitude.

Posting on Herb Greenberg's blog, he has been making perceptive observations on the famously passive board of directors of Overstock.com and its chef executive/conspiracy theorist/journalist-taunter/short-and-analyst-suer/"miscreant"-blamer/Worst CEO-wannabe Patrick Byrne.

In one comment the other day he analyzed Byrne's mastery of the "art of spinning":

1) Always make excuses as long as you can.
2) When you cannot defend your actions attack the messenger (such as financial analysts and short sellers)
3) Distract inquiry from your issues by pointing to tangential issues (attack the naked short sellers rather than discuss your business issues)
4) Show your credibility by pointing to good things you have done or ideas you have in unrelated areas (such as solutions for public schools in Colorado)
5) When you can no longer spin and are exhausted you shut up and offer no guidance to investors

Yesterday, Antar has made some worthwhile observations about the Overstock board of directors.

Byrne likes to portray his company as a victim of a monstrous short-sellers, and has been touring penny stock websites spinning nutty "stock counterfeiting" conspiracy theories. But the real problem (apart from Byrne, of course) seems to lie in the Overstock boardroom.

After expressing admiration -- "as a former criminal in a way I have to admire the way he stays around despite some his outrageous actions. He still gets people to drink the Kool Aid!" -- Antar turned to the Audit Committee of the Overstock board.

Antar observes that "there is a difference between legal and illegal. The really fuzzier area is actions that are legal but may be or may not be unethical. He seems to keep his actions just within legal bounds but in the area of legal/unethical."

Antar notes that Overstock board's Audit Committee members -- Ray Groves, John A. Fisher, Gordon S. Macklin and Allison H. Abraham -- each gets stock options from the company and one has 300,000 shares.

Antar continued:
How can these Audit Committee members (in substance) be independent and have the necessary professional skepticism and objectivity to fulfill their responsibilities as stated above if they have stock options? The auditors cannot own such stock and the so-called independent Audit Committee members who own stock are watching the auditors?

Audit Committee Members who own stock, receive stock options, and any earnings based compensation (in the company Board they serve on) simply cannot in substance be independent.

A valid point, I think. Antar continued:


With the exception of Mr. Groves the others have very nice looking educational backgrounds and resumes but in my opinion are not specifically suited to be effective audit committee members. I do not believe that a degree in economics is the proper educational background for such members. Macklin, Abraham, and Fisher would not give me any fear if I were a criminal today.

I'm not sure that even an independent audit committee would make much of a difference. As I pointed out in Wall Street Versus America, most of the late-trading mutual funds had boards with large majorities of independent directors.

In the months ahead, unless Overstock can reverse its march into oblivion, I am sure that the Overstock board of directors will be an object of much scrutiny.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Thursday, December 07, 2006

Those Obscene Bonuses

I'll be on CNBC's On the Money program tonight at 7 (eastern time) to discuss the recent spate of over-the-top Wall Street bonuses.

Charlie Gasparino revealed yesterday on CNBC that fifty execs at Goldman Sachs will be getting bonuses of $25 million each. More today from Roddy Boyd in the Post. The whole thing is nuts.

When is the Street going to draw the line on overpaying its people? Don't they have anything better to do with their shareholders' money?

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Wednesday, December 06, 2006

A Richly Desrved Accolade

Overstock.com chief executive/conspiracy theorist/journalist-taunter/short-and-analyst-suer/"miscreant"-blamer Patrick Byrne received a richly deserved "runner-up" for the title of Worst CEO of the Year by Marketwatch.com's Herb Greenberg.

Aw shucks. Byrne has been desperately grasping for publicity -- even ranting and raving on penny stock websites -- so he no doubt would have preferred the "worst" title. Instead it went to a perfume company exec, Parlux CEO Ilya Lekach.

Herb 's contrasted these two clowns with the quietly competent Apple CEO Steve Jobs:


. . .That's just the opposite of this year's winner and runner-up, Lekach and Byrne, who epitomize some of what I believe make bad CEOs: Arrogance in the face of fumbled financials, and blaming short-sellers for a host of problems.

Unlike Lekach, Byrne has for several consecutive quarters taken full blame for one corporate screw-up after another. Don't get me wrong: Byrne has done an atrocious job, proving himself inept at running a public company. And while his idea for Overstock is intriguing, his execution has been a failure, especially relative to what he led shareholders to expect. Worse, he has spent shareholder time and money using innuendo and lies to create a conspiracy theory that includes journalists (including yours truly), regulators, politicians and others as his company's performance plummeted.


Oh well. Maybe next year. Of course, if Overstock's shares continue to pursue this trend, and if analyst fears concerning its cash flow are borne out, the whole issue may become moot fairly soon.

* * *
My column on Grasso elicited some emails saying that I was defending the man! Read the column, folks. Grasso was obviously overpaid, but I don't believe that using New York State resources to sue him on behalf of NYSE seatholders is the best remedy. If he engaged in wrongdoing as NYSE CEO, as one person suggested, then he should be pursued for that and not for cashing a paycheck.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Tuesday, December 05, 2006

Dear Eliot and Andrew

My suggestions to the outgoing and incoming New York State Attorney General can be found at Forbes.com, here.

I call on Eliot Spitzer to stop the absurd legal case against Dick Grasso, and I urge his successor Andrew Cuomo and move against issues of real concern to investors -- arbitration, pump and dump, hedge funds and naked shorting. (Move ahead on the first three and repudiate the fourth.)

The need for a strong and feisty NYAG is underlined by reports in the media that the Securities and Exchange Commission is going to mount a full frontal assault against whistleblower Gary Aguirre at a Senate Judiciary Committee hearing today. The New York Times reports that another SEC official shared Aguirre's concerns about the SEC's handling of a major insider trading case.

Spitzer has totally ignored hedge funds during his tenure. Perhaps his successor can take a stab at that issue and the others I mention, and repudiate the fraudulent "naked shorting conspiracy" diversion campaign.

UPDATE: Turns out that it wasn't much of an assault on Aguirre at the hearing today. The SEC came away with several cartons of egg smeared on its face. See this account in the New York Times Dealbook blog.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Sunday, December 03, 2006

Shareholder Interest vs. Public Interest

Loren Steffy of the Houston Chronicle had a thought-provoking column the other day on the two-tiered stock structure at the New York Times, saying that it is not good for investors. The column has been prompted a good deal of discussion, not always favorable, as Steffy notes in his blog.

What makes this whole issue fascinating is that it deals with something we in journalism don't like to talk about, which is that good journalism is not necessarily a good investment, and vice versa.

Yes, it seems the Times was trying to insulate its management from investors. Steffy points out that "If the Times, or any news organization, didn't want to answer to investors, then it shouldn't have sought the public's investment."

Well, he's got a point there. Public companies have an obligation to their shareholders to maximize their return on investment. But that has a nasty way of conflicting with their obligation to provide readers with the best possible newspaper.

To cite an example from my own dreary beginnings in this biz...... I started out in journalism at the Hartford Courant many zillions of years ago. My very first job was cranking out stories of local interest in the town of New London. These were stories that were of no interest to anyone but residents of that town. As I recall, we had exactly 650 daily readers in New London (population 30,000, give or take). At the time, two very good local papers were covering New London.

It was ridiculous. It was bad business. How did it happen? The Harford Courant was a privately held newspaper.

Today, the Courant is part of a publicly held chain, and such nonsense as a reporter cranking out stories on the New London sewer board -- well, it is out of the question! I understand that the entire southeastern Connecticut bureau, which had four reporters and many stringers when I was there, was eventually phased out of existence.

The Courant is a much tougher paper than it was before, much better edited, but labor-intense local news is given far fewer column inches.

So Loren is right. Two-tiered newspaper stocks are not good for investors. But they are, I think good for readers. The solution is for investors who don't like two-tiered stocks to not buy them.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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Friday, December 01, 2006

More on Wall Street's Sweet Deal

Susan Antilla has a great column today on the NASD-New York Stock Exchange regulatory merger, which I mentioned the other day.

Susan's column is a welcome departure from the generally uncritical coverage of the merger in the business press. I haven't seen, until today, a detailed analysis of how this will adversely affect regulatory oversight of Wall Street.

Bravo, Susan!

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

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