Tuesday, July 31, 2007

Overstock.com CEO Patrick Byrne Posts on Internet During Conference Call

I've marveled in the past (see this post and others) about Overstock.com CEO Patrick Byrne's self-destructive Internet addiction -- how he has dragged his wretched company through the mud via skeevy, sometimes foul-mouthed posts in which he rarely identifies himself as CEO (shades of Whole Foods CEO John Mackey).

I only found out today how really bad off he is,Internet-addiction-wise.

I was dozing through the Overstock.com quarterly conference call this morning, numbed by the always-dubious financial gobbledygook and Sith Lord Chewbacca. After all, there's really no way of distinguishing facts from exaggerations and hocus-pocus until afterwards, when his version of reality is dissected by accounting-fraud-watchers like Sam Antar and Tracy Coenen.

So I wandered over to the Investor Village message board. I saw this:



Note the time: 11:43 a.m., eastern time. The conference call, which began at 11 a.m., was still underway when he posted that "attaboy" response to loyal corporate shill Evren Karpak. It didn't end until 12:15.

Yep, like me, Byrne was obviously bored to tears listening to tiresome stuff like whether or not his cruddy company is ever going to make a buck, so he went over to the Overstock message board at Investor Village. Just as I did, except that he's the CEO of the company, supposedly focusing on the questions being directed at him.

"Hannibal" is his anonymous user ID. Since he did not sign the post, as usual, most people looking at that post would have no idea that the CEO of the company was posting on the Internet during the company's quarterly conference call. Which is why Byrne's defiance of Regulation FD is not a very good idea.

Ironically, in that same conference call Byrne whined about all the criticism of his Internet posts, and claimed again, falsely as usual, that he doesn't post online under pseudonyms, a la Mackey. This right in the middle of proving that what he was saying was a flat-out lie.


Amazing? Not by Patrick Byrne standards. Over the weekend he made a fool of himself on the Slashdot website, weighing in on a discussion about whether Wikipedia (with which Overstock is competing via "Omuse") is "infiltrated by foreign agents."

I'm not making this up. Read his contribution to the loony discussion here. His director of communications and in-house stalker, the nauseating Judd Bagley, was doing the same thing -- via pseudonyms "WordBomb" and "writerjudd" -- on Slashdot and the Wikipedia Review anti-Wikipedia site. On neither site did Bagley identify himself as an official of Overstock.com.

One might think it odd -- and legally questionable -- that two officials of a company seeking to compete with Wikipedia, through their laughable "Omuse" wiki, would try to undermine Wikipedia. The media, however, has become a bit numbed to Byrne's disgraceful conduct and has largley given him a pass. Regulators, though investigating Byrne and Overstock.com, have so far taken no action.

I wonder if this head-in-the-sand attitude is justified for a company that makes a mockery of corporate ethics.

UPDATE: Tracy Coenen translates the conference call from Byrne-speak into English.

© 2007 Gary Weiss. All rights reserved.

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The Dow Jones Deal Charges Ahead (Part Deux)

I hate to say "I told you so," but it seems that my post yesterday was right. The stock is up 11% this morning, as somehow the deal that seemed to be crumbling yesterday is fast moving to completion.

Remember: what Rupert wants, Rupert gets.

CNBC's David Faber reports as follows:




© 2007 Gary Weiss. All rights reserved.

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Monday, July 30, 2007

Brian Hunter Pulls a 'Richard Kimble'

Any fan of the great old sixties show The Fugitive will appreciate the latest news from the saga of Brian Hunter: hedge fund failure, website-suer, and all-around creep.

The Globe and Mail reported today that Hunter, on a lunch break from an interview with the Federal Energy Regulatory Commission, suddenly "pulled a Kimble" and lit out!

I'm serious. Here's what the Globe and Mail says:

Brian Hunter, the Calgarian who made more than $100-million trading natural gas for Amaranth Advisors LLC before the hedge fund collapsed, fled the U.S. as Washington regulators were trying to interview him earlier this year, the chairman of the Federal Energy Regulatory Commission says.

"He was in the middle of an interview and there was a lunch break, and he never came back from lunch," FERC chairman Joseph Kelliher said in an interview yesterday after announcing preliminary findings that Amaranth, Mr. Hunter and another trader manipulated the market over three months early last year. FERC is seeking total penalties of $291-million (U.S.).

Why do you think he did that? I mean, what's going on here.... Were they, like, rude to him or somthing? Did he have indigestion.....? Or maybe he....

Oh, wait a second. I know!

He's looking for the one-armed man who actually manipulated the natural gas market!



Dealbreaker has more, but I think my theory makes the most sense.

© 2007 Gary Weiss. All rights reserved.

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The Dow Jones Deal Charges Ahead

This just appeared on the Online Journal:

*****************************

News Corp. Says It's 'Highly Unlikely'
To Buy Dow Jones at Current Count

By MARTIN PEERS
July 30, 2007 2:26 p.m.

News Corp. Corp. is "highly unlikely" to proceed with its $5 billion offer for Dow Jones & Co. if its bid doesn't get more support from the Bancroft family than has currently emerged, a News Corp. spokesman said.

************************************

The stock is down on this news.

Maybe I'm cynical, but I interpret this to mean that the Dow Jones deal is charging ahead.

What Rupert wants, Rupert gets.

© 2007 Gary Weiss. All rights reserved.

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Proof of Naked Short Selling!

Read all about it here.

© 2007 Gary Weiss. All rights reserved.

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Sunday, July 29, 2007

The Hedge Fund Class

Ben Stein's column in the New York Times today should be required reading for every legislator on Capitol Hill. And I mean that literally. They should be tied to their desks and forced to read it.

Stein gives a brilliant dissection of a phenomenon that can only be described as evil: the rise of a class of super-rich hedge fund and private equity managers who are, almost invariably, taxed at a rate far below the rest of us.
Is it right or even admissible in the human conscience that while teachers, emergency room technicians, police and firefighters are taxed at full earned-income rates — and often underpaid — that the highest-earning people in this country should pay at either very low tax rates or none at all?

Or, put it like this: do we dare send our men and women to fight for an America in which the very rich are so favored by the government that it amounts almost to an aristocracy?

"Congress," Stein says, "can take notice of a mammoth inequity in taxation during wartime and make the tax on private equity and hedge funds approximate the treatment of other highly paid people — or it can continue down the road to the Bastille."

This essay will, of course, be greeted by the usual cries of horror from the hedge fund industry. Tough. Time to make the tax code more fair to the rest of America and end this super-class of the super-rich.

© 2007 Gary Weiss. All rights reserved.

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Friday, July 27, 2007

Today's Stock Market Commentary


© 2007 Gary Weiss. All rights reserved.

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The Latest Naked Shorting Poster Child

Just about every day a new corporate misfit joins the ranks of the Naked Shorting Poster Children (tm) -- the OTC horror shows, red-ink geysers, mismanaged chamber pots and other fly specks seeking excuses for dreadful share prices. Today's new entrant is a fine example of the genre.

It's none other than Usana Health Sciences, a nutritional supplements manufacturer whose exploits have been chronicled by Barry Minkow of the Fraud Discovery Institute.

Forensic accounting expert Tracy Coenen reports in her FraudFiles blog that Usana unfurled the banner of the Baloney Brigade anti-shorting nutcases in a junk lawsuit that it filed against Minkow.

Welcome aboard, Usana Health Sciences! You're in good company. Why only today, Universal Express -- the SEC-persecuted standard-bearer of the cause -- issued a really fantastic press release charging the SEC with "permitting the destruction by naked shorters of 5,000 to 7,500 small public companies over the last 10 years."

Hey, don't make fun of corporate blame-shifters like Usana and Universal Express. They've got the ear of SEC Chairman Christopher Cox, and he is proving constantly that he is just the man that the Baloney Brigade and their allies in the U.S. Chamber of Commerce want in the job.

This week he began an effort to turn back the clock on shareholders having a voice on corporate governance. (Read the Floyd Norris blog item on that.) So expect more blame-shifting CEOs, less SEC action against crooked companies, and more SEC pandering to the Baloney Brigade and its allies in big business.

© 2007 Gary Weiss. All rights reserved.

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Thursday, July 26, 2007

Another Regulator Piles on Brian Hunter

Brian Hunter, former head trader of the world-class hedge fund disaster Amaranth Advisors, got another kick in the slats today. The Federal Energy Regulatory Commission wants Amaranth and Hunter to pay $291 million in fines and penalties for manipulating natural gas futures.

Yesterday, the Commodity Futures Trading Commission filed similar charges against the website-suing trader and Amaranth, which was the biggest hedge fund collapse in history.

Hey, I have a question: isn't market manipulation against the law? Don't people go to prison for that? Just wondering. After all, it seems to me that what these guys are talking about is a lot worse than insider trading.



Corporate cretin Patrick Byrne of Overstock.com, who blames all his company's failings on hedge funds, once said that he doesn't dislike all hedge funds, just the baddies -- in other words, all hedge funds except the one run by his brother, or the one through which he owns the bulk of the company's shares.

I think I have found a hedge fund honcho who would melt Patrick Byrne's heart.

P.S. I wonder how investors in Solengo Capital, Hunter's new plaything, feel about their fair-haired boy?

© 2007 Gary Weiss. All rights reserved.

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Investors Seek Mackey Ouster; Whither Byrne?

The New York Post reports today that a large investor in Whole Foods shares is recommending that CEO John Mackey be ousted for his anonymous Yahoo posts.

"Regardless of whether Mr. Mackey is ultimately found to have violated the law or the company's code of conduct," the group wrote, "his poor judgment has already damaged his credibility, jeopardized the proposed Wild Oats' acquisition and triggered a Securities and Exchange Commission investigation."
You could substitute "Patrick Byrne" for "Mackey" and "Overstock.com" for "Whole Foods" in the above, and it would describe precisely the same situation. As I've described, Byrne has defiantly posted under the pseudonym "Hannibal," and only recently started using his real name after the Whole Foods mess broke.

He and his house stalker Judd Bagley have committed far worse breaches of the most basic principles of corporate ethics.

Yet Byrne is getting a pass from his lapdog board and the SEC, which is conducting a slo-mo investigation of both him and his train wreck of a company.
© 2007 Gary Weiss. All rights reserved.

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Wednesday, July 25, 2007

Why the Merger Matters

Dean Starkman of CJR Daily has an obituary today-- a premature but good one -- on the demise of long form journalism at the Wall Street Journal under Rupert Murdoch.

He's right, but I think his essay would be more on target if they included all the Dow Jones publications, not just the Journal. It sometimes seems as if Barron's and MarketWatch.com are simply ignored by media writers. Long-form journalism has thrived there too, you know.

© 2007 Gary Weiss. All rights reserved.

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Three Cheers for the CFTC! Hip hip hooray!

It's not every day that a guy can really gush about a regulatory agency -- heaven knows, the ones I generally write about tend to suck -- but I am really enthused today about the Commodity Futures Trading Commission.

Today comes word that the CFTC has sued one of the most truly odious characters in hedge fundland -- quite a distinction, that -- the sue-happy, free-speech-oppressing, failed former head of the collapsed Amaranth Advisors hedge fund, Brian Hunter.

As I've mentioned in the past, Hunter has given the expression "junk lawsuits" a new and odious meaning. His new hedge fund, Solengo Capital, has filed a ridiculous lawsuit suing Dealbreaker.com for publishing a marketing brochure.

There's nothing lovelier than seeing a sue-er like Hunter getting a taste of his own medicine, particularly for behavior that is really porcine.

According to Bloomberg, the CFTC's suit charged Amaranth with trying to manipulate U.S. natural gas prices, and sought an injunction against Amaranth and Hunter, who was its chief trader.

The Bloomberg story says
Hunter ``actually bragged about flexing his muscles upon America's natural gas markets,'' said Gregory Mocek, enforcement director for the commission, said on a conference call with reporters today.
So now he can actually brag about being both a sue-er and a sue-ee. In fact, the sound of the latter brings Hunter very much to mind.



© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
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Tuesday, July 24, 2007

The Gift That Keeps on Giving


What can you do on a day when the Dow falls 226 points? Well, you can weep bitter tears, drown yourself in alcohol or chocolate, or you can enjoy the latest Patrick Byrne sleaze!

Yup. It has only been a day since the most recent news from Byrne's World, and Corporate America's most wretched CEO has already outdone himself. He is truly the gift that keeps on giving. The O-Smear blog, run by a sleaze-averse techie, has the scoop in a post today.

Seems that Overstock.com's CEO has been caught with his pants down, again, and as usual he has his own big mouth to blame.

In an online post on July 12, Byrne reprinted a note he said he had sent to a New York Times reporter:

"Incidentally, it may be neither here nor there for your story, but in case you are interested, there is a Yahoo poster who uses the names “netmargin15” and “can_i_use_this_alias” who both pumps Amazon and bashes Overstock. The first is the smart sock-puppet, the second is the basher. I know:

  • He or she is an Amazon employee.
  • He or she is of a rank high enough to have access to Amazon’s VPN service.
  • He or she displays a very high level of business knowledge, commensurate in my experience with a senior executive.
As a journalist, I cannot reveal my source for this information. But you can also ping this person through Yahoo."
Now, every time Byrne has referred to himself or his nauseating paid stalker, director of communications Judd Bagley, as "journalists," the nausea has been such that the eyes usually glaze over. So naturally most persons reading this post would not have inquired further. But O-Smear has a strong stomach, and has discovered just how Byrne got that information.

It seems almost certain that Byrne obtained information from spyware planted by Bagley.

O-Smear has all the damning details, so I'll not repeat them here. But I will repeat some questions that I have raised before:
  • Does Overstock.com have a board of directors? Not a competent board, or a board with independent directors, but any kind of corporate governance whatsoever?

  • What brand of sleeping pill is being used by the enforcement division of the SEC? It has got to be a whopper.
Chris Byron once said that the media is the "seeing eye dog" of the SEC. In this case, it is blogs like O-Smear that are doing the scut work while the SEC snoozes.

© 2007 Gary Weiss. All rights reserved.

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Monday, July 23, 2007

Overstock.com CEO Patrick Byrne Admits He Posted Under Pseudonyms

Seems that Overstock.com CEO Patrick Byrne is now admitting that he "pulled a Mackey" after all.

In a post on the Overstock.com website late last night, Byrne admits that he posted on the Internet under anonymous pseudonyms -- the same grave offense that has snared Whole Foods CEO John Mackey, prompting an SEC probe, internal investigation and an apology by Mackey.

The Times article had quoted Byrne as saying that he always signed his name to his copious Internet message board posts. But as I noted in a previous blog item, that's a blatant lie. Byrne until recently always used a pseudonym, and almost never signed his full name or disclosed his corporate affiliation and massive share ownership when posting on Internet message boards. His user profile on his two favorite message boards, Investor Village and Motley Fool, is "private" and does not disclose his identity.

Byrne claims that the Times did not properly convey the Great One's meaning. However, given his penchant for dissembling, I think it's fair to assume that he was fairly quoted and is now backing off from a lie that is contradicted by the evidence.

Byrne says:
Please provide a citation for this claim: "Mr. Byrne said that he never hides his true identity and always signs his name when he posts under his online handle, 'Hannibal'". Is it your claim that I used the words "always" and "never" in some message board post (and if so, please cite that post), or is it your claim that I stated this in our interview? I know for a fact that the claim is false as regards our interview, and believe it to be false with regard to any online posting, but I stand ready to be corrected. [emphasis added]
(Note that Byrne is contradicting what he said in a rambling, sick rant on his website a week ago, in which he said: "I post in a way that is anything but anonymous." I guess he forgot he said that.)

What's not clear to me is why Byrne seems so anxious to backtrack. The SEC is already investigating Byrne and Overstock, so that is one possible source of pressure.

The media has given Byrne a pass over his online conduct, which was far more egregious than Mackey's and raises serious Reg. FD issues. I wonder if he will continue to be ignored now that he has fessed up. I also wonder if the SEC will take action against him or cower before his real or perceived political influence. His pet senator, Utah Republican Bob Bennett, recently gave a floor speech calling for Senate hearings on his favorite constituent's obsession, the nonexistent "naked short selling" bogyman that is a favorite of penny stock promoters and inept CEOs.

Elsewhere on the Overstock front, fraud-fighter Sam Antar has a sizzling post today on how the SEC was a victim of a "trojan horse" disinformation campaign by Overstock in its war against an analyst who dared to publish negative information about the company.

UPDATE: To round out the day's tidings from this train wreck of a company we have this: it seems that Overstock left out something pretty significant in super-hyped press release glorifying as a major "victory" the denial of a motion to dismiss in its junk lawsuit against prime brokers.
In addition, the Court granted Overstock (and its co-plaintiffs) leave to amend other of their claims for restitution under the Unfair Business Practices Act and for the common law claim of interference with advantage, to more specifically plead the factual basis of these claims.
What Overstock left out was that there were two motions, and that Overstock lost one.

An investor named Al Petrofsky, who attended the court hearing at which the ruling was made from the bench, fills in the gaps in a post on a stock message board:

[The judge] granted the defendants' motion to strike, and ruled that the plaintiffs' may not, as part of the Unfair Competition Law claim (the fifth cause of action), seek to recover any compensation for a decline in the stock price. However, they can still seek to recover such compensation under some of their other theories, such as Tresspass to Chattels (the second cause of action) or Market Manipulation (the fourth cause of action).

He gave Overstock until September 14 to submit an amended complaint that is consistent with his rulings.
Gee. Isn't it materially misleading to not disclose that you lost one of the two motions pending before the court?

Petrofsky confirmed by email that he was the author of the post.

Overstock's skewing of the truth is predictable. What is also predictable is that the media, in its coverage, swallowed whole what Overstock said, without checking further. Let that be a lesson to all of my brethren in the media.

© 2007 Gary Weiss. All rights reserved.

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More on the Fate of Barron's Under Murdoch

The New York Times today has an article on the fate of Barron's under the almost (but not quite) certain News Corp. acquisition. This was a good and thorough article, as evidenced by the fact that it quoted a blog item on the conspicuous absence of Barron's from the debate over the Murdoch bid.

But I have a quibble with the reporter's analysis.

After observing that Barron's editors are not covered by the "editorial independence safeguards" to which both parties agreed, the Times says:

Ultimately, market forces may be a better safeguard than special agreements. The publication is doing very well, and Mr. Murdoch is first and foremost a smart businessman — as recognized by Barron’s list in March of the top 30 chief executives.
I think that misses the point. No one is suggesting that Barron's is going to be dismembered. Its staff may even be beefed up. However, I think there is a good chance that Barron's editorial product will be the first true outpost of Murdoch in the Dow empire.

That's also likely for MarketWatch, is similarly is not covered by the agreement.

The Bancroft family is meeting today. Given the pressures being brought to bear, I'd say the chances of Dow Jones surviving as an independent entity are fast evaporating. R.I.P.

© 2007 Gary Weiss. All rights reserved.

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Friday, July 20, 2007

The Conspiracy Widens



The naked short selling conspiracy has widened to encompass Floyd Norris of the New York Times! Yup, friends and neighbors, the chief financial correspondent of the Times is corrupt.

We have that on the word of the naked shorting poster child Universal Express and its CEO Richard Altomare, the standard-bearer of the anti-shorting Baloney Brigade until that banner was hoisted by Patrick Byrne of Overstock.com. Apparently Altomare is fighting hard to regain leadership of that phony cause, judging from a recent escalation of his (or, I guess, strictly speaking, his attorneys') rhetoric.

In a filing that slimed its way into the courthouse on July 12, and which has mouldered there unnoticed, lawyers for the company and Altomare said:

. . . it is important to note that the Commission has
taken out of context a number of reported facts from the
USXP quarterly and annual filings and those non-contextual
statements are subject to explanation without which the
Court will be misguided.

Two examples of the Commission’s statements taken out
of context. First, its remarks at Response at n. 5 that
USXP took out a full page statement in The New York Times
on the subject of naked shortselling to respond to Floyd
Norris’ advocacy on behalf of those who have a multihundred
million if not multi-billion dollar stake in the
naked shortselling scandal unfolding every day. Appellate
decisions in other courts have judicially recognized the
use of paid advocates employed by underhanded, even
criminal elements intending to break small companies
through the combination of “bashing” on the internet and
naked shortselling of stock. [Emphasis added]
The second example.... eh, who cares? I assume that "paid advocate" means paid by someone other than the Times. (Sure would like to see those "appellate decisions." Too bad there ain't any.)

The "Commission" referred to above is the SEC, which has asked that Altomare be jailed for disobeying previous court rulings. The SEC has been fighting a protracted battle to yank Altomare as CEO, and to have the entire company fumigated for multiple securities law violations. Altomare has fought back the baloney way, by a full-court P.R. press that included the Times ad mentioned in the brief.

This kind of thing makes me wonder why some people in the media continue to take these fruitcakes seriously.

© 2007 Gary Weiss. All rights reserved.

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Thursday, July 19, 2007

Another Naked Shorting Poster Child Sucks Wind

It's called Pegasus Wireless, and it is an OTC fly speck that has sucked in a surprisingly large number of naive investors. Seth Jayson of the Motley Fool reports that "the Pegasus 'plant' in Freeport [Bahamas] has neither phone service nor electricity, and no one at the plant knows where CEO Jasper "Jay" Knabb is."

Too bad. I preferred Knabb when he was braying about his brave fight against the evil-doers:

"The fight is just beginning," Knabb said in an interview [in September 2006]. "But I can't win a battle in this market when no one is willing to help us."

Barron's was less sympathetic in an article shortly before that.

Elsewhere on the baloney front: Overstock.com Patrick Byrne will be pleased to know that he has the firm support of Richard Altomare, CEO of Universal Express, in his junk lawsuit against the prime brokers. Makes me wonder if that support will continue if Altomare is jailed, as the SEC has sought.

Knabb, Byrne and Altomare: Does the phrase "three stooges" come to mind?

© 2007 Gary Weiss. All rights reserved.

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Wednesday, July 18, 2007

Is Dow Jones at the 'USS Missouri' Just Yet?



I know, I know, I've said in the past that Rupert Murdoch's acquisition of Dow Jones is a foregone conclusion. I've illustrated that point with old photos of the Japanese surrender on the USS Missouri, in my usual understated way.

Still, the Wall Street Journal article today leaves me wondering if the long-awaited Unconditional Surrender is actually happening.

Yes, the board of directors last night voted to recommend the merger.

Yes, the votes seem to be there.

But then we get the following in the Journal article today:

As of yesterday afternoon two of the company's family directors were actively engaged in pursuing alternatives to Mr. Murdoch, according to people familiar with the matter. Christopher Bancroft has been talking to Internet entrepreneur Brad Greenspan about a proposal to buy a portion of the company. Mr. Greenspan, who has talked to other family members, was working on a more detailed proposal to send to Dow Jones representatives yesterday and is looking for investors, according to a person familiar with the matter. Mr. Greenspan is working with advisers at New York firm Dinosaur Securities.
I know, this is desperate and probably doomed to failure. But...... I still wonder if we are at that "USS Missouri moment" just yet.

© 2007 Gary Weiss. All rights reserved.

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Tuesday, July 17, 2007

The Score at Halftime: Mackey 1, Byrne 0

It's interesting to contrast the heartfelt (if belated) apology released today by Whole Foods CEO John Mackey with the swinish, sick rant unleashed by Patrick Byrne yesterday.

Both engaged in inappropriate, probably illegal conduct on message boards. Mackey is starting to "get it," while Byrne is in a paranoid haze of denial.

Contrast too the internal investigation launched by the board of Whole Foods with the inaction of the famously inert Overstock.com board of directors.

That's the difference, I guess, between integrity and sleaze.

© 2007 Gary Weiss. All rights reserved.

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The Last Refuge of a Corporate Scoundrel

Novastar Financial, the struggling subprime lender, has been at the center of a merry-go-round of self-generated hype in recent days, as this "naked shorting victim" poster child struggles to rescue itself from its self-generated horror. But today we get the coup de grace:

Novastar is ducking into the last refuge of the corporate scoundrel--the reverse stock split. So says an announcement yesterday, which has the 4 for 1 split buried in a happy-talk press release.

Reverse splits are famed throughout microcap stockland as an artificial means of boosting share prices, in this case by 400%. Hey, you got to increase the share price some way. If you can't generate profits, why not the stroke of a pen?

Seems that Novastar won't be filing for bankruptcy soon, but is being bailed out in a dog's breakfast disguised as a "bailout." Herb Greenberg observes: "The nature of this deal, which sounds eerily like a death-spiral financing, suggests just what terrible shape the company is in." Seems that all this "bailout" does is keep the company's furniture from being auctioned off. Investors are still screwed.

As fans of corporate train wrecks may recall, this company was a center of small-investor hysteria generated largely by a former used medical equipment salesman named Phil Saunders. Saunders was revealed by the New York Post to be the crackpot who runs an anonymous stock market conspiracy website called "sanitycheck" under the pseudonym "Bob O'Brien." Amazingly enough, this moron -- who hyped Novastar as a center of lurid "naked shorting" conspiracies -- managed to suck in a sizable number of rubes to buy this faltering stock and not sell when things started looking bad.

His website was mercilessly hyped by Overstock.com CEO Patrick Byrne -- who went so far as to push his site on CNBC, and to hype the site on every Overstock.com web page. That over now, and the result is a major victory in the fight against mental illness. Readership has trailed off dramatically since the Overstock promotions ceased, according to Alexa. (Click on the three-year chart to see the magnitude of the decline since early last year.)

Working with Saunders in pumping Novastar was a Howard B. Hill, who works on the fringes of Wall Street and is known mainly for mindless hype of the stock on stock message boards. His rants were republished as "The Best of HHill" on a stock-hype website called NFI-info.net, founded by Saunders and now defunct. Fortunately, his tireless overoptimism is preserved for posterity on the Wayback Machine.

Gretchen Morgenson of the New York Times noted the other day that Hill is affiliated with one of the entities involved with the "bailout." Seems that every dog, and every shameless stock pumper, has his day. Perhaps Phil Saunders should be paid a finder's fee?

UPDATE: The company's shares tumbled over 17% on July 18, as an analyst predicted that the company's troubles will continue despite the "bailout."

Saunders was hiding under his pickup truck and unavailable for comment.

© 2007 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, gary-weiss.com.

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Monday, July 16, 2007

Yahoo Message Board as 'Blog'

The Wall Street Journal today had an entire editorial devoted to Whole Foods CEO John J. Mackey's "anonymous blogging".... except.... except.... he wasn't blogging.

Well, he did have a blog, but that was under his own name.

At issue is not his blogging but his posting on a Yahoo message board devoted to Whole Foods stock. Big difference.

When not misunderstanding what Mackey was doing, the rest of the editorial was an attack on Regulation FD. That seems to be the position taken by Mackey as well: "Regulation FD be damned."

I just wish that defenders of Mackey would have the intellectual honesty to simply come out and say it.

© 2007 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, gary-weiss.com.

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Sunday, July 15, 2007

Today's Patrick Byrne Lie Du Jour


From a New York Times article in tomorrow's newspaper on the John Mackey message board postings, online tonight:

Patrick M. Byrne, founder and chief executive of the beleaguered online retailer Overstock.com, has for years been accused of anonymously resorting to the Internet to do battle with his company’s critics. In an interview, Mr. Byrne said that he never hides his true identity and always signs his name when he posts under his online handle, “Hannibal” (the Carthaginian conqueror, not the celluloid serial killer). [emphasis added]

Oh really? Here's Byrne's most recent post on the Investor Village message board for discussion of Overstock.com (not naked short selling or Sith Lords or bodies in trunks):



Hmmm...... seems that he forgot to sign it. Oh my.

That is not the exception, that is the rule.

Here are the name-signing stats for Byrne's "Hannibal" posts on the Investor Village Overstock.com message board, toted up by Internet sleuth "Scipio Africanus":

  • 1 signed as "Patrick Byrne, CEO"
  • 3 signed as "Patrick Byrne"
  • 57 signed as "Patrick"
  • 34 unsigned - including one "Kreskin", one "PB" and one ";-)"
And I would add:
  • 0 that disclose that he is the largest shareholder of Overstock.com.
Here's a link to all the Byrne posts on IV. A strong stomach is not required but recommended.

His profile is, needless to say, "private."

His previous postings on the subscription Motley Fool board followed a similar pattern, and also was hidden behind a profile not containing his real name.

Before that, he posted anonymously on the "fuckedcompany.com" message board, although those posts have been mysteriously deleted.

One oddity about the article: I'm not sure where the Times picked up about Byrne being accused of sockpuppeting. I haven't read that anywhere. The issue is much more serious, as I have discussed in several recent posts, most recently this one.

I'm more than a little surprised that the Times didn't talk about his "I'm a journalist" cock-and-bull story. Makes me wonder: is the media intimidated by Patrick Byrne's well-documented record of "going after" critics?

Anyway, don't feel too harsh about Byrne Lie No. 2343100. The Mob is out to get the poor dear.

UPDATE: Fraud-fighter Sam Antar recounts in his blog the consequences of asking Byrne to do what he said he did in the Times:

On January 29, 2007, in a post (message number 4166), on InvestorVillage, I asked Patrick Byrne to clear up the confusion:

"Hannibal:

Can you please sign your post with your full name so there is no misunderstanding as to who is replying?

Patrick Byrne (CEO of Overstock.com) uses the handle Hannibal. Let's clear up any misunderstanding as to who is responding. [emphasis added]

Respectfully,

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

Patrick Byrne chose not to reply to the above question. Later, he complained (message number 4463) that I was acting as a “Junior Prosecutor" and asked other message board readers to ignore me:

"Is there anyone here who suspects that Sam is just trying to clog, or waste my time, or misdirect this discussion board? If you agree, please recommend this post. If we get over 20, I say that is proof that it is time we all agree to ignore Sam forever." [emphasis added]

The management of Investor Village obediently banned Sam from the Overstock message board.

Forensic accountant Tracy Coenen observes:

It’s bad enough that Byrne is not clearly and publicly disclosing his identity when writing messages about Overstock.com, but it’s even worse that he lies about it and makes it seem like he does always disclose it.

Byrne hides behind the First Amendment and free speech. Well…. he may have the right to say what he wishes about Overstock, but Regulation FD dictates how he must do that when his free speech relates to Overstock, the public company which he runs.

Byrne later tried to reconcile his lies in a rambling, psycho rant.

© 2007 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, gary-weiss.com.

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Did Rupert Murdoch Buy Trent Lott?

The New York Times public editor, Clark Hoyt, has an analysis of the Times's two-part examination of the Rupert Murdoch financial empire. I thought articles were damn good, but I was underwhelmed by this: the Times suggested, without exactly saying so, that Murdoch bought Trent Lott by paying him a book advance.

The Times, Hoyt recalls,

said that Murdoch was in danger of losing a part of his media empire in 2003 as Congress moved to limit the television holdings of any one company. Senator Trent Lott, a Mississippi Republican, provided a crucial vote as Congress raised the cap to just what Murdoch needed to keep all his stations, the newspaper said. Months earlier, Lott had received a $250,000 advance from HarperCollins, Murdoch’s publishing house, for a memoir titled “Herding Cats.”
The Times quoted a News Corp. spokesman as saying the purchase was coincidental. Hoyt opines:

Was The Times unfair to report the advance and the vote the way it did? I don’t think so, because I don’t think the paper said Lott exchanged his vote for the advance. It said that Murdoch’s style is to cultivate relationships with those in a position to help his interests, and this was a good example.
But where's the evidence that Murdoch was involved in the book deal at all?

I agree that the advance gave Lott a big conflict of interest. However, I think it's reaching to imply that this was some kind of payoff or attempt at influence-purchasing. At least that was my reading of the Times article. It struck me as an unfair implication. Lott, however, should have been far more sensitive to the conflict of interest inherent in signing a book deal with a News Corp. subsidiary.

I know a teeny bit about the publishing world, and can tell you that this kind of advance was and is not unusual for a book by a major politician. It surely not the kind of mega-advance that would require approval of the CEO of the parent company.

Now, if that advance was paid for a coloring book by Lott's grandson, it would be a different matter. Then I would smell "payoff."

Hey, I'm as upset with the Murdoch takeover bid for Dow Jones as the next media guy, but let's not go overboard.

© 2007 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, gary-weiss.com.

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Not Very Nice

Just a brief note on something that isn't very nice: a reader advises me that somebody is trying to manipulate the share price of a little Amex-traded penny stock called TAN Range Exploration Corp.

He or she is doing so in a method that is awfully flattering, but stupid -- by impersonating me on a Yahoo message board and insinuating I'm investigating this company.

SEC take notice.

I have no idea if this company is good, bad or indifferent, but manipulative conduct on either side of a stock needs to be investigated and punished.

© 2007 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, gary-weiss.com.

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Saturday, July 14, 2007

Extra! Extra! Patrick Byrne Changes Careers!

I have found the reason why Patrick Byrne, CEO of Overstock.com, behaves more like a spoiled prep school brat than a corporate executive. Turns out he's not a corporate official who must abide by the rules required of heads of public companies.

Nope, he is a "public figure" and above all a "journalist," a member in good standing of the fourth estate.

This latest fantasy can be found in a post by Byrne, one that has received little attention, on his personal Overstock.com blog.


John Mackey, the Whole Foods CEO, needs to pay attention as he deals with an SEC probe -- see Tracy Coenen's analysis. This journalist stuff may be nutty (hey, this is Patrick Byrne we're dealing with), but the insanity defense has worked for some.

Instead, the media has focused on the rather pedestrian list of excuses that Mackey has given for posting anonymously on Yahoo message boards. Compare that logical if misguided list with Byrne's rambling fish story, which clearly bespeak a man who believes that his ancestral wealth inoculates him against the consequences for telling even the most blatant lies.

Some excerpts from Byrne's missive:

"I tend to discount the thoughts of anyone who insists upon anonymity (unless there is a real security concern). This applies to everyone, whether they be executives or not."

This is an astounding lie, even for Byrne, because he has a record of embracing, endorsing and promoting anonymous Internet crackpots when they favor his cause.


He has promoted on CNBC (left) a wacko anonymous website run by Phil Saunders, a former used medical equipment salesman who runs the "sanitycheck" stock market conspiracy website under the pseudonym"Bob O'Brien." This anonymous, creepy website was for months endorsed on every page of the Overstock website as a link misleadingly labeled "market reform."

But above all, Byrne has personally endorsed and promoted an anonymous website run by his director of communications and spokesman, the nauseating Judd Bagley. The latter runs Overstock.com's antisocialmedia.net corporate smear site, which began anonymously and was later outed as an Overstock enterprise by the New York Post and by Internet sleuths.

Byrne has enthusiastically endorsed those anonymous sites, which have aggressively smeared his critics and act as fan sites and PR vehicles for Byrne and Overstock.

Second, no executive (or for that matter, any employee) should ever go online to talk up her own company’s stock or try to bash a competitor’s stock price.

But as I have pointed out before, Byrne did just that at the tail end of a Motley Fool post in March 2006 (below).



His drumbeat of attacks on critics -- most conspicuously Herb Greenberg of Marketwatch.com-- are clearly designed to reassure his core buy-and-hold investors that they should not sell their shares.

I think that when a person decides to become a public figure he is relinquishing his ability to take part in public discourse without identifying himself, simply as a matter of etiquette, not law.

This would explain why he disregards Regulation FD by using the screen name of "Hannibal," not signing his full name, and not saying that he is CEO and chairman of the board of Overstock.com and its largest shareholder.

All that said, there is nothing about being a public figure compels one to surrender one’s 1st amendment rights.

Ditto. He views himself not as a corporate officer whose public statements are governed by SEC rules, but as a "public figure" who hsa "rights" under the First Amendment but no obligation under Reg. FD.

After claiming that some anonymous ID on the Yahoo boards is an Amazon employee, we get the pièce de résistance:

As a journalist, I cannot reveal my source for this information.

Oh, and that brings me to the title of this compendium of doubletalk and lies: "A thing called, "the 1st Amendment."

Translation: "SEC, Bite Me."

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
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Friday, July 13, 2007

Is Mackey Too Wacky to be CEO?


That excellent question is tackled by Fortune writer Matthew Boyle, as the media continues to come to grips with the spectre of a CEO, John Mackey of Whole Foods, posting anonymously about his company on Yahoo message boards.

"It is time to boot this guy out, but I doubt the board will," he quotes Jeff Sonnenfeld, a "CEO and leadership expert" at the Yale School of Management.

The reason he needs to go, however, is not that he is wacky but that what he did was against the law, including but not limited to Regulation FD. The media finally began to grapple with that elephant in the room, which I dealt with in my post yesterday.

The Wall Street Journal missed the point entirely, comparing Mackey's anonymous posts to signed blogs, which are an entirely different kettle of fish. The New York Times recognized the legal issues, however:

Peter J. Henning, a professor of securities law at Wayne State University in Detroit, said executives of public companies are required to make financial disclosures available to all investors, not just a select few.

“He wasn’t speaking on behalf of the company,” Professor Henning said, adding, “He certainly was talking about it. And he was attempting to influence the stock price.”

After hearing some of Rahodeb’s postings, Professor Henning added, “I would have to believe that Whole Foods’ general counsel nearly keeled over when they learned about this.”

Mackey clearly requires the kind of supine board and see-no-evil corporate counsel employed by that other compulsive message-board user, Overstock.com CEO Patrick Byrne, who also treats Ref. FD as a joke.

So far, both CEOs are blessed with something even greater -- a snoozing SEC.

Herb Greenberg points out that Mackey anonymously attacked him, an interestingly Byrne-esque thing to do.

More reaction:

The White Collar crime blog discusses the possible legal ramifications.

Several commentators noted the obvious Byrne-Mackey parallels. Lee Distad says he

will . . . go out on a limb and say that the Whole Foods story will diverge from the Overstock.com train wreck sooner rather than later. I forsee that John Mackey will be sent packing by his own board, under pressure from regulators and the media.

Why?

Because Whole Foods makes money. Because they're successful. Because there will be a lot of concerned parties on Wall Street with a vested interest in making sure that Whole Foods continues to succeed. Now that Mackey has shown what kind of thoughtless, half-cocked decision making he's capable of, he's a liability. Those concerned will want to have him ejected before he does something that scuttles the ship.

Compare that to OSTK, whose vested interests are limited solely to buy-and-hold investors who still believe in Santa Claus, and are still praying that one quarter, any quarter, their baby will show a profit. If your company was as beneath most people's radar as Overstock.com, you might resort to public temper tantrums to get attention too.
Long or Short Capital:

Following in the big clown shoes of Patrick Byrne of Overstock.com (NASDAQ: OSTK), [Mackey] thought it would be a good idea to post to an anonymous stock message board about Whole Foods. The company for which he is the CEO. Protected only by the anonymity of an anagram of his wife’s name. I’m undecided if it’s a better or worse call than being a bat-crazy Quixote in public like Byrne. This is less ethical but more competent as as opposed to more ethical and less competent. But this is decidedley worse than not wearing a condom in Haiti, which is our standard threshold for management competence.

For this focused non-dedication to competent and sensible management, we award John “Rahodeb” Mackey with The Patrick Byrne Award for Operational Focus and Excellence. May all your current and future stockholders be warned.

UPDATE: Evidently the politically-hypersensitive SEC chairman Chris Cox knows how to read. The Wall Street Journal online edition reports today that the SEC has launched an informal inquiry, according to the usual "people familiar with the matter."

One of these days, a cultural anthropologist should track down when "people familiar with the matter" replaced "sources" as a euphemism for "a spokesman for Chris Cox."

© 2007 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, gary-weiss.com.

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Thursday, July 12, 2007

John Mackey, Patrick Byrne, and a Snoozing SEC

Today the news wires are buzzing about an amazing tale: the CEO of a public company, John P. Mackey of Whole Foods, systematically posted messages under a pseudonym on Yahoo message boards. The media is astonished: "How Whole Foods C.E.O. Led 2 Lives," gasped the New York Times Dealbook. I guess you can call Mackey the Lon Chaney of Corporate America.

Mackey, it seems, posted anonymously on message boards to bash a competitor and boost the company's share price -- amazing behavior that came to light not because of an SEC enforcement action, on any number of possible grounds ranging from securities fraud to Regulation FD, but in a lawsuit by the Federal Trade Commission. Seems that in those anonymous posts, Mackey bashed a competitor, Wild Oats, which he was going to acquire.

Two things are noteworthy about this:

1. The SEC's inaction.

and

2. The fact that no federal agency, including and most notably the SEC, has taken action against (speaking of horror shows) a far worse Internet-addicted CEO, Patrick Byrne of Overstock.com, whose prolific message board posts, in my view, are far worse than anything Mackey did.


Like Mackey, Byrne posts under a pseudonym -- "Hannibal" -- on stock message boards. As a rule, Byrne does not give his full name, or identify himself as chief executive of Overstock.com, chairman of its board of directors, and, just as importantly, as the single largest holder of Overstock shares.

Yet, as I have documented time and again in this blog, has repeatedly used Internet message boards to smear his critics -- spreading lies about people in the media (myself included) and making nutty accusations such as that the Motley Fool website and some of its analysts are "bent" and corrupted.

He has done so not as some anonymous "basher" but as a message board Big Kahuna -- if, that is, you are among the select few who are aware of the fact that the nutty-sounding, paranoid crackpot posting on various message boards is actually the nutty-sounding paranoid crackpot who runs Overstock.com.

The media, perhaps inured to Byrne's chronic wackiness, has missed this significant point. Andrew Leonard in Salon, in a column entitled "Whole Foods CEO John Mackey's wacky Web rants," said as follows:
One assumes that the CEO of a publicly traded company would not be dumb enough to leak insider information on a stock discussion board, or make unmerited forward-looking statements in an effort to pump up Whole Foods stock. But who knows? It's sure hard to imagine any Whole Foods corporate public relations person being anything but horrified at the news that the CEO is bashing competitors and predicting stock prices under a pseudonym out in the wild Internet.
Guess again, Andrew. Here's one example of Byrne's naked, manipulative efforts to hype Overstock shares -- and the value of his holdings -- on Internet message boards. I've written about this before, but I think a re-run is in order.

On March 12, 2006, Byrne put a tantalizing little kicker at the bottom of a post on the limited-readership, subscription only Motley Fool message board:

PPS Big story breaking next 24 hours. Stay tuned.
I repeat, this is a limited-readership, subscription-only message board, concerning a stock with a wafer-thin float.

It also needs to be taken into consideration that this was done by a CEO who takes message boards very seriously, and who has contended that "paid bashers" are involved in the famous Sith Lord conspiracy.

He really did this. No foolin'.

Here's a screen shot of the relevant portion of the post:



Here's a link to this historic post, which you can access if you are a paid member of the Motley Fool website.

I repeat: you can access this only if you are a paid member of the Motley Fool website. (I'm repeating myself, and putting the relevant passages in boldface, because I sometimes think that the SEC has either eyesight or reading comprehension problems.)

Note that this CEO and largest shareholder of a public company is not identifying himself as CEO and largest shareholder of a public company. I repeat..... OK, I made my point.

It so happens there was some activity within the "next 24 hours" -- an idiotically bullish article by investor Arnie Alsin.

The Alsin article caused the stock to explode. The shares, which traded at 22.85 on March 10, climbed 12% to 25.55 on March 13, and another 25% to 28.50 on March 14l, on massive (for Overstock) volume of more than 2 million shares each day. Nice! Until you consider that Alsin was dead wrong. The shares have since skittered down to 19 and have traded at a lot lower than that. Note the link in the comment to this article by the proprietor of the O-Smear blog.

Confronted with this blast from the past in April on the Investor Village Overstock message board, (perhaps inspired by this Motley Fool article by Seth Jayson) Byrne tap danced and pirouetted -- and came forth with the following cock-and-bull story:


"Odd that you don't quote from that one"? You might find it even odder that Byrne did not "quote from that one."

Or at least it would be odd -- if that post actually exists. As best as I can tell, it does not. In the three months since I originally posted on this subject, it hasn't emerged. No loyal member of the Byrne Fan Club has brought it to my attention.

So I think it is fair to assume that Byrne was lying in a public forum. Say, doesn't the SEC have a word for that?

Seth Jayson of the Motley Fool (Byrne's bloviation venue in the Spring of 2006, until critics there bruised his fragile ego and he sulked away), observed as follows:
Where, I wonder, is this face- (or neck-) saving "disclosure," as to what Patrick was talking about. I haven't seen a single clarification from Hannibal100 in any of the posts made under that user name on this board subsequent to the original "big news" post -- and I just read every single one of them
Further proof that the "clarification post" dwells only in Byrne's vivid imagination can be found in a June 2006 post on another Motley Fool board from a Byrne supporter. One user had pointed to the "big news" comment, and the Byrne defender responded, "Nonsense. I forwarded your post to Dr. Byrne. He replied that the big news he was referring had not happened yet. "

I've reprinted the past few paragraphs from my April 23 blog post on Byrne's deceptive conduct. What's even more amazing is that the SEC is aware of this, and is of course aware of similar if less troublesome sliminess by John Mackey, and does nothing.

The famously passive board of directors of Overstock.com has also been made aware, including its "independent" board members, who now included a noted class action lawyer, Joseph Tabacco.

I wonder about Mr. Tabacco. Is he in the chicken coop to guard the birds, or to leave the door open for the fox?

© 2007 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, gary-weiss.com.

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