Tuesday, September 09, 2008

Mr. Tabacco Has Some Explaining To Do

Two of the leading poster children for naked shorting conspiracy theorists are BIDZ.com and Force Protection. BIDZ has claimed that the big, bad naked shorters (and not anything management has done) is the reason its shares are in the commode.

While Force Protection's management has stayed away from the subject, it has been pushed doggedly by Overstock.com's wack-a-doo CEO Patrick Byrne--who has disgustingly wrapped the flag around the issue, because Force Protection is a defense contractor.

Now comes word that Force Protection is the subject of a class action suit. Nothing surprising there, except that co-lead counsel is the law firm of Berman DeValerio Pease Tabacco Burt & Pucillo.

The "Tabacco" in the name of the firm is Joseph J. Tabacco, a member of the Overstock.com board of directors.

When Tabacco was named to the Overstock board, I raised the issue of the conflict of interest--from the standpoint of future plaintiffs--between Tobacco's duties as a plaintiff's lawyer, fighting securities fraud, and his job on the board of a company that routinely violates the securities laws and has no concept of corporate ethics. There may not be a legal conflict of interest, but this certainly raises a serious question about Tabacco's judgment.

According to a copy of the order appointing Tabacco's firm, posted on the firm's website, Berman De Valerio was picked by the Chicago Laborers Group. Seems to me that these good union folks owe it to their members to give this whole subject a close look.

As for BIDZ -- oh, just the usual shaky financials and questionable backers that one expects from companies like this. Sam Antar has been all over the story, and my old colleague Bill Alpert of Barron's ran a good piece. The Barron's article is available by subscription only, but here is a Seeking Alpha summary.

© 2008 Gary Weiss. All rights reserved.

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