Thursday, February 28, 2008

He Spat on the Sidewalk Too

I seem to be getting a lot of mob press releases in my inbox recently. The latest is an illustration of the state of the modern day mob. It concerns the sentencing of the acting boss of the Genovese crime family, Danny Leo "a/k/a the Lion," 67 years old, and his nephew Joey, 46. Both are from New Jersey, and here is what they did:

DANNY and JOSEPH LEO conspired from 2002 to 2006 to commit extortion by threatening a loansharking victim with physical violence and other harm if he did not make prompt repayment of various loans and debts. DANNY LEO also conspired with other members and associates of the Genovese Family from approximately 2003 to 2006 to extort money from the owners and operators of an illegal gambling business by threatening economic harm and violence.
OK, this is no good and I'm glad they're being put away for "60 and 45 months respectively," according to this press release from federal prosecutors in Manhattan.

But here's what this gets me wondering: is this all these guys have to do to make money? Shaking down some bookies and a guy they loaned money to? Is that what they've been reduced to--low-grade extortion?

Just wondering. Back in the day, the Genovese crime family controlled labor unions, much of the garment industy, real estate, food businesses, and of course also committed quite a bit of stock fraud. Extortion is nasty stuff, but somehow I expect more from a Genovese family boss. Are they that much down on their luck?

The answer, I suspect, is yes. The mob was always a tawdry, disgusting business without any glamor at all. If the Sopranos had reflected real life, I've always felt, it would have been too grimy and small-time to watch.

© 2008 Gary Weiss. All rights reserved.

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Tuesday, February 26, 2008

More on Overstock.com's Accounting Shenanigans

Sam Antar begins the first installment of a detailed, multipart analysis in his blog today:
Once again, Overstock has proved to be the story that keeps on giving. Every time I try to find the answer to one simple question, I am confronted by even more violations and inconsistencies. The latest evidence, analyzed in this blog post, indicates that the company has knowingly violated its own revenue recognition policies since at least 1999.
This may sound technical, but it isn't. These are the kinds of things that make a difference between a company reporting "real big" sales and "real lousy" sales.

That is why accounting issues are at the heart of the SEC's investigation of Overstock and CEO Patrick Byrne. So this is a rare opportunity to see a company's fraudulent practices being exposed, in real time, while an investigation is underway.

© 2008 Gary Weiss. All rights reserved.

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Friday, February 22, 2008

The Policemen Are Getting Younger -- But Not the Mob Guys

One of the telltale signs of age is how the policemen all seem to be getting younger. I have found that to be true, but not when it comes to mob guys. They still seem to be getting older.

Today I received a press release from the U.S. Attorney's office in Manhattan announcing the sentencing of a Genovese family capo named Ciro Perrone, who had been convicted of RICO violations, loansharking and such. He is 87 years old. The sentence was five years.

Here's more on Perrone, in case you care. Seems he had asked for clemency for his "civic deeds." Such as, perhaps, showing us all how a guy can still remain active well into his golden years?

© 2007 Gary Weiss. All rights reserved.

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Wednesday, February 20, 2008

Troubles to Come at the TImes?

This is a development to watch:

Dissident shareholder Harbinger Capital Partners has increased its stake in newspaper publishing company New York Times Co. to 11.8 percent, according to a Securities and Exchange Commission filing Tuesday.

Harbinger, working together with Firebrand Partners founder Scott Galloway, a New York University business professor, has criticized the Times for not aggressively building up its digital businesses.

The investors have nominated four candidates for election to the board at the Times' annual shareholder meeting on April 22.


Earlier this month, Harbinger disclosed that it had raised its stake to more than 10 percent from 5 percent.

What this means is that the Times is in play, and is in danger of a hostile takeover. If you think that's unimaginable, a conquest of Dow Jones by Rupert Murdoch would have been inconceivable two years ago.

© 2007 Gary Weiss. All rights reserved.

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Nothing New Here, Just Selective Disclosure

What would be serious business for most U.S. public companies is routine, even humdrum at the corporate train wreck Overstock.com. Thus comes word today that Overstock committed a serious violation of SEC Rule 10b-5.

Reformed felon and corporate crime expert Sam Antar has the scoop in a blog post today.

On Feb. 12, Overstock issued a press release celebrating a minor turn of the screw in its junk lawsuit against Gradient Analytics, an independent research firm that dared to sue the company.

But Overstock "forgot" to mention that Gradient was countersuing.

That's what's known as "selective disclosure," a violation of SEC Rule 10b-5. Can't just release news favorable to you. Kind of obvious, you might think, but this is Overstock.

According to the SEC:

Section 10(b) of the Exchange Act and Rule 10b-5 proscribe, among other things, misstatements of material fact made in connection with the purchase or sale of securities. Information is material if there is a substantial likelihood that its disclosure would be viewed by a reasonable investor as having significantly altered the total mix of information available.
Right. Such as disclosing the latest news in your fave junk lawsuit and keeping out the stuff that don't look so good.

To make things worse, it seems that the market reacted favorably to the news, which it wouldn't have done if the Gradient cross complaint was disclosed.

I wonder if the SEC will react quite so favorably?

The feds should certainly take special notice, in their ongoing investigation of Overstock, because of the importance Overstock has attached in the past to a Gradient countersuit. (Thanks to John Lichtenstein for jogging my memory on that.)

Overstock put out a press release in March 2006 entitled, "Overstock.com to Gradient Analytics and Rocker Partners: Where's the Countersuit You Threatened?"

Here's the press release. CEO Patrick Byrne is quoted in the release as saying as follows:
Eight months ago Gradient and Rocker were thumping their chests threatening to counter-sue us. I said at the time that they would not because these miscreants could not survive the discovery a counter-suit would trigger. They still have not filed suit, and now, once again, they are doing whatever they can to stall the discovery process. I once again invite them to counter-sue, and let us move to discovery quickly.
So now both are countersuing, and Overstock does not view this as being as worthy of disclosing as its taunt.

Also notable is this: Instead of "welcoming" the countersuits, the legal papers on Sam's site indicate that Overstock is moving to quash the one from Rocker, which was filed some weeks ago.

Gosh, I thought Overstock wanted "discovery." What has this slimy little company got to hide (as if we didn't know)?

© 2007 Gary Weiss. All rights reserved.

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Friday, February 15, 2008

A Victory Over Pretexting: One Down, One to Go


Hewlett Packard has paid a hefty but undisclosed sum to reporters for Business Week and the New York Times, to settle the widely publicized pretexting scandal. Gumshoes for the company had lied to get phone records and other personal information from reporters.

Hewlett Packard had the decency, belated as it was, to admit fault and act to set things straight. Contrast this with Overstock.com, which openly engages in pretexting via its nauseating in-house stalker, Judd Bagley.

Bagley freely admits to lying about his identity and planting spyware in emails, with the goal of intimidating critics and suppressing criticism of the company.

Overstock is under SEC investigation, but it is time for a criminal investigation of Overstock's and Bagley's conduct.



The telegenic lifelong bachelor has boasted on his blog about having "8,000" emails demonstrating his various conspiracy theories -- including "1,841" from me that, as he describes them, would be forged if they are not figments of Byrne's lurid imagination. The SEC needs to subpoena those "emails" in its ongoing probe, and include this sordid company's pretexting and smear campaign in whatever action it eventually takes.

At least one forged email was offered up to a reporter for The Register, an Internet tabloid, who was researching a hatchet job on Wikipedia. The SEC needs to find out who forged those emails (as if we didn't know) and make an appropriate criminal referral.

UPDATE: There's a persistent rumor that Gradient Analytics has filed a countersuit in its long-running legal battle with Overstock. Actually a bit more than a rumor, as the source is the well-informed scambuster, Sam Antar.

Funny that it wasn't disclosed -- even as Overstock belched forth an update on a minor turn of the screw in said litigation. (I would say "SEC take notice," but even the sleepiest SEC investigator would notice this one.) Gee, is it bad when a company discloses only the aspects of ongoing litigation that make it look good?

© 2007 Gary Weiss. All rights reserved.

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Wednesday, February 13, 2008

Good News and Bad News at Business Week

First the good news: Business Week is seeing an increase in newsstand sales. So reports SABEW's Talking Biz News.

BW said in a statement yesterday that

. . .newsstand sales jumped 9.3 percent, to 37,397 copies, in the second half of 2007, as compared with the same period in 2006, according to the latest Audit Bureau of Circulations publisher’s statement. In addition, average circulation rose 1.3 percent to 933,566,
BW says its recent redesign is the reason for this. It's been criticized internally, and by people like me, but if it is working, that is what matters. As I pointed out the other day, I hear that BW has been losing money at a $20 million annual clip and may be sold in four years if that trend is not reversed.

But then today the New York Post reports that some BW temporary writers are now assigned to a temp agency. They were told "they were being reassigned to a contract with Kelly Services."

No layoffs, but not good news at all, and a bit demeaning for the writers involved. It also would appear to be at variance with the good news I mentioned earlier.

© 2007 Gary Weiss. All rights reserved.

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Monday, February 11, 2008

Department of 'Oh My Goodness!'

In his column on corporate sleaze-factory Overstock.com some months ago, Joseph Nocera of the New York Times observed that CEO Patrick Byrne's "Internet ramblings have lost much of their 'oh my goodness' factor, so they don’t get the attention they once did."

Accordingly, Byrne and his nauseating paid stalker, the hideous Judd Bagley, have had to ratchet up the shrillness of their attacks on critics to divert attention from Overstock's accounting shenanigans. Yet still he is ignored, and Byrne has complained about that on several occasions.

Bagley no longer pretends that he is "director of communications" -- he rarely signs off on press releases -- and spends most of his days posting to an anti-Wikipedia website. Quite a popular man at Overstock, particularly among the hard-working employees paid less than him, I would surmise.

Forensic accounting expert Tracy Coenen today has a dispatch from the "oh my goodness!" front, concerning a falsehood-laden attack by Byrne on his most potent critic, fraud fighter Sam Antar, who was mastermind of the Crazy Eddie stock swindle.

Sam’s. . . a good target because he doesn’t back down. He has seen financial statements that stink over at Overstock, and he’s not letting go of the issue until his questions are answered. And mind you, these aren’t just Sam’s questions. They’re also the questions of many in the investing community.
Byrne's latest missive, used in waste of shareholder resources on the Overstock website, calls Sam Antar a "crook" -- an expletive he has directed at me, Herb Greenberg, and pretty much every one else who disagrees with him. Only this time -- oh my goodness! -- Byrne is right.

Sam Antar is a crook!

In fact, Sam says so pretty much every time he opens his mouth or posts on his blog. He logs thousands of hours flying around the country at his own expense, lecturing law enforcement on how to avoid crooks like him. He is a recognized expert on such things, warranting a lavish recent Fortune magazine article that infuriated Byrne.

What bothers Byrne is not that Sam is -- oh my goodness! -- a crook, but that he is honing in on this SEC-investigated, slimy company's accounting.

He knows that Sam is on to something, and that he has absolutely nothing to gain from what he is doing, except to atone for his past crimes.

The title of Tracy's post puts it well: "Overstock.com, what are you hiding?" As if we didn't know.

© 2007 Gary Weiss. All rights reserved.

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Saturday, February 09, 2008

Wall Street Angle in Gambino Bust

Newsday today has an interesting wrapup on the recent Gambino family megabust. Here's a Los Angeles Times pickup of the article.

Newsday says that securities fraud charges, mentioned peripherally in the indictment, "stem from a giant Wall Street boiler-room operation prosecuted in 2001."

The latest Gambino indictment accuses reputed Gambino captain Charles Carneglia and reputed captain Leonard DiMaria with securities fraud conspiracy stemming from the 2001 stock fraud prosecution, according to court records.

DiMaria and Carneglia are accused of plotting to commit securities fraud in the sale of three stocks from November 1995 to March 1996, according to the indictment.
Interesting. I wonder if that aspect of the case dates back to an informant who was the buyer in an unrelated art forgery case some years ago.

Note this New York Times story from back in 2000. Seems that there was an "unnamed man who had pleaded guilty to securities fraud and was already cooperating with federal agents." [emphasis added] The two people involved were "associates" of Carneglia, and quite obviously they were cooperating against him.

Could just be a coincidence. Or it could be that the unnamed man who had pleaded guilty -- probably under seal -- was instrumental in the 2001 prosecution and the ongoing investigation of Carneglia. There were quite a few mob stock prosecutions in 2000 and 2001, so it's hard to say offhand which one is involved.

That's how mob prosecutions are made. One case leads to another which leads to another, with defendants flipping like waffles. Took a while to get this one going, that I will say. Eight years?

© 2007 Gary Weiss. All rights reserved.

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Friday, February 08, 2008

Universal Express, Again and Again and Again

Naked shorting poster child Universal Express is the General Hospital of Corporate America. No, strike that. It is a cross between General Hospital and Reno 911. New York Times chief financial correspondent Floyd Norris observes today that he has been getting some weird emails from stock market conspiracy nuts -- weird, that is, to those unfamiliar with naked shorting nuts.

The former management of Universal Express, about which I have written once in a column and numerous times in blog postings, continues to have supporters.

That is remarkable to me, since the court record estabishes that Richard Altomare, who was chief executive, ran the company as his own piggy bank. Employees paid company expenses on their personal credit cards while he had the company pay for hundreds of thousands of dollars worth of jewelry. The company was financed by selling stock illegally for years, with the sales continuing even after a federal judge ruled it was illegal. Its reports to shareholders were filled with lies.

Former CEO Richard Altomare, he says,
always claimed he was the victim of an S.E.C. vendetta, viewing himself as a whistle blower who has exposed the role of naked short selling. There is scant evidence of such trading in the stock, however, which may not be a surprise since the company itself was selling billions of illegally issued shares.
That's strong language for the Times, and stronger still for Floyd, who is something of the dean of New York financial writers. I guess it must have something to do with the naked shorting nuts' charm offensive. One email he has received reads:
“Your criminal intentions are quite transparent. As the truth is exposed your rants will be proven lies. What is the market price for a soul??
Your name will be synonomous with ‘paid schill’!” [sic]
Floyd goes on to observe that a rumor is floating around the Internet that an upcoming appellate court hearing is expected to be a winner for Altomare. Baloney. No such hearing is scheduled.

One commenter made a good point on Floyd's blog:
For ten years I’ve watched in disgust as the Feds ignore most penny stock scammers and play softball with the few they do catch. Altomare violated a permanent injunction and didn’t even get cited for contempt of court. It’s no wonder penny stock fraud is rampant. It’s probably the safest form of theft available.

© 2007 Gary Weiss. All rights reserved.

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Penny Stock Company Hoodwinks Media

CJR Daily's once-horrid "Audit" section does it again, with a great article about a penny stock company called Brilliant Technologies Corporation.

The Audit says it "made several business-news desks look silly recently when they credulously reported an announcement by its Qtrax unit that it had signed a deal with all four major-label record companies to give consumers all the music they wanted—free—through an advertising-supported format."

"Great story," says the Audit, "if true. Except it wasn’t."

Not bad at all for the Audit, which not too long ago used to list naked shorting conspiracy websites -- run by penny stock promoters -- on its list of recommended websites.

© 2007 Gary Weiss. All rights reserved.

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The Toughest Job in Journalism

Some people might think that covering Iraq is the toughest job in journalism, and it may be, but publisher of my alma mater Business Week is way up there.

The magazine has been losing ad revenues, staff morale is in the commode, and I've heard from current and former staffers that it's been bleeding red ink to the tune of $20 million a year. I've also heard that if things don't turn around, BW will be sold in four years. Or at least, so the staff was told in a meeting last year, or so I'm told.

If so, that would be the end of what had been a fine franchise and, under former editor Steve Shepard, a leading voice in biz news.

To help stop the flow of advertising red ink, McGraw Hill has hired Jessica Sibley from the Wall Street Journal. Here's a Mediabistro article on the move. quoting the press release in full.

It's an impressive hire, in addition to being the first (I think) woman publisher of BW. She has great credentials so as they say, we shall see what we shall see.

P.S. The people I know at BW -- I mostly run into them at farewell parties nowadays -- are fairly certain BW will turn around. I sure hope so.

© 2007 Gary Weiss. All rights reserved.

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Tuesday, February 05, 2008

Patrick Byrne Hedges His Bets


Byrne is the fickle type, apparently.

My favorite CEO, the always-affable, telegenic Patrick Byrne of Overstock.com, used corporate resources a few weeks ago to give a ringing endorsement to fringe Republican candidate Ron Paul.

Made sense. Paul taps in to the deep-seated paranoia that afflicts all too many people nowadays, has endorsed Byrne's loony "naked shorting" conspiracy theories, and his self-styled "libertarian" (a/k/a "screw the public") point of view is very much in keeping with Byrne's. He is a friend of Wall Street, as is Byrne despite his rhetoric, and endorsed a book by a stock scamster.

A marriage made in heaven, one would think. In endorsing Paul, Byrne said:
In October Dr. Paul came to Utah, and he and I visited for an hour in my office. After that meeting, I gave him the largest donation I could under federal law: it is rare to meet a politician who understands the Constitution, and rarer still to meet one who thinks it binds the government meaningfully (I would give Dr. Paul more were there not now a federal blackout on free speech known as “McCain-Feingold”). In a television interview last week I stated that, while for the first time in my life I felt there are several candidates qualified to be president, my #1 choice would be Dr. Paul.
The maximum under the cursed McCain-Feingold act, designed to limit the influence of lucky-sperm types like Byrne, is $2300.

The Deseret News reports today that Byrne gave a ringing endorsement to yet another Republican candidate, Mitt Romney. What's interesting is that, according to the Federal Election Commission, he gave $2300 to Mitt Romney on Nov. 30. That would be about a month after he dug deep and gave the max to Paul.


Romney is, of course, pretty much the polar opposite of Paul on most issues.

While I guess there might be a bit of a lag time in reporting these things--his contribution to Paul does not show up just yet -- it does appear that the two donations took place in the same time frame, and he probably gave to Romney after he gave to Paul. (As best as I can tell, "date of receipt" means just that.)

That would indicate that Byrne is pretty crassly hedging his bets. Why doesn't he use corporate resources to tell his customers he is giving the max to Mitt?

He previously gave the max to Rudy Giuliani and almost the max to the cursed free-speech-abridger John McCain.

Hey, don't blame Byrne for inconsistency. He and his company are under SEC investigation and a guy's gotta do what a guy's gotta do.

© 2007 Gary Weiss. All rights reserved.

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Monday, February 04, 2008

A Hagstrom For Regulators


I believe I've used the expression "road map for regulators" more than once to describe ex-scamster Sam Antar's detailed analysis of Overstock.com's sleazy accounting practices.

So here's a different metaphor: The detailed post out today is very much in the tradition of the venerable map-maker, Hagstrom. Except that the only motorists who need follow it are investigators for the SEC.

The title says it all: "Overstock.com and Patrick Byrne: Phony Accounting and False and Misleading Disclosures." You can read it here.

I really don't have much to say beyond "read it." If, that is, you are interested in how a widely publicized company can manipulate its financial statements, right in plain view of an army of feckless brokerage house analysts and the world media.

Byrne has lately been posting on the Overstock website a warmed-over attack on former Business Week reporter Tim Mullaney, who posed a series of tough questions to Byrne two years ago. Byrne has been practically begging the media to pick up on his smears. Anything to divert attention from his shady accounting. I guess he feels that in glorying in his past victories -- he browbeat Business Week into not writing about his dreary financial results -- he can relive them.

The irony is that Mullaney's questions were right on the mark, and Byrne's replies were slippery and deceptive. Byrne also said in the exchange with Mullaney that "I think 'EBITDA' is the stupidest thing I ever heard emanate from Wall Street (no small feat)." Yet he recently trumpeted -- and inflated -- the company's EBITDA numbers.

Byrne's view of his face-off with Mullaney as a public relations triumph borders on the delusional. It established his reputation in the media as a bully and as a CEO with something to hide.

I doubt that the SEC, which is investigating Overstock and Byrne, is focusing massive resources on his "campaign of menace" (as Joe Nocera put it) against critics. Their case largely centers on accounting. Silencing critics is, I believe, largely secondary, sort of icing on the cake.

Now they have no excuses for further dilly-dallying, as the accounting issues that are evident in public statements ( Lord knows what is buried in their books and computer files) has now been laid out for them.

They've got a great road map. Time to step on the gas.

© 2007 Gary Weiss. All rights reserved.

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Friday, February 01, 2008

Corporate Blame Shifter in Federal Probe

One of my favorite corporate blame-shifters, the Canadian pharmaceutical company and unsuccessful junk-lawsuit-filer Biovial, had some bad news today: a federal grand jury investigation.

I wonder if the CBS News program 60 Minutes, which ran an indescribably dumb segment on Biovail's withdrawn lawsuit against short-sellers, is going to do a segment on this really sobering development.

Biovail said "it faces a government probe that could lead to civil and criminal charges related the launch of blood pressure medication Cardizem LA."

The stock actually went down on the news, rather than enjoying what I would call a "Patrick Byrne rally" -- a suspicious gain on a day of bad news.

© 2007 Gary Weiss. All rights reserved.

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Today's Peculiar Stock Chart


Sumthin' fishy here?

Just wondering aloud about something: How is that that a company reports a negative earnings surprise, combined with New York Times exposure of inflated EBITDA numbers -- and its share price soars 9% and ends the day up 2%?

This happening on a day when the market is down?

And then weakens when the market is on a tear?

All this happening to a stock that, even after being beaten down, is already grossly overvalued?

I'm wondering:

Is this stock being manipulated on the upside?

Does a recently announced share buyback have anything to do with this?

Or were small investors hoodwinked into buying the shares on the basis of those inflated EBITDA numbers, only to get a quick loss for their trouble?

Just wondering. That company is, of course, my favorite corporate train wreck Overstock.com (NSDQ: OSTK), and as with every other aspect of this creepy little company, its share price chart is mighty peculiar.

I guess you can call what happened on the day of the earnings announcement as a "Patrick Byrne rally," as in the famously dissembling CEO of this SEC-investigated company.

This looks to me an awful lot like a pump-and-dump but hey, what do I know?

© 2007 Gary Weiss. All rights reserved.

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