Where Was the Press While an Analyst Was Being Crushed?

Gretchen Morgenson today has a great column in the New York Times today on the successful effort to crush an independent analyst by Matrixx Initiatives, the criticism-phobic pharmaceutical company whose OTC cold products were recently ordered recalled by the FDA.

Reading her column got me to thinking: all this occurred some years ago. Where were the media while it was happening?

Gretchen focuses on the company's legal war against Tim Mulligan, editor of the Eyeshade Report newsletter, which drove him out of business. Her account of Mulligan's encounters with the SEC is startling, even to those of us accustomed to SEC passivity on corporate transgressions and--in this case--blatant issuer retaliation:

In addition to his dismay over the legal battle, Mr. Mulligan said he was perplexed by encounters with S.E.C. officials regarding Matrixx. Amid his legal wrangle, he contacted two S.E.C. enforcement officials offering his research about the company. They dismissed him as “suspicious,” Mr. Mulligan said, and refused to provide e-mail addresses to which he could send his work.

In April 2004, he wrote a letter to William H. Donaldson, then the chairman of the commission, about the hostility that he had met. “In my humble opinion, your agency’s purpose would be better served by being more open to outside information,” he wrote.

Writing a letter to the do-nothing Donaldson was, of course, about as useful to his cause as taking the letter and flushing it down the toilet.

Morgenson concludes:

To be sure, Mr. Mulligan’s encounters with the S.E.C. occurred five years ago. But the officials’ dismissal of him doesn’t appear to have been an anomaly — just think of the warnings that were ignored on Madoff.

Perhaps under its new leadership, S.E.C. officials will be more welcoming to independent financial sleuths. Given how outgunned it is by Wall Street and corporate America, surely the commission can use all the help it can get.

No, it certainly wasn't an anomaly. Readers of this blog have learned, in realtime, how white collar crime fighter Sam Antar has repeatedly blown the whistle on misleading accounting at the corporate crime petri dish Overstock.com, only to be ignored by the SEC.

Articles like Gretchen's are welcome, but they are the exception to the rule. Whistleblower warnings tend to be disregarded by the media--as they were in the case of Madoff whistleblower Harry Markopolos--and Antar's detailed dissection of Overstock accounting has been similarly ignored by the press, which instead prefers to print puff pieces generated by Byrne's new p.r. firm, such as this rubbish today in the Boston Globe.

The media, unfortunately, can sometimes exceed the regulatory agencies in laziness and irresponsibility. Except for a Joe Nocera column a couple of years ago, Matrixx's battle with Mulligan received only sporadic coverage in the press, mainly small articles on hiccups in the legal battle.

There's been some coverage by Nocera and others of Overstock's vicious campaign to intimidate its critics, which recently included dispatching a hireling named Judd Bagley to contact Antar's estranged wife. Byrne has sicced his hoods on reporters who dare to describe his activities in less than flattering terms, and Sam's accounting analysis--such as his finding that a fourth quarter profit was a result of smoke and mirrors--has received virtually no coverage.

Maybe it's the intimidation campaign, or maybe simple laziness. Hell, the Boston Globe reporter who cranked out the puffy Q&A with Byrne today would have had to actually read Sam's blog, or give him a call if she didn't understand the accounting terminology involved.

Accounting watchdogs like Mulligan and Antar have an annoying tendency to be right. So when Overstock finally meets its maker, either by much-delayed SEC action or sheer weight of mounting losses, the usual postmortems can be expected. Where were the media? The answer will be "Just where they when Matrixx was hounding Tim Mulligan and Internet message board posters. Doing nothing."

Chris Byron once called the media the SEC's "seeing eye dog." But all too often the press is as apathetic as our famously lethargic regulators.