Friday, September 04, 2009

'Renowned Attorney' Wes Christian Smacked Down in Baloney Lawsuit

One of the earliest of the recent spate of junk lawsuits involving the hobgoblin of "naked short selling" was filed back in 2002, by a company called ATSI Communications. In a press release at the time, the company announced that it had hired the "renowned trial lawyers" of Wes Christian's law firm to bring the suit.

Christian was indeed well reputed at the time (he certainly won "renown" for his share dumping). But he since has supped from the kool aid springs of baloney, filing one "nekkid short selling" lawsuit after another, as well as by representing the nitwits at in their junk suit against Rocker Partners--and getting nowhere.

ATSI said:
The suit alleges that during the relevant time period, the defendants masterminded what has commonly been called a "Death Spiral" funding scheme, and illegally manipulated the stock price through "toxic convertible Toxic Convertible.

Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of " mechanisms and the methodical operation of naked short selling Naked short selling, or naked shorting refers to the practice of selling a stock short without first borrowing the shares or making an "affirmative determination" that the shares can be borrowed. to depress the value of the stock. In the Company's opinion, these actions have resulted in devastating losses to the Company's market capitalization.
The U.S. Second Circuit Court of appeals, in a ruling issued the other day in the ATSI suit, provides a clue as to why he's gotten nowhere with suits like this: because his claims have no merit. The court feels pretty dang strongly that his claim had no merit. It upheld a lower court decision imposing sanctions on him, his partner Gary Jewell, and another lawyer involved in the suit.

The lower court decision found that Christian and his pals "lacked any reasonable factual basis" for suing the principal defendant, Knight Capital Markets, and ordered them to cough up $69,656.69 in fees and costs. The appellate panel agreed, though it sent the case back to the lower court for review of the amount.

The lower court was really teed off. Knight hadn't even asked for monetary damages.

One interesting sidelight: seems that Wes Christian worked hard to keep this penalty out of the public record. As noted in a footnote on page four, Christian and Knight agreed on a settlement that would have vacated the lower court's judgment and short-circuited the appeals process. The judges of the Second Circuit, bless their hearts, would have none of it, observing that "it is precisely to avoid the public's scrutiny of the sanctions that ATSI's counsel seeks vacatur."

The court observed:
We would be hard pressed to conclude that the judgment here, sanctioning lawyers appearing before a United States District Court, is insignificant.
No, it sure ain't. Tough luck, Wes.

I wonder if journalists who have blithely quoted Wes Christian in the past, for articles such as this and this, will continue to swallow his drivel? I'll also be curious to see whether media outlets who picked up the initial press releases, in this and similar suits he's filed, will follow up by reporting the court's decision.

If you ask me, Christian and his buddies were treated leniently by the court. Stock manipulation is a serious allegation. Lawyers who throw around that charge without adequate basis should not be allowed to practice law.

© 2009 Gary Weiss. All rights reserved.

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