Thursday, January 28, 2010

More Sleeping Media, Illinois Edition

In a blog post yesterday I described how Salt Lake City newspapers are doing an lousy job of covering Overstock.com and its loony CEO Patrick Byrne, not even mentioning the departure of a key executive. A loyal reader brings to my attention an even more egregious example of journalistic nonfeasance, this one from Illinois.

This involves the governor's race in Illinois, for the seat vacated by Rod Blagojevich, in which Illinois comptroller Dan Hynes is running against Gov. Pat Quinn for the Democratic nomination. An interesting controversy has become a factor in the Democratic race: seems that an employee of Hynes named David Pippy has been posting attacks on penny stock companies on a stock message board.

Here's a report on the subject from a local ABC affiliate in Chicago. Pippy is accused of running into the ground a poor little penny stock company called Prime Star Group, among others, by posting on the InvestorsHub message board. Prime Star is apparently suing everybody in sight.

Now, Pippy should definitely not have been using state computers for stock bashing, or stock pumping for that matter. But state employees are not always the most overworked people in the land, and it's not unusual for them to use their computers for nongovernment purposes. Nor is it strange that a penny stock company says that somebody other than itself single-handedly drove its stock into the ground. If I ever hear of a penny stock company taking the blame for its shares declining, I'll drop dead from a heart attack.

But what I do find peculiar is that the governor of Illinois is buying into this rubbish, and that the state's newspapers aren't calling him on it.

All I could find in the Chicago Sun-Times was this unprobing he-said, she-said account.

All I could find on the Chicago Tribune website is this AP story, which I had to get off Google cache because it's not on the website any more.

Apparently nobody bothered to pull up the latest SEC Form 10-Q for the Las Vegas-based Prime Star, which discloses that the company has $1.4 million in assets, $9 million in liabilities, a $47.8 million accumulated shareholder deficit, no revenues, no sales. In fact, any inquiring reporter could have skipped down to this:
The Company has had no significant operations, assets, or liabilities since November 7, 2005, and accordingly, is fully dependent upon future sales of securities or upon its current management and / or advances or loans from significant or corporate officers to provide sufficient working capital to preserve the integrity of the corporate entity.
Reading through all this crap, what I wonder is this: what in the hell was Pippy doing? I doubt very much that he could have been shorting a stock like this, as penny stocks are very hard to borrow. Maybe he bought the stock and got burned. Or maybe he's just one of those "shareholder vigilante" types I've written about from time to time who just hate overvalued penny stocks. I don't know, and obviously nobody in the Illinois media has ever bothered to ask him.

What I do know is that the idea that he single-handledly drove down the price of this flyspeck company is dubious at best.

Look, I don't care about this company or David Pippy or any of the other people involved in this nonsense, and I couldn't care less how Illinois picks its governors. But all I can say is that Illinois' media seem as FUBAR as its electoral process.

© 2010 Gary Weiss. All rights reserved.

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Deja Vu in Times Reporter Banned From Real Estate Event

The New York Observer reports that New York Times reporter Christine Haughney was denied a ticket to the annual ball of the Real Estate Board of New York. Apparently thr REBNY didn't like her coverage. (H/T, Talking Biz News.)

“As one of the most sought-after tickets, there are always more requests than can be accommodated,” said a REBNY spokesman in a statement. ”We therefore limit complimentary tickets to those members of the media who are assigned to the real estate beat." Translation: the REBNY didn't like her actually covering the last ball, unlike reporters from the trade press who used the opportunity to kiss butt.

I had a remarkable sense of deja vu reading this article, as it reminded me of what the New York Stock Exchange used to do in the imperial heyday of its former chairman, Dick Grasso. Before Grasso was pushed out for being overpaid (flimsy grounds, I must admit), he was noted for using the exchange's annual media soiree as a way of punishing reporters who had crossed him. I was on the no-invite list after running stories on the way the NYSE was manipulating program trading statistics.

It's a shame that little acts of pettiness like this by Grasso didn't leak out at the time. It did reflect on the character of the man, who ultimately embarrassed the exchange and permanently damaged its franchise. There was no Internet in those days, but there was a New York Observer. Which raises another issue, how did the Observer find out? The article says that the reporter and her editor "declined to comment." Hmmmmm........

© 2010 Gary Weiss. All rights reserved.

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Wednesday, January 27, 2010

Put the 9-11 Mastermind on Trial in Otisville!


Give him a clean shirt and ship his ass off to Otisville

I'm delighted to read today that Mayor Bloomberg has seen the light, and is now against the simply awful idea of trying Khalid Sheik Mohammed in lower Manhattan.

Sure, he was right that trying the Sept. 11 mastermind at the scene of his crimes had a certain panache--and it would be even nicer to execute him there, preferably by something slow--but it just would disrupt the city too much.

I like the idea, suggested by the local community board, to try him at a military base or perhaps the federal prison at Otisville in upstate New York. I especially like the Otisville idea.

Otisville was one of the places that was considered for Bernie Madoff. He wasn't sent there--he wound up in North Carolina--but Otisville is known as one of the repositories for a number of the Wall Street mob defendants. I like the idea of Mohammed being exposed to these particular exemplars of American capitalism, if at all possible. Perhaps they'll teach him a thing or two about stock swindling or IPOs? A new career for New York's favorite jihadist!

Or maybe they'll teach him about naked short selling, and then Overstock.com's crazy CEO Patrick Byrne will really have some to crow about. (And maybe become a neighbor, at the rate he's going.)

Hopefully, after conviction, the feds will give some thought to the "slow execution" idea I broached above. Just a suggestion.

© 2010 Gary Weiss. All rights reserved.

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Are the Salt Lake City Papers Asleep?

Seth Jayson of the Motley Fool expresses bewilderment at the lack of media coverage of the departure of a key financial officer at the corporate crime petri dish, Overstock.com, coming as it did immediately after a devastating article in the Big Money.

He was focusing on the big wire services, and he's right, but what I wonder about is the bewildering (or maybe not so bewildering) silence of Overstock's hometown newspapers, the Salt Lake Tribune and the Deseret News. Not one word in those two newspapers about the departure of David Chidester, head of internal financial controls.

Are they too terrified of the Nastiest CEO in America, Patrick Byrne, to do their jobs? Are they worried about personal attacks by Byrne? Are they afraid of their families being terrorized by the child-stalker, Byrne's nauseating go-fer Judd Bagley?

They have good reason to be afraid. Bagley has engaged in pretexting and cyberstalking of the wives, kids and grandparents of media people. He has boasted about personally stalking my apartment in New York, and has targeted my wife in his Overstock-financed smear campaign. He tracked down the estranged wife of one Overstock critic, in unsuccessful effort to get dirt on that critic. He once targeted a teenage blogger. As author and financial blogger Barry Ritholtz correctly put it, he is a "career douche bag."

These newspapers' silence seems to substantiate one of the points in the Big Money article, which is that Byrne uses crude tactics to discourage coverage.

Said Roddy:

I am one of only two reporters—the other is my former Fortune magazine colleague Bethany McLean—apparently evil enough in his eyes to warrant a reference to oral sex and ejaculation in his assessment of our ethics and reporting skills.

. . . consider that investigating the likes of Overstock is to be propelled back into a parallel world of eighth-grade recess writ large, replete with smears, tricks, and dirty language. And just like eighth grade, Byrne has learned that many people simply don’t like to fight back.
Apparently these tactics work, and they certainly do close to home.

Keep in mind that Chidester's resignation is not a rumor. Overstock filed an SEC Form 8-K announcing his departure, five days after the event.

The resignation came one day after the Big Money story, citing internal company documents, pointed to Overstock engaging in a sales tax avoidance scheme and suffering from a total lack of internal financial controls. Blogger Sam Antar, a prime target of Overstock's hoods, perceptive blog post on the troubles facing David Chidester.

In his post today, Seth Jayson pointed out:

The guy [Chidester] who knows where the bodies are buried (or doesn't, which would be more interesting) at a firm that's under SEC investigation, the day after a story breaks about a tax-evasion scheme, and no one bothers to report on it?

That's what happens when clowns like Patty and Judd, the unacomplished Facebook Granny and Child stalker behave so insanely for so long. The media starts to ignore the simpler evidence of skankiness that's too boring and too obvious.

That, or as Roddy Boyd discussed in this article, the writers and editors out there are too afraid to risk the wrath of con.

The Salt Lake papers don't always ignore the loony activities of Overstock.com, with the Salt Lake Tribune (not the Deseret News) belatedly mentioning, after it was reported elsewhere, that the the company has fired its auditor, filed an unaudited financial statement, and engaged in a public row with the fired auditor.

But as far back as I can recall, neither paper has broken news about Overstock -- and no, occasional puff pieces and reprinted press releases and wire stories don't count as "breaking news."

The heavy lifting, and the exposure to attack, is left to out-of-town reporters like Joe Nocera of the New York Times, Carol Remond of Dow Jones, Bethany McLean, now with Vanity Fair, Herb Greenberg and Roddy Boyd, formerly of the New York Post and Fortune. All have been viciously attacked by Byrne and his employees.

With the Salt Lake papers shirking their responsibility, Utahns are left with out-of-town reporters like Roddy and bloggers like Sam Antar, who today described in detail how Overstock has violated accounting rules by failing to disclose related party transactions with its Deep Capture astroturf website. Byrne uses Deep Capture to intimidate his critics and the media. It is run by Byrne's employee Bagley, who has focused so obsessively on stalking kids that he is described by blogger Barry Ritholtz as a "possible pederast."

Just to put Barry's terminology in context:

. . . The reality turned out to be far more insidious than that: A career douche bag (and possible pedarast) named Judd Bagley decided to engage in some fraudulent pretexting. He assumed a false persona on Facebook, using someone else’s name and photo (perhaps committing a Felony in NYS). He then began cyber-stalking the children, friends and family of numerous journalists, bloggers and fund mangers. After friending all the kiddies, Bagley posted their names, friends, etc. at the Deep Capture site.
Sam describes in his blog how Overstock has systematically violated accounting standards that require disclosure of related party transactions. The transactions were with the Deep Capture site. Yep, that's the kind of company we're talking about. Yet not a word on any of this in the newspapers that purport to cover prim, proper Salt Lake City.

William Wolfrum, meanwhile, takes a satirical approach, as he did previously.

I don't expect the Salt Lake City papers to consider it news that a CEO in their midst is a laughingstock, reflecting on Utah companies generally, but an executive departure of such importance should not be ignored.

Once Overstock collapses under the weight of its own self-generated scandals, you can be sure of one thing: you won't be reading about it in Salt Lake City, unless Overstock issues a press release.

UPDATE: Talking Biz News asked both papers for reaction. Nada. Sam's work, meanwhile, received an enthusiastic endorsement from a leading academic authority on corporate accounting, Prof. David Albrecht: "As only Sam can, the Overstock.com fraud situation is dissected. Sliced and diced. This is a must read for any honest person who is curious about just how fraudsters go about their business."

© 2010 Gary Weiss. All rights reserved.

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Tuesday, January 26, 2010

Throw Bernanke Overboard

I explore the pros and cons of kicking Ben Bernanke to the curb in my weekly Portfolio.com column.

The problem with dumping him at this stage is that it won't really get to the heart of the matter, which is that he's just one of a cast of characters who need to be ousted. The problem is the ensemble. I think it's a bit like you're not liking the cast of Seinfeld, and just getting rid of Elaine.

Hey, that's not a bad analogy. I should have used it....

© 2010 Gary Weiss. All rights reserved.

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Monday, January 25, 2010

More Fallout From Big Money Article: Overstock.com ex-CFO Quits

More fallout from The Big Money's devastating article on the corporate crime petri dish, Overstock.com: the official in charge of the company's nonexistent internal controls, a disaster area exposed in the article, is out on his rump.

The company issued an 8-K today, at the edge of the time allowed by law, announcing that ex-CFO David Chidester departed the day after the article appeared:

On January 20, 2010 Mr. David K. Chidester left by mutual agreement, effective immediately, from his position as Senior Vice President, Internal Reporting and Information, of Overstock.com, Inc.
In the article, ace financial writer Roddy Boyd pointed out that the company basically didn't have internal controls.

The Big Money has obtained documents showing that in the months after Overstock filed its lawsuit, a series of mishaps surrounding its bungled inventory-management software upgrade pushed it into some dire financial straits. The crux of the problem—which had been building for several months while Byrne railed against short-sellers and sundry business reporters—was that since Overstock’s software system couldn’t track its inventory well, its accounting staff had trouble deciphering how much it owed and whom it had to pay. [Emphasis added]
Note the last sentence. That little detail--not knowing what was going on--didn't prevent Overstock's Creep Executive Officer, Patrick Byrne, from putting his John Hancock alongside Chidester's on Sarbanes-Oxley-required certifications attesting to the soundness of its internal controls. Chidester was CFO during that time.

Overstock restricted itself to that one-line 8-K. No customary press release saying what a terrific, competent guy just vamoosed.

White collar crime-fighter Sam Antar comments today on Chidester's departure,

In addition to signing false Sarbanes-Oxley certifications, Chidester made false claims to investors about Overstock.com's compliance with SEC Regulation G, governing non-GAAP financial measures, as I will describe in more detail later in this blog post.

The term "mutual agreement" usually means that the company does not want David Chidester around to answer your questions and Chidester does not want to be readily available to respond to your inquires. After all, David Chidester knows where the "black holes" are to be found in Overstock.com's financial reporting irregularities.
It also could mean that Chidester was paid a nice hunk of cash to keep his mouth shut. That won't stymie the SEC investigation into the company's accounting, if it uses its subpoena power
to get Chidester to cough up what it knows.

One thing I wonder is whether the two local Salt Lake City newspapers will continue to ignore all this. Neither paid any attention to the Big Money article. I don't expect much from media outlets within clutching distance of Patrick Byrne, but it will be interesting to see if they continue to keep their readers ignorant of the sewer in their backyard.

UPDATE: Seth Jayson weighs in, with some choice comments on Byrne and his hired goon, the possible pederast and compulsive child-stalker Judd Bagley.

True to form, neither Salt Lake City newspaper picked up on this.

© 2010 Gary Weiss. All rights reserved.

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Death of the World's Dumbest Real Estate Deal


They wanted to kick tenants out of these ugly buildings and move in yuppies.

I for one am ecstatic to learn that the World's Dumbest Real Estate Deal has just officially dropped dead. I refer to the $5.4 billion purchase of Stuyvesant Town and Peter Cooper Village by Tishman Speyer Properties LP and BlackRock Inc. They announced yesterday that they've turned over the two housing complexes to their creditors.

Ordinarily there's no reason for rejoicing over the death of a real estate deal, in this case the biggest one of its kind ever, but this one is an exception. That's because this particular deal was both odious and stupid. It was predicated on the new landlords' ability to evict large numbers of tenants and jack up the rents.

But Tishman and BlackRock "forgot" that New York has the strongest tenant-protection laws in the nation, and the residents of those two middle-class projects weren't about to give up their apartments without a fight. They won an immense court victory, upheld in October by New York's highest court. The high court ruled that 4,000 apartments were illegally removed from state rent regulations, which meant that Tishman-BlackRock would have to pay $200 million in overcharges. A further deal with tenants was reached in December.

Surprisingly, the brief New York Times article on the death of the deal didn't mention the court battle with tenants.

One of the things that made this deal exceptionally idiotic was the intent to turn these two housing complexes into luxury apartments. These buildings were ugly as sin.

Now, admittedly most New York apartment buildings are nothing much to look at. But StuyTown and Peter Cooper Village, built right after World War II as veterans' housing by Metropolitan Life Insurance Company, are indistinguishable from the low-income housing projects that were being built at about the same time in poor neighborhoods of the city. The apartments themselves were nice enough, but the buildings were sterile and without character. The same was true with Parkchester in the Bronx, which was also built by MetLife right after the war.

Another problem with StuyTown/Peter Cooper Village is that lots of the apartment are on lower floors and/or have undesirable views, looking out onto parking lots or First Avenue. Sure, apartments with views on upper floors were desirable, but the existing tenants no doubt clung to them with a death grip.

I remember Parkchester well from my Bronx days. It was in the middle of nowhere, much like StuyTown and Peter Cooper Village. The buildings were huge, and nobody wanted to live there if they could get apartments elsewhere in an actual neighborhood.

Here's the irony: under New York law, the sins of the former owners are passed on to the new ones. Any penalties due to the tenants must be paid by the creditors. What a mess--and a well deserved one at that. What's amazing is that the people involved didn't do elementary research into New York state tenant laws before sinking billions into this asinine deal.

UPDATE: Henry Blodget notes that nobody is discussing the morality of walking away from such a huge mortgage. That is true, there is a moral issue here for the creditors, but it pales before the morality of a real estate deal predicated on using legal trickery to toss people out on the street.

© 2010 Gary Weiss. All rights reserved.

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Friday, January 22, 2010

Overstock.com's Latest Scam: Haitian Relief

There's one born every minute I guess. Evidently the grimy corporate crime petri dish Overstock.com feels that way, because it s trying to glam onto the widespread compassion for Haiti with an appeal that goes like this: just give us a buck, and we'll pass it on to Haitian relief.

I mean, isn't that the smartest way to give charity: don't give it to the charity yourself. Just give it to a company under SEC investigation, whose accounting is the laughingstock of the corporate world, and they can be trusted to give the money for you. Sure they can!

The local CBS outlet in Chicago uncovered this goulish p.r. stunt, in an article on brazen corporate attempts to cash in on the Haitian tragedy:

Overstock.com has its Haitian-relief efforts on its main Web page, but customers are asked to add $1 to any purchase and the company will pass it on to a charity.

"That's great, but that's not the company doing it, and that's not even Overstock matching the dollars," Stern said. "This is just simply ... 'We'll pass it along.'"

Overstock could not be reached for comment.

If you have any questions about a company's motivation, Stern says you might want to send your donation directly to a charity.
Good advice.

This creepy little net retailer is also using the Haitian earthquake to promote its "Worldstock" p.r. scheme, under which it exploits low-paid craftsman by taking their wares at bottom of the barrel prices and selling them to the unwary. Like all of CEO Patrick Byrne's other schemes, it has been a financial disaster. This guy would have lost money in the slave trade.

Would you trust your money with a company run by America's Nastiest/Dumbest CEO, Patrick Byrne, whose internal controls are a disaster area, who is under SEC investigation for his accounting, is suspected of sales tax fraud (see Big Money article), and is widely known for his dishonesty? Sure you would!

© 2010 Gary Weiss. All rights reserved.

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Thursday, January 21, 2010

President Carter Speaks Out on Wall Street


Meet the 44th President of the United States

President Carter announced today that he was declaring war on Wall Street.

In a meeting at the Oval Office attended by Treasury secretary W. Michael Blumenthal, Carter said "We should no longer allow banks to stray too far from their central mission of serving their customers.”

That's fine. Go right ahead and propose whatever laws and regulations you want. They won't get passed, now that corporate money can flood into the system almost entirely unrestrained, and he's lost his veto-proof majority in the Senate.

I forget who said it, a cable TV pundit I imagine, but somebody said a few months ago that if President Obama doesn't get health care reform passed he is going to go down in history as Jimmy Carter. The one-two punch Tuesday and today ensures it. It also means that financial reform is dead in the water.

So the big banks can breathe easy. I have no idea why the market tanked today. I hope it wasn't the jawboning on banks. Ain't happening.

© 2010 Gary Weiss. All rights reserved.

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Patrick Byrne on Patrick Byrne


William Wolfrum has a terrific satire on America's Nastiest/Dumbest CEO.

I blanched when I read this turning-his-own-words-against-him smackdown, not because it's not on target but because it's not very nice to make fun of the disturbed. Not nice, but funny.

Meanwhile, there's more to come in the saga of the dogged perpetrator of “Operation Heist and Freeze.” People are coming out of the woodwork as we speak, and some of them are talkative. Some of their names would be surprising.

My goodness. Whatever became of loyalty?

© 2010 Gary Weiss. All rights reserved.

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Tuesday, January 19, 2010

Suspicious Trading Ahead of Devastating Article on Overstock.com's Sales Tax Dodge


Somebody dumped big blocks of stock hours ahead of a negative article

The Big Money this afternoon came out with a devastating (and gutsy) article by former Fortune writer Roddy Boyd on the corporate crime petri dish that is Overstock.com, and its nuts CEO Patrick Byrne. The title is "America's Nastiest CEO," and it describes how Byrne has systematically harassed and attacked critics to cover up his own incompetence and wrongdoing--stuff that actually is a lot worse than has previously been acknowledged.

The article describes how Overstock was actually much more of a loony bin than any of its critics have contended over the years, with FUBAR internal controls and, above all, creation of a dodge for the purpose of escaping New York State sales taxes:

What caught the attention of critics was its announcement in the first quarter 10-Q filing in May of 2005 that it had set up a “variable interest entity” to engage in these transactions. The entity had agreed to lend Overstock up to $10 million—$8.4 million of which had been extended in November 2004—for which it received a below-market interest rate of 3.75 percent and a 50 percent claim to all profits. Overstock also had an option to buy the 50 percent it did not own.

Jeff Matthews, a hedge-fund manager, author, and blogger who had long been critical of Overstock and Byrne, immediately seized on the unusual structure of the transaction. He wondered why Byrne, who had discussed the great opportunities they were seeing (and participating in) within the diamond market that January, had not disclosed something as material as the joint venture.

. . . But the truth is much simpler: The deal seems to have been a tax dodge. The joint venture, struck with Moshe Krasnanski and his brother-in-law Mayer Gniwisch—a pair of veteran diamond merchants whom Byrne referred to as “Our Lubbavitcher friends”—had nothing to do with efforts to minimize accounting losses. In an e-mail to the board of directors, Byrne dubbed the process of recruiting the pair, who had set up the profitable online diamond-seller Ice.com, “Operation Heist and Freeze.” According to a memo, Overstock general counsel Jonathan Johnson prepared for the board of directors on July 13, 2005, the company’s VIE was designed to avoid a “nexus in the State of New York for sales tax purposes,” which means that the company would not have to collect, and pay out, sales taxes in the state. The diamond sales effort never really went anywhere for Overstock, and it was closed out during the holidays of 2006 with about $567,000 in accumulated losses, according to an internal balance sheet for the joint venture.

I imagine this explains why Gniwisch appeared on a message board to rub lotion after Byrne spouted some choice anti-Semitic epithets, as he does when life is not going well.

This is all horrific stuff, which brings me to the chart at the top of this item. Today, somebody dumped a 50,000-share block of this thinly traded company, and other large blocks were also jettisoned. The article appeared after the trading day ended.

I don't know if there's an insider trading issue, but I do know this--these trades may well have been prompted by Byrne revealing Roddy's impending article last Friday, in violation of Regulation FD, as in "fair disclosure." Today was the first trading day after the blog post appeared.

He did so by a tactic he has used several times in the past, publishing Roddy's questions in a typically juvenile obscenity-laced blog post (below) aimed at attempting to sabotage the article. He has done this kind of thing before. He tried it with Roddy once before, and at about the same time scared BusinessWeek to not run an article under preparation in early 2006 on Overstock's woes. The Big Money was made of sterner stuff.



Not only did this abortive journalist-intimidation scheme backfire, but it put Byrne in violation of Reg. FD, by disclosing to a select audience the material fact that an incendiary, potentially market-moving story was about to come out. Regulation FD requires that investors receive material information from companies in a uniform, fair manner.

Also last week, Overstock had to scramble to issue a form 8-K because of another FD violation, this one involving his blurting out to the New York Observer than the company was supposedly going to record a "profit" for last year. As I indicated at the time, Byrne simply does not like abiding by the securities laws. They're not included with his trust fund check, so as far as he's concerned they don't exist.

The revelations in Roddy's article are all very serious stuff. New York state does not like schemes to avoid payment of state sales tax, particularly when the state is clutching after every penny. Carol Remond of Dow Jones News Service reported on Friday that the SEC has subpoenaed all discovery in the recent litigation involving Copper River partners (former Rocker Partners) and Overstock, which presumably includes all this sales-tax-dodging sleaze.

All the king's horses and all the former SEC attorneys in his employ can't put the toothpaste back into this particular tube. It could mean the long-anticipated end to this dog's breakfast of a company and its stomach-turning chief executive officer.

You have to admit, Overstock is dying as it has lived--right down in the sewer. But here's the ultimate irony: all the Ralph Kramden style schemes, all the tax avoidance and scumminess, haven't put a nickel in the pockets of Overstock's shareholders.

UPDATES:

Barry Ritholtz inquires, "Is Patrick Byrne America’s Nastiest Dumbest CEO?":

Overstock has engaged in a variety of actions and inactions that are likely to subject it to various future civil, regulatory and tax proceedings in various courts. The heart of the article reflects a tax scam run by the firm to avoid paying New York State retail sales taxes. I would expect the New York and/or the SEC to use Boyd’s article as a road map for any prosecution. It is clear upon first reading this article that not only is this a disastrous retail operation, but it is run by a deeply disturbed individual who seems to have never tripped across “The Truth” even by accident.

. . . Here is a bit of irony: On paper, you might be led to think that Byrne is a bright guy — undergrad at Dartmouth, a Ph.D. in philosophy from Stanford, a Marshall scholar. It just goes to show you that having book smarts, being people savvy and possessing common sense can all be mutually exclusive.

I'm reminded of a famous quote from "Mr. Dooley," Finley Peter Dunne: "You can lead a man up to the university, but you can't make him think."

There's a good deal more in Barry's blog, including an insightful review of the activities of the "possible pederast" Judd Bagley, Byrne's nauseating cyberstalker. Personally I think that description is unfair--to pederasts.

Tim Sykes weighs in, though not specifically on the foregoing: "
some people truly don't deserve free speech, spreading lies and misinformation about short selling Prick Byrne should be a penny stock promoter, not a public CEO." If and when stock reaches its true value, with the hot air and fraud removed, Byrne is going to be a penny stock promoter whether he likes it or not.

Sam Antar blogs that the SEC is likely to expand its investigation into Sarbanes-Oxley violations:
. . . the article details that internal Overstock.com documents revealed that the company's "software system couldn’t track its inventory well, its accounting staff had trouble deciphering how much it owed and whom it had to pay."

However, my examination of Overstock.com's SEC filings finds that CEO Patrick Byrne and CFO David Chidester both signed Sarbanes-Oxley certifications for financial reports claiming that the company had effective internal controls over financial reporting, while internal company documents obtained by The Big Money contradict their representations to investors.

Sam has experience with the New York tax people from his days at the Crazy Eddie fraud:
Having done battle with New York's sales tax auditors as the criminal CFO of Crazy Eddie, I learned the hard way that they are more tenacious than mob collectors in retrieving monies owed - no offense to the SEC, FBI, or IRS. Under New York law, company officers are not protected by the corporate veil and are personally liable for any sales tax deficiency.
That's right, and it's true with corporate tax issues generally. Once I worked for a small Washington news service that sometimes didn't pay withholding taxes to the D.C. government. The head of the news service spent a few days in jail, corporate shell notwithstanding.

Bagley, posting under a pseudonym, took exception to Barry calling him a "possible pederast," on the basis of Bagley's obsession with friending children on Facebook. Note the response: "Anyone who uses a false identity online and that starts friending children is definitely a fraud, factually a cyber-stalker, and possibly a pederast. Hence, 'possible pederast.'"

Good point. His behavior speaks for itself. There is an old expression that begins, "if the shoe fits." And if Bagley would prefer not to be thought of as a possible pederast, why is he stalking children?

© 2010 Gary Weiss. All rights reserved.

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Monday, January 18, 2010

More on BusinessWeek Under Bloomberg

MediaWeek has an article out today on Bloomberg "putting its stamp on BusinessWeek," a subject I've dealt with in the past several times.

The one big change, of course, is that Bloomberg staffers are now writing a good number of BW articles, including cover stories. This is obviously not something existing staffers like very much, but I don't really see what choice Bberg has, given how the staff has been decimated in recent years, particularly if there are plans to expand the size of the magazine.

I've heard that nowadays most BW writers are now working for the wire. The number exclusively devoted to the magazine was estimated for me by somebody there as approximately ten, and possibly fewer.

As for changes in the traditional newsmagazine writing style, I've noticed a de-emphasis on analysis, which used to be the magazine's forte.

[New editor in chief Josh] Tyrangiel declined to generalize about plans to change the magazine’s style, including moving it closer to that of Bloomberg, which prides itself on writing for the nonbusiness person although its primary audience is its terminal user. “I’m not a fan of the throat-clearing paragraph,” he said, an approach he noted was rare in Bloomberg stories.
I've never encountered that expression very much so I ran it through Google, and I found that one of the few hits for the expression "throat clearing paragraph" came in this webcast interview Tyrangiel gave while he was managing editor of Time. com.

In that interview, Tyrangiel said he didn't favor "throat clearing paragraphs" at Time.com--a website. He said that in the context of saying long-form journalism didn't work on the web.

Of course, BW is a paper publication, and sometimes it publishes work that approximates long-form journalism. So........ what is he trying to say? Is he saying that BW should be written like an online publication?

Mediaweek, bless its heart, didn't get any elaboration from the new EIC. A definition of "throat clearing paragraph" might have helped too.

© 2010 Gary Weiss. All rights reserved.

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Sunday, January 17, 2010

It's Official: The New Credit Card Rules Suck Wind

Back in August I wrote an article for Parade on the perils of credit cards, and I looked ahead to legislation that was moving ahead to enactment, as well as a Federal Reserve rulemaking.

Well, all that has come to pass and it's official: consumers are as prone to abuse by credit card companies, most of them beneficiaries of TARP largesse, as ever before.

Gretchen Morgenson's column in the New York Times today describes how banks are figuring out new ways of rooking customers, and regulators are doing nothing about it. One back is charging for statements, which

certainly seems to flout the spirit of both the Fed’s regulations and the Credit Card Accountability Responsibility and Disclosure Act of 2009. But because it is labeled a statement fee, it does not appear to violate the letter of the law, which barred credit card issuers from levying separate fees when a consumer submitted a payment, whether “by mail, electronic transfer, telephone authorization, or other means, unless such payment involves an expedited service by a service representative of the creditor.”
The Washington Post points out that the new rules don't cover rebate cards.

Expiration dates on those cards typically range from two weeks to three months, said Brian Riley, an analyst with the research firm Tower Group. In addition, the programs are often designed to discourage consumers from redeeming the offer, he said. Riley estimated about 20 percent of $4 billion in annual rebate offers are left on the table.
Here's a laundry list (PDF file) of other methods card issuers have used to circumvent the new credit card rules, compiled by a confederation of consumer groups.

There's a lot that Congress and the Fed are totally neglecting, such as unfair collection methods that include sewer service. I'm glad that the media is focusing on the deficiencies of the credit card legislation, but there needs to be more coverage of the general sleaze involved, and the need to rebuild consumer protection laws.

© 2010 Gary Weiss. All rights reserved.

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Thursday, January 14, 2010

Annals of Public Relations


The ultimate objective of all corporate p.r. strategies is to avoid this

Today's chapter: Five thousand words beginning with this psycho rant...




that can be summed up in one word: Guilty.

Evidently former Fortune and New York Post reporter Roddy Boyd has an imminent article in The Big Money, hearkening back to Overstock.com's ill-fated venture into the diamond business.

Judging from the questions that prompted this tantrum, the article will show that Overstock.com engaged in some activities that may be construed as criminal in nature, including tax evasion.

I assume CEO Patrick Byrne's hysterical response (the language! oh my) in his astroturf blog was drafted without consultation with his attorneys.

Unfortunately for him, filing an 8-K isn't going to get him out of this particular hot water.

Here's Roddy's email to Byrne:

From: Roddy Boyd [mailto:roddyboyd@ymail.com]
Sent: Wednesday, January 13, 2010 7:04 AM
To: Patrick Byrne
Subject:

Patrick,

Roddy Boyd here. I am writing a story for Slate’s thebigmoney.com. I have set up this email account for this query and will no longer use it after 4:30 pm EST tonight. I will phrase the questions as bluntly as possible because I am not seeking to engage in an E-mail exchange. Should you need to reach out to the story’s editor, Please approach Jim Ledbetter. I believe his email address is xxxxxx. Please have your response in by 4:30 pm EST.

Your response will be linked to in its entirety, as well as referenced within the body of the story–I imagine it would look something like, “Patrick Byrne said, ‘xyz…..’” (To see Byrne’s full response, click here.)

The story deals with Overstock’s state of affairs in the fall of 2005 and winter of 2006. Specifically, It references the problems you had with factors such as CIT because of Overstock’s losses and its percieved weak operating position. The governing theme of the piece is that financial investigative reporting on fully operational companies is imprecise (unlike say doing a post-mortem on Lehman or Enron.) In other words, the concerns of OSTK critics about liquidity and the build-your-own-jewelry initiative appear correct, but that they (likely) could never have guessed precisely why.

An Email quote, from 11/14/05, from David Chidester to you, Jonathan Johnson and Jason Lindsey says, “Unfortunately what we feared has begun. Some factors and banks have stopped insuring our payables.”

This clearly had been a problem of some duration for OSTK, since on 9/22/05, five weeks after your suit was filed, you stated in an email to your colleagues, “I just sat with CIT. They confirmed that at one time we were reasonably good (not great), and have turned to @#$% in the last six months.” You added: “For years, I have been hearing from accounting that we pay our vendors super-promptly.”

The story also references emails between Rich Paongo and Chidester on January 20, 2006 which looked at the problems three of Overstock’s factors and lenders had with the company: “Not meeting projections, no profits, low cash, and slow payments .” On February 28, 2006, Joanne Dalebout, E-mailed you and your colleagues, “All [vendors] are saying that with Overstock in the papers a lot and the lawsuit they don’t think we will be in business and that we are too much of a risk? Also having problems with CIT not approving small orders.”

Why did OSTK not reference the troubles it was having with its key credit providers in any of its public communications?

As you will recall, one of the concerns that OSTK critics had was the company’s cash-flow and operational soundness. For a retailer, this would clearly appear to meet the threshold of materiality. Do you disagree?

And would you elaborate on this decision?

The story will also mention “Operation heist and freeze” with your “Lubbavitcher friends” from Ice.com.

–Why did you not disclose, per Jonathan Johnson’s report to the OSTK board on 7/13/05, that the diamond VIE was structured as it was to avoid “Nexus in the State of New York for sales tax purposes.”

–Please elaborate on Overstock’s decision to avoid paying sales tax and to not disclose the identities of Moshe Krasnanski and Meyer Gniwisch.

Thank you,

Roddy Boyd
There's a follow-up:
Forgive the additional query, but it is germane.

The big diamond block, the trade you staked with Moshe and Meyer for about $7.5mm, appears to have originated from one Lev Leviev, a rather interesting man.

Leviev, outside of his NYC and West-Bank real estate operations, is also one of the more active miner and marketers of Angolan diamonds, an area whose extraction methods and principles are quite controversial.

Were those diamonds sourced from Angola? If so, could you elaborate on any debate you had with respect to doing this sort of business?

thank you

Roddy Boyd

Here's an article in New York magazine on Byrne's chum Lev Leviev. Note the stuff about Angola. I assume the other characters in the story are equally colorful, which I trust explains why Byrne was foaming at the mouth.

I guess this explains why Big Money editor Ledbetter was a target of Byrne's pretexting scheme. I had always wondered about that.

Looks like Roddy has quite a story. Thanks to Wacky Patty, P.R. genius, we have a sneak preview.

UPDATE: William Wolfrum has an amusing "review" of "The Patrick Byrne & Overstock.com Show":

Emotional, paranoid, afraid and angry simultaneously at all times, Byrne is to corporate drama what Meryl Streep is to Hollywood drama. The set-up for the latest episode is apparently an upcoming article by former Fortune and New York Post reporter Roddy Boyd.
The following morning, Byrne apparently sobered up and rewrote his hysterical headline:



Note the emphasis on "ethics." Apparently Byrne believes that Boyd breached some kind of ethical precept by, supposedly, using stuff leaked from depositions under court seal in one of his recent junk lawsuits.

Aside from the Olympian hypocrisy of Byrne lecturing even Charles Manson on ethics, I'm left scratching my head. Byrne had always welcomed discovery. So why is anything under court seal? If he has nothing to hide, he should demand that all discovery be open to the public and press.

Apparently he does have something to hide. Something to do with the New York State sales tax, and the days when he was a would-be diamond baron. Back in 2005, Byrne said he had gotten the "steal of a lifetime" in diamonds and was going to blow Blue Nile out of the water. Like all of Byrne's other big ideas, this one went bust, Ralph Kramden style.

Blogger Jeff Matthews observed at the time: ". . . even assuming Overstock.com has—thanks to its 'skunk works'—figured out how to convert $7 million of diamonds into a profitable business, it would be worth understanding how exactly one goes about getting a 'steal' on $7 million worth of diamonds."

Stay tuned.

© 2010 Gary Weiss. All rights reserved.

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A Tough Time to Be an Atheist

I was corresponding last night with a friend who went overseas in October with his wife and two young kids, to join a UN mission. I was always a bit nervous about the whole family going together, as a group, to a country that was plagued with civil unrest, horrific poverty, and had limited medical services.

But one must go where the work is, so off they went--to Haiti.

The subject of our discussion was atheism. You see, they just happened to be on a brief vacation in Miami during the earthquake.

To give the whole thing even more of a Twilight Zone character, I just found out that their house, situated in the hills above Port-au-Prince, is undamaged.

I've followed the news closely and this is the first time I'd heard of any houses in the area being undamaged. Perhaps they were built with reinforced concrete, unlike most of houses in Haiti. I just don't know.

As for the subject of our discussion: we both concluded that it was very difficult to cling to one's atheism at a time like this.

© 2010 Gary Weiss. All rights reserved.

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Wednesday, January 13, 2010

Why Another Financial Crisis is Inevitable

The big banks know that they are too big too fail.

From today's testimony at the financial crisis commission:

"I think tomorrow in the context of this environment, at some level the government would intervene." "Because of the fragility of the system," [Goldman Sachs CEO Lloyd] Blankfein said, the government would be forced to step in.

That's it. No need for further research. The commission might as well pack its bags and go home.

Well, I don't mean that literally. They still need to publish a comprehensive 911-Commission style report. But the key aspect of their mission, which is to prevent another financial crisis, is now moot. There will be one.

In fact. expect another one within the next few years:
At another point, [JP Morgan Chase CEO Jamie] Dimon told commission member John W. Thompson, a former chief of the Symantec Corporation: “It’s not a mystery. It’s not a surprise. We know we have crises every 5 or 10 years. My daughter called from school and said, ’Dad, what’s a financial crisis?’ ” Mr. Dimon said he told her that it was an event that occurs every few years.
© 2010 Gary Weiss. All rights reserved.

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Patrick Byrne Admits Funding Dirty Tricks Operation


Throws down the gauntlet to the SEC

(See Update: Overstock cleaned up after Byrne's latest mess by issuing an 8-K)

A chilling story is out today in the New York Observer on Overstock.com's dirty tricks operation. Apart from the usual "oh my goodness" stuff, what's most interesting from a securities fraud perspective is further evidence of how Overstock.com CEO Patrick Byrne is flouting SEC disclosure rules.

First, Byrne has failed to disclose in any Overstock filing his ownership and ongoing financing of the "Deep Capture" astroturf website. The article made clear that it's his website, bought and paid for with a cool half million bucks, making rather pointless his efforts in the past to erect corporate shells to disguise his role.

The second and more clear cut violation of the securities laws is his flippant, almost giddy disregard of Regulation FD:

. . . Overstock does not enjoy getting into why it’s never recorded an annual profit in its history. (Mr. Byrne, though, said at deadline that the company is about to report its first annual profit. “I’m probably going to get a lot of shit for having said this,” he offered.)
That's entirely possible, but it depends on how serious the SEC is about enforcing Regulation FD, as in "fair disclosure." That's designed to ensure investors get material information uniformly, and not through the online editions of newspapers not ordinarily read by investors in Utah stock frauds, and teasers planted on bulletin boards ("PS: Patrick gives some interesting "guidance" in the piece. You OSTK investors will probably appreciate it.")

I'll be interested to see if Overstock wipes up after this latest mess by issuing an 8-K before the start of trading today. Whether it does or not, Byrne has just thrown down the gauntlet to the SEC, and it's up to them to accept the challenge or, as usual when crooked execs throw down gauntlets, do nothing.

"Profit" of course is an elastic term as Overstock, which is why the SEC is investigating its accounting.

You can't write about Byrne or his nauseating lackey Judd Bagley without being grossed out, so we have this creepy bit of stalking:
. . . Afterward, he was looking on a map to get his bearings. “And I saw this little cul-de-sac. I thought, ‘I know I’ve heard of that before.’ And I remembered, ‘That’s right! Gary Weiss lives there. So I just kind of walked down it.”
Bagley was off target. We haven't many young kids for him to stalk where I live, but there's a public school just around the corner.
“Posting the name of my 16-year-old son, what did that prove?” said the Barron’s editor Eric Savitz.
Well, I guess it proves that Bagley is a special kind of douchebag, as this article makes abundantly clear. But you have to admit that he's a well-financed douchebag.

The article was written by Max Abelson, who shares a surname (I don't know if he's related) with Alan Abelson of Barron's. Alan Abelson years ago was subjected to constant legal harassment by bagholders of companies he wrote about, who blamed him for the decline of stocks in which they invested. The only thing that's changed is that the harassers are getting scummier, and that they're going after families.

The parting shot from Barry Ritholtz is probably the best description of naked shorting that I've ever seen:
“It’s like a guy leaping off the Empire State Building, and he hits the pavement, and it turns out he also has high cholesterol,” Mr. Ritholtz said. “When they do the autopsy, I don’t think they’ll give a fuck about the high cholesterol. Naked shorting is the high cholesterol.”
UPDATE: BusinessInsider reminds me that Byrne, reconfiguring his nutty "Sith Lord" rant from 2005 is now saying there is not one but two "Sith Lords": Michael Milken and Steven Cohen of SAC Capital. Sort of the Sith Lord Twins. I'm surprised he didn't throw in Bernie Madoff and Al Capone, to make it a quartet.

A sarcastic message board post sums up Byrne's latest self-created problem: "An annual profit! Wow! OK, I am changing my sentiment to STRONG BUY, because of this information. . . . Now that I have changed my sentiments based on this statement by Mr. Byrne, I am going to start searching for the Reg FD filing."

Late in the day, Overstock's legal beagles shot over to the SEC a clean-up-the-latest-Byrne-mess filing, with the Observer article attached, but they were tardy. The filing came after the market closed, after an illegal runup of the stock, which ended up nearly a percentage point.

Ahem. I call that closing the barn door after the cow, or in this case the Reg. FD violation, had gone.

The filing says basically nothing: "The Company has not yet completed its financial statements for the year ended December 31, 2009. The Company intends to issue a press release containing financial results for the year ended December 31, 2009 when they are available." So what is that supposed to mean? That just makes the whole thing murkier. This is one of the weirdest 8-Ks I've ever seen, even from these buffoons.

This has happened before. Let's face facts: Patrick Byrne does not like abiding by the securities laws. I mean, they're not included in the envelope with the check that comes every month from the trust fund, so why should he obey them?

By the way, when Byrne said “I’m probably going to get a lot of shit for having said this,” the term of art for that is scienter.

© 2010 Gary Weiss. All rights reserved.

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Monday, January 11, 2010

'The Expert' is Brilliant


He knows whereof he speaks

Find him here. Nuff said.

Well, almost nuff said. His breadth of knowledge is as extraordinary as his Twitter following. Disregard what he says at your own risk. And I do mean risk.

I'm privileged to say that I grew up with this gent back in da Bronx. I know who he is. But I'm not talking. My lips are sealed, not that I have any choice.

His Twitter feed is here.

© 2010 Gary Weiss. All rights reserved.

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Saturday, January 09, 2010

Today's Junk Lawsuit: CMKM Diamond Bagholders Demand Trillions

This is the kind of thing that gives shareholder lawsuits a bad name. Bagholders of the CMKM Diamonds stock fraud, as is their wont, are venting their justifiable rage not at the company's former management, the subject of an indictment, but at the SEC.

Instead of picketing or slinging mud in anonymous, loony emails, they just filed a class action suit against the SEC in California. The text of the suit can be found here. They want "3.87 Trillion Dollars."

The crux of the complaint, as best as I can understand it, is this:

32. At some date prior to June 1, 2004 the Securities and Exchange Commission in concert with the Department of Justice of the United States, together combined with Robert A. Maheu and others to utilize CMKM Diamonds, Inc. for the purpose of trapping a number of widely disbursed entities and persons who were believed to be engaged in naked short selling of CMKM Diamonds Inc. stock and cellar boxing the company.

The Securities and Exchange Commission and the Department of Justice, with assistance from the Department of Homeland Security, believed and developed evidence that said short sellers were utilizing their activities to illegally launder moneys, wrongfully export moneys, avoid payment of taxes, and to support foreign terrorist operations. To fulfill the plan to criminally trap such wrongdoers, the Securities and Exchange Commission, with assistance from the Departments of Justice and Homeland Security:

(a) Assisted in and approved the retention of Roger Glenn, an ex-SEC trial attorney and drafter of Sarbanes-Oxley, to join CMKM Diamonds Inc. for the purpose of verifying claims value, increasing authorized shares of stock to 800,000,000,000, and supervising from the inside of the company;

(b) Encouraged the company to expand its promotional activities, assisted in the set up of the “racing activities” of the company, and underwrote a substantial portion of the cost of such activities;

(c) Consented to, facilitated, and supported the sale of certain company claims to several foreign corporations;
In fact, and even some of the naked shorting types themselves admit this, the company was just a big fraud, was not a subject of "naked shorting."

I agree that there's plenty of blame to go around, particularly the failure of the Bush Administration's Justice Department to pursue an indictment. But the main responsibility, apart from the company itself, lies with the naked shorting conspiracy nutcases, many of whom were shareholders who were just too dumb or dishonest to see what was really going on.

However, I do like the idea of transferring the assets of the government over to the CMKM nutcases, as is demanded in this suit. They can junk all the B-1 bombers and ICBMs, deploying the proceeds into Overstock.com Call Options, and turn Governors Island into a Baloney Theme Park.

At Mount Rushmore, we can lose Washington, Lincoln and Roosevelt and replace them with Wacky Patty Byrne, Richard Altomare and Urban Casavant.

We could even change the name of the country. Suggestions welcome.

UPDATE: The comments to this item are classic, and I let them all go through rather than exercise editorial judgment, as I usually do in such situations. I thought I thought one (no, not the pizza delivery boy one), made some good points.

© 2010 Gary Weiss. All rights reserved.

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Friday, January 08, 2010

The Masons Need to Keep Secret


My Uncle Sid used to work at a furniture store in Queens. He was a wonderful guy, and died some years ago. He was proud of serving in the Army in World War II and stayed with the Army reserves until his retirement. That's about all I knew about him, aside from the usual family stuff.

So it came as a surprise when I learned after his death that he was a third thirty-second-degree Mason! Ancient Accepted Scottish Rite. That's pretty dang high, and I never heard a thing about it while he was alive.

I knew nothing about the Masons, except that they were secretive and that Hitler didn't like them. Weren't they tied up with the Illuminati or something? But then I learned that people like George Washington and Winston Churchill used to be Masons, that the conspiracy theories about them are a lot of rot, and then I thought of joining the Masons myself. Hey, it's a secret society. Sounded kind of neat.

I took a look at the initiation fees and lost interest. Besides, I didn't know any Masons except my uncle, and he wasn't around.

So I was intrigued by the New York Times op-ed today by Holly Brubach on how the Masons are shedding their secretive ways. Personally I think that's a mistake.

One of the things that makes the Masons intriguing is that they're secretive. It's what you call a "marketing device." It almost persuaded me to look into joining, and I never join anything. Without the secrecy, the Freemasons are just another social club.

UPDATE: I'm told my uncle was a thirty-second degree Mason, not a third degree Mason as I indicated earlier. Zowie. I had no idea.

© 2010 Gary Weiss. All rights reserved.

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Portfolio's Role in Dodd's Downfall

This is the sort of kvetching I could never have done when I was still at the late Conde Nast Portfolio, as it would have seemed self-serving. But Portfolio's dead, so I can come out and say it: I think the media has been spectacularly ungenerous in not crediting the late magazine for the downfall of Chris Dodd, who has decided not to run for reelection.

Certainly his ties to Countrywide, exposed by Portfolio's Dan Golden in June 2008, were not the only reason Dodd has bowed out. But they figured significantly. Dan, a Pulitzer winner while at the Wall Street Journal, is now with Bloomberg, and just wrote a long takeout for Bloomberg-BusinessWeek. (And no, he didn't put me up to this.)

Portfolio got knocked to smithereens by the media while it was alive. At leave give credit where credit is due now that it's kaput, folks.

Here's an irony: now that Dodd is on the way out, financial regulatory reform is in danger. Ain't that a kick in the head?

© 2010 Gary Weiss. All rights reserved.

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Wednesday, January 06, 2010

Overstock.com Staves Off Bankruptcy With 'Hillary Clinton Nutcracker'



The corporate crime petri dish Overstock.com has done many strange things in its desperate struggle to stave off bankruptcy: engaged in pretexting against critics and the media, cooked its books, and sold a video game glorifiying rape.

Today, Washington's City Paper notes that these tasteless creeps have hit a new low: selling a "Hillary Clinton nutcracker" in a set with a "Bill Clinton corkscrew." Get it? A steal at (here's the real joke) thirty-seven bucks!

I guess you can't expect much from a company whose CEO, Patrick "Wacky Patty" Byrne, once suggested to Bethany McLean of Enron fame that she used to give "blow jobs to Goldman Sachs traders."

Misogyny, criminality--hey, this company may sell overpriced crud that you couldn't give away for three bucks at a yard sale, but as a story it is the gift that keeps on giving.

© 2010 Gary Weiss. All rights reserved.

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Harlem: Return to 1935


Harlem's ethnic makeup in 1935

I've always been fascinated with Harlem. I attended school there, and my first journalistic effort, for a long-dead weekly, was an article on the remaining Italian community in Harlem. So I was fascinated by an article in the New York Times today on how central Harlem is becoming multiethnic.

What I liked about this article is that it acknowledges what people sometimes forget, which is that Harlem has a long tradition of being multiethnic.:

Andrew A. Beveridge, a sociologist at Queens College, said, “Harlem has become as it was in the early 1930s — a predominantly black neighborhood, but with other groups living there as well.”
That's right, and I'm surprised the Times didn't reprint the map it ran back in 1935, showing the ethnic residency patterns in Harlem at the time. As you can see, a good part of central Harlem was non-black, and at the time all of East Harlem was white and Hispanic. My father's family used to live around Lexington Avenue in East Harlem during and after World War I.

People frequently forget how New York's ethnic character has shifted dramatically through the years. Not many people know that Greenwich Village, especially the area around Minetta Lane, used to be the biggest black neighborhood in New York long before Harlem.

© 2010 Gary Weiss. All rights reserved.

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Tuesday, January 05, 2010

The Return of Black Dom


Black Dom: from stocks to pizzas

(Updated)

One of the characters in Born to Steal is a fellow named "Black Dom" Dionisio, a Colombo crime family associate who was one of the hoods behind Hanover Sterling and other shady brokerages in the early 1990s. Now word that Dom has come down in the world, big time.

Mob Watch reports that Dom, who served time for securities fraud a while back (this court ruling describes his pedigree), is now on trial for shooting somebody during the Colombo family's civil strife in 1991. It seems that he made a bid for release before trial, saying that he works for a prominent Brooklyn pizza restaurant called Lucali's.

But....
The feds, however, think Black Dom's full of shit, because he hadn't been providing any pay stubs since he supposedly started working almost a year ago. They say he's simply using Lucali's as a front, perhaps for sinister purposes. So Dionisio countered by producing said stubs -- 10 in all. Problem is, they came from the personal account of Lucali's owner Mark Iacono, not the restaurant. And they were written on sequentially numbered checks, implying that Dom was hastily paid for an entire year all at once.
The Daily News originally reported on Dom's connection with the restaurant, but not on the pay stubs.

One thing that makes this interesting is that Lucali's is not some greasy joint in Hicksville, but is in upscale Carroll Gardens, and is getting quite a reputation for outstanding pizza. It has received publicity in restaurant websites and even the New Yorker, describing Iacono as a former "marble fabricator." The New Yorker reported:

These days, it’s not unusual to encounter a wait of well over an hour for one of the ten tables; late-arriving takeout patrons are sometimes turned away all together. So it was hardly surprising, last week, when a Presidential-calibre motorcade pulled up out front. Beyoncé Knowles and Jay-Z emerged, and were quickly ushered to a table near the chef.
When I read the Mob Watch item I was intrigued, because someone by the name of Mark Iacono used to be a trader at a "chop house" called A.T. Brod, and was named in an NASD complaint concerning the short-selling of shares in the aforementioned Hanover Sterling. More on the entities and other nastiness described in the complaint can be found in this BusinessWeek article.

Well, rest easy, folks. You'll be happy to know that the pizza restaurateur Mark Iacono is a different guy. The one who used to work at Brod would now be nearing 50, which is much older than the fellow pictured in the articles on the pizza place, unless he's exceptionally well preserved. Still, you have to admit that this is one hell of a coincidence.

The Daily News article says
"Dionisio, 39, is now permitted to leave his home six days a week for his $300-a-week job at Lucali's, where the owner praised him. "Regardless of his past, he's like my family," Mark Iacono said.
Hey, I'm all for giving ex-cons a second chance, if they've reformed. One of my favorite financial bloggers is ex-con Sam Antar, scourge of the Overstock.com fraud. But I have my doubts about Dom, however.

© 2010 Gary Weiss. All rights reserved.

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Monday, January 04, 2010

More on the New Bloomberg BusinessWeek

I'm surprised that nobody pointed out to me the gaping omissions from my blog item last week on the latest issue of BusinessWeek. I just picked up a copy at my local newsstand, and noticed them immediately.

Apart from its all-Bloomberg cover package, there are at least two other firsts, both very promising.

First there is a long takeout by Daniel Golden describing how for-profit colleges are targeting the military. Dan is a Bloomberg reporter, and he is modestly described as just that in his six-word biography.

Come now, Bloomberg, don't be shy! Dan Golden is a Pulitzer Prize winning former Wall Street Journal reporter who was a senior editor at the late Condé Nast Portfolio . His article is rich, detailed and above all, looooong, certainly by recent BW standards. I copied it to Microsoft Word and noticed that it weighed in as just under 3500 words. That's just under standard Portfolio feature article length.

Now, it didn't have quite as much analysis as I usually like to see in such things, but I don't want to quibble because it's refreshing to see long form journalism, especially in the decimated pages of BusinessWeek. Bravo!

The second thing nobody pointed out to me is just a little stylistic thing, but significant: in the new issue there is none of the loony page numbers that had been introduced under an atrocious new design, in which page 10, say, would be "010," computer-style. This pretentiousness has been eliminated. Good thing.

These are positive changes, particularly the long piece. Maybe there's hope yet for BusinessWeek.

© 2010 Gary Weiss. All rights reserved.

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Business as Usual at Overstock.com: Lying About Their Auditors

My two favorite Overstock-watchers, Sam Antar and Tracy Coenen, have blog items out over the weekend describing how it's business as usual at my favorite corporate crime petri dish, Overstock.com. Their blogs describe lies, opinion shopping--in other words, business as usual.

Sam's latest post describes how conflicting disclosures by Overstock reveal improper opinion shopping by the company, a theme I explored in a recent post.

Tracy Coenen delves into the significance of this revelation: "It’s clear that [Overstock.com CEO] Patrick Byrne and Overstock have been lying, based on the company’s own statements."

Since this is evident from the company's own financial statements, a question again arises: why hasn't the SEC taken action?

Later in the day,the company announced it "has removed from its site all apparel and accessory products which feature exotic animal skins, including snake, alligator, crocodile, lizard, ostrich, stingray, eel, shark or kangaroo" from its website.

Too bad there is no prohibition against reptilian management behavior.

© 2010 Gary Weiss. All rights reserved.

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