Biovail Redux

Here's a piece from last week that I missed: a CJR Daily Audit column on how 60 Minutes flubbed a story on Biovail, which recently pleaded guilty to criminal charges.

When 60 Minutes decided to do a business piece, it went after two of the few market participants—shorts and independent researchers—that actually have an incentive to counter the Wall Street sales machine.

Then to pick a company already under SEC investigation as a purported victim is to ask for trouble. The SEC’s suit blew apart the 60 Minutes piece. This criminal plea is just the cherry on top.

This item also demonstrates anew the Audit's evolution from dreck, under its eccentric former editor Mark Mitchell, into a must-read column. Note the hat tip to Carol Remond, who is now a target of Mitchell in his new role as a flack for Overstock.com.

I'd say it's high time that 60 Minutes followed up on the Biovail story--and, this time, told the whole truth and not just corporate spin.

© 2008 Gary Weiss. All rights reserved.

Biovail Pleads Guilty: World of Baloney Mourns

The Baloney Brigade stock market conspiracy theorists lost yet another team leader today. The Canadian drug company Biovail, which has bravely fought against the truth about the company for many years, pleaded guilty today to federal kickback and conspiracy charges.

This is terribly upsetting for CEO blame-shifters such as Overstock.com CEO Patrick Byrne (see separate item on his latest publicity coup), who have dedicated their lives to concealing their incompetence behind "naked short selling" and other market conspiracy theories. This is also a bad day for the cause of bad journalism, such as the awful 60 Minutes segment that naively took up the causes of this sleazy company.

I'm still waiting for the CBS News program to tell viewers what an awful job it did in reporting on this company.

Biovail was already nailed recently with SEC fraud charges that are similar to what a few brave analysts, such as Gradient Analytics, have been saying about the company for years. I believe that a junk lawsuit Biovail filed against Gradient is still pending.

Fortune's Roddy Boyd points out that

Biovail's plea bargain doesn't just close an ugly chapter in the Toronto-based company's history. It also pulls the rug out from under a multiyear quest by the company's former management, led by onetime CEO Eugene Melnyk, to blame an alleged conspiracy of hedge funds and research analysts for Biovail's financial and legal woes. . . . Unfortunately for Biovail, federal prosecutors from Massachusetts didn't agree that the [analysts'] assertions were unfounded.

Actually I'm kind of sorry that the feds let Biovail cut a plea bargain. I think the Richard Altomare Wing of the Metropolitan Correctional Center would have been a more fitting new corporate GHQ for this company.

Zac Bissonnette comments: "Moral of story: when a company starts suing people and lashing out at its critics, sell the stock. That philosophy would have saved people a ton of money on Biovail."

© 2008 Gary Weiss. All rights reserved.

CJR Daily on 60 Minutes and Biovail

Great piece in CJR Daily's Audit last night on Biovail and the disgraceful 60 Minutes segment that I've discussed a bunch of times in the past, most recently here.

Audit editor Dean Starkman observed:

The SEC charges against Biovail effectively torpedo the Stahl piece, which was devoted to airing the drug maker’s allegations that the stock-research firm, a predecessor of Gradient Analytics, concocted phony research to please SAC, a client.

In fact, the danger to investors was Biovail. So, 60 Minutes had it exactly wrong. But it’s worse than that: Biovail had been under SEC investigation since 2003. So it was clear at the time that Biovail was probably not a good example of a public company victimized by shorts. In fact, it was more likely that the Biovail example would prove the value of shorts, as it has.

The Audit piece is a refreshing contrast to the attitude of the former Audit editor, Mark Mitchell. An article such as this would have been impossible under the old regime, you see, because Mitchell swallowed whole the line peddled by Biovail and Overstock.com that they were swell and that the media and analysts were the real villains.

Mitchell spent a year working on a hatchet job pursuing Biovail and Overstock's conspiracy guff, mainly focusing on Herb Greenberg. It was ultimately rejected by Columbia Journalism Review, and Mitchell quit under a sustained barrage of criticism.

Mitchell has since become a kind of de facto p.r. man for Byrne, appearing with him at a college lecture in Utah -- resulting in this strange article in the Deseret News -- and pursuing once again his Byrne-inspired "article," though he is a biz hazy as to who would run such rubbish. He telephoned me for his "article" a few weeks ago and told me initially that the publication was "secret," but then admitted that he had none.

More on Mitchell's latest, strange antics here. Mitchell, incidentally, never returned my call and email in which I wanted to discuss with him the initial coverage in a college newspaper, since removed after a complaint by Byrne, saying that he was a "business associate" of Byrne's.

(Note: Mitchell later admitted that he is on Byrne's payroll. See this subsequent item.)

It's certainly good to see that The Audit is actually functioning as a journalism review, not as a vehicle for corporate shills.

© 2008 Gary Weiss. All rights reserved.

Deja Vu at Biovail

If the fraud charges against Biovail lodged by the SEC yesterday seem familiar, there's good reason. Gradient Analytics, the victim of a junk lawsuit by Biovail, noted in a statement today that the SEC's charges against the crummy Canadian drug maker track closely with what Gradient said about the company quite some time ago.

Gradient says in its release, not online at the moment, that "its research into Biovail from 2002 to 2003 identified the same issues that are now the centerpiece of the accounting-fraud charges supporting the U.S. Securities and Exchange Commission complaint against the pharmaceutical company."

Gradient noted that Mark Schonfeld, head of the SEC's New York office, gave credit to analysts who raised questions about Biovail, saying on CNBC that “Part of the credit does go to people who were asking a lot of questions and were rightfully skeptical when the company was making representations that just didn’t quite make sense.”

That's lovely. But it leaves open a question that continues to linger: why hasn't the SEC acted against Overstock.com, which also is the subject of accurate reasearch by Gradient, and which also has lashed out against the firm with a lawsuit?

The SEC should punish Biovail and other corporate slimeballs for their retaliation against analysts and short-sellers, and force them to terminate their blame-shifting lawsuits. It's lamentable that a Spitzer-like state regulator is not leading the charge on this -- which might explain the venom that Overstock.com CEO Patrick Byrne expressed toward Spitzer recently.

© 2008 Gary Weiss. All rights reserved.

The SEC Nails Biovail: Will 60 Minutes Issue a Retraction?

In the past I've discussed a creepy little Canadian drug company called Biovail, focusing on its No. 1 talent -- which is not making drugs, but rather casting blame on short-sellers, and gulling naive members of the press. Biovail was notably successful in that regard, gaining an atrocious 60 Minutes segment that was subsequently excoriated for its sheer stupidity.

Just about every single bit of news that has come out on Biovail has indicated that the short-sellers have been on the money, and that Biovail was a piece of dreck. Its CEO, Eugene Melnyk, skeedaddled, and word emerged last month that Biovail was the subject of a federal grand jury probe.

Today, the SEC weighed in with a fresh set of charges against Biovail, proving again that the shorts have been right and that the 60 Minutes piece was bunk.

Here's what the SEC says:

The Commission's complaint alleges that present and former senior Biovail executives, obsessed with meeting quarterly and annual earnings guidance, repeatedly overstated earnings and hid losses in order to deceive investors and create the appearance of achieving earnings goals. When it ultimately became impossible to continue concealing the company's inability to meet its own earnings guidance, Biovail actively misled investors and analysts about the reasons for the company's poor performance.

Biovail settled the Commission's charges and will pay a $10 million penalty. Four current or former Biovail senior executives still face SEC charges: former chairman and chief executive officer Eugene Melnyk; former chief financial officer Brian Crombie; current controller John Miszuk; and current chief financial officer Kenneth G. Howling.

"This is another case involving the tone at the top of a public company. It demonstrates the Commission's commitment to holding individuals accountable when they create a corporate culture of fraud and deceit," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement.

"We allege that Biovail and senior executives engaged in a pattern of systemic, chronic fraud that impacted its public filings of quarterly and annual reports over the course of four years," added Mark K. Schonfeld, Director of the SEC's New York Regional Office. "In an effort to conceal the fraud, Biovail's senior officers intentionally misled the company's auditors and the investing public, showing their complete disregard for their responsibilities to shareholders."

Of course, if the SEC is interested in holding individuals accountable for fraud and deceit, it remains to be explained why its two-year-old investigation of the fraud-ridden Overstock.com has yet to bear fruit.

The SEC complaint, while lurid, actually leaves out a lot of stuff, such as the fact that a junk lawsuit filed by Biovail persuaded Banc of America Securities, which had been issuing negative reports on Biovail, to stop following the company. Despite all the post-Enron rhetoric about the sanctity of independent analysts, the SEC has done woefully little against companies like Biovail and Overstock that want analysts to be obedient little puppies.

As for this particular piece of dreck: Will 60 Minutes issue a retraction for lending itself to the Biovail blame-shifting campaign -- or even have the decency of updating the idiotic "battle of the titans" article on its website? Don't bet on it.

UPDATE: The Ontario Securities Commission piles on.

© 2008 Gary Weiss. All rights reserved.

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.

Lost in the Translation

Biovail press release concerning its junk lawsuit against hedge funds and analysts, entitled "Biovail Says Settlement With Maris, BAS Expected to Be Helpful in Suit Against Hedge Funds and Others":

Biovail said that in fact, today's settlement agreement with Banc of America Securities and one of its former analysts David Maris, is expected to be extremely helpful in Biovail's pursuit of its lawsuit. The company said that the settlement provides, among other things, an agreement by Mr. Maris to provide substantial sworn testimony, voluntary production of material documents from BAS and Mr. Maris and the right to demand additional discovery of BAS and Mr. Maris which would include all relevant materials, such as e-mails, correspondence, tape recordings and trading records.

David Maris press release:

"I am pleased that Biovail has dropped the baseless lawsuit it concocted against me and given me a complete release of claims," Mr. Maris said.

"However, contrary to the suggestion in a press release issued by Biovail on September 10, I am not cooperating with Biovail," he added.

"Under my Settlement Agreement with Biovail and the company's former chairman and CEO Eugene Melnyk, I have no obligation to cooperate with Biovail or to answer any questions unless Biovail seeks to depose me," Mr. Maris continued.

If Biovail does seek to depose him, Mr. Maris said he will respond truthfully to questions asked by all parties, including Biovail.

"Although Biovail is free to depose me, I don't believe my answers will assist the company in its cause. To the contrary, I am unaware of any conspiracy against Biovail and do not believe any such conspiracy ever existed," Mr. Maris's statement concluded.

Oh my. One of them is lying.

Here's an American Lawyer article on the whole Biovail mess.

© 2007 Gary Weiss. All rights reserved.



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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

Farewell to a Corporate Blame-Shifter

One of the great blame-shifters of the corporate world is gliding off into the sunset. His name is Eugene Melnyk, and he runs a dodgy little Canadian drug company called Biovail. Melnyk will be packing up his things and retiring as CEO as of June 30, the AP reports.

Isn't that terrible? I was so getting used to reading about this company's most famous products: the junk lawsuits that it files to suppress negative information in the marketplace.

The first, which it filed against a short-seller back in the 1990s, went nowhere and was dropped.

The latest was filed in February 2006 (here's a company handout announcing the glorious thing) and was filed against villainous hedge funds and independent analysts. You know -- the guys who have the audacity to think that Biovail is a piece of cow dung? The famous train wreck Overstock.com filed a similar suit several months earlier.

The second lawsuit got him a certain amount of sympathetic attention from the media, including a spectacularly naive 60 Minutes segment. That report was so awful that it didn't even mention his 1990s lawsuit, which was filed against a shorts-seller and was similar to the second suit he filed.


Either Biovail is a victim, as Melnyk has asserted, or a piece of cow dung, as the analysts and short-sellers allege. Which is right? Well, "dung" seems to be winning, hands down.

The SEC the other day filed a Wells Notice, which means that it is about to file charges against the company and Melnyk personally. The U.S. Attorney's office in Brooklyn is also investigating. Joe Nocera had an update in his Saturday New York Times column (the one that sent Overstock.com Patrick Byrne bouncing off the walls last weekend).

Hence the entirely coincidental retirement.

As you can see from Joe's column, junk litigation works. It got Banc of America Securities to drop its analyst coverage of Biovail. Thus the company was able to achieve its aims by simply filing the lawsuit and not proving a thing.

Isn't that terrific? After Enron, tough analyst coverage was supposed to be the aim of all red-blooded Americans. But now we know how that was all just a lot of bull. Analysts are supposed to write glorified press releases, showering praise on inept CEOs like Melnyk and Byrne.

So bon voyage, Eugene Melnyk! You'll be missed. But there are plenty of incompetent CEOs following in your footsteps. Blame-shifting has been all the rage for some time, and the SEC is only just catching up.

P.S. I wonder if 60 Minutes is going to do a follow-up if and when the SEC files charges?

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

'60 Minutes' Revisited

Two good articles today -- in the New York Times (subscription only) and TheDeal.com -- debunk last Sunday's awful 60 Minutes episode on Biovail's tussle with short-sellers.

Great stuff. Joe Nocera's column was the most eloquent defense of shorting outside of you-know-what. TheDeal's article made the following interesting point concerning the 60M piece and Overstock.com CEO Patrick Byrne:

. . . Byrne hasn't gotten the friendly treatment from "60 Minutes," or any other big media outlet, for that matter, probably because, in a conference call last year, he charged that several high-profile journalists were players in a vast conspiracy theory dominated by a mysterious Wall Street puppet master he called the "Sith Lord" and inexplicably blurted out that he's not a cokehead. Contrast this behavior to Melnyk's, who, according to The Wall Street Journal, hired public relations firm Sitrick and Co. to help push his case against Gradient in the media. If "60 Minutes" is any indication, PR pays.

What a shame. Is there no room for character assassination, paranoia and weirdness in our national discourse?

Does this mean that when a CEO promotes a conspiracy cult website that specializes in smearing and threatening reporters -- that, well, maybe such tactics don't win friends in the media?

I'm referring, of course, to Byrne's close association with the anonymously run "sanitycheck" website and -- you know, that's gotten me thinking:

Let's say, purely hypothetically now, that I run a company, and certain reporters have been mean to me or are asking tough questions.

I give the emails to my exchanges with those reporters to a "good friend who is anonymous" and he publishes those emails and attacks those reporters and performs other nice IR tasks on my behalf. Totally out of the goodness of his heart, of course! Or maybe not.

Is that kosher? Or is it whatcha call a "loophole" in the securities laws?

It's an interesting question, I think, and one that the SEC might want to examine when it's finished subpoenaing reporters and otherwise chasing down Byrne's conspiracy theories.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

The STFU Campaign & the Joys of Paranoia

So the STFU Campaign is going full-blast, I see.

I refer, of course, to the "Shut the F--- Up" Campaign being waged by the cruddy pharmaceutical company Biovail and the cruddier Internet retailer Overstock.com against their respective critics. The cable-TV business channels are following every twist and turn of the campaign by these two companies, with the assistance of an obligingly dumb Securities and Exchange Commission, to silence their critics.

The hopes and dreams of money-losing companies everywhere are going with them! I am sure the STFU Campaign will spread across this great land of ours, silencing the few independent research firms and financial journalists who fail to fall in line with corporate dogma.

To me, the most interesting thing about the STFU Campaign is its use of a time-tested technique in American discourse -- paranoia. Overstock.com's goofy CEO, Patrick Byrne, pioneered the use of Applied Paranoia in the multi-pronged short-seller-research firm-media-etc.-etc. conspiracy theory that he unleashed at a conference call last August. Biovail, while less goofy, is also alleging that the company's share price is in the toilet because of a conspiracy involving much the same characters.

As Max Boot observed in the Los Angeles Times yesterday, paranoia is a time-honored feature of American public discourse. Boot observed that in his 1964 essay, "The Paranoid Style in American Politics," the late Richard Hofstadter noted:

"One of the impressive things about paranoid literature is the contrast between its fantasied conclusions and the almost touching concern with factuality that it invariably shows. It produces heroic strivings for evidence to prove that the unbelievable is the only thing that can be believed."

As examples, Boot noted, Hofstadter "cited a 96-page pamphlet by Joseph McCarthy that contained 'no less than 313 footnote references' and a book by John Birch Society founder Robert Welch that employed 'one hundred pages of bibliography and notes' to show that President Eisenhower was a communist."

Boot was citing Hofstadter's essay to debunk a study on the Israel lobby, but I think his point extends to the STFU Campaign.

The paranoid "naked shorting" conspiracy cult embraced by Byrne is, of course, notable for amassing mountains of meaningless "evidence" -- mostly statistics concerning "fails to deliver" securities. The lawsuits, similarly, support their conspiracy charges with detailed allegations and sworn statements by objective, dispassionate fired former employees.

So onward with the STFU Campaign! And remember: If your company's stock falls in price, it's not your fault. It's them.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

Early Kudo etc. etc. etc.

The first general-circulation review of Wall Street Versus America has come out (a bit, ahem, early) -- and it is a rave from the Houston Chronicle. Here is a link.

Golly. "Erudite and savagely funny." Very nice. True, but nice.

I've been blogging a bit less than usual because of the press of other business, including this op-ed piece that ran in the New York Times on Saturday. Bear Stearns was recently the subject of a $250 million fine that was, as I describe, chump change.

Meanwhile, I see that there has been a lot of activity on the short-selling-subpoena-baloney-Overstock-Biovail-etc.-etc.-etc. front, including a report on 60 Minutes on Biovail's lawsuit against a hedge fund and independent research firm. It was a straightforward account, and it had nothing to do with the nonexistent "naked short selling" scandal, so naturally it was immediately proclaimed as a major public relations victory by the Baloney Brigade.

Oddly, a Dateline NBC segment last August, though sympathetic to the balonies, was vilified by these same knuckleheads. Logic has never been their strong point.

Lesley Stahl said something to the effect that this segment should interest every small investor with an IRA or 401k. I agree. If the CEO of a company you own goes on a crusade against short-sellers, dump the stock immediately.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.