Wrapping Baloney in the Flag

Jeff Matthews has an enjoyable item today on one of the more loathsome conspiracy theories being circulated on the Internet: that "naked shortsellers" are attacking a company called Force Protection, and that by some twisted logic "American soldiers were being punished by naked short selling."

Though not mentioned by Matthews for some reason, the author of the Big Lie described in his item is none other than the most the entertaining CEO in America, the always entertaining overlord of Overstock.com, Patrick Byrne. Showing his customary good taste, Byrne illustrated his item with a photograph of flag-draped coffins (above). 

Byrne, when not driving his creepy little company into the ground, spends most of his time writing nutty items for an Overstock-hosted blog called "Deep Capture." His latest missive claims that Force Protection, which makes vehicles for the Army in Iraq, was a victim of naked shorting. 

Matthews notes that the company actually is a victim of itself. Apart from competitive factors:

. . . Force Protection has had a few issues particular to itself.

Not being in compliance with Nasdaq Marketplace Rule 4310 (c)(14) for a period of time, as a result of not filing its June quarter 10Q, for one.

Announcing in August, 2008 that its 2007 financial statements “should no longer be relied upon,” for another.

Announcing it had identified “material weakness in its internal control over financial reporting,” in November 2007, for a third.

Hey, sounds a lot like Overstock.com. The difference is that Force Protection's management has not, as far as I know, endorsed the screwball theories being advanced by Internet creatures like Byrne. (And not repudiated them either, for that matter.) As I pointed out a few months ago, a member of Overstock's somnolent board of directors, Joseph Tobacco, is representing investors suing Force Protection. 

I said at the time that Tobacco has some explaining to do. He still does, in spades. It's hard for me to see how Tobacco can represent aggrieved Force Protection investors while serving on the board of a company that officially sponsors a website publishing crap like this about Force Protection and taking an anti-investor slant in general. 

Byrne's latest craziness is par for the course for naked shorting nuts, but wrapping the flag around their conspiracy theories is especially odious, even by their standards. 

Obviously Byrne is exploiting the Iraq dead as a kind of publicity stunt -- the Deep Capture website, though run by a full-time staff of thugs lead by the nauseating cyberstalker Judd Bagley, has failed to gain much readership despite constant hyping, a "$75,000 contest" that fizzled, and a link on the Overstock site. But I doubt very much that the parents of the Iraqi war dead appreciate this crass exploitation of their tragedy. 

© 2008 Gary Weiss. All rights reserved.

Mr. Tabacco Has Some Explaining To Do

Two of the leading poster children for naked shorting conspiracy theorists are BIDZ.com and Force Protection. BIDZ has claimed that the big, bad naked shorters (and not anything management has done) is the reason its shares are in the commode.

While Force Protection's management has stayed away from the subject, it has been pushed doggedly by Overstock.com's wack-a-doo CEO Patrick Byrne--who has disgustingly wrapped the flag around the issue, because Force Protection is a defense contractor.

Now comes word that Force Protection is the subject of a class action suit. Nothing surprising there, except that co-lead counsel is the law firm of Berman DeValerio Pease Tabacco Burt & Pucillo.

The "Tabacco" in the name of the firm is Joseph J. Tabacco, a member of the Overstock.com board of directors.

When Tabacco was named to the Overstock board, I raised the issue of the conflict of interest--from the standpoint of future plaintiffs--between Tobacco's duties as a plaintiff's lawyer, fighting securities fraud, and his job on the board of a company that routinely violates the securities laws and has no concept of corporate ethics. There may not be a legal conflict of interest, but this certainly raises a serious question about Tabacco's judgment.

According to a copy of the order appointing Tabacco's firm, posted on the firm's website, Berman De Valerio was picked by the Chicago Laborers Group. Seems to me that these good union folks owe it to their members to give this whole subject a close look.

As for BIDZ -- oh, just the usual shaky financials and questionable backers that one expects from companies like this. Sam Antar has been all over the story, and my old colleague Bill Alpert of Barron's ran a good piece. The Barron's article is available by subscription only, but here is a Seeking Alpha summary.

© 2008 Gary Weiss. All rights reserved.

'History and Mystery' on Sharesleuth

As I've said in the past, I'm no fan of Sharesleuth because its owner, Mark Cuban, finances it (or tries to) by shorting in advance of articles on the website. That's a no-no for anything purporting to be journalism.

Sharesleuth's business model has been a flop for the same reason it has been editorial failure: over the past two years it has written about a grand total of four companies. Compare this with ProPublica, which churns out a constant stream of investigative articles and is funded by a nonprofit group. When it was commenced two years ago, Cuban hyped it as the savior of financial journalism. It has been anything but.

In fact, you get more timely share-sleuthing from Zac Bissonnette on AOL in one month, than you have from Sharesleuth in its two years of existence.

All that aside, I think that the latest Sharesleuth offering is worth reading -- a detailed depiction of the matrix of stock fraud and overseas boiler room schemes. Some of these were targeted by Internet sleuth Floyd Schneider, making him a target of the stock fraud aficionado Judd Bagley, the nauseating cyberstalker who makes his living harassing critics of Overstock.com's nutty CEO Patrick Byrne.

Sharesleuth would have proven its value, despite its business model, if it had produced articles frequently, dealing with overpriced or fraudulent shares that are currently in the public eye, whether or not its owner was able to make a few bucks. Instead, its readership has dropped, embarrassing, to pretty much nothing.

That's a shame, because there really is a need for a "share sleuth." ProPublica is an outstanding news outlet (despite an annoying technical glitch that cuts off the left side of the page). But its business section lacks hard-hitting financial journalism.

What's needed is a truth squad guarding against ongoing hype in the markets, not historical overviews or massively documented hits against companies on a once-per-blue-moon basis. So when Byrne tells outlandish lies about Force Protection Inc., describing that financially quaky company as a "victim of naked short selling" (as he did on Fox Business News yesterday), the truth squad could roll into action.

Perhaps ProPublica could fill that role. There are lots of journos being cast out of newspapers around the country, and it would be great to put them to work doing some real share-sleuthing -- in the public interest, not to make a billionaire richer.

© 2008 Gary Weiss. All rights reserved.