A Death in Baloneyland

The new look at NCANS

The astroturfing website that promoted "naked short-selling" conspiracy theories -- a phony issue pushed by CEOs of crappy companies to divert regulators from real investor concerns -- is no more.

Visitors to the "National Coalition Against Naked Shortselling" site -- and there sure as hell haven't been many lately -- are now greeted with the dread Internet error message that means that a website has given up the ghost.

The site pushed the interests of corporate excuse-mongers everywhere, and was especially shrill at promoting the disastrous Novastar Financial subprime lender and the SEC-investigated monstrosity Overstock.com. The group was fronted by a coot named Mary Helburn, who once famously called Enron a victim of naked shorting.

This "organization" was so brimming with baloney that it didn't even know what its name was. It was variously known as the "National Coalition Against Naked Shortselling" on its site and the "National Coalition Against Naked Shorting" in its incoherent SEC comment letters.

A note on the "sanitycheck" stock market conspiracy website says that "NCANS is going to be incorporated into this site over the next few weeks, as this site is the de facto hub now for issues NCANS is grappling with." Translation: NCANS is kaput. The ostensible reason it was a "duplication of effort" to keep the site active.

Since that is a lame lie by even Baloney Brigade standards, I assume the site's funding source -- Patrick Byrne of Overstock.com, I would imagine -- has closed his checkbook for legal reasons.

Since the NCANS did not exist except for the little-viewed website and a similarly moribund Yahoo discussion group, this means that a minor but annoying source of investor misinformation has, thankfully, bitten the dust.

The NCANS site promoted kooky conspiracy theories, smears against media critics, and served as a sounding board for "Dr." Patrick Byrne, the wack-a-doo CEO of Overstock.com. Since it was created a couple of years ago, the anti-shorting movement has lost whatever credibiltiy that it may have had, thanks to Byrne's antics and the stench of his creepy house stalker, Judd Bagley.

Though barely alive, the "sanitycheck" website, run by a former used medical equipment salesman named Phil Saunders (a/k/a "Bob O'Brien), seems ready to give up the ghost as well. At one time it was interesting to see what clearly insane people had to say, but the shock value of that is also getting a bit old.


Though Alexa numbers are notoriously unreliable, they do give a rough gauge of readership, and indicate that Sanitycheck's following has flocked elsewhere. (To 9-11 conspiracy sites I would reckon.) As you can see from the three-year Alexa chart above, the site received a spurt of readership when promoted by Byrne, in a famously wacky CNBC appearance (below), and was sustained by links on every single Overstock page under the misleading title "Market Reform."


The page links have now dwindled from thousands to a mere one, as Byrne -- doubtless acting under legal advice and/or SEC pressure -- has taken down the links to Saunders's site. Byrne now has taken the important job of smearing his critics in-house, with screwball posts on an Overstock message board and the antisocialmedia.net corporate smear site.

Withdrawal of Overstock support has meant that "sanitycheck's" Alexa chart now has an uncanny resemblance to the price chart of Saunders favorite stock Novastar, which he shamelessly hyped on the web. It still amazes me that people would buy, or not sell, stock on the basis of the ravings of an unhinged anonymous idiot like Saunders. But it really happened.

To be sure, Byrne and other corporate blame-deflectors have not given up. Byrne's checkbook is still open, and is pouring Overstock's scarce cash into lobbying the SEC over this nonexistent problem. But any pretense of the anti-shorting movement being anything other than a corporate-financed astroturf operation is now, officially, kaput.

© 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.

Novastar Proves VIrtues of Reverse Split

Naked shorting poster child Novastar Financial, the struggling subprime lender, has proved the wisdom of the 4 for 1 reverse split that it inaugurated last month.

Reverse splits are, as I explained at the time, the last refuge of a corporate scoundrel. This stock-pumping artifice, which really should be illegal, artificially pumped up the price of Novastar shares instantly by 400%.

And it was well-timed at that! At the time the split was announced on July 16, Novastar was trading at $7.51, or $30.04 adjusted for the split.


This afternoon -- its stock already up 400% because of the split -- it was $6, and had been as low as $4.17. The stock declined because (surprise suprise) an analyst reiterated his underperform (translation: "this is a piece of garbage") rating. Here's Herb Greenberg's take on the day's events.

If it hadn't been for the split, in other words, Novastar would be a $1.50 stock.

Talk about great timing! But what the heck, you know why this has happened. Subprime lending woes? Not on your life. It's naked shorting, you see.

Which reminds me: I wonder what naked shorting nutcase Phil Saunders a/k/a "Bob O'Brien," Novastar booster and founder of the wacko "Sanitycheck" website, thinks about all this? He was Novastar's No. 1 fan and founded a website dedicated to advancing the cause of Novastar, "NFI-Info."

Ditto for Mary Helburn of "Enron was a naked shorting victim" fame, another Novastar booster who heads the National Coalition Against Naked Shortselling.

These two characters have some explaining to do.

UPDATE: The stock closed at $6.78. Woop-de-doo! It's down only 77% since the reverse split was announced.

© 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.

The Times Chronicles the Patrick Byrne Meltdown

The meltdown begins, March 2006

The New York Times today has a fascinating column by Joe Nocera on the meltdown of Overstock.com's Patrick Byrne, his anti-analyst-and-media jihad and "naked shorting" demagoguery.

It is a seminal piece that will be cited by market scholars for years to come, long after Overstock and Byrne are just vile memories.

Just by coincidence, Nocera's column comes almost exactly one year after Byrne's meltdown officially began, in a famously bizarre appearance on CNBC. Byrne's downhill slide into the muck had already commenced, but as he held up that sign it was obvious to pretty much everybody that he was losing it.

The latter stages of his deterioration are just as grotesquely entertaining to watch. Nocera provides stunning, new details of Byrne's infamous meeting with Utah legislators over his pet "fails to deliver" legislation:

As it became clear that Mr. Byrne had no support, and the law was going to be repealed, he first offered to finance the state’s defense himself. No, he was told, the state had to bear the cost for its own litigation. Then, he became increasingly agitated, accusing [Utah state senate majority leader Curtis] Bramble of betraying him. As his tone became more belligerent, and he began cursing, most of the others in the room, their jaws agape, simply listened to him rant. Several of them later told me they had never heard anything like it.

Apparently (and I have to admit, I find this hard to believe) even his wads of cash in political donations won't buy his way out of this mess:

Though no one will say so publicly, the word is that Utah officials now feel they were snookered by the Overstock C.E.O. And that his behavior at that meeting further damaged his credibility. And that, even though he is one of the state’s largest political donors, he is going to have a hard time ever getting the Legislature to take him seriously again.

Nocera quotes Bramble as saying "he now believed that Overstock’s motives were 'highly suspect.'" This, mind you, from the sponsor of the original bill. "He added: 'There are those who believe Overstock has been using the Legislature as a distraction against its own problems. It raises serious questions.'"

No s--t, Sherlock.

Now that Byrne has insulted and embarrassed two branches of the Utah state government, you have to wonder whether the state's lapdog Capitol Hill delegation will continue to offer unblinking support for Byrne's fantasies.

Nocera says that Byrne "is becoming harder and harder to take seriously. . . Which is not to say that I don’t still think he’s dangerous."

That he is, and that is why I and many others have been watching him very carefully.

Byrne is clearly terrified by this scrutiny, and he hauled out his shopworn intimindation tactics when Nocera came calling. His surrogate Phil Saunders a/k/a "Bob O'Brien" posted Nocera's emailed questions on his nutty "sanitycheck.com" website, and Byrne pledged to do likewise.

But the brass-knuckle tactics, used effectively against Business Week a year ago, didn't work -- just as they didn't when Susan Antilla of Bloomberg took a star ship to Planet Byrne.

One final note: Nocera wrote another seminal column on the early stages of Byrne's slide into the abyss, "Overstock's Campaign of Menace," in February 2006.

Nocera is a finalist for the Pulitzer Prize in Commentary, and I understand that the oft-quoted "menace" column was one of the prize submissions.

Byrne may be an unmitigated disaster for Overstock shareholders, but for journalists and regulators he is the gift that keeps on giving.

UPDATE: Overstock's resident stalker, "director of social media" Judd Bagley, responded in a message board post accusing Nocera of being corrupt:

Joe Nocera's skewed take on this issue can no longer be attributed to mere differences in human perceptions. He has sold his soul. And I guarantee you he hates himself for it. Certainly, whatever he's getting in return helps to numb the pain, but that stuff never lasts.

Similar sentiments ("Bought, stupid? I'll go with bought.") came from Mary Helburn, director of the National Coalition Against Naked Shortselling. I always wondered why some people in the media would quote this ditz as an "authority" on anything after she said that Enron was a victim of "stock counterfeiting." I'm even more amazed now.

Bagley later went into a meltdown of his own, with a message board post threatening to contact the employers of small-fry investors who criticize Overstock.

As Nocera pointed out in his column, these kinds of ravings are losing much of their "oh my goodness" factor. But the fact that a public company would employ goons like Bagley and tactics like this underscores the need for continued close scrutiny of Overstock.com.

© 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.

The Real Investor Pain Caused by Baloney

I sometimes refer to the anti-naked-shorting zealots as the Baloney Brigade, which is flip language prompted by the bizarre, sometimes unintentionally funny paranoid ravings of Baloney propagandists such as Phil Saunders (a/k/a "Bob O'Brien"), Patrick Byrne and so on.

But there's nothing funny about the pain these nightcrawlers cause to their shareholders (in the case of Byrne) or the people naive enough to buy in to their rhetoric (in the case of Saunders, Byrne and the rest).

Probably the best example of that can be found in the Investor Village message board for the naked shorting poster child NovaStar Financial, whose share price recently collapsed. NovaStar was a supposed naked-shorting victim and was mercilessly pumped by Saunders and by Mary Helburn, executive director of the National Coalition Against Naked Shorting.

Here's a sampling of the genuinely pathetic posts from some of the people who bought in to the NovaStar crock peddled by Saunders, Helburn and others. I just took these at random by word-searching "wife" and "401K." And I do mean sampling. There are dozens of others:

"The Worst Thing IS that

"I have to tell my wife that I blew our IRA because I listened to [Phil Saunders a/k/a] the Easter Bunny."

***

"I had borrowed a portion from a 401K plan & plugged it into NFI. It will hurt for a couple of years but will not be mortal....But it did take me a few days to break the news to my wife....She took it better than I expected."

***

"After being in NFI for over four years, it was a painful task to liquidate all my 21K shares on the opening today. I followed this stock closely, moved very slowly gradually building a substantial income stream for retirement. With that income stream now gone, I must find other means. Life will go on, but my less than extravigant lifestyle will be more modest. I realize that I was far to overweight in NFI all along, but the dividends kept comin, and I spent them.
Investing in NFI was entirely my doing. However, the NSS [naked short selling] and manipulation became very alarming as did management's lack of concern and the worst possible PR/IR. Oh well, shoulda, woulda, coulda. Can't look back anymore."

***
.... and then there's this NovaStar investor who was really pushed up against the wall:

"Was forced to sell out today--Schwab raised margin requirement to 50% and wouldn't budge.

Sold last of it; 4K @ 9 and 6K @ 8.50.
Paid off the margin loan.

Paid the only credit card balance I was running.

Have $22K left to pay taxes next year (probably will owe $28K--Argh).

I've paid the 2006 taxes already, and I'll send the IRS what I have left on 4/15 and be done with it.

No debt; SSI coming in, VA for medical plus Med part-B for extras.

Now it's a task of reducing cash out-flow to where it's not more than in-flow.
Going to be an exciting time--I've never had to live on a budget before.

First to go have to be the cows, our most heart-rending task--but they are expensive pets."

****

I don't feel massive amounts of sympathy for these investors. They were adults. But the charlatans who pumped this stock and harassed skeptics, and the message board operators who allowed them to do so, need to be held accountable for their actions.

© 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.

Another Naked Shorting Poster Child Succumbs

Another anti-naked-shorting poster child flamed out today.

It's called NovaStar Financial, and it's a doggy subprime lender that is a favorite stock of an ex-used-medical-equipment peddler named Phil Saunders. The stock is down 29% in aftermarket trading, after word of a disastrous fourth quarter. (It opened the following day down 41% in massive trading.) NovaStar said it expects to "recognize little if any taxable income" through the year 2011.

Gee, that's not what Phil Saunders had been saying! He was saying that this was a great company and that its shares had been hurt not by bad financials, but "stock counterfeiting."

Now, you may ask, "Why would anyone in his right mind care what some crackpot named Saunders thinks about a stock?" Well, believe it or not, lots of dimwitted small investors actually listened to this goofball -- because they think he is the "Easter Bunny."

Yup. According to the New York Post, Saunders is "Bob O'Brien," a/k/a "the Easter Bunny," the anonymous creep who is the leading propagandist of the anti-naked-shorting movement. Saunders runs the "sanitycheck.com" anti-naked shorting website, and also calls himself "manager" of the National Coaltion Against Naked Shortselling astroturf group.

Another Saunders favorite and naked shorting fantasy "victim," Overstock.com, has collapsed since Saunders starting talking up the company and serving as de facto investor relations man for its wack-a-doo CEO, Patrick Byrne.The site is linked on the Overstock.com website under the Orwellian "market reform" label.


Saunders pumped NovaStar mercilessly on message boards (spewing incoherent drivel like this), and operates a stock-pumping website called nfi-info.net, filled with the usual "stock counterfeiting" baloney alongside brainless touting of NovaStar and childish attacks on NovaStar critics (above). Some typical nfi-net misinformation can be found here. Saunders registers nfi-net through a shell company in an offshore domain server under his phony name. A lot of effort to thwart scrutiny, wouldn't you say?

Like its NFI-pumping sister site, Sanitycheck is a collection of incoherent rants and smears of NovaStar/Overstock critics, interspersed with the expertise of "experts" such as a dentist who babbles about "fails to deliver" when not filling cavities, and Mary Helburn, "executive director" of NCANS. She's the one who says that naked shorting, not crooked management, was the real problem at Enron. She's also a militant NovaStar- and Overstock-cheeerleader. (A typical pumper post from two weeks ago.)

Saunders was Overstock's primary smear-disseminator (one of many examples posted here) until that function was taken in-house by Judd Bagley, who runs Overstock's antisocialmedia.net corporate smear site. But Saunders has sat with Byrne in at least one meeting with the media, and his links to Byrne, Overstock and NovaStar need to be probed by regulators.

His smear-and-stalk tactics also deserve scrutiny. As Herb Greenberg recounts, in 2005 Saunders "went so far as to post the address and names of the wife and son of one prominent short-seller of NovaStar in a message board post, with the tag line, 'This is coming up on game over-time. Figure it out. Your playbook is known.' In another post he wrote, 'Anyone know Herb's wife's name, and his middle initial?'" He used similar tactics against Byrne's critics and members of the media, myself included.

Don't make the mistake of dismissing Saunders as just another Internet crackpot. The Motley Fool's Seth Jayson recently observed:

Senators have always been easily duped by people of his ilk regarding short selling. It's happened over and over again throughout our market's history. There are even examples of so-called short "victims" who've testified in front of this august body, who've then been implicated in the very frauds they were trying to cover up by whining about short sellers to their congressmen.

Still, nothing changes, when dangerous blowhards like Bobo get backing from certain multi-millionaires, and gather enough ears, our elected officials drop the steak knives and wine glasses, venture out of the Capital Grill for a few minutes, and blow smoke about how lousy the SEC is.

It's hard to feel sorry for people who lose money after listening to idiots like Saunders, Helburn and their ilk. Any non-institutionalized adult who would stuff his retirement account with this crap -- as per one sob story on a message board -- causing his retirement savings to decline 50%, is deserving of contempt, not sympathy.

The anti-naked shorting whack jobs, reacting to the decimation of their stock picks, are now telling the faithful that they should pull out of the "corrupt" U.S. markets. Again, anyone who follows the advice of these con men and psychos deserves every penny of losses that result.

I guess the good news is that hits on sanitycheck's whack-site have dribbled off to nothing in recent weeks, according to Alexa. The other good news is that Saunders has a ton of money invested in this ca-ca.

Perhaps he can redeploy his life savings into baloney futures?

UPDATE: Several days later, the New York Post had a great piece by Roddy Boyd describing how countless small investors were suckered into this stock via Saunders and other touts on the Investor Village message board.

© 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.

After the Bell: Overstock Sues Everybody

Graphic Courtesy of Wall Street Folly

Overstock.com just announced that it was suing every white male north of the Susquehana River, all of whom engaged in a conspiracy to drive down the company's stock. A press release can be found here.

"I have a fiduciary duty to defend the company. These manipulative activities have caused tremendous damage to Overstock," said Patrick Byrne, chairman and chief executive officer of Overstock.com. . . "The best way to address and solve the problem is to get it in front of a jury of 12 Californians."

The lawsuit names "[John] Does 1-100," so when I say that Overstock is suing everybody, I am not exaggerating.

Leading the distinguished roster of plaintiffs is Mary Helburn, "executive director" of the "National Coalition Against Naked Shorting" astroturf front group, a noted intellect who has contended that naked shorting was the "real problem" at Enron.

The company is announcing fourth quarter numbers on Monday, but that is just a coincidence. This is not an effort to steer Monday's conference call excuse-a-thon away from the numbers, and if anybody says so -- well, shame on them!

(The numbers turned out to be far worse than the most pessimistic estimates. Coincidence! Coincidence!)

This is not a desperate effort to generate imaginary future revenues by filing a junk lawsuit that has zero chance of success! Shame on Overlawyered.com for suggesting that!

Overlawyered.com said:

The suit alleges shenanigans on controversial practices of naked short selling, but the economic theory of price manipulation and damages is simply bogus: if the perpetually-money-losing Overstock were really worth billions more, investors would have every incentive to squeeze the short-sellers, who don't have the market power to manipulate the price.

How dare Overlawyered apply logic to the endeavors of Patrick Byrne!

Above all, shame on Jack Byrne for publicly spanking his offspring on Friday:

"I don't agree with all the flamboyant statements and reckless statements he has been making," Jack Byrne said of his son. "I have to admire he sees evil and he's not going to stop ... but it really has nothing do with Overstock."

Of course he's not going to stop! What else is he going to do? Run the company?

The comedy continues. Reruns set for A&E next season (if Overstock.com is still there).

P.S. As for that stuff about going before a "jury of 12" -- this may turn out to be a case of "be careful what you wish for, lest it come true."

UPDATE: Overstock lawsuit successful (and Reg FD be damned)!

© 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.

The Real Mess at Enron -- Naked Shorting, Of Course!

I promised myself that I could let at least one day go by without saying anything about the wild and (literally) crazy naked-shorting cult, but .... well, I can't resist. They are fascinating in a grotesque way, and attract interest the way people crowd around a traffic accident.

Anyway, a reader brings to my attention what is actually a very typical message on a Yahoo stock message board from Mary Helburn, who is executive director of something called the National Coalition Against Naked Shorting.

After first noting a report of supposed naked shorting in UAL stock in 2002 (shortly before it went bankrupt), she went on to point out that everything you have read is wrong. Enron and other major corporate disasters of recent years were all victims of naked short-selling:

It isn't just UAL. It is any company that has bad news.. CPN, DAL, Enron...

This is the tip of the iceberg.... and it is all coming out..

They prey on small caps that they can manipulate and large caps under stress. They sell,sell, sell and make it look like it was all the company when it was really naked short selling. Wall Street, hedge funds, brokerages, do not want this out for the public to know. [Emphasis added]

Enron shareholders should be collecting from the brokerages for their losses.

M.

CPN was the stock symbol of Calpine Corp. and DAL was Delta Airlines -- both of which wound up in bankruptcy after years of well-publicized corporate woes. Or at least, that is what "they" wanted you to think. That it was the company. It wasn't! It was them! Them! Themmmmmm!

Another message board poster tried unsuccessfully to reason with Helburn. . .

Do you really think UAL could have sold some shares in a secondary at $5 to pull it out of its debt death spiral, but was prevented from doing so by abusive shorting causing its stock to go to 30 cents?

That isn't what happened. There was abusive shorting, but the stock went worthless because the business went bankrupt due to debt overcome by massive operational losses.

You are mixing 2 separate issues together, Mary, and I cannot understand why you continue to do so.

. . . but she held her ground.

Remember, this is typical -- a mainstream example of the rubbish disseminated by the Baloney Brigade.

To answer the gentleman's question, there's a simple explanation why the Baloney Brigade "continues to do so," generating this pap day after day: It is all they have.

There is no naked shorting scandal, only paranoid fantasies. Deprived of facts, all they are left with is fiction -- and it would be funny if these bozos weren't so influential with our regulators and lawmakers.

UPDATE: A reader points me toward another manifestation of this effort to slap "naked shorting" on every financial scandal of recent years, this one appearing on the "blog" of a Baloney Brigadier named Dave Patch. On Feb. 13 (a Friday, perhaps?) he posted a rambling essay devoted to explore that Enron-as-shorting victim theory.

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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.