Medifast, Meet Barbra Streisand

Ms. Streisand, I'd like you to meet another dumb lawsuit plaintiff

In an item the other day I described how a lawyer for Shaquille O'Neal, suitably named "Roach," had sent a threatening "cease and desist" letter to blogger Tim Sykes, demanding that Tim remove all refrences to a company tied in to O'Neal called NXT Nutritionals Holdings Inc.

Doing so was dumb as hell, because all the Roach did was to amplify Tim's claim that NXT is a "pump and dump"--something known as the "Streisand Effect," after an equally dumb lawsuit the singer once filed. All the suit filed by Streisand accomplished was to disseminate a photograph she was trying to suppress.

Roach was pretty dumb, but I've found someone even dumber--a company called Medifast Inc. Repeat: Medifast Inc. (just want to be sure you noticed) that is suing Barry Minkow, his Fraud Discovery Institute, forensic accounting ace Tracy Coenen and a bunch of other people, including an anonymous person on a Yahoo! message board, for saying naughty things about the poor wittle dahling mutlilevel marketer.

Here is Tracy's post on the suit, and here is a post from Sam Antar asking Medifast why it hasn't responded to the allegations that have arisen concerning the firm.

As with NXT, I have no opinion on Medifast except that a suit like this is just plain stupid. All it is going to accomplish is to disseminate Minkow's claims to people like myself who don't follow such things and ordinarily couldn't care less.

Sam points out:

The lawsuit alleges that Barry Minkow orchestrated an illegal scheme to drive down the stock price of Medifast shares to profit from short selling. However, Minkow has a first amendment right to critique or to use your words "bash" Medifast, notwithstanding the fact that he publicly disclosed that he holds a short position in your company and is a convicted felon. Minkow's opinion and analysis is backed up by very detailed reports prepared for Fraud Discovery Institute by Mr. FitzPatrick and other data made fully available to the public for examination and scrutiny.

The Defendants will certainly assert "truth" as a defense to claims of defamation made against them in this lawsuit. That same kind of truth led a federal Judge in Utah to dismiss Usana's (NASDAQ: USNA) frivolous defamation claims against Fraud Discovery and Barry Minkow and award them legal fees covering their Court costs.

I remind you that discovery in civil litigation is a two-way street. Minkow and the other Defendants can now subpoena all of Medifast's books, records, and documents and closely scrutinize them to look for any possible improprieties and irregularities in defending themselves in this litigation. In addition, they can subpoena documents from Medifast's auditors, vendors, customers, and other business relationships. You and others will be subject to sharp questioning under oath in pre-trial depositions by the Defendant's attorneys. Now Medifast's business documents will ultimately become subject to close public examination and careful scrutiny if this case goes to trial.

Medifast, meet Barbra Streisand.

© 2010 Gary Weiss. All rights reserved.

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.

Return of Sewer Service

Lots of lawsuit papers are "served" here

Some years ago, a friend of mine got his annual credit report--the free one, not the one you get through bogus "freecreditreport" websites or the outfit Ben Stein shills for. Something odd stood out on the report. It seems that he was being sued! This was the first time he'd heard about it.

My friend was the victim of a foul practice known as "sewer service," based on the ancient practice of sheriffs tossing lawsuit papers in the sewer rather than serving them on the defendants, and filing false affidavits that they have been served.

My friend wasn't served in the suit at all by an unscrupulous process server, and the debt he was claimed to have owed was entirely bogus. He showed up in court and the suit was dismissed.

Sewer service is a great scam, and a very old one. The courts accept affidavits of service at face value, and enter judgments against people who often do not owe the money at at all, are victims of identity theft, or have a valid defense. Even if they don't, they are entitled to their day in court.

The New York Times today reports that a class action suit has been filed in federal court against alleged perpetrators of sewer service. I'm glad that something is being done about this, but a suit is not enough. People who perpetrate sewer service should be put in jail. It is fraud and also perjury, as it involves process servers

New York attorney general Andrew Cuomo has started taking criminal action against sewer-service scam artists, and that's great. These people belong in jail, not just back in the civil courts that they have abused.

The court system, judges and clerks, need to be proactive about this abuse. Judges and clerks are public officials, and they should blow the whistle on sewer service when they see it happening.

One thing I wonder is whether the sewer-servers alone are culpable, and whether the companies for which they work -- the big banks, utilities, and their slimy collection agencies -- aren't perfectly aware that sewer service is being utilized. As has become evident in suits involving defaulted mortgages, often collection agencies and factors who buy debts do not have sufficient paperwork to prove their case.

I'll bet that the collection agencies know that these outfits carry out sewer service, thereby letting them get an easy victory without proving their case against people who owe them money -- and those who don't.

© 2009 Gary Weiss. All rights reserved.

The SEC Nails Investools

One of the subjects I dealt with in Wall Street Versus America was how investors had been preyed upon by phony investment seminars, which were little more than schemes that parted investors from their money. One of the grimier efforts was "Investools," which put on seminars using tie-ins, now severed, with CNBC and BusinessWeek.

After an investigation that dragged on for over a year and a half, today the SEC announced that it settled securities fraud charges against Investools for "misrepresentations at investor workshops." The fine is the usual SEC wrist slap, with Investools pledging to stop doing stuff that it didn't admit to doing in the first place.

The Commission's complaint alleges that from 2004 to approximately June 2007 at Investools how-to-trade-securities workshops former Investools employees Drew and Miller misleadingly portrayed themselves as expert investors who made their living trading securities. They did so to mislead investors into believing that they too would make extraordinary profits trading securities if they purchased expensive Investools instructional courses and other products and followed Investools' securities trading strategies. The complaint further alleges that in reality, neither Drew nor Miller made the trading profits they claimed. For example, in 2005 and 2006, while Drew was portraying himself as a successful investor, he had hundreds of thousands of dollars in net trading losses. In 2006 and 2007, while Miller was portraying himself as a successful investor, he had tens of thousands of dollars in net trading losses.

What made Investools especially interesting was its murky corporate history, as successor to a company called Ziasun that used to intimidate critics through lawsuits against critics on message boards.

That was one hell of a red flag, and the SEC got right on the case. How long did it take since Ziasun was on the warpath.... ten years?

© 2009 Gary Weiss. All rights reserved.

Ben Stein's Employer Drops Lawsuit Against Blogger

In a previous post I described how Freescore.com, Ben Stein's employer, had sought to silence a blogger who was dared to criticize that slimy company. Public Citizen's Consumer Law and Policy Blog reports that the suit has been dropped.

But here's what makes the whole thing funny. Freescore claimed "victory" because it said its suit against Yahoo!--another Stein employer-- was moot because it had identified the blogger who had the temerity to criticize these night crawlers.

According to CL&P:

...the villain whom they want to sue for defamation is Franklin Seegers, who allegedly lives in Washington, DC.

A few minutes research online would have told them how wrong that is. According to the Washington Post, in 2006 DC resident Franklin Seegers was sentenced to 40 years for his role in a violent drug gang known as Murder Inc. Federal Bureau of Prisons records show that Seegers can now be found at the Butner Federal Correctional Complex in North Carolina. These are the brilliant sleuths who charge $29.95 per month for protection against identity theft for Internet users who call to get their “free” credit score?

More on this from Ben Stein's nemesis, Felix Salmon, in his blog here.

© 2009 Gary Weiss. All rights reserved.

Ben Stein's Employer Trying to Silence Blogger

Yahoo columnist Stein shills for creeps trying to ruin a blogger's life

Seems that Freescore, the sleazy outfit for which Ben Stein is shilling, is on the warpath against a blogger who criticized these creeps. Public Citizen has intervened on the blogger's behalf.

The irony is that the litigation involves Yahoo, which employs Stein as a columnist. Sound familiar?

The citizen watchdog group says:

Adaptive Marketing, a company that has drawn a bevy of consumer complaints and negative media coverage for its FreeScore.com services, should not be able use the courts to unmask an anonymous blogger in retaliation for articles that questioned the companys bait-and-switch business tactics, Public Citizen said today in a motion filed in superior court in Stamford, Conn.

The company, which uses TV personality and commentator Ben Stein to hawk its offer of free credit scores to consumers, has filed a motion with the court asking that Yahoo! be ordered to identify the blogger behind the flaneur de fraude blog. Yahoo! was the target of the discovery because flaneur has a Yahoo! email address. The blogger, along with media outlets such as The Wall Street Journal and The Washington Post, wrote about how Adaptive and its parent company Vertrue, Inc., mislead consumers through schemes such as offering free credit scores and then adding recurring charges to their monthly credit card bills for other services.

Oh, I'd be remiss in not pointing out the URL of the blog Stein's employers are trying to silence: http://datatoinformation.wordpress.com/.

I repeat: http://datatoinformation.wordpress.com/ Be sure to bookmark that.

Take a bow, Ben Stein! You really have sold your soul on this one. But I must admit, you certainly are getting some terrific publicity for Freescore, as well as yourself, and from more than just your old pal Felix Salmon. Let's hope regulators shut it down, and fast, thanks to your good work.

The target of this litigation is Yahoo, because the blogger has a Yahoo email address.

Stein does a column for Yahoo, one entitled, ironically enough, "How to Not Ruin Your Life."

Yessireebob, this fellow is a walking conflict of interest.

I can't for the life of me understand how Yahoo can use Stein to offer personal finance advice under these circumstances. Hell, it's wrangling in court with his employers--guys who are trying to ruin a blogger's life. Seems pretty open-and-shut to me.

UPDATE: Adaptive Marketing is apparently going berserk, suing everybody in sight. Meanwhile it has a Senate subpoena heading its way. Oh goodie.

© 2009 Gary Weiss. All rights reserved.

Cash4Gold Has Something to Hide

A company called Cash4Gold is a tad sensitive. It has sued an ex-employee and the Consumerist website over this article.

Goodness, I need to post more on that company. Meanwhile, spread the word.

© 2009 Gary Weiss. All rights reserved.

'Renowned Attorney' Wes Christian Smacked Down in Baloney Lawsuit

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

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

ATSI said:

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

Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of " mechanisms and the methodical operation of naked short selling Naked short selling, or naked shorting refers to the practice of selling a stock short without first borrowing the shares or making an "affirmative determination" that the shares can be borrowed. to depress the value of the stock. In the Company's opinion, these actions have resulted in devastating losses to the Company's market capitalization.

The U.S. Second Circuit Court of appeals, in a ruling issued the other day in the ATSI suit, provides a clue as to why he's gotten nowhere with suits like this: because his claims have no merit. The court feels pretty dang strongly that his claim had no merit. It upheld a lower court decision imposing sanctions on him, his partner Gary Jewell, and another lawyer involved in the suit.

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

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

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

The court observed:

We would be hard pressed to conclude that the judgment here, sanctioning lawyers appearing before a United States District Court, is insignificant.

No, it sure ain't. Tough luck, Wes.

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

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

© 2009 Gary Weiss. All rights reserved.

Haverhill Home Staging's Public Relations Genius

There's a little company I'd never previously heard of called Haverhill Home Staging. It advertises on HGTV and is in the business of "staging" houses for sale.

Now, here's why I did hear about these folks, and am writing about them at this point in time: they're awfully upset about what has been said about them anonymously on Internet message boards, to the point of suing.

Here's a press release that talks all about how this company is getting beat up anonymously on the web:

The Haverhill Institute of Staging & Design announced today that it has filed a libel suit against an online blogger in an effort to vindicate itself and disprove the libelous statements made about it on several online blogs.

"The postings on those blogs are categorically false and unconditionally denied", said Danielle Rodriguez, Haverhill's General Operations Manager.

The company expects to file several more claims after it receives information from ISP's identifying other anonymous posters.

"We'll use all legal means at our disposal to repair any damage to our reputation. We are not a litigious group of people. This was our last resort and we regret having to pursue this avenue, but it's truly impossible to defend ourselves on un-moderated blogs."

So let's see if I understand this. People say bad things about you anonymously on the web, so you sue to ensure that..... what? That people like myself who have never heard of you are certain to find out about all those nasty things anonymously said about you on the web?

And even not anonymously. At Walletpop, Zac Bissonnette goes into detail on what a terrific company this is.

Here's a message board where you can read even more about Haverhill Home Staging.

One thing's for sure: I'm keeping an eye on this company that I'd never heard of before.

I haven't encountered such sheer genius since Solengo Capital's lawsuit against Dealbreaker a couple of years ago. You know: the one in which it sued because of publication of a "confidential" offering document, thereby bringing it even more publicity.

© 2009 Gary Weiss. All rights reserved.

Requiem for a Junk Lawsuit

One of the most noxious corporate blame-shifters I know is Biovail, a Canadian biotech company whose primary product appears to be litigation----suing short sellers in an unsuccesful effort to prove that it isn't a heap of dung. A few months ago the company pleaded guilty to criminal charges. Here's a blog item from last May describing the charges and some of the awful press coverage Biovail has received.

Yesterday, a federal judge tied a bow around this whole stinky mess, by throwing out a junk lawsuit against some hedge funds that had been accused of conspiring to drive down the company's share price.

In so doing, Judge Stanley R. Chesler described the suit as a preemptive strike against a class action suit. The judge said:

“The record before the court suggests that these proceedings and the RICO action proceedings were all part of a choreographed strategy by Biovail and its attorneys designed to constitute a counterattack against the Biovail securities action,” he wrote. “The conduct is so egregious, and the futility of imposing alternate sanctions is so clear, that dismissal is the only appropriate sanction.”

I can think of a more appropriate sanction: fine the responsible parties and their lawyers, and insist that they be paid out of their own personal funds. It would be nice if the Obama administration started taking strong action against companies that file frivolous lawsuits like this. It's called "issuer retaliation" and it's a major problem.

© 2009 Gary Weiss. All rights reserved.

Where Are the Condolences for Overstock.com Shareholders?

Overstock shares since filing of the junk lawsuit

The clown prince of Corporate America, Overstock.com's wack-a-doo CEO Patrick Byrne, issued a gloating press release today on the liquidation of Copper River, a hedge fund (formerly known as Rocker Partners) against which he has filed a junk lawsuit.

That's to be expected from this odious and small man, known mainly for his inept management of a company that is a mockery of corporate governance. His antics are so nutty that the company was forced to disclose in an SEC filing that he is destroying the company's already-slim reputation with his paranoid ravings.

You have to wonder who will offer condolences for Overstock shareholders. When he filed his junk lawsuit against Rocker, the company's shares were trading in the forties. They have never returned to those levels, and now they are struggling to stay in the double digits.

© 2008 Gary Weiss. All rights reserved.

Taser Shareholders Blame the Boogeyman

The real villain

UPDATE: See correction update at bottom.

Word comes cascading over the wires today that shareholders in yet another company whose stock is in the doldrums, Taser International, has filed a junk lawsuit against that all-purpose villain, the phantom menace known as naked short selling. Forty Taser shareholders are suing a bunch of Wall Street firms, which are responsible for the company's shares decreasing. Not Taser!

The suit was filed by the Texas law firm of John O'Quinn, who has filed a bunch of other junk lawsuits on the same subject and has yet to get a nickel from anybody. This is the same O'Quinn who told Dateline NBC that naked shorting has "put as many as a thousand companies into bankruptcy" resulting in "market losses of more than four hundred billion dollars."

O'Quinn said that back in 2005 (when I was writing Wall Street Versus America) and, since NBC didn't bother to do so, I called him to ask if he could name some of those companies. I'm still waiting patiently, hand on the phone, but he hasn't called back. Gee, you'd think that if there was even one such company, maybe he would say what it is. (Another lawyer in the O'Quinn anti-shorting legal consortium, Wes Christian, turned out to be a big seller of his clients' stocks.)

Taser has been a regular on the naked shorting conspiracy circuit for such a long time that I'm surprised we had to wait so long for this junk lawsuit. It is not an Overstock-style train wreck by any means, but its shares are down 50% year to date.

Correction: Taser is not a party to the suit, as I erroneously said in an earlier version of this item! My apologies to Taser management for identifying them with the Baloney Brigade, which in my book is one of the worst things one can say about a company.

UPDATE: Taser joined the lawsuit in June 2008 (see p. 44 of its 10-K).

© 2008 Gary Weiss. All rights reserved.

A Cure for the Bad-CEO Blues: Sue Your Shareholders

Stephen Taub has an intriguing brief article in CFO.com on the latest hot new trend among blame-shifting CEOs: Suing unruly shareholders.

Vaalco Energy is trying an unsual tactic to stave off a proxy fight: suing its shareholders.

The independent oil producer filed an action against New York City-based hedge fund Nanes Delorme Partners I L.P., and Pilatus Energy SA, of Zug, Switzerland, in federal court, alleging they violated securities laws by sending misleading information to shareholders in an effort to install three of their nominees on Vaalco's board, according to the Associated Press.

One of the targets of this imbecilic junk lawsuit responded as follows:

Julien Balkany, a Managing Member of Nanes Balkany Partners LLC, the General Partner of Nanes Delorme Partners, stated: "We believe that VAALCO has great potential, but that the company will continue to materially underperform without new independent representatives on the Board. In addition, rather than provide a clear strategic plan to rebuild stockholder value, the company has chosen to evade the critical issues facing Vaalco by filing a desperate and baseless lawsuit aimed at disenfranchising stockholders and 'chilling' the democratic process and to defend its failures by launching a campaign rooted in misleading facts and unnecessary scare tactics designed to distract stockholders from the company's poor performance."

Just goes to show you how far we've come from Enron. Nowadays, bad companies add insult to the injury they inflict on shareholders by lashing out at analysts, the media, and now investors. The SEC and other regulators, meanwhile, are snoring loudly in the background.

As perfected by Overstock.com's wack-a-doo CEO Patrick Byrne, the name for this kind of toxic blame-shifting is known as "issuer retaliation." That was also the theme in David Einhorn's great new book Fooling Some of the People All of the Time.

Einhorn chronicled his battle royale with a scuzzy company called Allied Capital. Here's a cogent review by Jesse Eisinger in Portfolio.

UPDATE: A rep for Vaalco wrote to say that this item gives this company a bum rap. I asked for a reply that I could post verbatim, and was sent the following:

VAALCO’s Board and management team are active, engaged and successfully executing on the Company’s strategy. Nanes Delorme Partners’ claim to the contrary simply ignores the facts:

· VAALCO has delivered superior stock price performance. VAALCO has outperformed its peer group and the broader market as a whole over the last six month, one, three and five year periods. Indeed, our stock performance has exceeded our peers[1] by 25%, 20%, 23%, and 167% in each of those periods, respectively[2].

· VAALCO’s operating performance is among the best in the industry. Since 2000, 80% of the exploration and appraisal wells drilled by the Company have been successful. We also have a 100% success rate with our development wells on the Etame Block, our principal producing asset. These are exceptional drilling success rates in our industry.

· VAALCO’s financial performance is strong. Revenues, cash flows and earnings per share have consistently increased in nearly every year. VAALCO’s average return on invested capital (ROIC) over the last five years is 30.7% and in the top 5% of our industry.

We are confident in our ability to build on this strong operating and financial track record. We believe 2008 will be a break-out year for your company and for the value of your VAALCO shares.

· VAALCO’s exploration program, which includes seven planned exploration wells, will expose the Company to in excess of 50 million net barrels compared to VAALCO’s current 6.2 million barrels of proved reserves. This represents an eight-fold potential increase. We have rigs arranged to commence drilling this summer.

· We expect continued significant increases in stockholder value in the near-term. VAALCO’s stock price historically surges when the Company moves from the property acquisition and seismic phase to the drilling phase – and this is precisely where we believe we are now.

THE PUBLIC RECORDS OF nanes delorme partners and Pilatus energy ARE
RIFE WITH CONFLICTS AND SCANDAL

Nanes Delorme Partners and Pilatus Energy appear to be concealing what the public record makes clear – Nanes Delorme Partners and Pilatus Energy are conflicted and their ethics tainted by a scandal involving corruption, kickbacks, fraud and embezzlement. You deserve to know the following:

The Public Record on Nanes Delorme Partners*	The Public Record on Pilatus Energy*
Nanes Delorme Partners only recently purchased its VAALCO shares and more than half of its shares were transferred from Pilatus Energy on 02/14/2008. Source: Nanes Delorme Partners definitive proxy statement filed with the Securities and Exchange Commission on 05/07/2008	Pilatus Energy is a limited partner of Nanes Delorme Partners. It recently purchased 2,700,000 shares of VAALCO between 11/28/2007 and 01/30/2008. Source: Nanes Delorme Partners revised preliminary proxy statement filed with the Securities and Exchange Commission on 05/05/2008. (Notably, Nanes Delorme Partners’ prior preliminary proxy statement filed on 04/25/2008 did not mention Pilatus Energy by name, but only referred to an unnamed “limited partner.”)
Nanes Delorme Partners I LP is a New York based hedge fund that invests primarily in the oil and gas exploration and production sector. Source: Nanes Delorme Partners press release, 04/24/2008	Pilatus is comprised of Pilatus Energy and Pilatus Ressources (sic) which are two companies based in Zug, Switzerland. Pilatus has positions in the majority of the African and Middle East countries. Source: Pilatus Energy press release, 01/31/2008
Julien Balkany, a 27-year old French citizen, paid Nanes Delorme Partners employee, and nominee to your board is leading Nanes Delorme Partners’ proxy campaign. Source: Nanes Delorme Partners revised preliminary proxy statement filed with the Securities and Exchange Commission on 05/05/2008; Nanes Delorme Partners press release, 05/08/2008	“…Pilatus Energy and Pilatus Resources, two companies run from behind the scenes by France's Loik Le Floch-Prigent…” Source: Africa Energy Intelligence, “Abbas I. Yousef Al Yousef,” 12/19/2007 “The name of the former Elf CEO doesn't appear on their list of executives but it is he who makes all of their investment decisions.” Source: Africa Energy Intelligence, “Le Floch-Prigent's New Incarnation,” 12/05/2007
Nanes Delorme Partners is paying its two other nominees $25,000 simply to stand for election and additional monies if they fail. Source: Nanes Delorme Partners definitive proxy statement filed with the Securities and Exchange Commission on 05/07/2008 (While Nanes Delorme Partners’ nominees may have no affiliation with your company, these payments show that they are by no means independent from Nanes Delorme Partners.)	“France's mammoth Elf corruption case, probably the biggest political and corporate sleaze scandal to hit a western democracy since the second world war.” Source: The Guardian, “Gigantic Sleaze Scandal Winds Up as Former Elf Oil Chiefs Are Jailed,” 11/13/2003 “Le Floch-Prigent, 60, and a former Elf director, Alfred Sirven, 76, are both already serving time after losing appeals earlier this year against separate convictions over corruption at Elf, since absorbed into the Franco-Belgian oil company Total. Both have admitted some of the charges against them during the four-month trial.” Source: Associated Press, “Verdicts Expected in France's Biggest-Ever Graft Scandal,” 11/12/2003
Nanes Delorme is a broker for the sale of oil and gas assets, including those of VAALCO’s competitors. “In recent years, Nanes Delorme advised Afren on buying up the stake of Gulf Energy Resources in Angola’s Cabinda Central concession and on acquiring Heritage’s interests in Congo-Brazzaville.” Source: Africa Energy Intelligence, “The New African Oil Trail Blazers,” 02/20/2008	“In a matter of months, the small Swiss group Pilatus Energy has built up an African portfolio with the help of a few middlemen who can knock on presidential doors…In September, it was awarded the Ngoki concession in the Mossaka region thanks to the advice of the former chief executive of Elf, Loik Le Floch-Prigent, who negotiated with the Congolese officials on Pilatus’ behalf.” Source: Africa Energy Intelligence, “Pilatus Has Right Connections,” 11/29/2006 (These activities are competitive with VAALCO’s core operations.)

Ask yourself: If this information is available simply from the public record, what else about Nanes Delorme Partners and Pilatus Energy has yet to be revealed?

---

[1] VAALCO peer group as defined by the independent governance and proxy advisory firm RiskMetrics (ISS)

[2] Based on closing stock prices on May 13, 2008

* Permission to use quotations neither sought nor obtained.

So there! The formating of the chart ain't so good, but I can't seem to fix it.

Incidentally, it's nice to get a dignified response to an item, one that takes issue with the facts and does not engage in mudslinging. A refreshing change, even while I disagree with their actions here.

© 2008 Gary Weiss. All rights reserved.

Usana Junk Lawsuit SLAPPed Down

Seems that we have a rare victory against corporations seeking to silence their critics. Tracy Coenen describes how most of a suit in Utah against ex-con fraudbuster Barry Minkow by Usana Health Sciences has been thrown out of court. All but one of Usana's claims was tossed out.

What makes this interesting is that the court cited the anti-SLAPP statutes, which are rarely enforced laws prohibiting suits just like this.

The SLAPP statutes allow the defendants to claim legal fees. It's not clear if that is going to be applicable here, but I certainly hope so.

© 2008 Gary Weiss. All rights reserved.

Overstock Directors Throw Wreckage on the Legal Tracks

A typically nutty press release gurgled forth today from the corporate basket case Overstock.com. It celebrated a month-old court ruling tossing out a challenge to its junk lawsuit against prime brokers. (This is the suit that was so screwy that it led to the resignation of two directors.)

"This decision clears wreckage off the legal tracks, and we are eager as ever to continue discovery," said Jonathan Johnson, Overstock senior vice president of corporate affairs and legal.

But what Johnson and Overstock CEO Patrick Byrne did not disclose is that, at the same time that they were celebrating clearage of this legal wreckage, they were simultaneously throwing up legal wreckage -- to stymie discovery against their board of directors.

As I mentioned previously, the director defendants have recently filed a "special motion to strike" the counterclaim filed against them in another of Overstock's junk lawsuit barrage, this one filed against a Copper River Management (formerly Rocker Partners) and Gradient Analytics.

The filing of that motion stays all discovery.

Odd that Overstock, in updating the public on the status of its litigation, failed to disclose that rather pertinent bit of information. After all, if the "removal of legal wreckage" in the prime broker suit is significant enough to warrant issuance of a press release, shouldn't the "placement of legal wreckage" in the other junk lawsuit also warrant a release? Well, it's not odd, this being Overstock, but you know what I mean.

I've always marveled at Overstock.com's professed yearning to be dragged into court and forced to actually tell the truth, for a change, in its junk lawsuits. To me, nothing has epitomized the delusional character of this company and its management. Do they really believe the stock market conspiracy crap they put in those suits? Do they really want to see their famously unhinged CEO subjected to a grueling deposition?

Do they really think that their conspiracy fantasies will rescue them from the destruction they've wrought upon their shareholders? Overstock has lost three-quarters of its market capitalization in just three months. The stock, trading at about 9.50, closed at 39.13 on Oct. 31.

Do they really want to have their accounting given the once-over by the other side's lawyers and forensic accountants -- at a time when their accounting is the subject of a formal SEC investigation?

Above all, why did they wait until now to hype up this routine, and not unexpected, court decision? Did Overstock grasp at this old news to juice up its lagging share price?

Personally I'm delighted to see the suits go forward. I don't know about Copper River and Gradient, but the prime brokers can certainly afford the legal fees, and I weep for them not. The Street firms that have been sued are hardly choir boys, and it's nice to see them turn their legal weaponry on this malignant little company and not investors.

© 2007 Gary Weiss. All rights reserved.

More Bad News For Overstock.com

More bad news for the sleazy corporate train wreck Overstock.com. The California Supreme Court threw out a motion to dismiss the company's junk lawsuit against Gradient Analytics and Rocker Partners.

This means that Overstock's wack-a-doo CEO Patrick Byrne will now be subjected to the hot light of civil discovery proceedings for the first time in his life. It means that Gradient and Rocker's legal team, headed by superlawyer David Boies, will now subject Overstock to subpoeanas for documents, and that Byrne & Co. will be grilled in lengthy, detailed, excruciating depositions.

If Byrne is aware of the Pandora's box he has opened, it would surprise me. The man is so deluded and detached from reality that I doubt that he has the wits to contemplate the consequences of anything he does.

Such as, for instance, being hacked to pieces by David Boies under penalty of perjury.

Such as beginning a process in which every single thing that Overstock.com, Patrick Byrne, and his minions have done will be exposed to public airing. The fruits of this inquisition will be available for everyone -- you, me, the media, regulators, the SEC, prosecutors -- to feast upon.

Lies and spin can only count against him, as will the company's long list of misdeeds -- ranging from questionable accounting to hiring a paid stalker named Judd Bagley. The latter took time out from dressing up as a woman to stalk Wikipedia editors, and crafted a creepy press release "celebrating" this awful news.

The last bad news Overstock "celebrated" was an SEC subpoena last year. That signaled the commencement of an SEC investigation that continues, while a parallel SEC investigation of Overstock's charges resulted in Gradient et al being cleared.

So it is fair to assume that this lawsuit is not going to go Overstock's way, and that this putrid company is about to undergo a welcome airing of its dirty laundry.

UPDATE: This post seemed to draw blood from Team Byrne, which posted an anti-Semitic slur against me on the sewer called the Investor Village message board -- always a sign that I've hit home. Byrne, who had previously never met an anti-Semitic supporter he didn't like, had to weigh in to calm things down.

Meanwhile, Tracy Coenen updates the Bagley-related bad news in a three-part series in her blog (here's part one). O-Smear, meanwhile, posts some examples of Bagley's best "strategic messaging" on behalf of his employer.

© 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.

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.

A 'Must-Bookmark' Website

It's called the "hedge fund implode-o-meter" and it can be found at http://hf-implode.com/.

As the name implies, it is a running total of imploding hedge funds -- eleven since mid-2007 -- with links to pertinent article. It's a companion of sorts to a similar website run by the same people, the Mortgage Lender Implode-O-meter.

Both sites are similar. Just the facts; no agenda that I can detect from a skim of the sites. Don't know much about the two gents who've erected them, but their hearts seem to be in the right place, and they are certainly performing a public service.

In fact, you know they're performing a public service because the Mortgage Lender Impode-O-Meter has spawned a junk lawsuit of its very own!

© 2007 Gary Weiss. All rights reserved.



-----------

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 Latest Naked Shorting Poster Child

Just about every day a new corporate misfit joins the ranks of the Naked Shorting Poster Children (tm) -- the OTC horror shows, red-ink geysers, mismanaged chamber pots and other fly specks seeking excuses for dreadful share prices. Today's new entrant is a fine example of the genre.

It's none other than Usana Health Sciences, a nutritional supplements manufacturer whose exploits have been chronicled by Barry Minkow of the Fraud Discovery Institute.

Forensic accounting expert Tracy Coenen reports in her FraudFiles blog that Usana unfurled the banner of the Baloney Brigade anti-shorting nutcases in a junk lawsuit that it filed against Minkow.

Welcome aboard, Usana Health Sciences! You're in good company. Why only today, Universal Express -- the SEC-persecuted standard-bearer of the cause -- issued a really fantastic press release charging the SEC with "permitting the destruction by naked shorters of 5,000 to 7,500 small public companies over the last 10 years."

Hey, don't make fun of corporate blame-shifters like Usana and Universal Express. They've got the ear of SEC Chairman Christopher Cox, and he is proving constantly that he is just the man that the Baloney Brigade and their allies in the U.S. Chamber of Commerce want in the job.

This week he began an effort to turn back the clock on shareholders having a voice on corporate governance. (Read the Floyd Norris blog item on that.) So expect more blame-shifting CEOs, less SEC action against crooked companies, and more SEC pandering to the Baloney Brigade and its allies in big business.

© 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.

Overstock.com CEO Patrick Byrne Admits He Posted Under Pseudonyms

Seems that Overstock.com CEO Patrick Byrne is now admitting that he "pulled a Mackey" after all.

In a post on the Overstock.com website late last night, Byrne admits that he posted on the Internet under anonymous pseudonyms -- the same grave offense that has snared Whole Foods CEO John Mackey, prompting an SEC probe, internal investigation and an apology by Mackey.

The Times article had quoted Byrne as saying that he always signed his name to his copious Internet message board posts. But as I noted in a previous blog item, that's a blatant lie. Byrne until recently always used a pseudonym, and almost never signed his full name or disclosed his corporate affiliation and massive share ownership when posting on Internet message boards. His user profile on his two favorite message boards, Investor Village and Motley Fool, is "private" and does not disclose his identity.

Byrne claims that the Times did not properly convey the Great One's meaning. However, given his penchant for dissembling, I think it's fair to assume that he was fairly quoted and is now backing off from a lie that is contradicted by the evidence.

Byrne says:

Please provide a citation for this claim: "Mr. Byrne said that he never hides his true identity and always signs his name when he posts under his online handle, 'Hannibal'". Is it your claim that I used the words "always" and "never" in some message board post (and if so, please cite that post), or is it your claim that I stated this in our interview? I know for a fact that the claim is false as regards our interview, and believe it to be false with regard to any online posting, but I stand ready to be corrected. [emphasis added]

(Note that Byrne is contradicting what he said in a rambling, sick rant on his website a week ago, in which he said: "I post in a way that is anything but anonymous." I guess he forgot he said that.)

What's not clear to me is why Byrne seems so anxious to backtrack. The SEC is already investigating Byrne and Overstock, so that is one possible source of pressure.

The media has given Byrne a pass over his online conduct, which was far more egregious than Mackey's and raises serious Reg. FD issues. I wonder if he will continue to be ignored now that he has fessed up. I also wonder if the SEC will take action against him or cower before his real or perceived political influence. His pet senator, Utah Republican Bob Bennett, recently gave a floor speech calling for Senate hearings on his favorite constituent's obsession, the nonexistent "naked short selling" bogyman that is a favorite of penny stock promoters and inept CEOs.

Elsewhere on the Overstock front, fraud-fighter Sam Antar has a sizzling post today on how the SEC was a victim of a "trojan horse" disinformation campaign by Overstock in its war against an analyst who dared to publish negative information about the company.

UPDATE: To round out the day's tidings from this train wreck of a company we have this: it seems that Overstock left out something pretty significant in super-hyped press release glorifying as a major "victory" the denial of a motion to dismiss in its junk lawsuit against prime brokers.

In addition, the Court granted Overstock (and its co-plaintiffs) leave to amend other of their claims for restitution under the Unfair Business Practices Act and for the common law claim of interference with advantage, to more specifically plead the factual basis of these claims.

What Overstock left out was that there were two motions, and that Overstock lost one.

An investor named Al Petrofsky, who attended the court hearing at which the ruling was made from the bench, fills in the gaps in a post on a stock message board:

[The judge] granted the defendants' motion to strike, and ruled that the plaintiffs' may not, as part of the Unfair Competition Law claim (the fifth cause of action), seek to recover any compensation for a decline in the stock price. However, they can still seek to recover such compensation under some of their other theories, such as Tresspass to Chattels (the second cause of action) or Market Manipulation (the fourth cause of action).

He gave Overstock until September 14 to submit an amended complaint that is consistent with his rulings.

Gee. Isn't it materially misleading to not disclose that you lost one of the two motions pending before the court?

Petrofsky confirmed by email that he was the author of the post.

Overstock's skewing of the truth is predictable. What is also predictable is that the media, in its coverage, swallowed whole what Overstock said, without checking further. Let that be a lesson to all of my brethren in the media.

© 2007 Gary Weiss. All rights reserved.



-----------

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.