Thursday, May 25, 2006

Crackpot Victory in Utah

The crackpot anti-naked-shorting conspiracy campaign scored a major victory yesterday, one that will be cheered by every incompetent CEO, stock promoter and boiler-room thief in the country. Boys, Utah is in your corner!

The Salt Lake City Tribune reported today that the Utah state legislature passed a bill that takes aim at naked short-sellers -- a "menace" that, for the most part, exists mainly in the press releases of crummy companies and the imagination of conspiracy theorists. Note the delicious irony -- a state notorious for real stock fraud passed a bill aimed at curbing nonexistent stock fraud.

Not surprisingly, this bill was heavily pushed by CEO Patrick Byrne, who has feverishly sought to divert attention from his company's poor performance by whining about the supposed naked-shorting of his company's shares.

The problem with the bill is that it doesn't target naked shorting per se. It targets "fails to deliver" securities, which can occur for many reasons unrelated to short-selling. However, the legislature apparently felt that was of no importance in its eagerness to please Byrne and the "counterfeit securities" loons.

The legislation itself -- you can look at it here -- has all the usual loopholes, and I'm not really sure how much it matters or whether it will withstand court review.

Incidentally, I'm not sure if the above link shows the complete legislative history, but if so it would seem that this bill was rushed into law in all of two days.

The important thing is not the bill -- or even that the Utah state legislature has made a fool of itself -- but rather that a campaign that is seeking to misinform America's investors has scored a major victory.


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

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Friday, May 19, 2006

That Chinese Torture Thing

I was glancing through a list of IP addresses accessing this blog lately -- one can do that, thanks to Sitemeter -- and was pleased to find a visitor from the US Marine Corps. Honored! My father worked for the Navy for many years, so I always viewed myself as something of a "civilian Navy brat."

But here's the thing that caught my eye. His or her was referred via Google search to my "Chinese Water Torture" item a while back.

I trust that this subject was researched purely for recreational purposes. If not, well, I hope it has something to do with that fellow who caused that gap in the skyline a few years ago. Go to it, guys!

Anyway, the "torture" that I wrote about was a metaphor for the experience of being interviewed by another journalist. The story never ran. So the whole experience was a waste of time -- except for providing fodder for two blog items!


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


Thursday, May 18, 2006

Verdict on the Verdict

A must-read today is Rich Behar's thorough analysis of the recent acquittal of the defendants accused of murdering Paul Klebnikov.

More information on Project Klebnikov, the investigative reporting project to which I'm proud to belong, can be found here.


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

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Comings and Goings

A couple of comings and goings came to my attention today.

The first was a press release today from the Securities and Exchange Commission, with good news! Good news, that is, for Debevoise & Plimpton, the hotshot Washington law firm that just hired away the SEC's Associate Director of Enforcement, Paul R. Berger. Mazel tov!

Interesting how the SEC always issues a press release on such occasions, actually proud of the revolving door between itself and the big law firms that defend the people and companies it is supposed to regulate and investigate.

Once hired, these people work very hard behind the scenes, to make life easier for Wall Street and public companies, thereby ensuring that all those years of low-paid service to the SEC don't go to waste.

Stuff like the revolving door doesn't get too much attention because of the media's declining appetite for tough, investigative reporting, as I described in my book.

That brings me to the second coming and going that emerged today, at Time magazine.

It was in the papers today, at the tail end of articles about the new managing editor. If you look deep down in these stories, such as this one in the New York Times, you can see that the famed investigative team of Donald Barlett and James Steele have been tossed out on the Street.

"They're very good but very expensive, and I couldn't get anyone to take them on their budget," the Times quoted Time Inc. editor in chief John Huey as saying.

"We'll miss their work," he is quoted as adding and golly, I sure will miss their work. Won't you?

I don't think that regulatory agencies will miss their work. Pesky reporters are annoying, and can hamper one's quest for what really matters, which is that cushy job at the end of the rainbow.


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

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Saturday, May 13, 2006

While I was out....

I spent most of this week promoting the book and doing other stuff, so I have neglected this blog! While I was away:

More hedge fund lunacy

The New York Times told the story of a small college in Ohio that has gone completely ga-ga over hedge funds. The College of Wooster puts "nearly 80 percent" of its endowment in hedge funds. This has resulted in -- surprise surprise -- "rich rewards."

One of these days, I'd like to read about an endowment or hedge fund that has not generated "rich rewards." Since hedgies don't have to report their returns, and endowments don't publicize their journeys into the Horse Latitudes, we never hear about those. I'd also like to read a story like this that actually names the hedge funds in which an endowment invests and -- if that info is not available -- says so.

In this case, apart from a reference to "14 long-short managers," we just don't know. As I described in Wall Street Versus America, college endowments are one of the last bastions of opacity in the investment world, and that picture gets murkier when hedge funds are involved. The media could help a little by at least saying that this picture is murky.

The Sound of One Soba Noodle Slapping

On May 10, the SEC settled charges with Morgan Stanley that it held back "tens of thousands" of emails from regulators investigating the IPO and analyst scandals. The agreed-upon penalty was fifteen cents -- sorry, typographical error. Make that read "$15 million or the equivalent of 15 cents to you and I."

The Overstock Hubris Watch, staunch standard-bearer of the anti-naked-shorting Baloney Brigade, announced on Tuesday that it was getting a wide-ranging subpoena from the SEC. With typical arrogance, it said it "celebrated" the subpoena. On Wednesday, the company announced it was withdrawing a stock offering, obviously because of the subpoena. (See this story, subscription required.)

Meanwhile, the head of the anti-shorting campaign, the bravely pseudonymous crackpot "Bob O'Brien" (outed by the New York Post as used medical equipment salesman Phil Saunders) was spinning the withdrawal on Yahoo message boards in posts like this one -- intimating that Overtstock had engaged in this stock sale in the first place for reasons other than the obvious one of raising cash.

The SEC should take a hard look at "O'Brien's" financing and his relationship to Overstock and its CEO Patrick Byrne. Byrne has promoted the former's website on CNBC, and has released transcripts of interviews with reporters on "O'Brien's" website. "O'Brien," meanwhile, has viciously attacked real and perceived "enemies" of Overstock and Byrne on his website and on the Internet.

The last thing this already overhyped stock market needs is "third party" websites and "independent" stock promoters, shilling companies and performing PR for CEOs with no transparency, and not even their names disclosed. "Swift Boat Vets for Truth"-type organizations might make sense in politics, but in the markets they are just another hustle.


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

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Tuesday, May 09, 2006

Are Regulators Coming to Their Senses?

Last week I gave a talk to several dozen attorneys in the regulatory and enforcement staff of the New York Stock Exchange. It was a very flattering invitation when you consider that I am not exactly favorable toward the NYSE, to say the least, in my book.

The topic of my talk was the anti-naked shorting campaign.

I can't say what questions I was asked, but my message was pretty much what I said in the book. That is, that a small group of crackpots and conspiracy theorists, serving the interests of stock promoters and unprofitable companies like, are monopolizing and diverting regulatory attention. It's time for regulators to stop kowtowing to these people and start investigating.

I hope they were listening.

Word emerged today that at least some regulators may be getting the message. The Securities and Exchange Commission has issued a subpoena to It's not clear exactly what the SEC is probing, but Overstock CEO Patrick Byrne issued a press release saying that he "celebrates" the subpoena -- which I read as "laments," translating Byrne-speak into the English language.

A tipping point? I hope so.

UPDATE: Here's what the SEC wants from Overstock, which was appended to Byrne's spin-a-gram:
"The subpoena requests a broad range of documents, including, all documents relating to the Company's accounting policies, targets, projections, estimates, recent restatement, new technology systems and their implementation, and communications with and regarding analysts. In addition, the subpoena requests all information relating to the filing of its complaint against Gradient Analytics, Inc., communications regarding shareholders who did not receive the Company's proxy statement in April 2006, communications with shareholders, and communications regarding short selling, naked short selling, purchases and sales of Company stock, obtaining paper certificates, and stock loan or borrow of Company shares. The Company intends to review the subpoena and respond in due course." (emphasis added)

Hopefully the SEC is probing Byrne's aggressive effort to shift blame to short-sellers for his company's misfortunes, and in particular his tactics and promotion of the anonymously run "sanitycheck" website.

P.S. As my talk before the NYSE enforcement staff indicates, I'm more than happy to chat with any group, anywhere, about the subjects explored in the book. Just drop me a line.


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

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Monday, May 01, 2006

It's Nice to Have Friends

Seems that the Society of American Business Editors and Writers has a friend! It's none other than the anti-naked shorting cult.

Such is the impression I garner from glancing through the "sanitycheck" website and the SABEW blog, which yesterday posted remarks made by some journalists at the SABEW conference on Sunday. Those remarks were first quoted on "sanitycheck" -- a crackpot anti-naked-shorting conspiracy website -- as coming from a "transcript." The "transcript" quoted New York Post biz editor Dan Colarusso as making some blunt and -- in my view -- welcome remarks about the anti-shorting kooks.

However, SABEW tells me that there was no "transcript."

Wasn't that nice of the anti-naked-shorting movement cultists? They went to all the trouble and expense of hiring a private investigator to pose as a journalist, go to Minneapolis, attend the meeting, record the comments and then get someone to transcribe them for posting on the "sanitycheck" website?

This is particularly flattering since "sanitycheck's" main purpose is to attack journalists who antagonize of the anti-shorting movement. As I describe in Wall Street Versus America, the anti-shorting movement is an investor-confusion mechanism, designed by and for pump-and-dump stock swindlers and operators of crappy public companies.

To give you an idea of what I'm talking about here: The anonymous operator of "sanitycheck" recently accused Forbes editor Bill Baldwin of being on the take for speaking up for short-selling. Nutty accusations, pulled out of thin air, are commonplace on the "sanitycheck" site.

All this expensive flattery directed at SABEW makes you wonder who pays the freight for these distinctly low-rent crackpots. Might be a fruitful subject of inquiry by regulators, by the way.


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

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