Tuesday, September 29, 2009

Consumer Columnist Firing a Free Speech Issue?

George Gombossy, who was fired by the Hartford Courant in a brazen surrender to a major advertiser, has sued the Courant for wrongful termination. He's basing his suit on a Connecticut statute that, Gombossy notes, "protects workers from retribution for exercising their First Amendment rights in the workplace."

I wish Gombossy well, and I hope he can find some kind of legal basis for prevailing, but I have my doubts. The statute, discussed here, applies to situations in which an employee mouths off at work. A previous court ruling, mentioned in the article I just linked, makes it clear it's not for situations like this.

Is this a "there oughta be a law" situation? Not necessarily. The law can't protect newspaper employees, and their readers, from craven, cowardly editors. Like it or not, the First Amendment in situations like this is a right of the publisher, not the reporter.

Again, I emphasize: this firing stank, and I hope Gombossy can figure out a way to collect. I just don't see it happening as a free-speech issue.

© 2009 Gary Weiss. All rights reserved.

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McGraw Hill Is/Is Not Leaning Toward Bloomberg

Continuing the maddeningly inconsistent coverage of the sale of BusinessWeek, Reuters reports this afternoon that McGraw-Hill is "leaning heavily" toward selling BW to Bloomberg.

Meanwhile, Keith Kelly reports in the New York Post that all is quiet on the Bloomberg front: ". . . the board has yet to meet to consider the Bloomberg offer or any other offer. The board is not expected to meet in the next few days."

Kelly also said that "many top Bloomberg execs, including Chief Content Officer Norman Pearlstine, who was quarterbacking the deal were celebrating Yom Kippur yesterday."

Perhaps these two reports are consistent after all, as I guess one can "lean heavily" toward Bloomberg without acting on it, but they seem to "lean heavily" (to borrow a phrase) in different directions.

Meanwhile, Tom Lowry tips the scales decidedly in the Bloomberg direction in this blog item later today.

© 2009 Gary Weiss. All rights reserved.

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Victoria Gotti's Fish Story

John Favara goes down in history as one of the most pathetic victims of the mob. He was the next door neighbor of John Gotti, the bestial boss of the Gambino crime family. Favara accidentally ran down the Gotti's young son Frankie in March 1980. Favara was abducted and brutally murdered.

Details of Favara's murder--apparently he was dismembered while still alive--have emerged in mob prosecutions over recent years, as described here.

So that's that, right? Just another disgusting murder of hundreds of murders carried out by the Gotti crew and other mob thugs over the years. But now, it seems, Favara's memory is being foully stained.

The New York Post yesterday published an excerpt of a new book by Gotti's daughter Victoria, and her account portrays Favara as a smirking, callous, drunk idiot:

My brother had borrowed another kid's minibike and was riding in a construction site near the side of the road. But that dreadful day, a drunken driver was speeding down the avenue and struck my brother.

The driver dragged him some 200 feet before angry neighbors stopped the car, pounced on his hood, and stopped him from crossing the avenue.

"Don't you even realize you have a kid under the wheels of your f- - -in' car?" one neighbor, Ted Friedman, recalled yelling out.

According to the neighbor, the driver, John Favara, then stopped the car. Another neighbor reached in and grabbed his keys, shutting the ignition off and pointed to my brother's near-lifeless body under the front wheels.

My brother's blood seemed to leave a trail down the entire block, leading up to the now-parked car.

Favara jumped from the car and started yelling, "What the f- - - was he doing in the street?"

To complete the picture, Favara is described as catching sight of Victoria's distraught mother and "he shot her a smug smile. Then he grinned."

Gee, I'd want to dismember a guy like that, wouldn't you? Except that this story seems like an absolute phony from top to bottom.

Compare the account of the accident provided by Ms. Gotti above to other accounts, such as Mob Star by authoritative mob writers Gene Mustain and Jerry Capeci. There's no mention of Favara being drunk, or of having dragged the child for 200 feet. Favara was never prosecuted. In fact, as best as I can tell, only Victoria Gotti provides these gruesome "details," which are calculated to make Favara as muder-able as possible.

The "smug smile" bit is totally lacking in credibility. Favara knew that he had accidentally killed the son of a vicious killer and gang boss. Every single other account, such as this one in New York magazine, make it very plain that Favara was mortified and repentent, and had consulted the neighborhood priest, who warned him to stay away from the Gottis.

The New York magazine account adds that Favara was blinded by the sun when he struck the child, and that Favara's son Scott was close friends with Frankie Gotti.

Scott Favara has had to grow up without a father because his family had the misfortune of living in the same galaxy as a blood-stained murderer like John Gotti. He hasn't even a grave to visit, as noted in this 2004 article. Now he has to see the memory of his father besmirched so irresponsibly.

Where is his book contract? Where is his newspaper excerpt?

© 2009 Gary Weiss. All rights reserved.

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Friday, September 25, 2009

Salt Lake Tribune 'Clarifies' Patrick Byrne's Bigotry

Byrne: Feeling the pressure

There's a "clarification" tonight on the website of the Salt Lake Tribune, at the top of this article in the Trib on Overstock.com's latest SEC investigation. I understand it's appearing in the print edition of the Trib tomorrow morning.

The clarification was prompted by a singularly repulsive glimpse we have into the bigot lurking below CEO Patrick Byrne's carefully coiffed and media-trained visage: his use of a Yiddish obscenity in referring to myself and white-collar crime fighter Sam Antar.

If you have any doubt that his "goniff" jibe is anti-Semitic, imagine for a moment if he referred to an Italian-American as a "Mafiosi" or to an African-American as a "Mau-Mau" or something like that.

In any event, this is all diversion, on the same gutter level as his "Giving Goldman traders blowjobs didn't work out?" taunt in a famous email to Bethany McLean. Yes, he is a misogynist as well as a racist, but that's beside the point. Byrne gives vent to his Inner Bigot when he is scared.

He's scared because he has has been using accounting tricks to make his quarterly numbers look better than they are, and he knows it, and so does the SEC.

Byrne can put on white robes and burn crosses in front of the Salt Lake Jewish Center, and it won't change that one bit.

A reader reminds me that Byrne's errand boy, a nauseating creep named Judd Bagley (right) who is on his personal payroll, used an ethnic slur -- "curry hole"-- in a message board posting a while back, in a sneering reference to my Indian-born wife.

For those unfamiliar with the terminology used by bigots like Bagley, "curry hole" is a racist term for an Indian's mouth. Definitely a careless use of an ethnic slur, as I'm not of Indian descent. Bagley needs to go back to his boss to be taught the proper use of ethnic slurs.

And of course there are the army of lowlifes who tag along, like the former penny stock broker who used to send me anti-Semitic emails, described here.

Still other readers remind me of his financial support for and decades-long friendship with a far-right militia leader named Bo Gritz, and his obsession with the Israeli Mafia and other Jewish subjects that some found anti-Semitic.

But no matter. This guy's prejudices, and the bigotry of his employees and his followers, are interesting, but not that important in the general scheme of things--unless the public looks beyond the p.r. at the character of the person running this company, and the passivity of its captive board of directors.

In both this article and a Deseret News profile, Byrne's excuses are given ample space. The latter summarized them as follows:
Byrne doesn't think Antar should get his hopes up as the restatements involve a trio of bookkeeping mistakes that when added and subtracted together decrease the company's bottom line by a mere $2 million against a total of $5 billion that was originally reported.
Byrne is obscuring the issue. All accounting errors cancel out over time (any forensic accountant can tell you about the double down effect-–you have to commit twice the fraud to maintain the fraud). It’s the timing of the accounting errors and their impact of quarterly results that counts – the "cookie jar reserve" that Sam has described in his blog. That's what has impacted the bottom line in several quarters.

For example, Overstock used smoke and mirrors to turn a fourth quarter 2008 loss into its "first quarterly profit in sixteen quarters." Didn't happen. Byrne's trying to portray this deliberate chicanery as "carelessness." Except that it was totally deliberate. Byrne has been on notice about these GAAP violations all along.

I now understand why lawyers counsel CEOs to shut up about ongoing investigations. Byrne has materially misrepresented the issues involved. If the SEC is serious about its investigation, which has yet to be demonstrated, it will explore public statements such as this.

Neither article expended the couple of sentences needed to go into the bottom line impact of Byrne's book-cooking, and Utah readers are poorer for it.

© 2009 Gary Weiss. All rights reserved.

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Tuesday, September 22, 2009

Battle of the Tweets

I mentioned this earlier, but I think this is worth an item of its own: the interesting exchange between Time.com's new Technology Editor Peter Ha and some people at my alma mater, BusinessWeek, over a "tweet" from Ha this morning suggesting that BusinessWeek was closing.

Ha began at about 7 a.m. (Twitter, annoyingly, doesn't give exact times), tweeting to his 1,038 followers: "Just caught wind that BusinessWeek is shutting down. Can anyone confirm or deny?"

Now that's a pretty significant thing to Tweet, don't you think? Not only a sensitive thing to the people directly involved, but also potentially market-moving.

A BW staffer named Ron Casalotti tweeted back: "Hadn't you heard? BusinessWeek being sold, not to be interpreted as "shutting down" -- please convey to all your retweeterst."

Ha responded: "I know what's going on w/ BW. I'm simply inquiring about what I heard this morning, which I hope is untrue," and then "I never said BizWeek is shutting down. I know they're looking for a buyer, but heard this morning that it was being shut down."

Then came BW tech writer Arik Hesseldahl, and the exchange grew sharper, with Arik inquiring as to the nature of this "wind" that Ha "caught," and McGraw-Hill spokesman Steve Weiss being particularly, and justifiably, testy. Ha apparently had no idea who Weiss--one of the better known p.r. people in publishing--was.

BW people have a right to be steamed. Why? Because it is pretty friggin' irresponsible to "tweet" something you've heard from somebody on something as sensitive as this, unless you are pretty sure that the person you heard it from is reliable. Ha soon backed off completely. If this turns out to be true, of course, he'll be a genius. If not, this is major egg-on-face.

But in a way, BW has been hoist on its own petard. BW has embraced--to an almost ridiculous extent--the new media. Twitter is an essential part of the new media, as are rumors. Certainly my other alma mater, the recently deceased Portfolio, was subject to numerous rumors, some accurate, prior to its demise. Portfolio just took the position, rightly or wrongly, that the new media is like that, and ignored them.

That's usually the best idea, though I must admit that this rumormongering by Ha might have been an exception.

UPDATE: A day later there's still silence from Ha, who did not take up Romenesko on an offer to discuss my blog item. The last word from him is this stonewalling. Very un-new-media-like, if you ask me. Hell, if his source was reliable he should 1) say so and 2) do more that "tweet" on it and publish the report on his website.

Meanwhile, Keith Kelly strikes a glum note in the Post in a column on the silence following the Bloomber bid:
One banking source said that even as a high-powered team from Bloomberg LP pores over the books in preparation for a final bid, there's still division within the company as to how good a fit the embattled magazine -- which lost $43 million last year -- would be.

BusinessWeek's continued hemorrhaging of red ink this year isn't helping: One source estimated that with ad sales down more than 35 percent so far, the magazine will lose more than $60 million, and maybe as much as $80 million. . .

. . .And so, according to sources, the debate inside Bloomberg is over how buying BusinessWeek would help to realize that goal -- and how much investment is needed before the magazine is turned around.

Meanwhile, he says, there are "wild rumors that the deal will be simply a sale of the magazine's trademarks and customer lists." Ugh.

© 2009 Gary Weiss. All rights reserved.

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BusinessWeek Should Celebrate Its 80th Birthday

The first issue, Sept. 7, 1929

Most publications would haul out all the trumpets for their 80th birthday, but BusinessWeek, ailing and for sale, has confined its trumpeting (so far, at least) to an online feature a couple of weeks ago. I think that's a shame.

It's not too late, and I hope BW comes out with an 80th Anniversary issue. It has a tradition to be proud of, even if the magazine under its recent management has clearly lost touch with its readers, perhaps, as Bruce Nussbaum suggests, through misinterpretation of reader surveys. (Note the interesting dissent in the comments section of the item just linked.)

There's a practical reason for BW to do a bit of chest-beating. The magazine is for sale, and buyers need to be reminded that they're not buying just any old print-web combo, but an American institution that once was a significant player in the national dialogue. It can be revived, in theory.

As a practical matter, however, BW's prospects are grim. It needs to find a sugar daddy "vanity buyer"--that's not happening--or a wealthy buyer who will twist the magazine/website to its will. That seems to be the most likely possibility, with Bloomberg bidding for Businesseek, and, as previously reported, Joe Mansueto apparently dropping out.

That means it now seems likely that the nation's biggest business magazine will be owned by Mike Bloomberg's ever-growing information empire. Now, that's not perdition. Bloomberg Markets magazine is a solid if stodgy property, and I've heard good things about its editor. One glimmer of hope, for sentimentalists, is that the point person for Bloomberg is Norm Pearlstine, veteran of the Wall Street Journal and Time, Inc.

In an ideal world, BW would become a kind of print ProPublica, reverting to nonprofit status, tossing out its celebrity columns, fluff and other crap instituted in recent years, and devoting itself entirely to hard-hitting journalism. The Hill reported yesterday that President Obama is "'happy to look at' bills before Congress that would give struggling news organizations tax breaks if they were to restructure as nonprofit businesses." I've been arguing for years that the news business is just not compatible with public ownership. Sure would be nice if Terry McGraw would just donate the magazine to some foundation that would run it as a public service, and profits be damned.

If that happened, hell, the magazine might become so good that it would be appealing to advertisers again.

But I'm just fantasizing. That's not even remotely in the cards. BW will either be closed or folded into the Bloomberg kingdom. Happy Birthday.

UPDATE: A rumor of BW closing, spread on Twitter by a Time.com tech reporting named Peter Ha, reminds me of the rumors of Portfolio's demise that preceded the actual event. Except this one has been denied by McGraw-Hill spokesman Steve Weiss (no relation), and seems totally bogus.

© 2009 Gary Weiss. All rights reserved.

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Sunday, September 20, 2009

Why Did George Bush's Justice Department Pass on CMKM?

Reading through the CMKM Diamonds indictment, a rather obvious question arises: why did federal prosecutors in Nevada wait until now to make a case against the management of the company?

Gathering evidence for white collar crime prosecutions is an onerous process, but it looks suspiciously likely that George Bush's Justice Department just sat on its hands. It's not a coincidence, I think that this indictment, not to mention the renewed SEC investigation of Overstock.com, comes after the change in administration. It's certainly no secret that the old administration did not put much of a priority on prosecuting corporate crime, and that it was prone to pressure from "naked shorting" activists and their pals in Congress, such as Utah's Orrin Hatch and Robert Bennett.

The feds have also failed to prosecute the principals of Universal Express, another outright fraud whose management has been shrilly defended by a small but vocal core of "NSS" crackpots writing letters to Congress.

This comment letter to the SEC from last year shows how hard Mark Faulk, a leading NSS lobbyist and later "CEO" of CMKM, pushed to have the SEC to divert them from going after the crooks who raped CMKM shareholders.

See the latter portion of the letter, quoting Falk's account of a meeting with the SEC, and a strenuous effort to push the hapless SEC lawyer assigned to the case, Leslie Hakala, to waste her time chasing naked shorting phantoms. Note the outrage, and ignorance of the securities laws, greeting an SEC official's warning that the SEC would oppose a "cert pull" aimed at squeezing shorts and manipulating share prices.

Now Faulk is singing a different tune, and in a letter to President Obama posted on the CMKM website, he claims that "an FBI spokesperson said that they were weeks away from issuing indictments in September of 2006."

This is a good example of the gift from the heavens that the "naked shorting" campaign has been to stock crooks. No matter how foul the transgressor, from operators of pump-and-dump stock schemes like CMKM's Urban Casavant to Dick Fuld of Lehman Brothers and Alan Schwartz of Bear Stearns, "naked shorting" is now used as an all-purpose counterattack in the face of gross irresponsibility that practically toppled the financial system (Fuld and Schwartz), to more routine cases of cooking the books (Overstock.com's Patrick Byrne) to outright stealing, as happened at CMKM.

© 2009 Gary Weiss. All rights reserved.

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Saturday, September 19, 2009

Naked Shorting Loon Out as CEO of CMKM Diamonds

After the departure of the now-indicted Urban Casavant as CEO of the CMKM Diamonds stock scam, the "management" of this "company" appointed a suitable replacement: a Mark Faulk, who operates one of the looniest stock market conspiracy websites, "The Faulking Truth," the premier thought-leader of market conspiracy nuts until the mantle of leadership was assumed by Overstock.com CEO Patrick Byrne.

At the time he was picked to "run" CMKM about a year ago, his predecessor opined that he would move CMKM Diamonds "to the next level" -- of shareholder delusion, I imagine.

Faulk is to the left in this picture in which he poses with Darren Saunders, a totally bonkers former penny stock broker at Stratton Oakmont noted for his threatening emails to SEC officials and one-man vigils in front of Nasdaq headquarters. Saunders used to send me lunatic anti-Semitic emails, some of which I quoted here and here. Faulk praises Saunders on his Myspace page, saying he "speaks out for all of us." How true.

Yep, Faulk was well qualified to head CMKM.

CMKM has now announced on its website that Faulk is "stepping away from the Company CEO and moving on to pursue other endeavors." Such as what, I wonder? Another fraudulent company that blames its travails on naked shorting? Phil Saunders, who ran the now-defunct "Sanitycheck" stock market conspiracy website that was a major promoter of CMKM, probably can give Faulk ideas on where next to provide his services.

Bankrupt subprime lender, and naked shorting "victim," Novastar Financial perhaps?

CEOs, even "CEOs" (quote unquote) of "companies" (quote unquote) like CMKM, don't ordinarily quit after an indictment unless there is a mighty good reason. I expect we'll find out pretty soon what it is.

© 2009 Gary Weiss. All rights reserved.

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Byrne: SEC Enforcement Division Takes Orders From Short-Sellers

The White House isn't the only building in Washington with a hotline

Patrick Byrne has a new conspiracy theory to explain why his corporate crime petri dish Overstock.com is under investigation by the SEC. Seems that short sellers, in addition to having a fax machine at CNBC, also have a hotline to the SEC, in which they bark out orders to start investigations against innocent CEOs like Byrne.

Byrne made that comment on Fox Business News, where he is trotted out as an "internet retailing expert," no doubt because of the skill at which he has eased Overstock into negative shareholder equity. He was brought out this time for a ritual denunciation of new bank compensation rules.

Byrne obviously expected a question about the SEC investigation and cranked out his scripted explanation--saying that the investigation was retaliation for his speaking out against the scourge of naked short selling, and that the SEC was inexplicably picking on him over innocent restatements--not an effort to turn losses into earnings, as Sam Antar has spelled in detail out on his blog.

The host then said, "Bottom line, this is a problem that has not gone away and is an issue that you have to deal with."

That seemed to catch him unawares, so Byrne departed from script and the "old Dick Nixon" emerged: "You know how it turned out that Bernie Madoff could basically call the SEC and get them to stop an investigation. It's also turned out that there are short sellers who can pick up the phone and get the SEC to start an investigation."

His rant starts toward the latter part of the video below:

Byrne knows perfectly well what this SEC investigation is about--not an inexplicable examination of innocent restatements, but a probe into his management of earnings. He also knows the SEC was tipped to his manipulation of financial statements not by "short sellers" but by Antar, in emails that were copied to one of his somnolent directors, Joseph Tabacco--and to Byrne.

Say, isn't it against the securities laws for the CEO of a public company to lie about a federal investigation in a public forum?

UPDATE: Byrne's hatchet man Judd Bagley made a point of linking to this same video on his "deep capture" smear site, so this was no slip of the tongue. "The SEC Enforcement Division Takes Orders From Short Sellers" is now part of the official Patrick Byrne Excuse Narrative.

© 2009 Gary Weiss. All rights reserved.

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Friday, September 18, 2009

Indictments in CMKM Diamonds Naked Shorting Scam

In tracking the strange story of CMKM Diamonds, an outright stock scam whose shareholders noisily blamed "naked short selling" and not the company, one thing always bothered me as SEC actions piled up: why haven't there been indictments?

Well, today there were. The Las Vegas Review-Journal reports that indictments have been unsealed naming six people in the $60 million CMKM stock swindle, including loudmouth ex-CEO Urban Casavant, who has been replaced by the loony Patrick Byrne as love object of the naked shorting conspiracy theorists.

Casavant "remains at large," according to the newspaper.

"At the threshold, the scheme required that the conspirators control a publicly traded corporation," according to the indictment. "The conspirators found a corporate shell suited to their needs in Cyber Mark International Corp."

Cyber Mark had been incorporated in Delaware in 1998, according to the indictment, and had been defunct since 2001.

The document alleges that Edwards used the name "Ian McIntyre" to acquire control over the Cyber Mark corporate shell around September 2001 and that he incorporated a Nevada company with the same name in April 2002.

Casavant later gained control of Cyber Mark, according to the indictment, and the company changed its name in December 2002 to Casavant Mining Kimberlite International.

In February 2004, according to the indictment, the company took the name CMKM Diamonds.

And the rest is history. The company instantly became a naked shorting poster child--the invariable fate of pump-and-dump scams as the law starts to put a noose around their necks. CMKM managers gambled on the sheer stupidity of a large number of their shareholders--after all, they had bought this piece of dreck--and they were right. They were dumb. Some pranced around the offices of the villainous Depository Trust & Clearing Corp. in 2005 (I work there, according to these morons), made damned fools of themselves and diverted scarce police resources.

It's been an interesting couple of days in the world of baloney. First Overstock.com is investigated by the SEC--which has nothing to do with naked shorting, but proves again how people screaming loudest about NSS are often crooks and scoundrels themselves. In this case, Overstock has systematically cooked its books, and has been allowed to do so by an inert SEC.

And now this, the long-delayed criminal case against CMKM. Will wonders never cease. Will Universal Express be next? The hood-in-chief there is named Richard Altomare, and the sleazy cast of characters includes uber-loon Bud Burrell, a self-confessed, undisclosed "consultant" to that crooked company. Altomare has already spent some time in prison, but for contempt of court.

It takes a while for crooks to be brought to justice, but eventually, most of the time, it happens. It's funny how the naked shorting loons always have contended that "jail is coming" for their real and imaginary adversaries. Yet their heroes are the ones targeted in investigations and indictments. The way some of these guys talk in the stock message boards, with their homicidal fantasies, I'm tempted to get the cops to dig up their backyards.

One down, several more to go.

© 2009 Gary Weiss. All rights reserved.

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Did BusinessWeek Lose Touch With its Readers?

My old colleague Bruce Nussbaum, BusinessWeek's innovation guru, has an interesting blog post yesterday that is pretty much a first: a current BW staffer publicly engaging in soul-searching about the magazine's troubles, rather than just blaming it on the recession and exonerating the people who have been in charge for the past four years.

You have to go to the video to get Bruce's thoughts on this. He says:

I think, despite many many many efforts at innovation and change, somehow BusinessWeek lost deep contact with its readers. . . there were an enormous number of surveys [and] efforts to be in contact with our readers. But in the end I think they were misleading.

The surveys, he said, indicated that readers wanted the magazine to be "general," and signalled that one needed to "talk to all readers all the time," when in fact the magazine's readers were a "coalition" of people deeply interested in various subjects, technology, finance and such.

I think he's basically correct. I had a discussion with the magazine's media columnist, Jon Fine, on that very point a couple of months ago, and Jon hammered away the company line that the magazine was just fine, and that all the "the editorial product is NOT the problem that needs to be solved. If it was, the reader-side indicators mentioned above would be terrible. They're not. They're quite good."

I pay less attention to "reader-side indicators" than I do to whether I like a magazine or not. I simply have not liked BW under its new management. I'd suggest that the top editors lost touch with their readers because they were so focused on "reader-side indicators" and didn't read their magazine very closely, or compare it with the days when it was a success. Fat advertising was not the only difference between then and now.

I do differ with Bruce on one point. "Surveys" don't manage magazines. It's the job of editors to interpret surveys, and this is where BW's top editors went sadly astray.

© 2009 Gary Weiss. All rights reserved.

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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.

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Thursday, September 17, 2009

Patrick Byrne Fails to Celebrate New SEC Investigation of Overstock.com

Vindication for Sam Antar, whom Overstock has tried to silence

Overstock.com CEO Patrick Byrne famously issued a thumb-your-nose press release to the SEC in 2006, when the company's records were subpoenaed in an SEC investigation of its accounting. Byrne said he "celebrated" the subpoena and he had every right to do so: the inert Bush administration SEC chairman, Chris Cox, was in the process of raping the SEC enforcement division, as a prelude to its inept performance on Madoff and the financial crisis.

Byrne had every reason to believe that nothing would come of it, and he was right.

Today, Byrne seemed downright peeved in reaction to yet another SEC subpoena, and a new SEC investigation of the company's smoke-and-mirrors accounting. In a press release issued after the market close, Overstock disclosed:

. . . it has received a notice dated September 15, 2009 from the Securities and Exchange Commission stating that the Commission is conducting an investigation concerning Overstock's previously-announced restatements of its financial statements in 2006 and 2008 and other matters. The subpoena accompanying the notice covers documents related to the restatements and also to Overstock's billings to its partners in the fourth quarter of 2008 and related collections, and Overstock's accounting for and implementation of software relating to its accounting for customer refunds and credits, including offsets to partners, and related matters.
Byrne's reaction was pained: "All of the matters that are the subject of the subpoena have been thoroughly disclosed and we are disappointed, given the extensive public disclosures Overstock has previously made, that the SEC, given all of the challenges it faces, has apparently chosen to expend time and resources on another investigation of Overstock," said Overstock.com Chairman and CEO Patrick Byrne.

No "yipikaye" today.

Byrne goes on to stoutly declare that he "will continue to speak out as I have on the shortcomings of our financial regulatory system." Such as its failure to go after CEOs who manipulate their financial statements, like him?

What makes this latest SEC probe especially painful for Byrne is that this is a total vindication for white collar crime-fighter Sam Antar, who has repeatedly pointed out the shortcomings in Overstock's financials, particularly concerning its restatements.

I've said several times that Sam has given the SEC a "roadmap" of the dreadful accounting at this corporate crime petri dish. Apparently the agency is finally using it.

Now, the question is, does Byrne have reason for optimism this time? Will his political clout work again? Will his family's domination of the purse strings of the Utah Republican Party pay dividends again, and will the SEC's supposedly reinvigorated enforcement division do what it did last time--and take a dive?

Some other things I'll be curious to know:

Will the air-heads who lob softball questions at Byrne in cable and Internet interviews dare to ask him about any of this, or will they continue to ask him on how to run a terrific (if insolvent) internet retailer?

Will Byrne sic his paid hood, the nauseating Judd Bagley, to stalk Antar again when he gives a radio interview on another subject?

The only thing that disappoints me is that the SEC probe doesn't appear to encompass Overstock's vicious campaign of issuer retaliation. But then again, it might be, just not mentioned in the subpoena. (It's not as if victims have been uncooperative, after all.)

Stay tuned.

UPDATE: Just to clarify something I didn't make very clear, and which wouldn't be obvious if you don't wade through Sam's posts: why are the restatements important? Because they were done in such a way as to turn a loss into a profit. That's a material misstatement, folks.

Sam described the book-cooking process in detail in a this post.

All this "restatement" and "cooke jar reserve" stuff sounds complex, but it really boils down to something simple: Overstock is losing money, and is pretending to be making money. The word for this is "stock fraud."

Byrne is too rich to draw a salary at Overstock, so it is something of a rich-kid hobby for him, but he still has to obey the law.

I hope that if the SEC decides to actually enforce the law against Overstock, for a change, that it take another step that has rarely taken: referring this to federal prosecutors.

© 2009 Gary Weiss. All rights reserved.

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Wednesday, September 16, 2009

The Contradictory Coverage of BusinessWeek's Sale

I've been following BusinessWeek's sale closely, and what strikes me is the contradictory character of much of the coverage on basic points. Having lived through Portfolio's demise just a few months ago, I can imagine how this must be annoying and confusing to the people directly involved.

Hell, this isn't coverage of the Iraqi war. This is the sale of a magazine. Either something is happening or it ain't.

For instance, is a layoff of 20% of the staff, including 25% of the editorial staff, in the works or not?

That possibility was first raised in a New York Times article two days ago. Reporter Stephanie Clifford said as follows:

McGraw-Hill reduced the magazine’s physical size, and in January, it announced its fourth round of layoffs in two years. This time, a quarter of the editorial staff will be cut, along with workers in other departments, for a total of 85 of BusinessWeek’s 421 jobs.
"Announced" was obviously wrong, as there was no announcement. I interpreted that to be a reference to the last big layoff in December 2007, in which many experienced writers and editors were let go. I was wrong.

Clifford later explained on her Twitter feed: "To clarify a bit further.-Layoff plans were detailed in the memo--haven't gone into effect yet (may not depending on buyer)"

But then, yesterday, she said in a Times blog that the layoff plans seemed firm:

Some employees at the magazine were surprised to hear about layoffs proposed in the first quarter of this year — they said they hadn’t heard a thing about it. Jon Fine, BusinessWeek’s media columnist who’s been covering this story closely, posted an item yesterday saying there was no layoff talk then. But these layoffs are being pitched to investors as something of a done deal. (A BusinessWeek spokesman declined to comment, so it’s unclear where the layoff plans stand now.)
Today her original story was corrected, but not the obvious error that no layoffs were announced in January, and there was no further clarification.

Meanwhile, the Wall Street Journal said today that the layoff was "an option presented to bidders as a starting point to make the publication profitable again." The Journal said, "The cost-cutting plans included slashing about 25% of BusinessWeek's editorial staff, mostly for support functions, according to the people familiar with the matter."

The Journal quoted a memo to employees by BW president Keith Fox, saying "Nothing is planned at this time, but business requirements, including resource needs, ultimately will be negotiated with any prospective buyer." So I guess the memo outlining the planned layoff didn't mean what it said.

I think the Times might want to either clarify or correct or reiterate its previous reporting.

By the way, copy editing is hardly a "support function," and I don't understand the "people familiar with the matter" attribution. This was first reported in the Times, for chrissakes.

Oh, and speaking of Bloomberg, just how interested is it/he/they? Keith Kelly put Bloomberg in the lead and detailed his people's discussions with the company. Jon Fine didn't mention any of that and said "the question looming over the process was whether or not late entrant Bloomberg LP would bid." Fine has not touched the layoff issue, aside from reporting that there was no announcement.

McGraw Hill and CEO Terry McGraw, meanwhile, have done their best to muddy the waters by declining to clarify any of this. Like good sellers, they've tried to make it seem as if there's a lot more interest than there actually is, via McGraw's comment about "93" potential suitors, and his saying that "all options are open."

I guess a seller has to do that, but it's made the contradictory coverage even murkier.

© 2009 Gary Weiss. All rights reserved.

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Tuesday, September 15, 2009

Another Slaughter at BusinessWeek?

I've chronicled in this blog how my alma mater BusinessWeek has been decimated in recent years, with layoffs that have ousted its most experienced writers and editors. That, combined with an ill-conceived redesign and other missteps, has hurt the magazine editorially and been a commercial flop.

Word emerges today that McGraw-Hill, apparently to spiff up BW to make it more appealing to buyers, has a plan to decimate the staff even further. Following up on her article yesterday, Stephanie Clifford of the New York Times lays out on a Times blog plans to fire one-fifth of the staff.

So it now appears that Clifford might not have made a rather serious error after all. She said yesterday that the layoffs were just proposed for a potential buyer and may not happen. Now she says that "these layoffs are being pitched to investors as something of a done deal."

The language in the memo sure as hell sounds pretty definite:

“BusinessWeek is in the process of implementing a restructuring,” the memorandum reads, “based on new processes that were recommended in Q1 2009. The plan, including a reduction in headcount of 20 percent, will result in significant cost savings without comparable risks to the quality of the products and revenue.”
This apparently is coming as a major shock to the staff, judging from Jon Fine's blog item yesterday. Attaboy, McGraw Hill! Just the way to keep staff morale nice and low.

This makes it seem as if the layoff will occur sooner rather than later, before the sale and before the traditional December layoff season. But that's pure speculation on my part, mind you. If BW carries out this head-chopping itself, before the sale, it would save money for buyers and make the terms more appealing I suppose.

The head-chopping memo is pretty specific:

According to the table, in editorial, 55 of 217 positions are supposed to be eliminated. Of sales, 9 of 69. Of marketing, 6 of 26. Of technology, 8 of 33. Of circulation, just one of 19. And in the “other” category, 6 of 57. That’s a total of 85 eliminations among 421 jobs - about 20 percent - leaving 336 BusinessWeek employees.
McGraw-Hill says “BusinessWeek will establish a leaner, entrepreneurial staff without affecting the brand, positioning of the franchise or revenue outlook. The eliminations of editorial staff are primarily in editorial support operations (makeup and copy desk), but also include a reduction in the number of journalists to reflect the smaller folio size of the publication."

"Leaner, entrepreneurial" or perhaps "sloppier and more poorly edited"? I can't tell you how many times my bacon was saved by the copy desk, functioning as copy desks should. Fifty-five is a big reduction if confined just to copy editing and makeup, and implies that these departments, which ensure that BW is accurate and well-designed, are being cut to ribbons.

Looks as if BW may not have to wait for a Gekko-style private equity type to turn the screws. Seems that the current owner can do that very nicely itself.

UPDATE: Terry McGraw later told the Wall Street Journal that all options are open, including "caffeinating" the magazine and making BW online-only. Blogs reported during the day that Warburg Pincus and Bruce Wasserstein have dropped out, and also quibbled over whether the memo meant what it said that the company was "implementing" a restructuring.

Maybe it doesn't mean that, some say. Maybe they're just planning one for future buyers. So why doesn't the memo say so?

I have to give Terry credit. He chose a fantastic time to sell a business magazine, and he's made the entire process so excruciating for the staff that I'm surprised anybody still works there.

© 2009 Gary Weiss. All rights reserved.

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Monday, September 14, 2009

'Blame the Shorts' Backfires

The Wall Street Journal today has an article on the legacy of the Lehman Brothers collapse, and a detail that underlines a point I've made several times: that scapegoating short-sellers is a sure way to accomplish absolutely nothing.

. . . a study by the [SEC's] Office of Economic Analysis concluded that it was "long sellers" -- investors who had bought stocks thinking they would go up -- who were selling the most during stock declines. Short sellers, the study said, became more active when stocks rose sharply.

Credit Suisse found the ban made stock pricing less efficient, which in turn can make buying or selling a stock more costly for investors. The firm's data showed the difference between prices at which banned stocks could be bought and sold, the bid and asked prices, doubled during the ban. After the ban was lifted and short selling slowly resumed, spreads fell back to about 65% above preprohibition levels the third week of October.

It will take some courage for the SEC to face down the political pressure to act against shorts--and courage is a commodity in short supply under SEC chairperson Mary Schapiro.

© 2009 Gary Weiss. All rights reserved.

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The Times Details BusinessWeek's Decline

The New York Times today has a sobering article that remedies a deficiency in coverage of BusinessWeek's recent troubles and pending sale. Rather than focusing on "suitors" and the broad numbers, Stephanie Clifford describes exactly how BW got in this mess. There's some disturbing stuff in this article.

I've long been impatient with the tendency to exonerate top management from responsibility for my alma mater's troubles, and to blame the whole thing on the economy. As the Times points out. BW's "share of the ad pages among competitors — Fortune, Forbes, Inc. and Fast Company — has fallen in the last six years."

The current management has systematically laid off the most experienced people at the magazine--one-quarter of the staff was let go in the latest layoff, according to the Times (see update about error in Times story)--while redeploying the savings into online features that have been a disaster:

Hoping to find new revenue, BusinessWeek started a social-networking site, Business Exchange, and sank $16 million into it in 2007 and 2008. Almost two years after its introduction, the site drew just 1.5 million page views in the United States in July, according to the measurement firm comScore. That is about the same as Wikinvest.com, a start-up offering investment tips.

Last year, Business Exchange had expenses of $7.6 million, and brought in only about $600,000 in revenue. The company expects that gap to narrow significantly. Still, the project is expected to cost $4.7 million this year, excluding interest and taxes.

I think one can assume that if this strategy has succeeded, there would have been no effort to shirk responsibility for its success. What's that old saying about failure being an orphan?

At the same time the magazine decided to trade good editors and writers for columnists and online fluff, advertisers were unpersuaded. A BW editor laid out the underlying editorial thinking here a few weeks ago, and the Times has the bottom line::

Though BusinessWeek.com attracts a lot of page views, 45 percent of those are from slide shows, which Web publishers consider a gimmicky way to increase hits. Only 16 percent of page views came from original articles for the six months ended in April. BusinessWeek.com also pulls in just $19.28 per thousand ad views, almost a quarter lower than what it was earning three years ago. And it sells only about 38 percent of the available ads, down from 79 percent in 2006, according to the document.
Overall, the Times reports, the magazine has adopted a kind of modified B2B strategy.

“Our mission is to move business forward,” read the mission statement, handed out at the meeting, and to help readers “make smarter decisions in their businesses, careers and investments.”

Some editorial employees liked the change. “We’re trying to serve business readers at a time when business is in disarray,” said one employee, who spoke on the condition of anonymity because employees are not authorized to speak publicly about the sale. “I think we’ve done remarkably well doing that.”

But other employees saw a different subtext: their role now was to help business leaders make more money. Though the investigative unit has continued its work, other staff members say their harder-hitting stories have been killed, held or edited into submission.

I heard an inkling of the latter some years ago, immediately after the change in management. It definitely is a change from the past. BW was never Mother Jones by any means (a story on Enron was spiked, for instanced, as I described in Wall Street Versus America). Some editors positively hated investigative reporting, while others treated it as a necessary evil. Very few, fortunately including my immediate bosses in the 1990s, actively encouraged it. But one never could have made such a sweeping "killed, held or edited into submission" statement in the past.

CJR says, "That's what we call burning the village to save it."

Clearly a new owner, if there is one, has his work cut out for him.

BW's Jon Fine points out an error in the Times account about the timing of the last layoff. He has no comment on the rest of the article.

The last big layoff--the one where all the experienced people were canned--was in December '07, not in January '09 as Clifford seemed to imply. Fine is correct that "there was no layoff of this size in 2008 or 2009," but I think that the December '07 layoff was close enough to that time frame, and certainly traumatic enough, to have been mentioned.

Meanwhile, take a look at this angry but on-target comment in the Talking Biz News blog. The blog notes another error in the Times account: BW was born in 1929, not 1926.

UPDATE: Clifford says on Twitter that the layoff is planned, but may not go into effect if a buyer doesn't want it to. I hope she uses something more than Twitter to fix this rather serious error. Such as a correction, online for starters.

More errors and inconsistencies were pointed out in the CJR Audit blog item. I'd say Clifford has a passel of correctin' to do.

At 24/7 Wall Street, Doug McIntyre weighs in on the spinelessness of McGraw-Hill and makes some important points:

No matter how the auction for BusinessWeek turns out, the question will always linger about why McGraw-Hill did not have the guts to take the chance that a buyer was willing to take. A lot of smart money still believes that Business Week is viable.
Finally, there is one more reason for keeping BusinessWeek and it may be the most compelling one. McGraw-Hill has faced charges about whether its financial ratings arm, S&P, played a role in the mortgage meltdown. The market has questioned S&P’s independence. BusinessWeek may be only 2% of McGraw-Hill’s revenue, but it is critical to the company’s reputation as an ethical distributor of business information. That has to be worth a great deal.
It's an obvious point, but I haven't seen it raised anywhere.

Michael Moore says that newspapers have "slit their own throats" by pursuing profits at the expense of newsgathering. That's true. But imagine pursuing profits at the expense of newsgathering and going out feet-first anyway? That appears to be BW's fate, unless Bloomberg or some other buyer materializes.

© 2009 Gary Weiss. All rights reserved.

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Friday, September 11, 2009

More Fallout from the CMKM Stock Fraud

A CMKM shareholder making a fool of herself, 2005

In Wall Street Versus America I described how a bunch of brainless boobs, mainly shareholders in a piece of dung called CMKM Diamonds, were demonstrating in front of the offices of the Depository Trust and Clearing Corp. in lower Manhattan--and not at CMKM's offices, wherever they might be.

It was a prelude to the Tea Parties that would follow a few years later: a handful of idiots, one demonstrating in assless chaps, who were unhappy with something and lashed out at a phantom menace. The difference is that the CMKM demonstrators had plenty of evidence, freely available on the Internet, that their company was an outright fraud.

CMKM was at the time one of the leading standard-bearers in the naked shorting conspiracy club, a job now taken by the loopy CEO of Overstock.com, Patrick Byrne.

Today an article in the Las Vegas Review-Journal describes how bad a scam CMKM was, and how just plain dumb some of these people were:
If at first you don't succeed, try again.

That appears to be the guiding principle for Daryl O. Anderson, 41, of Henderson.

Anderson was one of the defendants named in June in a federal court judgment over the $64 million CMKM Diamond stock fraud.

He was a stock broker at now-closed NevWest Securities which sold CMKM stock. Many of the shares were purchased by NASCAR race fans around the country because CMKM was promoted at NASCAR events.

While CMKM was promoted as a mining company, U.S. District Judge Larry Hicks ruled that CMKM had no legitimate business.

That lawsuit was handled by the Los Angeles office of the Securities and Exchange Commission in June. On Thursday, the SEC's Fort Worth, Texas, office sued Anderson and accused him of a "stock scalping scheme" involving over-the-counter stock Cloudtech Sensors.

Stock scalping is the illegal practice of recommending others buy a security or stock while secretly selling the security or stock.

"During the scalping scheme, he secretly sold 323,405 of his personal Cloudtech shares, realizing a profit of $930,852," the lawsuit said.
I guess Anderson knew a bunch of suckers when he saw them. Here's a link to the SEC action.

Now, in fairness I should point out that not all CMKM shareholders should be lumped together. Many rejected the conspiracy pap. But all too many used their victim status to push conspiracy theories that enabled other shareholders to be victimized in the future.

Fool me once, shame on you, fool me twice shame on me -- or, in this case, shame on them.

© 2009 Gary Weiss. All rights reserved.

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Thursday, September 10, 2009

BusinessWeek Moves Closer to Salvation

Great news for my alma mater: according to Keith Kelly at the New York Post, Bloomberg L.P. has tossed its hat in the ring for BusinessWeek.

Until now, the outlook for BW was bleak. The only bidders on the horizon, except for Joe Mansueto, were private equity shops that would have unhesitatingly ripped the guts out of BW -- even more than its guts have been ripped out under its inept current management. Bloomberg might actually turn it into a viable magazine again.

But if I were still at BW I'd not rest easy. Bloomberg is a hard taskmaster.

UPDATE: Jon Fine weighs in at BW.com. (Might have been a tad more generous if he'd acknowledged that Kelly got there first.)

I didn't notice this earlier: Kelly said in the Post today that Mansueto dropped out of the bidding. Bad news.

© 2009 Gary Weiss. All rights reserved.

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Wednesday, September 09, 2009

The BusinessWeek Suitor-Numbers Game

Bloomberg yesterday reported the surprising news that BusinessWeek was drawing the interest of 93 potential buyers. The basis was a televised interview with the CEO, Terry McGraw.

Paid Content immediately tossed cold water on that, and Business Insider widghed in with a report saying that BusinessWeek morale is, surprise surprise, "dangerously low."

Hell, they'd hardly be human if morale wasn't "dangerously low." After all, McGraw Hill is pulling the plug on the magazine just as it celebrates its 80th birthday, which Terry is commemorating by throwing the magazine to the wolves.

As for how many wolves there are, whether there are 93 or "half that" or whatever, I think that you have to pay close attention to what Terry actually said.

The question was "can you give us an idea of who it would best fit with?"

The answer was:
In terms of taking a look at options, the universe of people that were interested in taking a look were about 93. So, you know, yes, everybody's involved, whether it's hedge funds, private equity, strategic buyers, uh, you know, there's a lot of interest.
Since no clarification was asked or given, the "93" could have consisted of people dropping by to scour BW's books, or individuals just calling Terry or emailing to express interest.

Terry is a superb obfuscator, and he did a fine job of muddying the waters.

© 2009 Gary Weiss. All rights reserved.

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Tuesday, September 08, 2009

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.

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Patrick Byrne Learns the Downside of Overexposure

Byrne silently gesturing for attention while the adults ignore him

My favorite stock market conspiracy theorist, Overstock.com's screwball CEO Patrick Byrne, has used two p.r. firms lately to get his puss on the public airwaves. Byrne, now carefully coiffed and coached, tries to avoid speaking about what's really on his mind--like the fax machine by which evil-doers give instructions to CNBC--and instead tries to sound reasonably rational.

That's fine if you run into clueless interviewers. It works less well if find yourself inserted into a discussion about which you know absolutely nothing, and have the misfortune of finding yourself on the TV screen with two people who know what they're talking about.

Fox Business News just today made the mistake of pairing Byrne with two congressional experts on, of all things, health care. Why FBN was expecting much on that subject from a CEO who has managed to drive his company into negative shareholder equity, utilizing accounting card tricks to manufacture tiny phony profits, is utterly beyond me.

The result can be found in the video here, in which Byrne babbled nonsense "past congressional action" causing the health care crisis for about fifteen seconds of a segment running over six minutes. Byrne was first slapped down by Rep. Jim Hime of Connecticut, but his comment was so mind-numbingly stupid that he found no relief from Hime's Republican interlocutor or from the host, and spent the rest of the interview silently squirming.

I can understand Byrne's motive, but I'm really at a loss to figure out why FBN puts him on the air.

Any other company's board of directors would have long since fired a buffoon who wastes time pontificating (badly) on cable TV while his company goes down the tubes. But remember that this is Overstock.com, the world-famous corporate crime petri dish.

© 2009 Gary Weiss. All rights reserved.

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Friday, September 04, 2009

'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.

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Raising Bank Capital Levels is Not Enough

Treasury Secretary Tim Geithner proposed new international bank capital levels yesterday, and I argue in Portfolio.com that what he's doing is not enough.

You can read all about it here.

Yep, Portfolio.com. It's not widely known, but the online arm of the late, lamented Condé Nast Portfolio has been revived by American City Business Journals, a separate branch of the company that produced the magazine.

© 2009 Gary Weiss. All rights reserved.

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