(UPDATE: The NY Times just reported that the SEC has backed off on their subpoenas to the journalists - I'm not sure what that means, or why it was necessary to obtain their records yesterday, but today, it isn't. I'll reserve judgement, but also say that the positive things I say about the SEC in the following column were written before the article about the SEC backing off broke. Almost seems as though someone at the Commission said, "You did what?" Question is who pulled the attack dogs off, and why?)
I had another chat with Dr. Byrne today, and he told me that our good friend and award-winning journalist Carol Remond has received an SEC subpoena.
First Herb, now Carol.
The way he found out is interesting.
Apparently, today, a reporter from a large, “name” publication called and wanted his comments on the news that Carol, Herb, Rocker and Gradient had received subpoenas.
The tone of the interview was that it appeared that the SEC had picked up the ball and was now running down the field with it. I think everyone's a bit surprised by that. I know I am.
As an aside, Patrick has expressed to me his shock that they were moving, even though he told me that he’s made his affiants available to a number of law enforcement and regulatory bodies – at their request, not his. I think we just figured that a lot of that was for them to seem to be doing something – it’s not like they could read all the stories and do nothing – but that their appetites and hearts weren’t really in it. But now we are seeing that the lawsuit got everyone’s attention, and it triggered a systemic, “look into this and see if there’s anything to it” approach from a few groups – not just the SEC.
Patrick’s feeling has always been that the states would be more aggressive, especially in light of the NASAA forum on naked short selling. So while the SEC news is a positive, he found it a little surprising. He’s rocked a lot of boats over the last 6 months, and has been rather critical of the SEC’s performance, called them co-opted and gutless, so my sense is that he thought that they might be more inclined to give him a proctology exam than the defendants. I believe that was the basis of the now infamous, “Dead body in the trunk” story. Looks like we might have been a bit harsh.
I’m not a betting man, but in past discussions I’ve opined that it would be the states, as well, so I’m equally surprised by this rash of subpoenas. I know that there’s been considerable outcry to the SEC to do something from NCANS members and other concerned advocacy groups – the Wall of Letters correspondence amply paints that picture – and my hunch is that they are getting dozens, if not hundreds, of complaints per week against the perceived “miscreants” in this story. Maybe all that heavy lifting paid off.
I think we all just sort of assumed that they would be the last to move. Again, I’m willing to give credit where it is due, and I don’t think that I’m alone in my surprise – that anyone expected them to not only come to Patrick and ask to speak to the affiants at length, but to actually then act in a decisive manner.
The states aren’t standing still, though – I also got word that 6 or 7 brokers received subpoenas over the last week from another agency/regulatory body, also in the OSTK case. This is in addition to the DTCC subpoenas broken here last week. If this is any indication, we can expect to see the same thing now happen in the Biovail case, as apparently the large, public lawsuits get everyone’s attention – and suddenly the priority become in going after the bad guys.
Whatever works.
So, to recap, the SEC looks like they were working behind the scenes to go after this, even as I was calling them a bunch of complacent dopes. Carol, Gradient, Herb, Rocker have gotten subpoenas. A bunch of brokers have gotten subpoenas. The states are mobilizing, the SEC is mobilizing, and they are taking this seriously – the fact that they are going after the journalists tells you they mean business. Patrick will probably have to fix his presentations so that they don’t basically say that the SEC isn’t doing their job, and I can’t use them as the universal whipping boy, at least not as much.
There’s always the DTCC for that.
I think that everyone involved on the good guy side is delighted that the concept of justice isn’t completely dead in our regulatory bodies. I know that many of you reading this have sent many complaints to the SEC and our elected officials - hell, I’ve encouraged you all to do so even when it looked as though it wasn’t having any effect. It looks like that got their attention. Everyone needs to give themselves a pat on the back on this, as it is proof that your actions as individuals do matter, and that collectively our voices raised as a chorus can get our government to take action.
(Postscript: The first in a string of "Patrick is a menace" articles has just appeared in the NY Times, which essentially tries to make the case that because he has gone after the folks he believes are illegally messing with his company, he is Satan. There isn't a lot of reason cited, other than a rehash of all the usual crap the press dredges up (the sith lord, the miscreant's ball, etc.) and declarative statements that Patrick is bad. Bad bad bad. I'll be writing about that later, although is should be pretty quick - the truth is that there is nothing new there that we haven't all seen before. But it would appear that a full court, NY-style Patrick bashing is going to ensue, and that further, somebody got to the SEC and made them back off.)