There were a number of interesting interviews today on CNBC. The first was noteworthy because Gradient now has a PR “spokeswoman” who went head to head with Charles Gasparino, who pretty much ate her alive.
What do I mean by that?
Well, recall that so far Gradient and Rocker and Herb have all been saying that the meetings the affiants describe never took place, that it is all pure invention, and that they are victims of some plot hatched up by evil CEOs out to persecute them.
Today, the Gradient spokesperson admitted that in fact SAC HAD requested the report in question, and had in point of fact paid for it. Huh. So first, this was all “independent research” and yet now, it is reports for hire. So the story changed. Again.
This is particularly interesting in light of all the 1st Amendment crap that has been thrown at the wall by the NY financial press, many of whom are now apparently part of the SEC investigation, presumably as targets.
And the most intriguing aspect of this is that Gradient apparently broke Federal law by issuing a "sponsored" report without disclosing compensation ... SEC Reg. 17(b). So now we aren't just talking about a civil headache, but rather something more ominous. Anyone out there that is an expert on 17(b) violations that can chime in?
Here’s a message from a Yahoo message board that sums it up nicely:
“"A spokesperson for Gradient was just interviewed by Charlie Gasparino on CNBC. He asked a simple question, did SAC Capital request the report on Biovail.
The spokesperson let the rhetoric fly and Gasparino came back and said, you haven't answered my question, did SAC order the Biovail report?
The spokesperson said they did request an update on an earlier report Gradient had issued on its own.
Gasparino said, so clients taking a short position in a stock could request reports?
The spokesperson said they had an agreement clients could request 2 reports, but not for timing purposes to take a position in a stock, but they don't do that anymore for a number of reasons, and the information was prepared by Gradient analysts and the content was their own, independent.
Like a good attorney, Gasparino said thank you.
He just got Gradient to admit SAC did request the report, and Gradient allowed others to order reports.
Excuse me, that is independent how? And if a client knows Gradient is going to issue a report, how does that not effect prioir knowledge and the timing of taking a postion?
In the NYT article Gradient said these meetings and phone calls attended by the 4 former employees who have signed affidavits requesting a report never took place."
Now, I recall reading piece after piece arguing that the affiants were lying, and that Gradient was an unbiased research firm, thus doing a valuable service of independent research. Now it sounds suspiciously like they were writing hatchet jobs for pay.
The first big discrepancy in the story has surfaced, and it looks bad for Gradient.
If Donn or Carr are reading this; guys, nothing personal here. But read Den of Thieves. Carefully. The Milken legal team led many of those they were planning to throw under the bus down the primrose path, and they did so by having the same, or highly sympathetic counsel, representing both Milken as well as his subordinates.
I think it is time to ask yourself who is most likely to be thrown under the bus.
And ask yourself why all the articles say the SEC investigation into GRADIENT and not into Gradient and Rocker Partners. Because that should give you pause. This is shaping up to be Gradient and the journalists colluding, unbeknownst to the hedge funds. If you can’t see that coming, then you probably don’t believe in the Easter Bunny. But let me state here, for the record, that there are likely going to be heads on pikes, and if they can confine the damage to a level below the real capos and bosses, they will.
Get independent counsel. Now. And if they quit again, ask yourself whether the positions you are taking are in YOUR best interests. I know you are probably being told it will all work out, and that this is no big deal, but read the last 100 pages of Den of Thieves and see if there isn’t an eerie chill of familiarity. And I don’t just mean familiar names.
My feeling is that every person is entitled to counsel that will look out for their client’s best interests. If your counsel is telling you that it is a good idea to take a bullet for the team, or even worse, is counseling “don’t worry about all the guns pointed your way, we’ll be watching out for you….from over that hill” – then guess what, you may need to reconsider your position. If and when this goes into the criminal phase – and with all the high profile that is not inconceivable – the second in to make a deal has virtually no value.
Then again, maybe it is all innocent, and maybe the story keeps changing, well, you know, just because. Far be it for me to try to second guess how things work.
But I would advise you to get the best counsel you can. And make sure they are completely independent. As in not paid for by the hedge funds telling you not to worry.
History has an ugly way of repeating itself.