Well, the second, and now third-string NY financial press are working overtime to try to stoke the embers of outrage over the SEC’s investigation into stock manipulation and front-running of research reports by a group of hedge funds. Particularly disturbing to these pundits is the regulator's daring to include the research group accused of taking pay from those funds (and generating reports that were basically dictated to them, without disclosing the fact) – and using a network of journalists and media personalities to broadcast the universally negative information.
This makes around six articles since the market closed Friday, by all our good friends, and some new-and-yet-familiar faces. We already touched on Roddy and Nocera’s pieces. So let’s look at Chris Byron’s. Carol Remond’s, and Dan Dorfman’s (yes, THAT Dan Dorfman).
First we have Byron’s, which is typical of the refrain being sung. It essentially takes the position that ALL journalists have to worry about an out-of-control SEC, which is persecuting the good folks in the press, and their innocent-as-the-day-is-long hedge fund buddies.
The title of his piece says it all: "SUBPOENA-HAPPY REGULATOR SHOULD BE REINED IN."
So now conducting an investigation into stock manipulation becomes regulators gone wild, spraying each other with subpoenas while dancing in thongs.
You can read his piece here. Some tidbits:
“But if one of your business cards winds up in the possession of a reporter on the prowl for news, well, here is fair warning: The way things are going at the Securities and Exchange Commission, boring will not be the word you'll likely be choosing to describe what could happen next. Try horrid or ghastly and you'll be a lot closer.
In a worst-case scenario, you could wind up staring down the business end of an SEC subpoena from regulators who want to find out every detail of every conversation or contact you ever had with said reporter over the years - maybe even for your entire life.
Sound preposterous? Well that is almost exactly what the SEC is doing already in its much-chronicled and controversial struggle to build a conspiracy case showing collusion on Wall Street between short sellers and the media.”
This speaks for itself. The SEC is targeting 9 or 10 journalists widely believed, for years, by many market observers and shareholder advocates, to be shills for the hedge funds. Chris makes it sound like the SEC has gone jackboot on us and is unilaterally trampling the 1st Amendment, endangering all journalists far and wide.
This is pure horseshit, as it was when the ludicrous spin was first floated by a frantic segment of the NY press corps after the subpoenas were issued. But their approach hasn’t changed, even when CNBC’s own poll showed that a whopping 89% of respondents supported the SEC’s actions. That is just ignored, as a very small cluster of the NY press simply repeats ad nauseum the same tired and hackneyed refrain.
More Byron:
“In the immediate matter at hand, the SEC may in deed have a case of some sort or other against short sellers. Yet whether it does or not, the media has no dog in this fight because none of the reporters named in the various SEC subpoenas has ever been sued for publishing any falsehoods or libels involving the companies they've allegedly targeted.
Even so, the SEC has dragged the reporters in anyway, beginning with subpoenas to three well-known financial journalists in early February, seeking any and all e-mail exchanges and other contacts they may have had during the previous four years with short-selling hedge fund Rocker Partners and Gradient Analytics, an Arizona-based research firm.
This led to a predictable chorus of protests from the media that the SEC was engaged in an unconstitutional fishing expedition, and the commission thereupon appeared to back off.”
Chris. We both know damned well what they are investigating – front-running research reports, timing articles to cause maximum damage, and publishing false and misleading information. Fact is that virtually no journalist ever gets sued for libel, because rule number one of being an adult in the markets is never sue guys who buy ink by the barrel. It is proof of nothing that they have never been sued, any more than before the Drexel fiasco it was proof of Milken’s innocence that no junk bond king had ever been indicted on 96 counts. It is a stupid line of reasoning, and you are not a stupid man – so I have to wonder when smart guys start saying stupid things.
And including Cramer as a “journalist” is simply insulting to the genre. I jumping around on camera like a gibbon on meth touting your hedge fund buddies’ tips is journalism, it is time to hang up the notebook and get an honest job like drug running or pimping.
“Since none of the journalists has been sued by Byrne or anyone else for publishing something defamatory about Overstock, it is hard to think of any possible reason - except perhaps bureaucratic zealotry and spite – that could explain why the SEC would want the notes and e-mail of the reporters in the first place, let alone continue to pursue them in the face of Cox's assertion that the entire matter was being put on hold.
Cox's lack of leadership has been simply deplorable, and the time is fast approaching when the damage will be irreversible. In his announcement putting the SEC's first round of subpoenas on hold, Cox did his best to buddy up to the press, claiming the media and the SEC were historic partners in rooting out malfeasance on Wall Street.
BUT the press is more than just a partner to the SEC; it is the com mission's seeing eye dog. Nearly every major SEC case of the last quarter-century originated not with the commission, but with some reporter covering Wall Street who uncovered the illegal behavior and wrote about it first.”
Uh, not really Chris, but I don’t have the time nor the space to show you where you are wrong. Suffice it to say that the SEC is in the business of investigating crime in the stock market, and it has good reason to believe that your colleagues are involved – so stop the histrionics and hyperbole and start doing your job – the job of a reporter is not to complain incessantly about how mean the regulators are for investigating your colleagues, but rather to investigate whether this is the next Watergate. You aren’t doing your job, but instead doing the equivalent of whining that Nixon is innocent, does important good work, and shouldn’t be subjected to this invasive persecution. Knock it off. It is frankly embarrassing from a journalist whose work I once admired.
“Were it not for an early 2001 article by Fortune reporter Bethany McLean, the SEC would still be staring in glassy-eyed approval at the accounting world den of thieves known as Enron Corp. Yet instead of carrying her through the canyons of Wall Street on a sedan chair with vine leaves through her hair, she is one of the nine reporters whose contacts with Gradient Analytics the commission has subpoenaed Gradient to cough up toinvestigators.
What blockhead at the SEC allowed this to happen? Why didn't Cox stop it? Why hasn't he stopped any of this? It's a disgrace. For shame, Chris Cox, for shame.”
Uh, Chris, maybe he hasn’t stopped it because he saw the evidence and there is good reason to believe all 9, or at least some of them, could well be guilty as sin of some very bad things. Ever stop to consider that? No? Why not? Why should a journalist automatically be given blanket immunity from wrongdoing? Why should a chimp on TV be given that immunity? Why would you take the position that the SEC has no grounds to investigate what is clearly a case they have SOMETHING big to root out, given their bucking the NY press and continuing the investigation?
Folks, this is typical – these articles basically take the position that “This is an outrage” even as they try to sway the course of an investigation by exerting pressure from bully pulpits. It is deplorable that this is what the NY press has come to. Not surprising, but deplorable.
89% of Americans don’t agree with your self-serving rhetoric, Chris. CNBC’s own poll, and it was overwhelming, and compelling. Why don’t you do some investigative reporting into Dr. Byrne’s allegations that Cramer and Becky Quick not only knew about Gradient a long time ago, but were emailing them requesting hatchet jobs for use on the shows? Is that beneath you? Or is it because there are some things that you just don’t want to know?
Here’s an idea: Let’s let the SEC get the info they want, and if the journalists are guilty, put them under the jail and let the rats eat their eyes. If not, let the entire experience fade into the background of non-events on Wall Street, and their good names will have been vindicated, and truth will prevail. But let’s not try the case in the NY Post – you have no frigging idea what the SEC knows, but you can bet it isn’t “just” a fishing expedition, and perhaps that is why there is the full court press to proclaim everyone’s innocence early and often, declare that any investigation is an outrage (echoing Jesse and Herb – also subpoena recipients), and demonize everyone on the opposite side of the table from your buddies: CEOs, the SEC, Cox, members of the press who think you are full of it.
Moving on to Carol, she came out with a piece that was actually as close to balanced as anything I’ve ever seen her write. It still tried to spray venom, but did so in such a pallid and controlled manner that the piece actually seemed boring and scripted – a “just the facts” article that really contained no news, but was rather just a rehashing of all the data to date. I’m not going to waste any space on it – you can read the piece, and just imagine what I would say. Any thinking adult can put two and two together here, so I won’t insult your intelligence and waste the bandwidth by critiquing it. Suffice it to say that she “breaks” the startling news that O’Quinn’s team of attorneys are the ones that are taking on Wall Street in the majority of cases. Wow. Gasp. And that some of the cases were dismissed and are being appealed. Yawn. Why is this news? Uh, because 9 months ago O’Quinn’s group sued Rocker partners on behalf of OSTK? They aren’t involved with the Biovail suit, but Carol tries, without much enthusiasm, to drum up some interest in the idea that Wall Street is the victim here. Like I said, yawn.
This is the first article we’ve seen out of her since the SEC served her with a subpoena, so that sort of makes it newsworthy. Marginally.
Those poor tobacco companies were also victims, until 60 broke the whistleblower and O’Quinn won the billion dollar settlements. Oh, that. And he was routinely defeated until the day he won, and that day changed everything. So Carol, honey? Back under the rock.
Perhaps most significantly, Dan Dorfman chimes in as a reporter for the NY Sun (WTF? Who?) and crafts a relatively clumsy defense of all those poor billionaire hedge funds that are being persecuted by the bad old SEC.
In it, we see all the usual chestnuts:
“In the past few weeks, the SEC has launched three stock trading investigations that until now have gone unreported. Also, the commission has increased its scrutiny of one of the city's leading short sellers, Rocker Partners, which has already been sued for alleged stock manipulation.
Summing up the thinking of some hedge fund managers, one manager says there seems to be a mindset at the SEC that anyone who shorts a stock (betting its price will fall) is un-American or crooked. He says he has been hearing ever more complaints from fellow managers about an increase in calls from the SEC that center chiefly on short trades. He points out that such trades are perfectly legal.”
Some hedge fund managers? Like maybe Rocker, SAC, Jeff Mathews and Einhorn, you mean? I’ll bet they’d like it to seem like the SEC is unreasonably investigating.
Guys. They are investigating stock manipulation. Not short selling. If you manipulate stocks down so your short makes money, that is still stock manipulation. Driving a car is legal. Driving a car into your ex-wife as she picks up the paper in the morning isn’t (in most states).
“One brokerage compliance official with strong SEC ties told me the commission is particularly interested in the knack of some hedge funds - notably on stocks they're short - in influencing analysts to downgrade their investment ratings and in getting financial reporters to do negative stories. He said there is some SEC concern that these incidents are happening in excess - and that the same cast of characters often is involved.
The commission, I'm told, is honing in on the activities of Rocker Partners. It has recently made some calls to the brokerage community specifically seeking information about the firm. Its founder, David Rocker, part of whose success is believed by some hedge fund managers to be his repeated ability to get his short sales publicized in the press, didn't respond to calls seeking comment.”
I’ll bet he didn’t. What is noteworthy here is that the press is finally using the R word and breaking the story I broke months ago – that Rocker is being seriously investigated for stock manipulation and insider trading, among other things. And is one of a network being so investigated.
“An SEC spokesman, John Nester, also declined comment when asked about charges from the hedge fund community that the commission is on a vendetta against such funds.”
Because it is a really stupid question. The SEC doesn’t do vendettas. Although that is precisely the Milken defense. And it didn’t impress anyone then, either.
The SEC is investigating a collusive group of hedge funds who allegedly abuse the system to drive down and then maintain at depressed levels stocks they have targeted, and who likely are involved in illegal naked short selling, doctoring research reports, manipulating opinion through the media, abusive trading, and a litany of other possible offenses.
This isn’t a Vendetta. This is the SEC doing its job. Wall Street has just gotten so used to hedge funds running rampant and doing whatever they like, that it has forgotten that there is a sheriff in town – albeit often one that arrives after the fact. The industry has been fined for every imaginable larceny over the last 10 years, criminality at unimagined levels was uncovered on the Street beginning in the 80’s and progressing to date, and the former chairman of the NYSE is taking the 5th to avoid incriminating himself in hearings about Wall Street crookery. Does anyone see a pattern here? And yet the NY press are unanimously acting as though these hedge funds are Mother Theresa, and that it is an outrage to presume that some may be up to no good. What twaddle.
6 articles this weekend, all spinning the same yarn – hedge funds are victims of the SEC and those bad ole attorneys, journalists are victims of the SEC and those bad old attorneys (and the CEOs who pay them), and the whole thing is just an outrage.
Is it just me, or does it seem like the call went out in NY to get every hack that had ever owed a favor to write something eerily similar?
Is anyone fooled by all this?
CNBC’s poll says 89% aren’t.
No wonder everyone on Wall Street is so nervous.