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Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm

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Posted by:   bobo 4/29/2006 4:00 AM

Weekend update:

Milberg Weiss is about to have a harder time of it, methinks. In a NY Times article today, a guy who turns out to be a professional plaintiff admitted to taking cash in exchange for acting as the aggrieved party in many of Milberg’s suits.

“The New York Times Company

April 29, 2006

Case Turns Toward Law Firm

By JULIE CRESWELL

A six-year investigation into whether lawyers at the influential securities class-action law firm of Milberg Weiss Bershad & Schulman used illegal tactics took a significant turn yesterday after a retired real estate mortgage broker agreed to plead guilty and cooperate in the investigation.

The broker, Howard J. Vogel of Englewood, N.J., and Florida, received nearly $2.5 million in kickbacks from lawyers inside Milberg Weiss for agreeing to be, or having a family member agree to be, the lead plaintiff in 40 cases, including lawsuits against Oxford Health Plans and Barnesandnoble.com, prosecutors contend.

According to papers filed yesterday in Federal District Court in Los Angeles, Mr. Vogel has agreed to plead guilty to a criminal charge that he provided false information about his role in dozens of securities lawsuits filed by a "New York law firm" from 1991 to as recently as May 2005.

A spokeswoman for Milberg Weiss confirmed that it was the firm referred to in the plea agreement.

Mr. Vogel's testimony could prove crucial in building a case against partners inside Milberg Weiss as well as the firm itself.”

That is illegal, and a huge no-no from an ethical standpoint.

It also makes me wonder over the fallout from the revelation – what does that do to the suits filed against companies under false pretenses? What about the settlements collected in those suits? What about the ongoing actions? If this guy was acting as a pretense for ambulance chasers to sue, that means that their business model was to pick targets, contrive a case using their pet plaintiff, and then sue, hoping the company would settle.

Very, very scummy, and obviously only the first shoe to drop.

If they were doing stuff like that, what are the odds that they also filed suits solely to move stock prices for their hedge fund buddies?

Milberg has sued many of Rocker Partners’ known short positions, which is sort of fun – apparently they are the preferred, go-to guys for those poor shareholders (who it now turns out are paid flim-flam men) who feel aggrieved when the stock goes down, usually due to a hatchet job written by one of a handful of journalists, immediately followed by an SEC inquiry (wanna bet those are initiated by the same one or two guys?).

What a small world it is. NFI is currently involved in a class action where Milberg had a suit ready to file within 24 hours of a WSJ story which Rocker Partners was lucky enough to have gotten in front of with many millions worth of puts, due to expire within weeks of their purchase dates. Rocker made a small fortune from that. The world is filled with marvelous, and highly profitable for some hedge funds, coincidences, is it not?

I believe that they also sued known Rocker short TASR, and ACAS, and ALD, and KKD…the list goes on and on.

And now, apparently, they are being revealed to be lying, cheating scumbags?

What a complete surprise. Say it isn’t so.

----------------------

Speaking of lying, cheating scumbags, the latest bomb to drop in the REFCO scandal is the news that Austrian bank Bawag owned 27% of the broker at one point.

That would be the same broker who was caught, on tape, participating in the only naked short selling case ever pursued by the SEC. Caught red-handed, and negotiating a penalty with the SEC for participating in the stock manipulation scheme even as the Commission was approving them to go public.

I still wonder what genius at the SEC approved that, even as known scumbags who were trying to buy a workout for being stock manipulators were running the company. You really can’t make that up. And now it turns out that their bank partial-owners are also lying through their teeth as to the level of complicity they had in their dealings.

And still no transparency on how much of their funny book-keeping is concealing naked short selling liabilities. That, apparently, must be kept from the prying eyes of the public, who doesn’t deserve to know the truth.

And now Bawag wants to negotiate with creditors directly, thereby ensuring that any real culpability doesn’t ever become part of the public record.

Wonder how Badian is doing over in Austria? You know, the guy caught on tape who was advising his REFCO contact to naked short sell the shares of Sedona, “With unbridled levels of aggression…”?

Austria appears, as Dr. Byrne said months ago in his great “Dark Side of the Looking Glass” slideshows, to be a hotbed of money laundering and dirty deeds, including stock manipulations of all flavors.

Huh.

There’s another data point that “crazy” Dr. Byrne had 100% correct.

Is it me, or does it seem increasingly that every aspect of Wall Street’s behavior involves insistence that all is well and legitimate, and then, when the onion gets peeled, evidence of massive misconduct surfaces? Milberg, REFCO, the Citi broker a few days ago, lawsuits against hedge funds alleging manipulation, lawsuits by hedge funds against brokers alleging naked short selling, icon Spitzer exposed to getting large dollars for his campaign from Wall Street…I mean, where does it stop?

-------------------------------

Yesterday’s SEC filing from CXN created a firestorm of message board attacks against the company’s legitimacy, the CEO’s honesty, their product…you name it.

Some believe that it is a publicity stunt.

Others believe that it is a CEO who is just jumping on a now popular bandwagon to shift attention from his company, or to draw attention to the company. The theories change hourly. (The CEO jumping on the bandwagon theory can be easily disproved by viewing his position paper on the problem of naked short selling from almost a year ago)

Lest you haven’t followed this, let me clarify my position.

I don’t know whether CXN’s product is dung, or gold. I have no idea whether the company is a sham, or a tremendous opportunity. I don’t know whether the CEO is shifty guy, or honest guy. I don’t know whether they have been victims of naked short selling, or not.

Frankly, none of that matters to me.

Why?

This will be a test of the integrity and honesty of the system, that’s why. It will be an important data point. Here we have a company with virtually no short interest (300-something thousand out of 60 million issued), whose shares can’t be borrowed or lent (they aren’t eligible for margin, I guess) legally, which is publicly testing the system.

That is significant, as if their claims are legitimate, and the large hedge funds and prime brokers have been illegally selling shares, and depressing the price, then there is going to be a firestorm. If the company’s contention that they have many, many illegally generated shares trading out there are true, then the system is about to get exposed as one giant fraud, a larceny where the law means nothing, and Wall Street systematically cheats investors. This could be a very important case, as it is a test of the integrity of our market. Do the numbers that are reported – virtually no SI – accurately reflect truth, or is it all a lie? Two years ago I would have said these guys are crazy. Now, after just last week reading about the Citi broker who was selling naked, and marking the sales “long” to avoid triggering SHO, as well as to prevent appearing in the SI….I wonder. As should you.

This test is important because this is NOT a company on the SHO list. This is NOT a heavily shorted company. This is just average small company, with some revenues, and claims of a breakthrough product being launched – claims which may or may not be true. But whatever. None of that matters. What matters is whether shareholders get their certificates and their D shares, or whether millions and millions of shareholders can’t get their shares. Because if the former happens, then there is nothing to the company’s claims – and this was a 3 week blip on our radar. If millions of investors’ money was taken, and suddenly the brokers can’t deliver what they had assured their clients they had purchased for them, and for which no legal explanation for failure is available…then the industry is exposed as worse than anything we had ever feared – because this company is a microcosm for many. And it isn’t even on the map as far as being abused.

So this will give us a good glimpse of what an ordinary, low short, non-shortable company’s actual share composition looks like, which will either be reassuring, or confirmation of everyone’s worst nightmare.

I say be skeptical, but also keep a sharp eye on what happens. If we start seeing Wall Street mobilizing to demonize the company, while trying to figure out a way to circumvent the company’s legitimate action to verify that the industry ISN’T robbing its investors blind, then that will be the smoke. Which will tell us there’s fire.

So far, the same message board bashers that work the NFI and OSTK boards have suddenly saturated the CXN board. That’s odd, given that there is no logical reason to do so, unless they fear that this will curtail their own illegal trading – or they work for some of those big hedge funds and/or brokers. My alarms went off about 3 hours after the release, when suddenly the pro forma smear campaign started – the CEO is scum, company is a scam, product is bogus, trading is insider pumping – you name it, almost by rote.

Which has me wondering why they are working so hard on a company nobody should care about if they don’t already own the stock (I mean, there are no put options to buy or stock you can legally short, so why bash it?), and makes me further wonder whether the company, and their counsel, O’Quinn, might not be on to something.

This next week should be a real eye opener. I for one will be watching this closely, again, not because I am touting or bashing anyone, but because I can’t see any reason for anyone to mind the company’s actions…..unless their allegations are true. In which case Wall Street has a huge problem with this seemingly trivial release, and we can expect the full frontal of articles, the DTCC weighing in against the company, the SEC trying to figure out how to change the rules…all the usual tactics employed when Wall Street is caught red-handed.

I kind of can’t wait for Monday.

Have a good weekend, everyone.
Copyright ©2006 Bob O'Brien
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Comments (54)
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By happyswede on 4/29/2006 12:11 PM
Bobo.

This must seem like birthday and Christmas season all rolled into one for you as
you get to "unwrap" all these wonderful packages of news that more and more
confirms all your suspicions you've ferreted out the last couple years!

You ought to get the Nobel prize for Econmics for your vision and efforts!
We NFI shareholders have have been fortunate that you chose us!

Regards,

Tom
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By clearthinker on 4/29/2006 12:49 PM
Bobo, please comment on the circumstances surrounding the CITI broker marking tickets as long sales for 18 months and executing 100 trades this way. How much more OBVIOUS can it be that the settlement system is completely broken and/or compromised. I called 3 firms after the story broke and their comment was "It could never happen here..." The position would be bought in to proerly deliver the shares to the buyer, correct? No...that's not what happens....This guy did it 100 times in 18 months at CITI.....1 trade slipping through....maybe....100 of them not getting cuaght within days due to settlement issues....impossible....bUT IT HAPPENED.

This case alone should bring IMMEDAIATE CONGESSIONAL INVESTIGATION of ALL regulatory agencies responsible for the PROPER SETTLEMENT OF TRADES. THERE IS NO EXCUSE FOR ALL FAILS TO BE BOUGHT IN AND PROPERLY SETTLED. IF THIS MEANS THAT A COMPANY WITH NO REVENUE HAS 50,000,000 FTD'S AND THE STOCK GOES TO $200 A SHARE....SO BE IT...The system that let this happen has to live with the consequences of their complacency.

If you or I don't file a tax return, does the gov't give us a pass? Do they give us a little ol'e slap on the wrist and a small fine? No....we can go to JAIL.....and that is exactly what should be hanging over the head of each and every regulator who turned away from the thousands of investor complaints.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By J on 4/29/2006 6:08 PM

WW,

You have to understand that at this point in the campaign when new, invigorated faces show up with a strong agenda such as yours that it is immediately watched with suspicion.

It is a fact that bash teams are paid to work companies.

It is a fact that O' Quinn is not a recent departure from the turnip truck.

It is a fact that this is an interesting an unexpected move from a before uninvolved company...

What you are failing to understand the magnitude of though is the due diligence that O' Quinn has put in to this NS battle with many companies.. not just OSTK.

He is the real deal, and if is not going to simply let CXN use his name to pump and dump.

So we wait, and we watch.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By J on 4/29/2006 6:12 PM

WW,

I just wrote a longer response, but it vaporized somehow and I'm too tired to re-compose.

Here is the bottom line:

O' Quinn saw fit to take this company on, and I'm sure that that was the result of extensive due diligence.

He is not a hack.

That gives this credibility without any other facts being laid out. He has a stellar reputation of victories in courts of law, so we listen, give him the benefit of the doubt, let him play this out, and we watch.

Maybe it will blow up in their faces... maybe not.

I will stay tuned with you, but I believe that the Anti-NS Market Reform Team is on the right side of history.
one more . . . By Weakened Warrior on 4/29/2006 6:13 PM
In Bobo's original post at the top of this page he says this: "The CEO [of CXN]jumping on the bandwagon theory can be easily disproved by viewing his position paper on the problem of naked short selling from almost a year ago."

Uh, sorry Bob, but a quick search of that paper shows that "naked", "FTD", "fail", and "deliver" don't appear anywhere in that document. He was only talking about short selling, something he's been railing about for years. (They even put it in their SEC filings.) You might want to amend the post.

WW
one more . . . By Weakened Warrior on 4/29/2006 6:14 PM
In Bobo's original post at the top of this page he says this: "The CEO [of CXN]jumping on the bandwagon theory can be easily disproved by viewing his position paper on the problem of naked short selling from almost a year ago."

Uh, sorry Bob, but a quick search of that paper shows that "naked", "FTD", "fail", and "deliver" don't appear anywhere in that document. He was only talking about short selling, something he's been railing about for years. (They even put it in their SEC filings.) You might want to amend the post.

Sorry if this double posts, but the original didn't go up . . . perhaps Bobo is moderating me now. Hey, moderate away, but be fair about it.

WW
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By dave on 4/29/2006 6:52 PM
Jag Media is another data point. They issued a share dividend and all that happened is that shareholders with IOU's didn't get the dividend.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Oquinn's a badass on 4/29/2006 6:56 PM
folks are taking it as credible because Oquinn is
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Sylvain on 4/29/2006 7:54 PM
Bobo, you can add the name FAIRFAX FINANCIAL (FFH) on the list ofRocker Partners/Milberg Weiss. Good canadian company, big short selling. On the Threshold List NYSE since the beginning.Those crooks should be in jail.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Jasper on 4/29/2006 9:03 PM
Here's your evidence. Look under American stock exchange and you'll see CXN on the Reg SHO list.

http://www.regsholist.com/
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By jasper on 4/29/2006 9:04 PM
Here's your evidence. Look for CXN on the American Stock Exchange.

http://www.regsholist.com/
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By RegSHO on 4/29/2006 9:10 PM
Here's your proof.

go to regsholist.com and look up cxn under the american stock exchange. It's on the reg sho list.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By bobo on 4/29/2006 9:38 PM
Weakend warrior:

All fair questions. But the point is they, and the O'Quinn group, feel they have been F-d in the A by Wall Street. Your perspective has been adequately memorialized here. Duly noted. They suck, are filthy blackguards, etc. We get it.

Now let us allow the test of the system test. And stop posting here 5 to 7 times with the same perspecitve. We aren't dim. Neither are you. Knock it off. Or I will censor the rest of the recurring theme - the CEO is a scumbag, there is no naked shorting, etc.

I'm game. Let's test it.

The next 4 weeks is open on my calendar.

How bout yours?
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Bodnik on 4/29/2006 10:29 PM
Just curious WW, are you short CXN? Because I can't for the life of me see how a test of the system to determine the actual number of shares shorted hurts anyone except those that might be short or just possibly naked short. For purposes of argument, I assume it's the worst co. around. Who cares. I want to see if the short interest is accurately reported. IMO, it is not and having proof is useful to the anti-NSS cause.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By z3peru on 4/30/2006 4:04 AM
****But what evidence is there that the system has failed in the case of this company?****

Why are you adking us that question? Why don't you ask O'Quinn?
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By cogo on 4/30/2006 4:28 AM
i'd say 300k short is substantial when the average volume is less than 300k. and i'd say 1 share made up out of thin air is one too many...because crooks never stop with just one...it's always about pushing that 1 to 10, then 10 to 1000, 1000 to 1mil, etc...it never stops...

not trying to hijack this thread or change the subject, but this brings up an interesting question that i've tried to rationalize for quite some time on other stocks: lets say a stock has a massive number of shares outstanding (1.3bil), 120mil shares short, and average volume of 50mil. some might say the shares outstanding is so much larger than the short volume that it doesn't matter, but yet the short volume is equal to or more than the average volume.
question: at what point would you suspect illegal shorting and more importantly how the hell would you detect it in cases other than where there are more shorts than actual shares? let's assume that the stock had not appeared on regsho. maybe i just answered my own question: if it's next to impossible to detect, then that would be a prime target for the crooks. throw in overly negative media reports under the protection of 1st ammendment rights and i guess you've got a breeding ground for illegal activity "protected" under the law...i realize this is a difficult (and very broad) question, but does anyone have any thoughts on this scenario in particular...
Weakened Warrior By upwardmo on 4/30/2006 6:48 AM
Methinks someone doth protest too loudly.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By n-tres-ted on 4/30/2006 9:55 AM
Bobo and rtway,

I think Cox of the SEC would likely view the present morass as not of his own making. And, possibly like Donaldson before him, he is racking his brain trying to design a "strategery" for addressing the problem in a way that does not do great damage to the millions of individual investors and others in the financial markets.

I believe Patrick Byrne has been very measured and careful in his conduct of the "jihad" involving OSTK's shares because he is concerned with the possible repercussions damaging to so many parties.

For example, as CXN proceeds with its corporate securities restructuring, let's assume this results in CXN receiving requests for share certificates in excess of the number of shares issued and outstanding. Is CXN going to proceed with issuance of certificates as requests are received, or will CXN await a deadline date for all cert requests to be filed to see how many there are?

Either way, let's assume there are 100 million shares claimed over the i/o number. Those shares will be claimed by people who paid real money for the "entitlements." O'Quinn will be ready to sue the brokers involved. But isn't it likely that someone will get counsel to sue CXN on behalf of the shareholders who are left out of the certificate race?

At the same time, as the word gets out to the public and investors begin worrying about the situation of the stocks they own, is it possible there will be a mass scare and stampede out of the markets? Yes. And, of course, this, too, would be very damaging to investors and to the companies that need orderly and honest markets to raise working capital.

Yes, it is a very worrisome and dangerous mess that has been created by very ineffective policing and enforcement of investment laws.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By bobo on 4/30/2006 11:51 AM
There is no cause of action against the company for brokers creating counterfeit shares. The company didn't do anything wrong. The brokers did - they illegally acted as issuers. The cause of action is against the brokers. They know that. That is why they are going to freak out.

People should lose faith in the integrity of the markets if it becomes obvious that a predatory group on Wall Street has converted a share exchange into a counterfeiting ring. Arguing that allowing a counterfeiting ring to continue operating, because so many important people are involved in the scheme, is lunacy.

If this goes the way it could, America is going to figure out that a large chunk of its national worth has been stolen by miscreants on Wall Street. If turns out to be the case, then the system deserves to be collapsed and rebuilt honestly.

That is what these tests of the system are good for - sort of like doing a periodic physical exam. Do you cut out the cancer you find when you find it, or tell the patient to keep on keeping on while it slowly kills them?
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Cynic on 4/30/2006 1:07 PM
WW
One would hope OQuinn would have done his due diligence before wasting his firms time and money on this.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By rtway1 on 4/30/2006 3:15 PM
to ww. Shutup, we heard you. You are starting to sound like a basher and I don,t think you want that baggage do you?
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By $4.40 or Bust on 4/30/2006 4:16 PM
One thing that strikes me as odd: Certain writing styles that are particularly unique to a post and tend to link a poster to other threads on other sites under other names with a very similar motive. i am guessing that one of the visitors to this thread is from Boston and is a peon with some sort of working arrangement with a hedge fund(s). i may be right or i may be wrong--but I am certainly not the wise one here. Maybe you are the janitor or a secretary or maybe something higher up the food chain, or maybe you are simply paid to sit at your computer all day and jump from screen name to screen name with the intention to bash stocks of interest. What sort of commission do you make for bashing stocks? Or do you simply get tidbits of inside information about mass shorts? Nah, I doubt anyone would trust you that much with incriminating information like that. But I bet that you have been brain-washed to believe that you are doing the market a favor by trying to take out so-called weak companies through unethical means. Truly sad it is to think about what you're life must be like wanting to be someone powerful but realizing that you are simply a pawn and being used to make other people lots of money at the expense of hard working investors.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By disillusioned investor on 4/30/2006 10:57 PM
I haven't been following CXN, so I have no idea whether the company is iron pyrite or gold, but having had an exposure to another company that tried something similar, let me be the first to predict the DTCC won't let them go through with issuing the D shares.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By reply to dislussioned investor on 5/1/2006 5:20 AM
O'QUinn might be counting on that from the DTCC to move along his goal
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By troydian on 5/1/2006 7:27 AM
WW, I have been around this arena for a long time... I beleive that posters like yourself ..have a place ..What that place is...is to show that there are smart probably high payed Bashers working night and day to try to discredit and confuise (the sheep) The sheep have awoke.. they know you are a wolf... and anything you or any other miscreant says is for the furtherance of the main agenda...rape the public.... if you think most of us are stupid... you have made a grave error in judgement..peace
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Notradamus on 5/1/2006 3:40 PM
Hey Grandma, where's the wolf that is supposed to be in sheep's clothing? And Grandma, what big teeth you have...and Grandma, what a little penis you have...

bashers are simply a derivative of hedge funds and will do the same...proclaim no wrong or simply ignore that they've been caught...even with the fake shares in the their hand, they will claim no wrong and point fingers in every other direction...
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By oldfeller on 5/1/2006 7:15 PM
WW- You are not fooling anyone who read the press release. The D share does not replace the tradable share. Seems to me someone touched a nerve. Nice try but if you can`t fool me you have no chance with the rest of these guys.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By bobo on 5/1/2006 11:06 PM
WW: We get it. Where's the beef. OK. Let the test proceed. No special proof requiired. We issued the stock, now we are going to test the system. Period.

They do not have to submit their proof of malfeasance to some public forum. The point is that if the system is without fault, it will pass with flying colors.

So enough of the many, many posts articulating the same thought. We get it. Now let the test begin.
well well, GFME has news for you By Weakened Warrior on 5/4/2006 7:40 AM
Hi guys,

I'm not sure why the comments suddenly started working again, but it's nice that they did, and nice to see that it wasn't only me who was having trouble.

In response to the various "you are a paid basher", "you are short", "you work for a hedge fund", "you are from Boston" (?) knee-jerk responses that have been put here, I'll give you one response: I'm not short CXN, I am not a paid basher, and I don't work for a hedge fund. Nor am I from Boston. I find it fascinating that the above posters think that no one was already following this company, no one already had an opinion about its management, and no one felt like expressing that opinion, so the only possibility is I have evil motives. Or to go another way, the above posters are happy to say that THEY are trying to make markets better for no other reason than that they think it's a good thing to do, but not that someone else might be doing something similar. Apparently pointing out to you some of the serious questions that have been raised regarding this company with serious questions surrounding it makes me a bad guy. Isn't that a bit inconsistent -- only the anointed few can be good guys?

To answer two specific comments: oldfeller said "You are not fooling anyone who read the press release. The D share does not replace the tradable share." I didn't say that. I said the D share is not publicly tradable. Bobo claims that shareholders can just petition the company to make them tradable. Good luck with that. Bodnik can't understand how this "test of the system" is bad for shareholders. I'd say receiving part of what you own in a non-tradable form that you can't even sell with the stock is a bad thing. Perhaps you can tell me why it isn't.

On to the new news -- the Circle Group deal with George Foreman is cratering, as anticipated by many people who have followed it. Read the Yahoo board, which has the letter from the Foreman company's attorney, or follow this link: http://www.sec.gov/Archives/edgar/data/1079786/000092242306000632/kl05016_ex99-1.htm .

What's that you always say about the power of a theory being its predictive ability, Bobo? A number of folks predicted that the Foreman deal was cratering, and this whole naked short selling thing that Circle Group was working was just a smokescreen designed to distract attention from that fact, or cover it up, or act as an excuse. That theory is being proven out today.

WW
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Teresa on 7/23/2006 10:36 AM
Any thoughts on the Refco class action? The creditor committe for Refco is cleaning up and the investor class - refco shareholders and refco bondholders - are merely picking up the bread crumbs left over.

Luc would make a pretty impressive securities attorney I tell you.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By InTheKnow on 4/29/2006 12:56 PM
Who are the people who initiate the investigations at the SEC. Start an investigation now and let the investors know their track record. What a sham what a fuqing sham.

These people haven't initiated any investigations to protect the investors (REFCO). They only investigate for the crooks on Wall Street who rip off the public. What a sham what a fuqing sham!

SEC = Screw Every Customer
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By n-tres-ted on 4/29/2006 1:29 PM
Bobo, my guess is CXN will be ignored by the media no matter what happens. After all, it's a "lousy little $75 million cap company." Something that small can't possibly be important - except to those whose $75 million (and MORE) have been ripped off!!!

BTW if CXN is unshortable as well as unmarginable, then why are there any shorts whatsoever?!!
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By rtway1 on 4/29/2006 1:59 PM
I can not comprehend how the SEC chairman can face the American people knowing he is complicit through the derelection of his duties and knowing he is undermining this country in a time of crisis. We have 2 enemies we are fighting, the terrorist and our own politicians. Ross Perot is the kind of man we need as a leader NOW, or people of that make up and courage instead of money hungry, morally stripped liars. For those not aware the Refco case is being handled behind closed doors sop that the public can not know who or how they pulled off billions of dollars of forgery. It is for our own good and we should not own pointed scissors, it could hurt us.
Info on CXN, for those who want to learn something By Weakened Warrior on 4/29/2006 2:10 PM
Bobo,

You don't care whether CXN is a "shifty" company or not? You should. You should care very much whether shareholder-unfriendly corporate managers are hitching themselves to your bandwagon -- after all, aren't you all about PROTECTING shareholders? Wouldn't it be an incredible irony if your own efforts were being used by a guy who does just the opposite? But I guess that's what judo is all about, isn't it . . . using the other guy's strength.

Here's post 26270 from the Yahoo CXN board. If you read it, and follow the links, you might find out a little more about this company whose actions you're so excited about.

WW

******
2004 Nestle Timeline & the Lawsuit
by: dept_of_public_records

We wanted to post a condensed version of the Zaghi / Pac Bay lawsuit that included links to the primary press releases and filings, including the full March 2006 lawsuit filings.

Timeline of Events

On May 13th, 2004, Circle Group announces an increase in the Nestle order to $881,000.
http://www.crgq.com/press/05_13_2004.html

According to a lawsuit filled by Zaghi & Pac Bay (full filing below), on July 7th, 2004 it is alleged that Halpern refused delivery of a certified letter sent by Nestle that cancelled the $881,000 order.
http://makeashorterlink.com/?H50A135FC

On August 2, 2004, Michael T Theriault, COO of Circle Group, sold 59.5% of his CXN stock (50,000 shares, remaining shares 34,000)
http://makeashorterlink.com/?L29E129BB

On August 9th, 2004 Circle group files a prospectus for 17,583,329 shares of our common stock,
including 8,030,910 shares of common stock underlying warrants. No mention of Nestle.
http://makeashorterlink.com/?J16031ABB

On August 16, 2004, Circle files the 10QSB quarterly report for period ended June 30, 2004. The highly material order with Nestle for $881,000, publicized by Circle Group in the May 13th press release is not mentioned. Nestle, in fact, is not mentioned anywhere in the filing. Nestle will never be mentioned in any filing ever again.
http://makeashorterlink.com/?N6D9128BB

On October 15, 2004 Circle Group states “CXN today acknowledged a report published last week that Nestle Hand-held Foods Group is no longer using Z-Trim in the manufacture of its Lean Pockets brand sandwiches. The Company's subsidiary FiberGel Technologies was unable to meet Nestle's substantially increased order demand of 215,000 pounds, due to insufficient production capacity. After fulfilling less than 10% of the increased order, the company struggled to meet the delivery requirements. Nestle announced it will now use "alternative ingredients". FiberGel has no expectation of delivering Z-Trim to Nestle Hand-held Foods Group through year-end.”
http://www.crgq.com/press/10_15_2004.html

Full lawsuit filed by Naghi / Pac Bay on March 3, 2006

part 1: http://makeashorterlink.com/?S33A625FC
part 2: http://makeashorterlink.com/?P22A255FC
part 3: http://makeashorterlink.com/?H50A135FC
part 4: http://makeashorterlink.com/?H1F9325FC
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By Y on 4/29/2006 2:30 PM
http://tinyurl.com/hecng

link for full article

Broker Deceived Firm by Executing Short Sales, Marked Long, in Personal
Accounts

WASHINGTON, April 26 /PRNewswire/ -- NASD announced today that Steven
W. Norin, a broker who is currently registered with Citigroup Global
Markets Inc. of New York, has been suspended for 90 days and will pay
$400,000 to settle charges that he engaged in a pattern of improper short
sales in his personal accounts.
NASD found that from March 2003 through November 2004, Norin executed
100 short sales in 22 different securities and improperly marked them as
"long." NASD found that Norin wanted to sell certain securities in his
personal accounts short because he believed they were overpriced; when he
discovered that there was no available inventory or borrowable stock, he
improperly marked the orders long in the firm's order entry system to
defeat the system's ability to prevent improper short sales.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By brokeflat on 4/29/2006 2:31 PM
BTW if CXN is unshortable as well as unmarginable, then why are there any shorts whatsoever?!! That's elementary ... CXN was marginable from 20Jan04 through 01Jul04 ... with share price above $5 for the entire period with peak $8.85 on 02Feb04. The short interest in Jul04, the last month it could be shorted was 730K, the highest recorded. After that the SI goes down to flatten out at about 300K. Why 'they' didn't cover when the price got down to under half a cent is any body's guess. Probably because they didn't want to pay tax on their gains. However, the shorting could have continued illegally; naked and or fake long sales; after it could not longer be legitimately borrowed and shorted. Who knows; but I'm sure trading and voting records could show vote and trading anomalies after Jul04 indicating something was amiss. And, based on those anomalies, O'Quinn could have their interest tweaked. Yes; the company could be trash and I'm sure if anyone if the mainstream even mentions this, that's the view that will be taken. Company is a scam so investors should be burned and not rewarded; you know, a SEC enforcement view of the world.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By bobo on 4/29/2006 2:32 PM
Weekend warrior:

So it begins already, huh?

The issue I care about is the fairness of stock trading in the market - specifically, I care about market abuse by participants - fraud and theft.

Whether this company was able to manufacture adequate amounts of their product to make delivery to Nestle isn't germane to this discussion.

At all.

The discussion, in case you missed it, is: Is there a large ghost float of illegally created shares of CXN trading in the system?

That is it.

The test is to pull all the certs, and issue a non-cash dividend of significant future value. That way everyone will want to get the D share, which is only available to legitimate shareholders of record. It is not CUSIP, thus the system can't electronically print them (counterfeit them) to deceive customers already deceived into believing they own legitimate shares.

There is no "don't worry about it" - you either are given the shares, or you call O'Quinn and he cores the brokerages a huge new one. For him, this would be like falling off a log - imagine if millions of shares don't get their certs, and are thus denied not only their property, via fraud (a there is no legal way for that to happen), but also fails to get their D share - and then one can go into the question of damages due to the downward manipulation.

No, this isn't about whether the company is adept in manufacturing their ingredient, or is good or not. It is about whether Wall Street just got caught with their pants down on a stock that is no different than thousands of others.

Extrapolate what it means if the cert pull shows substantial bogus shares.

That is why this is significant.

I am not endorsing CXM or its product. I am not saying they are great, or they suck, or anything in between. I am saying that the question of whether Wall Street is ripping off main street America is a different one than whether CXM can make enough of whatever they make to meet customer demand.

And if you can't figure that out, you aren't trying very hard.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By evan on 4/29/2006 2:44 PM
I have an account at a US owned brokerage operating in Vancouver Canada.

Since I am a good customer, I can buy shares without putting any money in my account and I can sell shares without putting up any margin.

Normally, they ask for money by the end of the month (that's when compliance looks), but not always. I've had cases where I've bought $30,000 worth of stock with no collateral in my account for a month. Rather than pay for it, I sold the stock and took a $3000 profit.

If I short a stock that is hard to short, they mark it as "short covered". If the firm can't find the borrow, they eventually make me buy it in, but I can drag it out for at least a month.

I don't normally short, but it occurred to me that there would be nothing to stop me from crossing the short to another brokerage rather than covering.

It seems like I have a trading advantage against you, by virtue of my jurisdiction.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By bobo on 4/29/2006 3:17 PM
Evan: Now imagine you are a hedge fund domiciled in the Caribbean, and can direct $500 million through your broker, and you say "short 1 million of CXN, and I don't care how you do it". With me so far? Maybe you bother to create a Canadian subsidiary so it is a Canadian "person" or entity, maybe not. Whatever.

What you are describing is jurisdiction shopping. Happens all the time. It is why the CXN thing could easily show a major problem in the market.

You can't short CXN, at least theoretically. So theoretically there is no problem.

When theory meets reality, that is when it gets interesting...
Insider selling while withholding material information goes to credibility By Weakened Warrior on 4/29/2006 3:41 PM
Bobo,

You say: "The discussion, in case you missed it, is: Is there a large ghost float of illegally created shares of CXN trading in the system?"

What you don't see, and what you don't understand, because you have not been following CXN for years, is that this CEO, as is his habit, is grasping at whatever he can to pump his stock, and try to direct attention away from things like, oh, the company pumping the number of shares from 6 million to 50 million, to pick one example. You really need to read more about this company and this CEO, and realize that he is using your bandwagon for his own purposes. You are being made a dupe, and you are going for the bait like a dumb halibut. I gave you the links from the Yahoo board; you should read the lawsuit and see if this is really a company that you want on your team.

You say Nestle isn't germane? You've got to be kidding. A company takes on one large contract -- a make-or-break contract -- a contract that pushes its stock to an all-time high, well above where it had ever traded -- that contract is canceled -- the company doesn't announce that fact for three or four months, with insiders selling stock all the while -- if true, you would not consider that relevant to whether or not an outside observer should then believe that CEO when he starts bleating about naked short selling? Of course it's germane.

When the cert pull takes place -- if ever -- and it turns out there were few to no naked short shares on this stock, I assume you'll come back here and admit that I was right. You may not be taking a position on this company (although you are certainly aiding and abetting them), but I will -- this is all sound and fury, signifying nothing.

WW
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By hwh on 4/29/2006 3:53 PM
CXn, as is SDNA, supposed to be unshortable. Yet when as a test I entered pre entered a trade for sdna as short. The "shares available" window popped up showing 10,000+ as available. I did not execute the trade.

I will attempt the same test on CXN monday.

When reported to the authorities I was told it was not their problem and I should take it up with my broker. The ECN's are notorious for this allowance & know there is no concerm on the part of the authorities.

Many shareholders who had legitimate claims against fraudulent issuers & B/D's have fallen victim to the masters. The statutes of limitations have run out while watching companies prosecute cases.

Recently, where the risk of shareholder actions are running high, the Hedge funds have pre-emptively struck shareholder groups & individuals to prevent their reaching the courthouse first. The hedges filed early and in class action so as to force others to enjoin the class.

For the hedges, victory simply amounts to a rebate on their comission fees from their B/D's. The innocent parties, the only truly innocent, as I have contended for some time now have little to do but watch from the sidelines and expect zilch in return.

The classes of the cases should necessarily be :

1. The legitimate shareholders of record.

2. Bank Holding companies who actually control the media, analysts, & B/D's who perpetrate the crimes.

3.The SEC & NASD who allow the crimes to continue ad infinitim, plus the companies in certain cases...hwh
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By browntrout on 4/29/2006 4:01 PM
Bobo- WOW! That girl deserved to get get raped, right? She was just asking for it!It did not matter that raping is against the law- no way. I can't believe these guys showing up here and on Jahoo to tell everyone what a bad company it has been. There must be alot of money to lose on this one. I will bet Lil GW shows up proclaiming naked shorting the company was good for the investors and Tony Ryals is probably just drooling with JDD being mentioned in connection with CXN
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By bobo on 4/29/2006 4:05 PM
Weakened Warrior: You again miss my point. I am not touting CXN, don't own any, certainly am not encouraging anyone to buy it. You think it is a POS and the CEO is a crook. I get it. Maybe you are right. Maybe you aren't.

What does that have to do with whether there are millions of fraudulently created shares trading of their stock?

Answer: Exactly nothing.

And that is my point.

If nothing ever comes of the pull, and it turns out the company was in error, I will be the first to report it.

Now please don't clutter my blog with anti-company stuff. I get that you think they are scumbags. We all get that. It isn't germane to my topic, which is whether the market is counterfeiting their shares. It is possible that they are scumbags AND that the market is counterfeiting their shares. The two are not mutually exclusive. But the topic of the blog is not: "Is CXN a scam run by scumbags?" That is why you don't see it in the topic area.

Thanks for your cooperation. I don't want to have to start deleting.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By bobo on 4/29/2006 4:06 PM
Browntrout: It is sort of amazing how quickly they have mobilized, isn't it? I would have thought it much ado about nothing, but the bad guys seem to be working all weekend on this - it does make one wonder what is at stake...
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By InTheKnow on 4/29/2006 4:19 PM
Bobo,
Why do you think they (bashers) permeate the JAGH board on Ragingbull and have for years? They are stuck to the tune of an estimated 100-300 million shares. We are talking about a 42 cent stock that is bomarded 24/7 from bashers.

Jagh issued a special stock dividend and stockholders are still fighting to receive their shares. The excuse is..." it is not worth anything now and if it becomes worth anything we will pay it." That is what they can expect with their special dividend.
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By InTheKnow on 4/29/2006 4:42 PM
This Milberg thing is UNBELIEVABLE! Fuqing UNBELIEVABLE! WTFF!
Re: Weekend Update: Milberg Guilty, REFCO Revelations, CXN Firestorm By SteveM on 4/29/2006 4:50 PM
Bobo,

Why is any of this Milberg Weiss news new to anyone? Remember the Terayon issue? Same Milberg Weiss, same MO. Two year old news.

http://money.cnn.com/magazines/fortune/fortune_archive/2004/05/03/368548/index.htm

Milberg Weiss Gets Taken To Court

By Roger Parloff
May 3, 2004
(FORTUNE Magazine) – Did the ambulance chaser arrive before the accident?

That's the question U.S. district judge Marilyn Hall Patel of San Francisco is asking about Milberg Weiss Bershad Hynes & Lerach, the notorious class-action firm that's the scourge of corporate America. Milberg Weiss was co--lead counsel in a class-action stock fraud case before Patel, and in February she noticed that while the case had commenced on April 13, 2000, the day after defendant Terayon Communications Systems' stock had crashed, a plaintiff had signed his papers on April 11--the day before the plunge.
Judge Patel then discovered that two of the lead plaintiffs, who were represented by Milberg Weiss, had been massive short-sellers of Terayon stock, and she wondered whether Milberg Weiss had tried to conceal the fact that the plaintiffs--associates of George W. Bush crony Edward "Rusty" Rose III and his firm Cardinal Investment Co.--were not conventional investors. Based on evidence presented by Terayon, she determined that Cardinal had engaged in such an aggressive campaign to bring Terayon's price down that it may "have participated [in], if not perpetrated" fraud. (That campaign culminated with a Cardinal official posing as an analyst and using a false name to call in to a Terayon earnings conference call and ask questions on April 11.) In other words the Cardinal investors bet on Terayon's stock crashing, then sued when it did.

All that prompted Judge Patel to issue an extremely unusual order in February. She stripped the two short-sellers of their "lead plaintiff" status, and demanded that Milberg Weiss answer questions about its own fitness to proceed as co--lead counsel and whether it had "actively participated in or provided advice to plaintiffs regarding their scheme to cause a fall in Terayon's stock price." The U.S. Chamber of Commerce swiftly called for an SEC probe of Milberg Weiss. (The SEC declines comment.)

In late March, Milberg Weiss attorney Jeffrey Lawrence filed papers saying that he, his partners, and his clients had done nothing wrong: Though he knew that the lead plaintiffs had held short positions, he had not known their extent and regarded them as irrelevant; their nondisclosure had been unintended and innocuous; and the fact that one plaintiff had signed his papers before the April 12 stock plunge, wasn't surprising, because Terayon's stock had taken big tumbles in March as well. Finally, Lawrence argued, all Cardinal had ever done was to supply the market with true information about Terayon. In earlier rulings Judge Patel herself acknowledged that some of Terayon's statements during the period in question had been "plainly misleading."

Terayon's counsel, Paul Goldstein, would not comment on the Milberg Weiss submission other than to say that he plans to seek further discovery from the firm, as Judge Patel had earlier invited Terayon to do. Accordingly, Judge Patel is probably still months away from deciding what to do next. Her options include kicking the firm off the case, fining it, or deciding that it did nothing wrong after all, and allowing it to continue as co--lead counsel.

--Roger Parloff
"Millions"? Where is the evidence for that, other than CEO claims? By Weakened Warrior on 4/29/2006 4:52 PM
Bobo:

You say: "What does that have to do with whether there are millions of fraudulently created shares trading of their stock?"

You can answer that question by considering another -- where did the allegation that there were "millions" of fraudulently created shares trading come from?

Answer? The CEO.

Now it doesn't take a logician to see that IF that CEO is not credible, THEN perhaps his assertions about his company's stock being heavily naked shorted are not true.

Where is the evidence that CXN has been naked shorted at all, much less heavily? Even Byrne comes up with some sort of math -- "I own this many, my Dad owns that many, these mutual funds own this many, but this many seem to exist, therefore something is funky." Where is that logic in this case? Has the CEO presented it? Have you? Does it bother you that the short interest is something like 300,000 shares out of 50 million? Byrne uses the OSTK short interest as part of his evidence. Why doesn't the same apply here?

This is not hard to understand.

I'll even put it in the single sentence paragraphs of which you are fond.

Liars tend to lie, right?

So if a particular CEO has tended to lie in the past, as has been alleged, then he might be more likely to be lying now.

That's the point, Bob.

And don't threaten me with post pulls -- I really don't care. I know you are reading this, and when you see that CXN and naked short selling have exactly nothing to do with each other, you will remember. If you want to censor valid information from your own board, feel free. I'm not insulting you, and I'm not bashing the company. I'm saying you ought to look very closely at the record of this CEO and see if you, Bob, think he's credible.

You should read the lawsuit links, which detail things like below-market private placements of stock, and ask yourself if shareholder-friendly CEOs do that kind of thing. And finally, as I said in my original post, ask yourself if this is someone whose cause you want to be promoting, as you do when you say things like "This could well be the little company few ever heard of that revealed that the emperor has no clothes. Trust m