Utah.
Mostly desert. Beautiful state. Friendly people, home to the Mormon Temple, Park City, Overstock.com, and many other noteworthy people, places and things.
And now the first state in the union to take definitive steps against naked short selling.
A bill passed in the legislature there carries significant penalties for failing to disclose information about who is failing to deliver stock sold in companies registered in Utah.
You can read an article about the bill here.
You can read the actual bill here.
This is significant for a number of reasons. First, it represents a state stepping in and establishing meaningful penalties for aiding in keeping violations of basic property rights secret - something it is entitled to do, and which complements established law. You take someone's money in Utah, and don't deliver the property in the time allocated by the 1934 Securities Exchange Act, then your identiy is known and recourse is available - or you get hit with some meaningful fines. It will henceforth be painful to commit this sort of fraud in Utah.
Why it will only be for Utah registered companies is a sad testimonial to the ineffectiveness of the SEC. This bill is entirely consistent with Reg SHO, and merely imposes additional measures to augment SHO's non-penalties and non-disclosures. It strives for visibility and transparency where there is currently opacity and secrecy, and an awful lot of larceny. Why a state has to step in and lead the pack, rather than the SEC, is deplorable.
It really is pretty simple. Commiting fraud by taking shareholder money and then failing to deliver the product just got expensive in Utah. And every major brokerage in the country has offices there, if not regional clearing and processing centers, so this will impact all of them. My hunch is that they are going to squeal like stuck pigs and fling lawsuits like mad the second this goes into effect, as the LAST thing Wall Street wants is real penalties for real larceny - one could say that cuts into their bread and butter.
What a shame.
Bravo, Utah, and bravo, Patrick, for showing that significant steps can be made in this battle against special interests who view it as their birthright to bilk investors out of their savings.
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Marginally recognized pseudo-pundit Gary Weiss was quick to be the first to hurl feces at this bill. Not surprisingly, this self-anointed champion of investor rights is actually against anything that translates into actual transparency or reining in of Wall Street larceny. Normally I don't acknowledge "'lilGW's" dissembling, as it is so full of misstatement and falsehood that one could make a career out of debunking it, and I figure that any thinking upright biped over the age of seven can see the holes in what passes for logic in 'lilGW's world. But it is noteworthy for the speed with which it was distributed.
Here's the latest from his blog, which is stunning in its duplicity and ignorance. I'll interject my comments after each quote, in case it isn't immediately obvious as to how flawed this perspective is.
“Thursday, May 25, 2006
Crackpot Victory in Utah
The crackpot anti-naked-shorting conspiracy campaign scored a major victory yesterday, one that will be cheered by every incompetent CEO, stock promoter and boiler-room thief in the country. Boys, Utah is in your corner!
(Why is that? Why is enforcing the 3-day delivery rule to be cheered by stock promoters and thieves? Using this logic, violating those rules is good, as it would pain these promoters and thieves. Doesn’t that seem odd, that a guy who is supposedly anti-Wall Street corruption writes from the perspective that violating the rules mandated in the 1934 Securities Exchange Act is good, and enforcing “prompt” delivery of shares is bad? WTF?)
The Salt Lake City Tribune reported today that the Utah state legislature passed a bill that takes aim at naked short-sellers – a "menace" that, for the most part, exists mainly in the press releases of crummy companies and the imagination of conspiracy theorists. Note the delicious irony -- a state notorious for real stock fraud passed a bill aimed at curbing nonexistent stock fraud.
(So this exists only in the imagination of crackpots. Gary always ignores the only hard data yet presented, the FOIA data on NFI, where for a period of 2 years – up until the cutoff date of the report – as much as 40+% of some trading days was failed trades, and at one point 12.5% of all shares outstanding were failed trades. That isn’t anyone’s imagination – that is proof positive of massive fails in a company over a long period of time.
Gary, never one to be bothered by facts or hard data, merely does a three monkeys when this comes up, and blithely pretends the data is meaningless, or doesn’t exist. Gary, honey, face it – that FOIA data shows massive fails for long periods. It does. That isn’t innocent “the dog ate my cert” stuff – it is concerted stock fraud via failed deliveries, nothing else. The one day snapshot of OSTK fails shows 3% or so of their outstanding shares failed, per another FOIA – also significant for a company where the family and friends own almost every share. So please stop insulting the intelligence of your few readers with this nonsense – it isn’t washing. Your declarations that this problem is “nonexistent” is provably false and misleading, as in a lie. Stop lying, Gary. Please. It is embarrassing. )
Not surprisingly, this bill was heavily pushed by Overstock.com CEO Patrick Byrne, who has feverishly sought to divert attention from his company's poor performance by whining about the supposed naked-shorting of his company's shares.
(Supposed? Gary must have missed the aforementioned FOIA data on OSTK from last August, that showed for one day that 3% of the total outstanding shares of the company were failed. He also must have missed Byrne unable to get delivery of his shares for months, and Arne Alsin’s articles chronicling similar experiences, as well as Byrne’s presentation showing a gross disconnect between shares held at the DTC and share entitlements at the brokers. Gary just ignores this mountain of data and again declares this to be “nonexistent” and “supposed” – hoping you are as stupid as he believes his few readers must be.)
The problem with the bill is that it doesn't target naked shorting per se. It targets "fails to deliver" securities, which can occur for many reasons unrelated to short-selling. However, the legislature apparently felt that was of no importance in its eagerness to please Byrne and the "counterfeit securities" loons.
(Wrong. It actually excuses “legitimate” delivery failures under Reg SHO – and targets only the abusive, non-bona-fide market making failures. One would have to read the bill and comprehend the language to absorb that, however, so either Gary hasn’t read it, or his reading comprehension is low, or he, as with the FOIA data and the rest, is simply misstating again. Why all the falsehoods, Gary? Why? Are you being paid to write this crap?)
The legislation itself -- you can look at it here -- has all the usual loopholes, and I'm not really sure how much it matters or whether it will withstand court review.
(Ahhh, the first honest statement – Gary isn’t sure whether it will withstand court review. Here Gary admits the limits of his certitude – a refreshing break from the hyperbole and declarative misstatements that are his “style.”)
The important thing is not the bill -- or even that the Utah state legislature has made a fool of itself -- but rather that a campaign that is seeking to misinform America's investors has scored a major victory.
(So more invective and insults and name calling, and the assertion that this is a misinformation campaign – all declared as though established "truth", and yet wholly lacking any basis in fact. Gary never is able to articulate why complying with 3-day delivery rules is bad, or why highlighting the industry’s failure to do so is bad, or how informing America of how Wall Street takes their money and fails to deliver the product is bad – he merely calls those who are bringing visibility to the problem “loons” and calls the Utah legislature “fools”. Coming from a guy who can’t read and comprehend the bill, and who doesn’t seem to grasp the FOIA data, the irony is not insignificant…)
Now, this segues nicely into another area which features ‘lilGW, which is one group’s speculations as to why he is so anti-market reform.
A group contacted me with some compelling evidence that at least one of the most profligate Yahoo message board bashers, an alias known as Lamborghini751, is in fact ‘lilGW, or is posting from the same computer as ‘lilGW. If true, this is stunning, as it is hard evidence that this supposed authority is actually posting 40+ times per day, bashing Overstock, hurling insults, denigrating the company, invoking racially charged invective, and generally acting precisely as a paid basher would behave. Is there merit to this idea? Decide for yourself.
Here's the text of the post:
"Gary Weiss...This is your life,
by: ipfrehlee 05/25/06 09:32 am
Msg: 97783 of 97788
Nobody seems to need proof that Gary Weiss has been posting all manner of hateful and bigoted content here as lamborghini751, but I yearn to share some of the MANY many proofs that tie the two of them together.
I'll start with the most basic, and work my way toward the most complex but damning. That'll take about seven steps.
As soon as Weiss yells "uncle" and starts to set things right, I'll stop.
First, find a set of four photos (screenshots) here:
http://www.flickr.com/photos/proofmonger/
Read them in order.
To really understand them, you'll probably need to enlarge them to their largest (original) size. You'll find the button to do that on each individual image's page."
Here is the link to the actual post, which shows a series of screen captures establishing a damning pattern of evidence.
Gary, really, if they are right, you not only should be ashamed of yourself, but your publisher should seriously question the integrity of the material you are presenting in your latest screed. I have no way of knowing whether their speculations are correct, but they look pretty damaging to me, and frankly this begins to look like you are part of a coordinated campaign to damage the reputation of Byrne, the Market Reform Movement, Overstock, and anyone critical of the miscreants who routinely violate securities law in order to manipulate the price of targeted securities. I’m not an attorney, nor a high-tech expert, but I don’t see a lot of alternative explanations. Again, I’m not saying that Lambo IS Gary, but the data is provocative, to say the least. I can’t wait to see the second in the series of 7 “proofs” of Gary being Lambo – they gave me snippets of it, but seeing the whole data set is astonishing – I know those screen saves sure are.
What do you think?
If so, should the SEC get involved? Is anything illegal going on? Attorneys? Any opinions?