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Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 8/29/2006 5:41 PM

So, the CFA association, which is affiliated with Wall Street by virtue of their advisory capacity (unless they are honest, and are advising to stay the hell away from the markets) and role as financial advisors, side with Gradient in their Amicus, which trumpets the importance of free speech.

So do the reporters, not surprisingly. Or rather, so does the "Reporters Committee for Freedom Of The Press, The Copley Press, Inc., and the Bakersfield Californian" (!?!).

I would link the two Amicus briefs here, but they are too large for me to upload to my server.

I have both, have read 'em, and they basically say the same thing - free speech is good, and when analysts express opinions about companies, they are expressing their free speech, which is really important to keep free. God Bless Free Speech.

I'm all for that.

I'm a big free speech guy.

Which is why I find it sort of amusing that David Rocker, one of the guys in this suit, made a big deal out of indicating that he was going to sue me over a year ago...presumably because of my expressing my free speech.

That would be the same guy who was laughed out of court when he tried to sue a message board poster for expressing his free speech.

But that is his side's defense. A free speech defense. Honest. Bad Overstock is trying to chill Gradient's free speech, and presumably, Mr. Rocker's as well.

So free speech is good if it keeps you from going to discovery and you are a research firm or a mega-wealthy hedge fund, but it isn't if you are one of his targets.

Check.

Here's what I find sort of fascinating. The lower court ruled, correctly, in my opinion, that this wasn't about speech, it was about conduct, thus the free speech smokescreen was irrelevant. It was about conduct. Illegal conduct. And let the facts speak for themselves.

That caused a rush to block discovery (where the facts are discovered) while the Gradient/Rocker side appealed the court's decision, claiming that the judge had made a mistake.

I'll bet.

Let's start with the fact that Gradient isn't a journalism firm. They are a paid research firm accused of publishing negative and false information given to them by their hedge fund clients, after the hedge fund clients had front-run the reports by short selling the firms targeted in the reports. The purpose of publishing information that was given to them and edited by the hedge funds (allegedly) was to disseminate that negative info in a supposedly independent manner, and to allow journalists like Herb Greenberg to cite the negative information, virtually real time, in articles allegedly timed to coincide with massive short attacks.

That sounds a lot like stock manipulation, or racketeering, or collusion, or damaging a business' reputation for profit...but it doesn't sound like what I think of as reporting. And it sure doesn't sound like research or analysis - why call it such, if it is just a hedge fund talking their book via a thinly veiled third party, who allegedly was taking their cues and info from the hedge funds?

That sounds like a question of CONDUCT. Short and distort. Not speech. Releasing damaging, and often false or incomplete information, in order to affect the targeted company's business prospects, and stock price.

Free speech would be, if someone named the Easter Bunny said he had researched what appeared to be wildly manipulative trading in a number of stocks, all of them Rocker Partners shorts, and all of them coincidentally negatively reviewed by Gradient, and that further, those serendipitously grouped victim companies all landed on the SHO list, had Greenberg and another half dozen suspiciously malleable "journalists" writing negative slams about them, had coincidental SEC investigations launched (which turned up nothing but further damaged the stock price and business reputation)...and most had been sued by Milberg Weiss. And that the bunny found that most odd.

That would be free speech.

Free speech would also be where I wondered aloud if the sponsors of one of the briefs, who publish the San Diego Union-Tribune - know Herb Greenberg very well - given that they publish his material in that fine periodical?

Free speech. Nobody more for it than me.

But if I have my buddies front-run (so they can make big money)a negative slam I publish (paid by them to do so), supposedly as an independent researcher, but without disclosing that they supplied me most of the info and had paid me to release it so they could profit - is that free speech?

That is really the question here.

I don't know. I'm not an attorney, nor a reporter, nor a CFA.

But I am smart enough to know the difference between conduct, and speech.

Apparently the California Attorney General's team is too - their brief is squarely supporting Overstock, and dismissing Gradient's claims out of hand - with a mountain of case law to back their position up.

So we have the state's top lawman saying "Bull" to Gradient's mewling, and a nebulous reporter "committe" and a CFA organization (same one that killed the roundtable on naked short selling - apparently that kind of topic doesn't resonate with their free speech high horse) saying Gradient (and presumably Rocker) are freedom lovers threatened by oppressive corporations.

Their riff is rather heavy handed, mentioning loaded names like Enron and Worldcom to support their contentions - the financial world's equivalent of mentioning Stalin or Saddam to underscore one's point about those who tightly control a supposedly unbiased press. Then again, I'm a tough critic of Amicus briefs, having played a significant role in the NCANS one accepted by the Nevada court, arguing against the SEC's position.

What does it all mean?

Could be that someone is doing everything they can to pull in favors, and try to paint Gradient in the flag.

BTW, was it free speech when Gradient's PR flack "misspoke" on CNBC about Herb having instantaneous access to Gradient's important work - only to be proved incorrect by blogsters within minutes? Some accused her of baldfaced lying, but they did so in a spirit of free speech - and it was incorrect...

Free Speech. A wonderful thing. Unless you are suing someone you don't like, because they are messing up your meal ticket. Then free speech is for everyone else, but your critics.

Funny, that.
Copyright ©2006 Bob O'Brien
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Comments (19)
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By mhatmccane on 8/29/2006 10:29 PM
In this crazy, crazy world, I keep wondering when we are going to see an Amicus Brief by the SEC, and the SIA, and the DTC. I am pleased that the CA AG got involved and do hope that we get to discovery after getting rid of the smoke screen journalist nonsense.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By bobo on 8/30/2006 1:18 AM
We've already seen an amicus from the sec. Coming down on the side of the DTCC.

NCANS filed an amicus trashing their's.

Any quesions?
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By Granny on 8/30/2006 2:21 AM
I like your Freudian slip ... Fee Speech. Isn't that what they are really squawking about?
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By From_CFA_Institute_Facts_Sheet on 8/30/2006 2:31 AM
Top employers of CFA charterholders:

Bank of America Corporation
Barclays Group
BMO Financial Group
CIBC
Citigroup
Credit Suisse Group
Deutsche Bank
Fidelity Investments
The Goldman Sachs Group, Inc.
ING Groep N.V.
JPMorgan Chase & Co.
Lehman Brothers, Inc.
Mellon Financial Corporation
Merrill Lynch & Co., Inc.
Morgan Stanley Northern Trust Corp.
PricewaterhouseCoopers
Prudential Financial, Inc.
Royal Bank of Canada
Scotiabank Group
State Street Corporation
TD Bank Financial Group
UBS
Wachovia Corporation
Wellington Management Company, LLP
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By Granny on 8/30/2006 4:13 AM
Speech by SEC Staff:
Regulation vs. Enforcement in an On-Line World

by Richard H. Walker
Director, Division of Enforcement,
U.S. Securities & Exchange Commission

- - - - -

The Bond Market Association's 6th Annual Legal and Compliance Seminar
New York

October 25, 2000
I reject the argument that when fraud is perpetrated on a new medium, rulemaking is more appropriate than enforcement. The First Amendment has never protected fraud and it does not do so in cyberspace. Tokyo Joe quickly learned this lesson when his motion to dismiss was recently denied.

And Section 10(b) applies in the same way to conduct on-line and off. Its broad proscriptions address prohibited conduct and provide no exemptions based on the medium used.

Just because the Internet has spawned new techniques for facilitating traditional frauds does not mean that existing statutory prohibitions do not apply. No where is this more apparent than in the area of market manipulation � the intentional interference with the free forces of supply and demand to affect the price of a security.

The laws prohibiting manipulation require proof of both manipulative intent and effect. Historically, this has been evidenced by devices such as wash sales, matched orders or marking the close that have taken days, weeks or months to accomplish. But these indicia of a manipulation are not required to prove the requisite intent and purpose. And their absence does not give rise to a regulatory gap that precludes enforcement of the law where proof of manipulative intent and effect is otherwise present.

In an Internet world, the time it takes to manipulate a security has shrunk from days to minutes, and the techniques for accomplishing a manipulation have been simplified. A single mass e-mail or "spam" sent by the click of a mouse can more easily and cheaply reach investors and artificially influence trading than hundreds of cold calls from an old-fashioned boiler room or months of trading among confederates who control a stock�s float. Yet the purpose and effect in both instances is the same, and the prohibitions against manipulation apply equally in both contexts as well.

This is a message that Jonathan Lebed, a 16 year-old stock manipulator who appeared on 60 minutes last Sunday, his parents, his lawyer, and various members of the media appear not to understand. And it�s a message worth reiterating as people have asked whether the fundamental prohibition against market manipulation applies to conduct on the Internet. Trust me, it does.

Here�s what Lebed did. He purchased large blocks of thinly traded microcap stocks, often accompanying these trades with limit orders to sell. He then posted hundreds of identical messages, commonly known as "spam," to Yahoo! Finance message boards using multiple screen names. The messages typically touted the company by claiming, among other things, that the stock was about to "take-off," would be the next to gain 1,000%, and was "the most undervalued stock ever." In a number of postings, he made very specific price predictions, for instance, that the stock would go from $2 to $20, while at the same time placing limit sell orders at much lower prices. In at least one posting, he falsely claimed that the company was about to enter into a contract that would have generated large revenues. Lebed typically repeated the postings a second time early in the morning of the next day before going to school. In every instance, the price and volume of the stocks he touted increased, in some cases to 52-week-high levels. And he always sold out his positions at a profit, usually within 24 hours.

Lebed admitted that he authored and posted the messages in order to cause the stock price to rise so that he could make a profit, both of which, in fact, occurred. Indeed, he conceded on national television that he was manipulating the stocks. It�s not very often that we find stronger proof of manipulative purpose and effect. Nothing beats an admission.

And yet, for some reason � perhaps because this conduct took place over the Internet � even prominent financial newspapers have had a difficult time comprehending that the case involves market manipulation, plain and simple. Some of the press and others have gotten completely sidetracked and have attempted to defend Lebed�s conduct by demonizing Wall Street and suggesting that what Lebed did is really no different than what Wall Street analysts do every day. Of course, to the extent an analyst intentionally manipulates a security, misleads investors through widespread Internet postings under multiple names, makes unsubstantiated price predictions or other statements that lack a reasonable basis, or scalps a recommendation by selling when the analyst is telling others to buy, the analyst has a serious problem. But to suggest that these are "standard brokerage house procedures" is sophomoric.

What is perhaps most disturbing about this case is the reaction we�ve seen from the Lebed family and from others who seem to treat Jonathan as a cult hero. Both Lebed junior and senior have said, "What�s the problem? There were no victims." Maybe the Lebeds should have used some of Jonathan�s profits to buy a dictionary rather than a Mercedes. Just because you can�t always see them or identify them does not mean victims don�t exist. Those who unwittingly bought at an inflated price � only to be burned when the stock collapsed � meet any dictionary definition of victim.

Mr. Lebed also says he is "proud" of his son and distinguishes his son�s securities violations from smoking pot in the garage or stealing hubcaps. I wonder how many investors who�ve lost money as a result of Jonathan�s manipulations would agree with this sentiment. A hubcap is worth about $20. Smoking pot -- as harmful and foolish as it may be -- does not injure innocent bystanders. Securities manipulation, by contrast, deprives people of hard-earned dollars needed for retirement, education and the like. So Mr. Lebed is right in saying his son�s conduct is different from smoking pot or stealing hubcaps. It�s worse.

The Internet continues to open up vast new horizons for all of us. I hope it will not cause us to compromise our moral principles and values, or lose the ability to differentiate between right and wrong.

- - - -

http://sec.gov/news/speech/spch413.htm

Weasel Disclaimer
The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of Mr. Walker and do not necessarily reflect the views of the Commission, the Commissioners, or other members of the Commission's staff.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By gregcable2002 on 8/30/2006 4:41 AM
What Gradient use'es is FEE speech,not free speech.Is the Amicus brief about FEE speech? HAHAHA Smile everyone,the crooks are getting hammered from every side now and the weekend is almost here.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By lynetta32233 on 8/30/2006 5:08 AM
Great column, Bobo...you do have SUCH a way with words!

So what makes an amicus brief an amicus brief? You've logically and objectively torn their "free speech" defense to shreds. Can someone submit your column as an amicus brief to the court?
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By of interest on 8/30/2006 5:32 AM
http://www.johnreedstark.com/ClassMaterials/OtherArticles/manipulationarticle.pdf

http://www.johnreedstark.com/AdvancedLawClassDocuments/Advancedsyllabus2007.htm

http://financialservices.house.gov/Hearings.asp?formmode=detail&hearing=54

http://financialservices.house.gov/Hearings.asp?formmode=detail&hearing=55

http://www.pbs.org/wgbh/pages/frontline/shows/dotcon/crying/
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By Little Bo peep on 8/30/2006 6:17 AM
Can you hear the MUSIC now?
Previews before the show starts?
Frosted mini-wheats for me please.

State Department investigators have found that the head of the agency overseeing most government broadcasts to foreign countries has used his office to run a “horse racing operation”

http://www.nytimes.com/2006/08/30/washington/30broadcast.htmlex=1314590400&en=653f63144d3d1469&ei=5088&partner=rssnyt&emc=rss


Special Report misled on the alleged roles of Armitage, Rove, and Libby in CIA leak case
http://mediamatters.org/items/200608290009
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By Concerned Citizen on 8/30/2006 7:30 AM
Free speech does have restrictions and exceptions:

Because of the case, Schenck v. United States in 1919, you can not shout "Fire!" in a crowded theatre

Because of the case, Brandenburg v. Ohio, the US government could restrict free speech only if it was "likely to incite imminent lawless action". IMHO this one seems to match what the miscreants are up to in our case.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By newspaper on 8/30/2006 8:04 AM
NY post smear job on Pegasus (PGWC).

How sad is it that the media attacks CEO’s who mention or try to fight counterfeit shorts?

Did this NY Post writer (Chris Bryon) just decide to write a bad piece on the CEO and the company out of the blue?

Does it have nothing to do with the company’s recent quest to rid its companies of counterfeit shares?

How dirty is this; how rotten is it that the “free” press is not even afraid of being accused of having an agenda? They have no fear of being accused of collusion to smear a company that is having problems with counterfeit shares?

http://www.nypost.com/business/horse_feathers_business_christopher_byron.htm
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By bobo on 8/30/2006 8:21 AM
newspaper: How about the 5 articles trashing FFH that were in the Post afer they filed their lawsuit? Or the ones trashing Biovail? Or OSTK?

But it is, after all, the post.

Their editor was the one at SABEW who was talking about how best to use the legal system to silence their critics - you know, to silence their free speech using legal intimidation?
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By Little Bo peep on 8/30/2006 8:31 AM
newspaper says:
NY post smear job on Pegasus (PGWC).

The media merry-go-round ride has a very long line at the playground.
Anyone think fur and feathers are flying?

Is the political finger pointing in high gear yet?

Pick your poison.

It is on both sides.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By davidn on 8/30/2006 10:54 AM
I noticed Mark Faulk's book is being advertised by google on this site through pay advertising.

Given Mark's work for the cause, you should give him a free ad. I'll make a point to click on some other ads to generate revenue and I suggest everyone else do the same.

"Counterfeiting the American Dream Pre Order your Autographed Copy Now"
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By phonesll on 8/30/2006 11:03 AM
One thing everyone should be able to recognize is that reporters, journalists, lawyers, and some criminals, do not attach the facts. They attack people and their integrity. Reporters and jouralsists do this specifically because this is how they can make a name for themselves. Its rare to see any kind of article praising someone for doing something good, but its an every day event to see someone who did something wrong. Of course, the "wrong" is all a matter of perspective. Obviously, the NY and Wall Street financial press are completely silent and don't want to point out the wrong doing being done. And we all know why. I find most reporters and journalists to be hypocrites of the largest magnitude. There are no facts any more, just their opinion written as facts.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By SammyO on 8/30/2006 12:31 PM
Other members of the CFA Institute:

Gayle Essary: We have over 70 analysts that have provided research facilitated by InvesTrend Research, or are available to do so. The vast majority are qualified via their standings in the Chartered Financial Analyst program run by the CFA Institute, the global standard. All have to agree to abide by the ethics and standards of the CFA Institute, plus our own prohibitions against owning or trading in stocks under coverage. Also no company pays an analyst, and the analyst may not receive compensation from a company. InvesTrend pays the analyst in advance for his or her initial report, removing any pecuniary interest in the outcome.

Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By kevin on 8/31/2006 6:51 AM
Buy side liquidity is more common than sell side liquidity.

When a company has bad news and drops, the true believers will hang on or even average down. There is almost always buying support.

When the company has good news, the sellers will be greedy and wait for a higher price and many new buyers will come in. There may ZERO sellers and lots of buyers. The industry won't get any commissions unless they counterfeit to these buyers. At a higher price, there may be less buying dollar volume and less commissions. At our expense, they are incented to keep the price from rising.

What the industry calls "liquidity" is actually maximizing the transfer of wealth from the buyers to themselves. If the stock is held artificially low, there will be no sellers except for the criminal counterfeiters and lots of buyers.

They transfer wealth from the buyers to themselves through the value of the counterfeit shares and through the commissions on the counterfeit trades.

Then they take a percentage of that wealth and invest it in buying up media outlets and politicians.

Since their ability to countefeit is unlimited, they can set the price wherever they want, as long as the company doesn't dividend or buy back shares or in the alternative, offers options trading.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By newspaper on 8/31/2006 8:01 AM
Much easier to destroy than build

Much easier to knock down than prop up
I have seen the sites and blogs that vehemently disagree with NCANS and thesanitycheck point of view.

Know what gets me about people who don’t believe in counterfeit shorts?

They all admit to pump and dump BUT not to short and distort.

If people scam up why cant them scam down?

All they can do and redo is chant the evils of pump and dump. But they all seem to think that shorters and counterfeit shorters are not capable of illegal activity.

Even with undisputable proof of illegal short activity to destroy companies they deny deny deny.

Not only do they seem to say that the people who counterfeit short are above reproach they also idolize them

Talk about a cult.
Re: Reporters and CFAs Submit Amicus Briefs in Support Of Gradient Free Speech By newspaper on 8/31/2006 8:32 AM
Talk about Naked Shorts Counterfeit Shorts and you will get demolished.

Look at the bath PGSW is taking today.

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