After the Journal’s editors take Eisinger off the Bunny story, it is handed to Carol Remond of Dow Jones Newswires. Carol spends a few weeks trying to prove that the Easter Bunny is a paid stock promoter or some other force for evil, but unable to do so, she gives the story to Roddy-Boyd-The-Post who begins telling people he knows the Easter Bunny’s identity because the Bunny’s voice matches that of someone he heard on a conference call. When the Easter Bunny points out that, unlike the Bunny, the person on the conference call sounds like a chain-smoker in his late 40s, Roddy-Boyd-The-Post posits that the Bunny has been using real-time voice altering technology.

Then Roddy writes his big story - to be surpassed only by his garbage story five months later - that the Easter Bunny is, in fact, a used equipment salesman named Phil.

Remond’s Bunny work is at least a step above her earlier effort to describe a Mafia-infested brokerage in Canada as a legitimate “market participant.” It also beats her madcap scramble to prove that Patrick Byrne was running a criminal operation out of a gay bathhouse. “I’m going to shred this guy to bits,” she declared to a former SEC lawyer, and then ran around asking people whether they knew anything about a financial swindle Patrick was conducting with a cabal of gays in San Francisco.

Patrick admits some responsibility for Carol’s confusion. Suspecting that Rocker was obtaining privileged information about Patrick and Overstock, but not sure how, Patrick created two controlled leaks: one was that he was gay, one was that he used cocaine. Neither story was true, but if somebody were to believe these tales, that would be OK with Patrick. Meanwhile, he’d be able to map where information was leaking, depending on which story reached David Rocker.

A few days later, somebody had delivered the gay news to Carol Remond, who in the course of trying to “rip Patrick to shreds,” allowed the story to metastasize into something about a cabal and a bathhouse.

Patrick caught the mole, or the person he strongly suspects of being a mole, and was provided evidence that she co-owned two shell corporations under a different name with another Overstock employee. The shell corporations had no discernable business other than owning one cell phone. It appeared to those around the mole that her assignment was to figure out who Patrick knew at the Motley Fool, an internet financial news publication that had yet to be infiltrated by Rocker, and was thus the only publication still giving favorable coverage to Overstock.

Patrick confronted the suspected mole, who denied having ever heard of that other Overstock employee or having any shell corporations. He pointed out that the other employee’s file showed that she, specifically, had arranged for him to be hired, that they lived in the same apartment building, and that in fact, they lived next door to each other. At that point she remembered that she knew him, but denied having any dealings with him. Patrick pointed out that she co-owned two shell companies with him. At that point she remembered that she owned two shell companies with him. At that point Patrick fired her.

The alleged mole now works for the governor of Utah.

Soon after she left, a journalist at the Motley Fool began trashing Overstock - with help from David Rocker.

* * * * * * * *

November 2005….So three months have passed since Patrick sued David Rocker and placed him at the center of a financial scheme dubbed “The Miscreants’ Ball.” And now, Bethany McLean of Fortune magazine has published a story called “Phantom Menace,” which ridicules Patrick for suspecting short-sellers of using dubious tactics.

The day “Phantom Menace” hits the newsstands, a pastor at a Catholic church in Canada receives a package with the return address, “P. Fate.” Inside, there is a letter concerning Prem Watsa, the CEO of Fairfax Financial, a reputable financial services company in Canada. The letter reads:
 

Dear Father, The attached documents are being sent to you out of my concern for the Church’s finances. I am extremely sensitive to this as a result of losing a dear friend, Father Richard Bourgeois, an enlightened Benedictine Priest formally of the Collegio D’Anselmo, which as you may know is the Cardinal College of the Vatican. On September 4, 1999 the fugitive Marty Frankel, who perpetrated a massive fraud on the Catholic Church, was arrested at the Hotel Prem in Germany. Interestingly, a review of your most recent, “Talk in the Pews” shows Mr. [Prem Watsa] as the Chairman of the investment committee of the church. More interesting are the similarities in the facial features between Mr. Marty Frankel and Mr. Prem Watsa. While these coincidences are surprising, they do not compare to the similarities between the massive money-laundering schemes perpetrated by Marty Frankel and the massively convoluted paper shuffle created by Mr. Watsa through his public vehicle Fairfax Financial Holdings Ltd…the pattern of activities of Mr. Prem are too similar to the course of conduct of Marty Frankel to be overlooked by a person such as yourself, who is responsible ultimately for the funds of the congregation. Be aware Father, be skeptical and ask Mr. Watsa to make confession.

God Bless, P. Fate.

Attached to this note is a 30 page document entitled “Marty Frankel: Sex, Greed and the $200 Million Fraud,” which provides information about Frankel’s exploitation of the Catholic Church, and a vivid description of his adventures in sadomasochistic and group sex.

Mr. Watsa is an honest CEO. He is often referred to as “the Warren Buffett of Canada.” He has absolutely nothing to do with a sadomasochistic church scammer named Marty Frankel.

But Mr. Watsa, his family and friends will receive many more notes in the weeks to come. They will also be harassed, threatened and followed by goons in black vans. At one point, Mr. Watsa’s secretary will receive a letter signed by “Dick Tracy,” accusing her of being involved in a financial crime. The general counsel of a Fairfax subsidiary will receive a similar letter reading, “I am reading about you in the Lawer [sic] News and am stunned by the fact that you are posing next to the largest nose I have ever seen. Being so close to such a nose, one would think the sense of smell would rub off on you. In particular can you smell the very serious negative issues that are facing runoff for Fairfax.”

All of this is the work of a man named Spyro Contogouris. This fellow’s business card identifies him as working for an outfit called “MI4 Reconnaissance.” Sometimes, he holds himself out as an FBI agent. Other times, he claims to have connections to government officials at the highest level. In a note to Fairfax’s former chief financial officer, Contogouris writes: “Take just a minute, sit back and try to view what the world will look like for Fairfax and its former officers three years from now given the current level of regulatory scrutiny. I can help…” In another note, Contogouris promises to “bring a former Special Agent of the Secret Service and FBI…uniquely qualified to communicate to you a depiction of how the government works…”

When the former CFO agrees to meet, Contogouris changes his name to Martin Gardener, explaining, “I do not stay in hotels under any Christian name when meeting insiders at companies. You can use your imagination why. Clearly it leaves my options open in telling my story in the event I am ever subpoenaed. Capisce?”

Contogouris is a con artist who later goes to jail for ripping off a Greek shipping magnate. Prior to his imprisonment, he serves as a favored source to Bethany McLean, author of “Phantom Menace,” Roddy-Boyd-The-Post, Carol Remond, and Herb Greenberg - all of whom write negatively about Fairfax. Cramer, TheStreet.com, and The Wall Street Journal’s “Money & Investing” section, edited by Dave Kansas, formerly of TheStreet.com, also publish negative stories that mimic Contogouris’s “analysis.”

Contogouris’s business card may read “MI4 Reconnaissance,” but it should be no surprise that he is, in fact, employed by a hedge fund that is linked to David Rocker and Mr. Pink, both of whom are short-selling Fairfax stock. The hedge fund that employs Contogouris is run by a former employee of a man named Steve Cohen, who is also shorting Fairfax stock.

Cohen has achieved fame for keeping a $12 million stuffed shark in his living room. He is also the most powerful individual player on Wall Street. His trades account for more than 3% percent of daily volume on the New York Stock exchange.

In 2003, these high-powered hedge fund managers launched what they called “The Fairfax Project” - a plan to destroy Fairfax Financial. The hedge funds, working with MI4 Reconnaissance, have provided information to the SEC and the Department of Justice, which launched investigations that have so far gone nowhere.

Meanwhile, Fairfax has received a listing, without its authorization, on the Berlin Stock Exchange-making it easier for hedge funds to sell phantom stock.The company has appeared on the Reg SHO list of companies victimized by phantom stock almost every day since the list began publishing in 2005.

And on the same day that Mr. Watsa’s pastor receives that bizarre letter from MI4 Reconnaissance - the day that Bethany McLean publishes “Phantom Menace,” which ridicules Patrick Byrne for saying that some short-sellers use dirty tricks - on that day, hundreds of millions of dollars worth of stock in both Fairfax Financial and Overstock had been sold into the market and never delivered.

A simple Freedom of Information Act request to the SEC confirms this.

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