The crusading bloggers–or “pajamahadeen,” as they are sometimes called–have worked hard to get the mainstream media interested in the phantom share problem. In April 2005, the Easter Bunny even scored an invitation to have lunch at the Forbes mansion with a group of Forbes journalists and Kip Forbes himself.
The Easter Bunny and the journalists spoke for an hour in a living room. At first things did not go smoothly. The Bunny got lost in the twists and turns of hiding in South America with a backpack to avoid getting whacked, and people began rolling their eyes.
But then everybody moved to a private dining area. The Forbes journalists were open-minded. They were not hostile. At the end, Kip Forbes held up a 1987 Forbes magazine that had a cover story about naked short selling.
A year later, Forbes begins running a series of stories highlighting the travails of companies victimized by phantom stock. Correspondent Nathan Vardi gets the Mafia angle. And other stories are written by Liz Moyer, whom Gary Weiss (friend of crooks, hijacker of Wikipedia, liar) had prevented from getting a job at BusinessWeek.
* * * * * * * *
While the Bunny was soliciting Forbes, Gayle Essary was cheering on NBC’s “Dateline” program, which was rumored to have plans for a big expose on phantom stock. Essary, who has since passed away, was the son of an evangelical preacher who spent his formative years traveling to ministries throughout Texas. He retained in his own language a bit of the doomsday flourish, and in 2004, this short, slightly rotund man, who wore square eyeglasses and frumpy suits, launched a news service, FinancialWire, which for a while offered general business information, but was soon occupied almost entirely in churning out regular dispatches on “Stockgate: The Biggest Financial Scandal in History.”
In June 2004, Mark Faulk, a song-writer and playwright, broke the news of the Dateline story on his blog, “The Faulking Truth.” Gayle followed up with one of his first stories on FinancialWire.
StockGate: Dateline Could Blow Lid Off ‘Stockgate,‘ says Website.
“FinancialWire learned several months ago that ‘Dateline,’ the investigatory TV program aired by General Electric’s (NYSE: GE) NBC unit, has been preparing a blockbuster expose of ‘Stockgate,’ the term coined by FinancialWire to encompass the massive naked shorting scandal, that could cause the entire financial community to implode…”
In April 2005, while the Bunny was addressing Forbes, Gayle was still waiting for that Dateline story, and FinancialWire was still churning out the headlines:
StockGate: 5 Days To Dateline…
StockGate: 4 Days to Dateline…
StockGate: 3 Days to Dateline…
StockGate: 2 Days to Dateline…
Then, on April 12, this story:
StockGate: Dateline NBC Cancelled…
“No one is talking, but Dateline is reportedly blaming the Pope’s death, the Prince Ranier death, and the Prince Charles Wedding and other events as causing the delay. However, a desk person at the network revealed that the story is actually being replaced by an Al Roker interview with Ruben Studdard of American Idol fame…”
* * * * * * * *
FinancialWire speculated that the Depository Trust and Clearing Corporation might have quashed the Dateline story, and Gayle had good reason for his suspicions. The Big Black Box of Wall Street had recently unleashed its imperious public relations machine on Euromoney, a prestigious European publication, which had published a powerful story on naked short selling. (Unlike the captured American financial media, European publications have provided extensive coverage of the phantom stock problem).
“We will not accept silently this type of sloppy, one-sided journalism whether in print or broadcast,” DTCC first deputy general counsel Larry Thompson wrote in a letter to Euromoney. The word “broadcast” could only have been a reference to the impending Dateline story.
Meanwhile, the Big Black Box had turned its sites even on Gayle’s little news service. In April, 2005, DTCC officials demanded that the publishers of Investors Business Daily remove FinacialWire from IBD’s news feed, which had delivered Gayle’s stories to Yahoo! News and other internet outlets.
FinancialWire hired an attorney and celebrated the event in a
headline.
StockGate: Dateline NBC Cancelled and Attorney Accuses DTCC of Cheap Thuggery
“Is it possible that now, NBC has also fallen victim to a halt-the-media conspiracy that has outgrown even Financial Wire?”
But one of the best measures of any DTCC public relations campaign is Carol Remond. Whenever the DTCC faces bad news, the Dow Jones reporter can be depended upon to rush to its defense. That is why, in April 2005, as the Easter Bunny was lobbying Forbes, and Euromoney and Dateline were preparing to run exposes on naked short selling, Carol published a story noting that Patrick Byrne had become a “crusader and benefactor of conspiracy buffs” who believe Wall Street firms are illegally selling phantom stock.
Carol suggested that it was somehow suspicious of Patrick to publish an ad in the Washington Post encouraging the government to take action against phantom stock sellers. She said it was strange that Utah Senator Bob Bennett had taken an interest in the issue - that it must be because Patrick had contributed to Republican political causes.
On the day of that story hundreds of millions of dollars worth of Overstock shares that had been sold into the market remained undelivered. Several dozen other Utah companies were on the SEC’s list of companies victimized by phantom stock.
Also on that day, the Washington Legal Foundation, a prestigious legal advocacy group, published its own ad in The New York Times. It ridiculed the SEC for pursuing Martha Stewart for insider trading while failing to investigate “truly serious allegations of stock manipulation by plaintiffs’ class action attorneys and short sellers.” The prestigious lawyers said that the criminals have “behind-the-scenes contacts” with “friendly media…”
And, it added, “it’s all being done right under the noses of SEC regulators.”
* * * * * * * *
Over the next couple of months, Congressmen on both sides of the aisle sent letters to the SEC and the DTCC inquiring about the failure to stop illegal naked short selling. In June, 2005, William Donaldson resigned as chairman of the SEC, and the word from inside the agency was that he was actually fired when he began talking about addressing the problem of phantom stock.
This was shortly after Donaldson confirmed for the first time the existence of a Presidential working group “to address market issues for private pools of capital” (the “pools” being hedge funds). The pajamahadeen quickly discovered that the committees of this group were stacked with Cramer-connected short-sellers, including Jim Chanos, of Cynicism (Kynikos) Capital.
Carol Remond and other journalists, of course, picked up on none of this.
So the pajamahadeen took matters into their own hands. They held protests in Washington and New York. “National Counterfeit Conspiracy Days,” they called them.
There weren’t a whole lot of people at these protests, but they stood tall — on Capitol Hill, then at Times Square, and finally in front of the offices of the DTCC - hollering into loud speakers and waving banners. “I paid for real shares BUTT…,” read one banner. “The government knows but is covering it up,” read another. One protestor had a bare bottom (”naked shorts” - get it?). Another was wearing a purple business suit, and it wasn’t a costume.
The mainstream media didn’t cover the protests but Hugo, of Fit-a-Rita Margarita, was there.
He was making a documentary.
* * * * * * * *
So in the absence of honest media, these are the people left to fight the fight. And Patrick embraces them. He recognizes that they are underdogs. He knows that he’ll be ridiculed. But he embraces them anyway. He does it because he knows they are right.
His conviction only grows in the month before his “Miscreants’ Ball” conference call. That’s when his investigation reveals that Kevin Ingram, a convicted arms dealer, is mixed up in these events. A former trader at Goldman Sachs and Deutsche Bank, Ingram left to form his own dot-com in the late 1990’s, got short of cash, and went to Miami to deal arms. He made a deal to sell Stinger missiles to Pakistani Inter-Services Intelligence agents (even promising to work on obtaining a nuclear trigger), but they proved to be undercover FBI agents.Ingram got nabbed while boarding a chartered Lear jet bound for Europe with a million dollars in a duffel bag. He did a stint in federal penitentiary, then went to work on anonymous internet message boards, where the stocks he bashed mirrored the positions of Rocker - and of Herb, Bethany McLean, Jon Markman, The New York Post, Cramer, Gary Weiss, Floyd the Flimflammer, Carol Remond, TheStreet.com, and the Journal’s “Money & Investing” section.
At the same time that he learns of Ingram’s involvement, Patrick discovers the mole in Overstock. With Rocker putting out feelers for other Overstock employees who might be willing to spy for him, Patrick asks Stormy Simon, his vice president of marketing, to meet the hedge fund manager and “show some leg.” Stormy quickly gets a phone call from Rocker (which she plays on her office speaker phone, with Patrick, an attorney, and a recently retired US Army Colonel present as witnesses). Rocker is very excited, and presents ways in which he and Stormy can exchange information. He insists she come immediately to seem him, and tells her that he has ways he can “protect her.” When she hesitates, he becomes adamant.
Meanwhile, Patrick comes to suspect that the Kroll investigative agency has him under surveillance. Kroll employs former agents from the FBI and other federal agencies to dig up dirt for clients - and seems to have a special unit that serves hedge funds linked to Jules Kroll’s Rye, New York neighbor, David Einhorn. To determine whether he is under investigation, Patrick goes to Kroll’s offices and asks if he can hire them. He figures if they are investigating him then they will neither take him as a client, nor tell him that they will not take him as a client (because if they tell him they will not take him as a client, they’ll know that he will know that they must be surveilling him already). Sure enough they hem and haw and make a lot of excuses why it might take some time to file the paperwork.
Meanwhile, an independent security consultant tells Patrick that Kroll is preparing a report that a hedge fund is going to deliver to the Department of Justice. The private eye says that this report will accuse Patrick of funding international terrorism. It remains unclear whether the private eye’s bizarre information is accurate - but by this stage, anything seems possible.
* * * * * * * *
In any case, a small group of hedge funds are illegally destroying public companies with the help of convicted felons, mobsters, and captured regulators - and the only journalist on the case is Hugo of Fita-a-Rita Margarita.
Hugo, and NBC’s Dateline.
That’s right, Dateline is back on the case. FinancialWire announces the news.
StockGate: Travesty of Our Time: Naked Short Selling Finally to be Exposed on Dateline NBC?
Then, on July 29, 2005 the day does come. After nearly two years of investigation, Dateline airs its expose on phantom stock. Gayle, the Easter Bunny, and the rest of the pajamahadeen sit in front of their televisions in states of pure excitement.
Then Gayle’s story on FinancialWire: StockGate: Dateline Finally Aired. Yawn.
“The now infamous and previously postponed General Electric (NYSE: GE) Dateline NBC expose aired Sunday night to cacophony of yawns and disbelief…
“Leading up to the program, the producers refused to respond to questions about whether the program had been interfered with in the postponement and reediting process. There was no mention at all, for example, of the Depository Trust and Clearing Corp.”
Indeed, Dateline’s “expose,” which was supposed to be an hour long, had been reduced to a ten-minute non-story of the form, “Some say this is happening, others deny it, and all we can say is, ‘Be careful out there.’”
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