Russian Mafia Conspiracy on Wall Street in Media and Government - 4

So Patrick makes the mistake of appearing again on Kudlow & Cramer.

“But once again, once again, you are confusing the heck out of me and everybody else with your arguments about gross,” says Kudlow. “I’m not really sure why you continue to do this and what it is you’re trying to hide.”

Gross profits again? Patrick can’t believe it. “No good deed goes unpunished,” he says. “I’ve tried to explain the economics of our business. I wrote a three-page letter this time. Last quarter, I wrote a 12-page letter. Maybe it is confusing. I thought I’m trying to do a good thing.”

“But what is it that you’re hiding on this?…Are you trying to say to us you’re not making as much in sales revenue or that you will have a better future? I mean, it’s utterly confusing to me.”

“Well,” says Patrick, “first of all, I’m all about GAAP.” [GAAP stands for Generally Accepted Accounting Principles--the accounting system that is..."generally accepted."]

“So,” says Kudlow, “if you say GAAP profit–GAAP gross profit is up 83 percent, isn’t that misleading, this idea of GAAP gross profit?”

“Larry, that’s…”

“Quick answer.”

“…That’s…”

“Quick answer.”

“Quick answer is that’s a silly question. GAAP has a concept called revenue, a concept called gross profit, a concept called net profit. Those are GAAP–a basic accounting course teaches that.”

“I don’t understand it. I don’t understand it. Anyway, thank you for coming back.”

* * * * * * * *

While CNBC’s top television personalities are suggesting that it is some kind of crime for Patrick to cite a standard accounting term, a man named Amr Ibrahim Elgindy is attempting to board an airplane in Islip, New York, using a fake ID with the name Manny Velasco. In his possession are four cell phones, a suitcase full of cash, and $40,000 worth of jewelry. Elgindy would normally be carrying his .380 colt handgun, but he’s left that at home. Too risky carrying it in airports - especially when you’re fleeing the country.

Elgindy is hoping to get to Lebanon, where his remaining assets are stashed, but today he isn’t going anywhere. The woman at the counter has looked at him askance. She has looked at his ID, and looked again, and now she’s disappeared behind a curtain. She calls the cops, and before long they are hauling Elgindy away as he cries and pleads and says, “No really, I’m Manny Velasco - Elgindy is just some guy I met in New York!”

Amr Elgindy got his start working for Blinder, Robinson, nicknamed “blind ‘em, rob ‘em,” a Mafia-linked brokerage whose founder, a gold-chain and diamond-crusted-pinky-ring wearing goon named Meyer Blinder, eventually went to prison for securities fraud. Amr, who also goes by the names Anthony Elgindy and Anthony Pacific, later set up his own operation, establishing himself as one of Wall Street’s most flamboyant short-sellers - and a favored source to one segment of the financial media.

The FBI began investigating Elgindy after receiving a tip from a Solomon Smith Barney broker who said that on September 10, 2001 (that is, the day before the terror attacks on the World Trade Center), Elgindy had placed a call to Smith Barney instructing them to liquidate his kids’ trust funds. He also said, “Tomorrow the Dow is going to drop to 3,000 points.” (It was at 9,600 at the time.) The government spends months investigating whether Elgindy has connections to terrorists and advance knowledge of 9-11.

Ultimately, prosecutors indict him for the more demonstrable crimes of racketeering, conspiracy and securities fraud. (He gets 9 years for those crimes, and another 2 years for trying to flee the country.) Elgindy’s many offenses include bribing an FBI agent to provide him with information on agency investigations of public companies (the agent also gave Elgindy information on an on-going 9-11 investigation: Elgindy’s own), manipulative short-selling, and extortion. If the companies paid Elgindy off, he’d agree to stop disseminating false information about them.

A lot of people lost money on stocks that Elgindy attacked, and many of those people began investigating him long before the FBI did, often posting their findings on the internet. Gary Dobry, for example, is a Chicago boxer, artist and street busker who spent the better part of a year writing long screeds about Elgindy’s crimes. He also created pretty good acrylic Epaintings of Elgindy, and sold them at art shows.

Dobry’s obsession with Elgindy ended when he received death threats, and somebody threw a pair of garden shears through the window of his boxing gym (this, we will see, is a standard threat from mobsters in the securities business). But Deep Capture has recruited other Elgindy foes to its team. One of them is a former businessman whose company was destroyed by Elgindy, and who has made it his life’s mission to expose short-sellers’ crimes.

The businessman prefers to remain anonymous because he fears a Mafia hit, but he’s accomplished a great deal. For example, he traveled, undercover, to Costa Rica to meet Jonathan Curshen, a former trader for the Mafia-infested Pacific International and current proprietor of Red Sea Management, an offshore money laundering outfit. On multiple occasions, Curshen admitted to our undercover vigilante that he sells phantom stock — and threatened to kill anyone who revealed this. Curshen also described a special debit card that cannot be traced to its user. This, he suggested, could be used to pay off government officials and journalists.

But the undercover businessman’s biggest coup was in gaining membership to an online short-selling discussion board that Elgindy ran before he went to prison. Seeing that Elgindy was openly discussing crimes on the site, the businessman began taking screenshots of every page, so that his garage is now piled high with boxes of transcripts (which Deep Capture has scanned and stored somewhere safe).

In these transcripts, Elgindy and other short sellers make hundreds of references to certain journalists - most of them friends-of-Cramer. The reporters frequently mentioned include Herb Greenberg and David Kansas, both then editors of TheStreet.com (Kansas later becomes editor of The Wall Street Journal “Money & Investing” section), Carol Remond, and Dave Evans, a reporter for Bloomberg News. (When Federal agents raided Elgindy’s office, they found 2,000 hours worth of recorded phone conversations. According to a source knowledgeable about the investigation, “Herb Greenberg and Jim Cramer are all over those tapes.”)

Here’s one fairly typical comment, from a hedge fund manager on Elgindy’s online discussion board: “maybe when thestreet.com folds, we can hire Herb to work exclusively for us.”

At another point, a hedge fund manager calling himself “Peter” says: “Dave Evans gave us SPBR for free-been very profitable.”

A key member of this online community is Dan Loeb, a hedge fund manager who uses the screen name “Mr. Pink” (a reference to a criminal character in the Quentin Tarantino film Reservoir Dogs).

Mr. Pink says, “Dave Evans is a Made Man.”

* * * * * * * *

The short-sellers on Elgindy’s website talk a lot of nonsense (at one point they debate whether Elgindy and Dave Evans “swapped spit,” or merely engaged in a “loogie spitting” contest), so it’s possible that they are merely boasting about paying off journalists. But the comments on Elgindy’s website were so numerous that one can’t help but suspect that the relationships between these journalists and the short-sellers was beyond normal. At a minimum, the reporters must have known that hedge funds were trading ahead of their stories.

The reporters should also have known that Elgindy’s information was suspect - and that his target companies were often victims of short-seller crimes. Data obtained under the Freedom of Information Act shows that massive amounts of phantom stock were sold in the companies that Elgindy and his cohort shorted. As Carol Remond and others surely knew, Elgindy was also among the dubious clients of Pacific International, the Canadian brokerage that has catered to Wall Street operators connected to the Genovese crime family. “Let’s remember,” says one member of Elgindy’s website, “because of CANADA we can NAKED SHORT!”

Elgindy also brags on his website of having supplied the SEC and other government agencies with negative information. The SEC, especially, would helpfully open investigations into the companies targeted by Elgindy, precipitating huge declines in their stocks. One former SEC official interviewed by Deep Capture admits to having worked often with Elgindy. “I’d send his information up my up-line,” he says. “My superiors would tell me to open an investigation.” In most cases, the SEC never filed charges against the targeted companies.

But the investigations left the companies’ stock and reputations in tatters. Contributing to this, Herb and the rest of the Media Mob would write multiple negative stories about the companies Elgindy shorted. “These were good companies. A lot of them were pharmaceutical companies that had made important medical advances,” says the former SEC investigator. “Elgindy hurt them badly. He stopped new cures. And the SEC helped. The media helped.”

Elgindy is in jail, but the short-sellers who were members of his website, and who joined him in his “bear raids” on innocent companies, are still in business. One of them is John Fiero, who went by the screen name of “Bond,” and whom the NASD fined $1 million for selling phantom stock in companies that had the misfortune of being underwritten by Hanover Sterling, a brokerage that has been linked to the Genovese Mafia clan.

Fiero has yet to pay that fine. Quite to the contrary, a member of Elgindy’s website wrote at one point that the NASD had given Fiero an office and a set of trading computers — inside the NASD’s headquarters. If this was true, the NASD was either deeply corrupted, or it was using Fiero as an informant in ongoing investigations of phantom stock trading.

And then there is Dan Loeb, a.k.a. Mr. Pink. Loeb is a short-seller best known for hurling vitriol at his “enemies,” and for maintaining a high profile relationship with Fab 5 Freddy, the gangsta rapper. He is also very much a part of the Cramer constellation of hedge funds. And give him this: he stands by his boys.

Once, a respected hedge fund manager named Kenneth Griffin hired someone away from a hedge fund run by Loeb’s crony David Einhorn, who is also a friend of Cramer. In an email, Mr. Pink accused Griffin of running a “gulag,” and wrote: “Let me be clear that…should you attempt to hire people from [my friends], I will consider it an…act of war.”

Now, with Elgindy in prison, Mr. Pink’s friends are at “war” with Patrick Byrne and Overstock.com.

The generals in this war are , David Rocker, and the Media Mob led by Herb and Jim Cramer (who met Rocker once, in a grocery store).

* * * * * * * *

Cramer has a shtick whereby he brags about the crimes he has committed, perhaps so that he can later claim that his openness suggests a certain innocence. That might be why, in a semi-private discussion on his website, Cramer advocates breaking the law to drive down stock prices.