Tuesday, October 04, 2005

The OSTK Affidavits - Nuclear Detonation in Hedgeland

I just got finished reading the October 1, 2005 edition of the PIPEs Report, and its summary and dissection of the infamous OSTK affidavits, which are apparently a big part of the evidence against Gradient Analytics and Rocker Partners.

Now, I may not know much about SEC regs or even fair business practices, but I do know that if the charges being leveled in the sworn testimony are true, that some very bad behavior has been going on for some time, and that the company has indeed been harmed, as have its shareholders, by a group that cynically manipulated research, as well as the press, for their own enrichment. Everything from Gradient running hedge funds that invested in the stocks that were being "researched" to enabling hedge fund clients to write their own research and publish it as Gradient's, to misrepresenting their staff as CPA's and CFA's when they were in reality college kids, to holding reports to allow the hedge funds to take short positions - what seem like, if true, an awful lot of 10(b)5 violations, not to mention good old racketeering, to this admitedly untutored opinion. So when do our brave regulators get on this and start doing their jobs? Or do they just pretend that the allegations haven't been made, and keep trying to find a way to hang Dr. Byrne for having the temerity to shine a light on the cockroaches? What's it going to take for them to do their GD jobs?

I particularly liked where Gradient is claimed to have given Herb's editor office space, paid for by that firm - and ostensibly while he was busy writing nasty reports that went on Gradient letterhead. Now, is that bad? I mean, if you have a financial journalist who is bashing the company relentlessly, who is known to be a friend of the biggest short in the company's stock, would it cross any lines to have his editor working out of Gradient's offices?

Help me out here.

I get this odd feeling that the reason the messengers have been shot by all of the financial pundits who are friendly with this group is because they know that there is no way to explain away the charges, no facile aphorisms which will trivialize the charges of frontrunning customized reports designed to negatively impact the company's stock, and slandering companies for profit, and all the rest. And there is always Herb's editor working out of Gradient's offices. Or Gradient ostensibly running money out of their offices while issuing "independent research". And the list goes on, and on, and on.

No wonder they want to make Byrne look like a kook and spend a lot of time on the Easter Bunny's favorite color.

Who would want to have to confront the charges in the affidavits? They are wildly damaging, obviously ethically over every line one can think of, and likely criminal (I don't know, not being an attorney, but they seem criminal to me - and if what they are accused of isn't against the law, my question is, why isn't it?).

So it will be interesting to see what the spin squad comes out with now that the affidavits are out there in the public domain, to see how they explain Herb's editor working out of Gradient's offices, to see how they rationalize frontrunning the reports, allowing the hedge fund to write the reports, etc. - whether that is all OK, and acceptable behavior - particularly from the WSJ, who seemed way more interested in the ex-employees and any dirty laundry they could dig up on them rather than on the actual charges. The WSJ and the Post both seem to be shocked that whistleblowers tend to be disgruntled ex-employees rather than the CEO's of the companies who have been up to no good. What a surprise. How unusual. I guess they never saw Norma Rae, or followed the Deep Throat thing, or paid attention to the mutual fund frontrunning scandal - you know, little things like that.

I just can't wait to see how long it takes the AG's of the relevant states to haul some asses into court and demand some explanations. But that is just me. Maybe enough money and power buys you immunity from the long arm of the law.

Again, I have no way of knowing if the charges in the sworn statements are true, but I do have to wonder that anyone would go out on a limb and go on the record making these allegations if they weren't.

So have at it, guys. I'm sure Jeff Matthews will have a smirking retort - although it is noteworthy that Herb, who is always game for snide snipes at Dr. Byrne, didn't comment when contacted by the PIPEs Report. Neither did his "editor". Suddenly the whole glib gang has lockjaw.

I guess the strategy now moves to the timeworn "deny everything, keep quiet, demand proof, and blame everyone else" strategy that has been the modus operandi of every perp ever accused of anything on Wall Street. They've had months to attack the messengers and claim that everyone connected with the case is a nut or a fraud, and that hasn't altered the contents of the affidavits nor the damage of the information contained therein, so one wonders what is next - you just know that the fabled countersuits will claim that all the perps are victims, innocent babes being tormented by the bad old lawyers and the demon company with the nutty CEO.

Let's see how that plays before a jury. I'm going to bet that a Marin jury can see through all the bombast to simple right and wrong.

It's pretty clear to me.

But then what do I know?


Blogger Bingolabs said...

Blogging advice: put links to referenced material if available.

I would like to see this report you are talking about. I want to read about Greenberg's editor working out of Grandiant offices. Is it available online?



12:41 PM  
Blogger Tommy said...

This is good news. I am happy for OSTK longs, all 367% of them!

Once it becomes clear there are many naked shares in accounts, I wonder how the real ownership issue will be sorted out?

Just keep bidding up the price so that enough sellers (with real shares only) decide to sell so that the FTDs can be closed out? The SEC's worst nightmare come true! They should have fixed this when they had a chance instead of letting it grow like the Hindenburg.

In any case, I hope we can take a large step forward in this country towards fair markets and remove the criminal manipulations from the system. People like Herb Greenberg, if the allegations prove true, belong behind metal bars.

Failing to deliver shares, sticking IOUs into people's accounts, hiding the two from public scrutiny, diluting voting rights, etc...is no way to run a market - but this is the status in the USA today, unfortunately.

1:36 PM  
Blogger Jer. 9:24 said...


If you go to David Patch's web site, which is www.investigatethesec.com, Mr. Patch usually has a link to any issues of The PIPES Report that are relevant to the illegal shorting/counterfeit securities series of frauds. This is done with the publisher's consent, by the way.

You can find the September 2005 issue there now, and I believe the editors of The PIPES Report allow Mr. Patch to post relevant issues of the Report about two weeks after the regular subscribers get them. So if you are patient you can read the October PIPES Report in about two weeks.

Mr. Patch's web site is a great place to visit in order to keep up with these issues in any event; he posts relevant media articles as well as his own commentary, has been demanding justice longer than most anyone else out there, and had a hand in getting the State regulators into the game.

Jeremiah 9:24

2:31 PM  
Blogger rtway1 said...

Dear Bob, You have no idea how much I look forward to your messages. You certainly are a light in a room of induced darkness. If ever I can be of help to you please call me or e-mail me.phone 815-834-1614. Please observe the reports that old Herb has made on Capstone Turbine (cpst) just whenever it starts to rally ,old Herb has something to say. Also I did a Google on the aspiring actor (AKA Jim Cramer the snake) and found out he and Spitzer were school chums and Spitzers father had a apartment building he owned and good old Elliot got Jim a free apartment across the hall from him as to help him get on his feet. Do I smell something wrong with him showing up on the Cramer show? HMMMM. In closing I am shareholder of ostk and a great fan of DR. Byrne. And I have my certificates in my hands. Be good my friend, and if I can help in the fight, my time is yours.
Respectfully Dan Somers
17154 w 147th st.
Lockport Ill 60441

9:36 PM  
Blogger bob obrien said...

Thanks for the support.

Th PIPEs Report will be available through investigatethesec.com within a week or so.

Once it is out I would encourage everyone to send a copy to the state AG's and the task force, and ask them what the hell has to happen for them to start taking names? I mean, if they require a video of a hedge fund manager wearing a little black mask and handing a media personality a large sack with a dollar sign on it, while cackling "slam them hard with what I told you to say, but wait a week while I take my position, in knowing and wilfull violation of 10(b)5 and a handfull of racketeering statutes" they just got about as close as they ever will get. But again, what do I know?

My sense is that the same politicos that ran interference for the S&L thieves while they looted the banking system are alive and well running interference for Wall Street - remember that Wall Street stuffed most of the worst S&L's with billions of junk bonds and speculative ventures, enriching themselves at the expense of the taxpayer - I don't recall anyone on Wall Street doing any time for that.

So now you have a Senate Banking Committee that is uninterested in holding hearings over what is likely the single biggest financial fraud in existence as it apparently isn't a priority, the DTCC refusing to provide basic trading information or a modicum of auditable material, the regulators defending the industry's secrecy and the god given right of the pros on the street to fleece the public with impunity...

One man has taken on a trillion dollar community that apparently believes that everything West of 5th Avenue is fair game for robbery, and that owns a captive regulator base that will excuse any violations, no matter how obvious or onerous, and who has the best elected officials that their considerable money can buy.

It will be interesting to see who will be the reporter that blows this wide open.

My hunch is they won't be on the East Coast.

10:34 AM  
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12:18 PM  

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