Sunday, November 20, 2005

Dirty Rotten Scoundrels

Bad Men Doing Bad Things

The Overstock lawsuit is heating up, as Friday's revelation that the SEC is investigating the defendants (see the immediately preceding Sanity Check) was followed by the Easter Bunny's coming into possession of a document wherein the Senior Vice President, Corporate Affairs and Legal, of Overstock.com, makes a formal demand of a gentleman by the name of E. Rhead Richards to kindly cease and desist from contacting current Overstock.com employees, presumably on behalf of the defendants.

The reason I found this interesting is that apparently Mr. Richards represents himself to be a current or former FBI agent, who claims to be investigating these employees - and has gone to the familiar if extraordinary length of contacting those employees' family members, indicating that their loved one is "under investigation."

The wives and parents of the employee(s) were presumably concerned about their loved ones being under investigation by an FBI agent - I'm not sure that distinctions like current or former were used, or that those fine nuances are immediately apparent to aged or agitated relatives.

One source indicated that they believe that this "gentleman" was being directed by a former employee who was discharged by Overstock for, among other things, allegedly spying on a female employee when, shall we put it delicately, she had every reason to believe that she was in a place and situation where her privacy was sacrosanct.

A formal legal demand has gone out to this Richards fellow to cease and desist, and further the company has demanded to know upon whose orders he was acting. I would expect to see this escalate should he refuse to cooperate, which is why this is material to the lawsuit - other than to provide everyone a glimpse of the sorts of characters who are apparently affiliated with those involved in the suit (assuming that Richards is working on behalf of the defendants, or a cutout for them). Stay tuned for more on this particular tangent.

So we have the SEC investigating the defendants/alleged perpetrators, and now questionable intimidation tactics being directed at OSTK employees.

I have no way of knowing for sure whether there is any connection between this episode and the legal wranglings of the hedge fund and research firm embroiled in this suit. But I can certainly make an educated guess. And my hunch is that this will get uglier before long. Anyway, I found it illuminating in terms of the tactics that are used by those claiming to be innocent victims, if indeed Richards is acting on behalf of the folks on the other side of the OSTK conflict.

Of course, I'm told that I am kooky for wanting to remain anonymous, as the bad guys in the naked short selling conflict presumably would never stoop to anything worse than sending nasty greeting cards on my birthday. Of course, none of these geniuses insisting I am not at risk has to take the bullet if they are wrong, but hey, when you are playing with other people's safety, what the hell, right? We had Jesse trespassing recently, contacting aged relatives in an effort to intimidate. We now have Mr. Richards trespassing, contacting aged relatives in an effort to intimidate (or perhaps it is to make new friends by identifying himself as an FBI guy?). Seems like a very familiar playbook. Very familiar.

Anyhow, this little vignette resonated with me.


Cone Of Silence Still In Place

On another note, I wonder why we haven't seen a slew of articles from all the usual NY-based financial periodicals on Friday's revelations about the SEC investigation into Gradient (and presumably by extension, our favorite hedge fund)? Why does the Salt Lake City newspaper have to be the one to break this story, and why is it getting exactly zero coverage in these supposedly unbiased rags? The WSJ runs full page articles when short plays like TASR get investigated, and yet here are far more serious charges being leveled by OSTK's CEO, and now we discover that the SEC is on the hunt with a case number and a number of sworn interrogatories, and yet not a peep out of any of them.

Odd that.

Rocker is given free rein to badmouth OSTK in a variety of forums, and yet the teensie weeensy little detail that his favorite research firm and alleged partner in, well, you know, is being investigated by the SEC (per the SLC paper) doesn't make it into print. The law firm that sued virtually every one of his known short plays is being investigated by the DOJ, Gradient is being scrutinized by the SEC, and yet mum's the word.

Am I the only one that thinks that is bizarre? Or is it only companies where shorts can make a quick 50% from the drop in price when the investigation is announced that warrant attention? Are they afraid that investors or bankers will freak out when this becomes common knowledge? I'm afraid it's a little late now - the message boards have been a-titter on this topic all weekend, so the cat is well out of the bag.

But it will be amusing to watch the studious non-comment from all of the hedge fund familiars. Their silence remains deafening. Carol is MIA. Herb has no thoughts on the topic. Seth is busy clipping coupons. Roddy can't seem to get around to it even as he credulously repeats Rocker's party line this weekend. Jeff's smirking propaganda mill is silent. The WSJ C section suddenly is uninterested in SEC investigations. Ditto for Barrons. Bethany has other fields to plow. I could go on, but we all know the players. None would comment on Dr. Byrne not getting delivery of his shares for two months, or his father, Jack Byrne, not getting his. Tut tut, that isn't news, apparently. Neither is the most prominent short seller in the business getting the case he is involved in peeled apart by the SEC. Noooo. Nothing to see there. Pay no attention to any of that.

Wonder when the counter-suit that will begin the serious discovery hits? Wanna bet the fifth of never? That Dr. Byrne's sentiment that the stalling will escalate to unbelievable lengths turns out to be correct?

I'll keep following up on this and keep everyone posted. You undoubtedly won't hear about this by opening your favorite NY paper...

6 Comments:

Blogger rvac106 said...

Big D, checking out another 'team player,' the ever vigilant Ant & Sons...

http://www.antandsons.com/blogger.html

Keep the pressure on, and twist that knife ever so gently to the right... That's it, now left. Ahhhh....

RVAC

9:59 PM  
Blogger Craig is working on his first million said...

Sounds like typical PI/grey hat/pretexting. He is searching for more info, but trying to say you represent the FBI is not a wise move. Then again, I never said these guys were smart.

10:24 PM  
Blogger mfairview said...

What would be truly interesting would be a timeline of all the events leading up to this monumental trial. The 60 negative reports from Gradient, the slanted articles from Herbert, Remond, Barrons, WSJ, and, lastly, the seemingly daily grenades from Matthews back in the spring/summer. Anyone seeing this picture would be hard press to not think it too convenient to just be coincidental. Can NCANS set up a wiki on their site for a collaborative effort?

10:30 PM  
Blogger Tommy said...

These short guys are way in over their heads. That's becoming increasingly clear.

12:14 AM  
Blogger n-tres-ted said...

Anybody notice that OSTK is up sharply today?

10:31 AM  
Blogger bob obrien said...

Yes, OSTK is up over 20% in just two and a half trading sessions, and yet none of the financial press, who have been quick to note every engineered drop, see fit to alert the investing public as to the precipitous rise.

Apparently it is only news when OSTK goes down.

NFI also benefited from that sort of attention from all the same media figures. As did many of the other short plays that our favorite hedge fund is known to be heavily short.

Too bad that the SEC can't figure out these simple and obvious clues. Or maybe it is all a big coincidence. Who knows?

Maybe once the states get into the act bigtime they will be forced to do something, anything, to show that they weren't asleep at the wheel.

Don't hold your breath.

2:25 PM  

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