Post by jcline on Mar 12, 2006 18:05:34 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
SEC Subpoenas Journalists; The reports the Media won’t tell you – March 13, 2006
David Patch
It was February 24th that the public was first made aware of the Securities and Exchange Commission issuing subpoenas against members of the financial press. On that day, Marketwatch.com columnist Herb Greenberg broke the news that he and Carol Remond, another Dow Jones columnist had been served. Greenberg documented that he, along with his employer had no intention of complying with the subpoenas.
Following the Friday disclosure was a follow-up announcement later that day that the SEC was putting these subpoenas on ice for the time being citing reconsideration at the SEC. By the following Monday CNBC’s James Cramer and TheStreet.com made public the news that they too had been served by the SEC. While the subpoenas were now officially on ice, Cramer and TheStreet.com came out and announced they had no intention of complying regardless.
What later ensued over the following weeks was a course of events that question the overall integrity of the media profession and certainly those who were ultimately served these subpoenas. The financial press across the nation responded with daily self-serving rhetoric and outrage over the SEC’s actions without ever fact checking the events leading up to these subpoenas. The media used their print space to publicly support their peers never questioning what the SEC thought they may or may not have against them. The SEC was evil and out of control was the standard theme.
For the likes of James Cramer, Herb Greenberg, and several CNBC commentators the “outrage” led to childish and unprofessional actions. While the antics certainly raised ire with the public, the financial press had no issue with the blatant disrespect by these individuals.
Several weeks after being served, and several days after the SEC had made public that they had temporarily halted their actions, James Cramer took the liberty of taking his Federal subpoena, writing “BULL” on it in bright red bold print and using the studios of CNBC Cramer told the Federal Agency pretty much what they could do with their subpoena. Jim came a little late to the party with his courage but was making up for it now.
Cramer did not limit his antics to a single showing he did it several times over several days, and CNBC backed this childish and disrespectful antic by repeatedly airing the scene over and over for several days. Likewise, Cramer and Greenberg used the CNBC airways to launch their own personal attacks on those they believed were at the root of the issue regardless of whether facts supported their allegations.
Cramer, Greenberg, and former Cramer’s former co-host on CNBC Larry Kudlow embarrassed the profession acting as if they were above any law. The three gave new meaning to “self-importance” as each felt the courage to speak freely now that the subpoenas were on ice. Each acting out as bullies on the playground now that the danger is gone.
However, now that we are over a month into the issuance of these subpoenas and several weeks since first becoming aware of the situation, what hasn’t the media reported to the public in the evidence that followed and why not?
How about the facts leading up to the subpoenas?
According to SEC policy, enforcement investigations that require subpoenas require the approval of the Commission. In this case a formal investigation regarding possible fraud in the publication of analysts and media reporting, with subpoena power, was initiated by the SEC under the full approval of the Commission. According to SEC Director of Enforcement Linda Thomsen, these subpoenas were subsequently issued against members of the media with her approval and based on specific findings uncovered in the on-going SEC investigation(s). Cramer, Greenberg, Kudlow, as well as the respected prints like the NY Times and Wall Street Journal all failed to present this evidence of how the SEC conducts business.
While the media has blasted the Commission for allowing the subpoenas to be issued without Commission approval, policy is that the Commission approves the investigation and not individual subpoenas. As policy, a Chinese wall is created between the enforcement staff and the Commission to insure politics does not play a role in the operations of the enforcement staff.
While the SEC enforcement operation is supposed to be free of politics, and the media is the first to lash out when it is not, it is now the media that is playing the politics card.
The media has also reported that SEC Chairman Christopher Cox rebuked the SEC Director of Enforcement and her team for taking such measures without his prior approval. This again is far from the truth. These statements made for good print but the media was on a mission and facts only clouded that mission.
In a CNBC interview on March 2 Chairman Cox was directly asked whether he was angry about the issuance of these subpoenas and his answer was a resounding no. The Chairman addressed the issue of required separation between the Commission and enforcement. Little of this was ever repeated in news print or on CNBC once the interview was over. CNBC asked the question, didn’t get the answer they liked, and them moved off subject quickly.
On March 3, 2006 Chairman Cox re-iterated his support of the Director of Enforcement in the annual “SEC Speaks” series. According to Chairman Cox “Linda Thomsen is absolutely outstanding. She is a worthy successor to the giants of securities law who have preceded her as head of the Enforcement Division, some of whom are here today. And she leads a team of professionals here in Washington and across the country that is absolutely first rate. Linda, you are doing us all proud.” Hardly the rebuke the media presented to the public.
The media never reported on this continuous sign of support out of the Chairman but instead has tried to imply a rift exists over the subpoena issue. But more than the implied rift the media has attempted to create, the media also failed to report on the other comments made by the Commission staff on this day regarding this issue.
Commissioner Roel Campos, during his remarks at the annual “SEC Speaks” series stated “Yesterday, Thursday [March 2], the Agency also announced that it will develop clear guidelines regarding the issuance of subpoenas to journalists during fraud investigations. In my view these statements have been incorrectly interpreted in the media and in the public to indicate that our Enforcement Staff did something wrong. In other words, our Staff, in my opinion, seems to have gotten "a bum rap."
As the Commissioner provided the media the opportunity to correct themselves, they chose not to. The media acted cowardly, unwilling to admit the error of their ways and unwilling to correct the story to the general population instead leaving their misreported articles as accurate. What happened to ethics? To the media, clearly accuracy is less important when they are the ones under the microscope.
This message handed down by the Commission made its way to very few of the investing public as the media sanitized what it offered the public. Why? If the media wants to paint themselves as the information pipeline to all pertinent materials, why not do so in a fair and balanced manner?
Commissioner Campos closed his comments over these subpoenas by repeating the comments made the previous day by Chairman Cox on CNBC. “Finally, it goes without saying, no one is above the law. If in any matter it is important for the integrity of the investigation to enforce a subpoena, it will be done through appropriate legal process of the federal court system, without hesitation. Of course any privilege or constitutional rights will be taken into account as a matter of due process.”
Not a single media outlet repeated these opinions that the SEC has elaborated on. Nobody is above the law! Not even the press.
Ironically, in a speech this same day by Commissioner Paul Atkins the Commissioner further validated that a problem exists that has been unattended to by the SEC at this point in time and underreported by the media; the market concern over Bear Raids through abusive short selling.
During Commissioner Atkins “SEC Speaks” speech the issue of micro-cap fraud was raised and his personal perception is that the fraud was relatively void of enforcement initiatives. In this marketplace of fraud, the Commissioner identified not only the “pump and dump” initiatives taken by the stock promoters and shady corporate executives but also the concerns over abusive short selling. Ironically, it is abusive short selling that is at the heart of the SEC subpoenas into financial journalists albeit involving larger companies than the micro-caps mentioned by Atkins.
According to Commissioner Atkins “Fraud in this market [micro-cap] manifests itself through old-fashioned boiler-rooms with hard-sell cold-calling; new tactics such as cyber-smear or the infamous voicemail that was supposedly incorrectly left on machines giving a bogus stock tip; and bear raids composed of an unholy alliance of abusive short sellers, stock promoters, class-action lawyers, and others.”
Again, while Atkins dialogue was broad based in nature, the media reporting of his comments limited the comments to micro-cap “pump and dump” activities. Bear Raids were at the root of the crash of 1929 and 1987, became the foundation for why the SEC was created, and yet the media glossed over these comments about Bear Raids as if these were nothing more than a legal means of market correction.
Where is that balanced reporting that provides the public with the necessary tools to protect their investments?
Chairman Cox provided the financial press with an opportunity to right their ship.
The Chairman praised the financial press identifying them as “vital” in uncovering fraud. Furthermore, Journalists are “key to publishing and spreading across the country the information and material information about the financial operations of America’s companies that is so vital to the functioning of our markets.” But the Chairman cautioned that this comes at a price. The media will also be held to higher standards like a “bad cop” is held to higher standards based on the public trust that comes with the occupation.
Today the financial press, as a majority, has failed in their responsibilities regarding the dissemination of accurate and unbiased reporting. The financial press has huddled together and decided to protect their fraternal brothers and sisters without care as to whether those in question are guilty or innocent. The financial press has ignored the childish and unprofessional behavior of those who use the podiums provided to freely mock the Federal government and in doing so have lowered their standards and lowered public’s overall opinion pertaining to their integrity. The truth is for others to abide by according to the press and thus the press has become the center of attention instead of being on the outside looking in.
The financial press is hard pressed to discuss the issue of Bear raids and illegal short selling because much of their inside information comes from the short seller. To speak of the illegal actions orchestrated by short sellers may be cutting off the hand that feeds them so some things are left unreported and collateral damage will persist. Dow Jones columnist and CNBC commentator Charles Gasparino all but admitted to this very fact.
Due to this conflict of interest the financial press has allowed the investing public to be cheated by a form of fraud without insight into its very existence. Bear Raids continue to exist, at all market levels, and the financial press is unwilling to report it as it may interfere with their personal achievements in “scooping a story.” The financial press has decided that they will decide what crimes they feel are justified to better the overall markets.
While the SEC is now taking steps to address this area of conflict, the press wants immunity from aiding in the fraud. As the NY Times reporter Floyd Norris ridicules the Chairman Cox and makes allegations that this is a critical moment in defining his tenure, I would venture to say that this is equally critical of the financial press. Public perception is growing that the financial press is biased and conflicted. Certainly the way they continue to report this issue will tell us more about the overall integrity of the profession.
Should the SEC being immune from subpoenas? Not if they continue to be a participant of the problems at hand. Not if the financial press continues to selectively report the issues of Wall Street in a self-serving and callous manner.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006
An online newspaper reporting the issues of Securities Fraud
SEC Subpoenas Journalists; The reports the Media won’t tell you – March 13, 2006
David Patch
It was February 24th that the public was first made aware of the Securities and Exchange Commission issuing subpoenas against members of the financial press. On that day, Marketwatch.com columnist Herb Greenberg broke the news that he and Carol Remond, another Dow Jones columnist had been served. Greenberg documented that he, along with his employer had no intention of complying with the subpoenas.
Following the Friday disclosure was a follow-up announcement later that day that the SEC was putting these subpoenas on ice for the time being citing reconsideration at the SEC. By the following Monday CNBC’s James Cramer and TheStreet.com made public the news that they too had been served by the SEC. While the subpoenas were now officially on ice, Cramer and TheStreet.com came out and announced they had no intention of complying regardless.
What later ensued over the following weeks was a course of events that question the overall integrity of the media profession and certainly those who were ultimately served these subpoenas. The financial press across the nation responded with daily self-serving rhetoric and outrage over the SEC’s actions without ever fact checking the events leading up to these subpoenas. The media used their print space to publicly support their peers never questioning what the SEC thought they may or may not have against them. The SEC was evil and out of control was the standard theme.
For the likes of James Cramer, Herb Greenberg, and several CNBC commentators the “outrage” led to childish and unprofessional actions. While the antics certainly raised ire with the public, the financial press had no issue with the blatant disrespect by these individuals.
Several weeks after being served, and several days after the SEC had made public that they had temporarily halted their actions, James Cramer took the liberty of taking his Federal subpoena, writing “BULL” on it in bright red bold print and using the studios of CNBC Cramer told the Federal Agency pretty much what they could do with their subpoena. Jim came a little late to the party with his courage but was making up for it now.
Cramer did not limit his antics to a single showing he did it several times over several days, and CNBC backed this childish and disrespectful antic by repeatedly airing the scene over and over for several days. Likewise, Cramer and Greenberg used the CNBC airways to launch their own personal attacks on those they believed were at the root of the issue regardless of whether facts supported their allegations.
Cramer, Greenberg, and former Cramer’s former co-host on CNBC Larry Kudlow embarrassed the profession acting as if they were above any law. The three gave new meaning to “self-importance” as each felt the courage to speak freely now that the subpoenas were on ice. Each acting out as bullies on the playground now that the danger is gone.
However, now that we are over a month into the issuance of these subpoenas and several weeks since first becoming aware of the situation, what hasn’t the media reported to the public in the evidence that followed and why not?
How about the facts leading up to the subpoenas?
According to SEC policy, enforcement investigations that require subpoenas require the approval of the Commission. In this case a formal investigation regarding possible fraud in the publication of analysts and media reporting, with subpoena power, was initiated by the SEC under the full approval of the Commission. According to SEC Director of Enforcement Linda Thomsen, these subpoenas were subsequently issued against members of the media with her approval and based on specific findings uncovered in the on-going SEC investigation(s). Cramer, Greenberg, Kudlow, as well as the respected prints like the NY Times and Wall Street Journal all failed to present this evidence of how the SEC conducts business.
While the media has blasted the Commission for allowing the subpoenas to be issued without Commission approval, policy is that the Commission approves the investigation and not individual subpoenas. As policy, a Chinese wall is created between the enforcement staff and the Commission to insure politics does not play a role in the operations of the enforcement staff.
While the SEC enforcement operation is supposed to be free of politics, and the media is the first to lash out when it is not, it is now the media that is playing the politics card.
The media has also reported that SEC Chairman Christopher Cox rebuked the SEC Director of Enforcement and her team for taking such measures without his prior approval. This again is far from the truth. These statements made for good print but the media was on a mission and facts only clouded that mission.
In a CNBC interview on March 2 Chairman Cox was directly asked whether he was angry about the issuance of these subpoenas and his answer was a resounding no. The Chairman addressed the issue of required separation between the Commission and enforcement. Little of this was ever repeated in news print or on CNBC once the interview was over. CNBC asked the question, didn’t get the answer they liked, and them moved off subject quickly.
On March 3, 2006 Chairman Cox re-iterated his support of the Director of Enforcement in the annual “SEC Speaks” series. According to Chairman Cox “Linda Thomsen is absolutely outstanding. She is a worthy successor to the giants of securities law who have preceded her as head of the Enforcement Division, some of whom are here today. And she leads a team of professionals here in Washington and across the country that is absolutely first rate. Linda, you are doing us all proud.” Hardly the rebuke the media presented to the public.
The media never reported on this continuous sign of support out of the Chairman but instead has tried to imply a rift exists over the subpoena issue. But more than the implied rift the media has attempted to create, the media also failed to report on the other comments made by the Commission staff on this day regarding this issue.
Commissioner Roel Campos, during his remarks at the annual “SEC Speaks” series stated “Yesterday, Thursday [March 2], the Agency also announced that it will develop clear guidelines regarding the issuance of subpoenas to journalists during fraud investigations. In my view these statements have been incorrectly interpreted in the media and in the public to indicate that our Enforcement Staff did something wrong. In other words, our Staff, in my opinion, seems to have gotten "a bum rap."
As the Commissioner provided the media the opportunity to correct themselves, they chose not to. The media acted cowardly, unwilling to admit the error of their ways and unwilling to correct the story to the general population instead leaving their misreported articles as accurate. What happened to ethics? To the media, clearly accuracy is less important when they are the ones under the microscope.
This message handed down by the Commission made its way to very few of the investing public as the media sanitized what it offered the public. Why? If the media wants to paint themselves as the information pipeline to all pertinent materials, why not do so in a fair and balanced manner?
Commissioner Campos closed his comments over these subpoenas by repeating the comments made the previous day by Chairman Cox on CNBC. “Finally, it goes without saying, no one is above the law. If in any matter it is important for the integrity of the investigation to enforce a subpoena, it will be done through appropriate legal process of the federal court system, without hesitation. Of course any privilege or constitutional rights will be taken into account as a matter of due process.”
Not a single media outlet repeated these opinions that the SEC has elaborated on. Nobody is above the law! Not even the press.
Ironically, in a speech this same day by Commissioner Paul Atkins the Commissioner further validated that a problem exists that has been unattended to by the SEC at this point in time and underreported by the media; the market concern over Bear Raids through abusive short selling.
During Commissioner Atkins “SEC Speaks” speech the issue of micro-cap fraud was raised and his personal perception is that the fraud was relatively void of enforcement initiatives. In this marketplace of fraud, the Commissioner identified not only the “pump and dump” initiatives taken by the stock promoters and shady corporate executives but also the concerns over abusive short selling. Ironically, it is abusive short selling that is at the heart of the SEC subpoenas into financial journalists albeit involving larger companies than the micro-caps mentioned by Atkins.
According to Commissioner Atkins “Fraud in this market [micro-cap] manifests itself through old-fashioned boiler-rooms with hard-sell cold-calling; new tactics such as cyber-smear or the infamous voicemail that was supposedly incorrectly left on machines giving a bogus stock tip; and bear raids composed of an unholy alliance of abusive short sellers, stock promoters, class-action lawyers, and others.”
Again, while Atkins dialogue was broad based in nature, the media reporting of his comments limited the comments to micro-cap “pump and dump” activities. Bear Raids were at the root of the crash of 1929 and 1987, became the foundation for why the SEC was created, and yet the media glossed over these comments about Bear Raids as if these were nothing more than a legal means of market correction.
Where is that balanced reporting that provides the public with the necessary tools to protect their investments?
Chairman Cox provided the financial press with an opportunity to right their ship.
The Chairman praised the financial press identifying them as “vital” in uncovering fraud. Furthermore, Journalists are “key to publishing and spreading across the country the information and material information about the financial operations of America’s companies that is so vital to the functioning of our markets.” But the Chairman cautioned that this comes at a price. The media will also be held to higher standards like a “bad cop” is held to higher standards based on the public trust that comes with the occupation.
Today the financial press, as a majority, has failed in their responsibilities regarding the dissemination of accurate and unbiased reporting. The financial press has huddled together and decided to protect their fraternal brothers and sisters without care as to whether those in question are guilty or innocent. The financial press has ignored the childish and unprofessional behavior of those who use the podiums provided to freely mock the Federal government and in doing so have lowered their standards and lowered public’s overall opinion pertaining to their integrity. The truth is for others to abide by according to the press and thus the press has become the center of attention instead of being on the outside looking in.
The financial press is hard pressed to discuss the issue of Bear raids and illegal short selling because much of their inside information comes from the short seller. To speak of the illegal actions orchestrated by short sellers may be cutting off the hand that feeds them so some things are left unreported and collateral damage will persist. Dow Jones columnist and CNBC commentator Charles Gasparino all but admitted to this very fact.
Due to this conflict of interest the financial press has allowed the investing public to be cheated by a form of fraud without insight into its very existence. Bear Raids continue to exist, at all market levels, and the financial press is unwilling to report it as it may interfere with their personal achievements in “scooping a story.” The financial press has decided that they will decide what crimes they feel are justified to better the overall markets.
While the SEC is now taking steps to address this area of conflict, the press wants immunity from aiding in the fraud. As the NY Times reporter Floyd Norris ridicules the Chairman Cox and makes allegations that this is a critical moment in defining his tenure, I would venture to say that this is equally critical of the financial press. Public perception is growing that the financial press is biased and conflicted. Certainly the way they continue to report this issue will tell us more about the overall integrity of the profession.
Should the SEC being immune from subpoenas? Not if they continue to be a participant of the problems at hand. Not if the financial press continues to selectively report the issues of Wall Street in a self-serving and callous manner.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006