Post by jcline on May 10, 2006 21:24:42 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
SEC Retaliation; Subpoenas are Served up on SEC Critic – May 10, 2006
David Patch
Heck, we all knew it would eventually come to this. Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne predicted this day would come over a year ago and like good Federal Agents the SEC complied.
After the markets closed yesterday Overstock.com announced that the Company had been issued a subpoena by the SEC regarding a smattering of disconnected issues including all documents relating to the company's accounting policies, targets, projections, estimates, recent statements, new technology systems and their implementation, and communications with and regarding analysts. In addition to business operations issues the SEC also requested all information relating to the filing of its complaint against Gradient Analytics as well as communications regarding short selling, naked short selling, purchases, and sales of the company stock, obtaining paper certificates and stock loan or borrow of the company's shares. The only thing left out of the subpoena was a request for last month’s restaurant bills and the scorecards used to calculate Byrne’s golf handicap.
Yes, the predications made a year ago have come to roost and the lapdogs in Washington DC once again exercised their right to aid the illegal trading of the short seller. The witch-hunt is on and this time the SEC may have barked up the wrong tree. This time the SEC’s actions will be front row viewing by a large population of the investing public.
Understand, this is not the first time the SEC has come to the aid of short sellers who have over extended their short positions in certain companies. We have seen formal SEC investigations initiated into Taser International (NASDAQ: TASR) and Travelzoo (NASDAQ: TZOO) at a time where the reported shorts in the companies grew to near 100% of the public float and the settlement failures resulting from these short positions growing with them. The SEC also opened up an investigation into Novastar Financial (NYSE: NFI) and Allied Capital (NYSE: ALD) as they too accumulated excessive short positions and excessive fails attributed to those short positions.
Adding Overstock into this mix and Hedge Fund manager David Rocker was luckily short each of these companies as the regulators worked their magic.
So whatever came from these SEC Investigations?
The business press had a field day attacking each of these companies, the stock plummeted, and the SEC has yet to come up with a single enforcement case worthy of the destruction to shareholder value created by the bogus investigations. The only positives, the shorts were able to cover for a profit, some of the perpetual settlement failures were erased, and the markets were saved from yet another prime time embarrassing moment of regulatory malpractice.
The timely announcement of an SEC investigation into “accounting issues” being the typical catalyst to allow for one final “Bear Raid” by the institutions to protect their wealthy clients against the best interests of the small investor.
When I questioned SEC Spokesman John Heine on the recent SEC subpoena against Overstock.com his response was that the SEC would not confirm or deny that an investigation exists. That may be true but the SEC does require companies to notify all shareholders of material events or illicit an enforcement action so…theoretically the SEC was a co-signature to the Overstock.com press release.
Heine disputed this assumption claiming the rules are not that straight forward on when a company must identify such a material event such as a subpoena. Companies are supposed to roll the dice and hope for a “good” SEC Attorney if they choose not to. So much for standards rules to insure compliance.
Over the past 17 months the SEC has introduced Regulation SHO and been before the Senate Banking Committee twice whereby Senator Bennett challenged the standing Chairman on the effectiveness of the rule change. Throughout this period in time, Overstock.com has been on the Regulation SHO threshold list for better that 90% of the trading days and has had the short positions more than double in the stock since January 2005. All the while, Insiders and Fund Managers alike have identified that their stock purchases resulted in long extended failures to deliver as the stock prices continued to collapse.
Where has the SEC been? Apparently the SEC has been spending time listening to hedge fund managers complaining about accounting practices.
To address these glaring market concerns the SEC subpoenas the company and the officers of the company to acquire information on the physical certification of their share holdings. Is it now against the law to want to hold in controlled possession what you rightfully purchased? While the SEC has been attempting to direct the markets to a paperless system, they appear hell bent on intimidating every company and every investor who challenges present day operations by seeking physical delivery of shares to prove the SEC is negligent in monitoring the settlement process.
More ironic is that the subpoena to Overstock.com is seeking information regarding stock loan and stock borrow information on the stock. Doesn’t the SEC remember that they put out a position stating the company has no rights or control over company shares once the company registers and issues those shares into the marketplace? [Ref: Release No. 34-49804; File No. S7-24-04] If the SEC wants answers to stock lending, ask Wall street not the issuer who is restricted from finding out how many fails there are in the system.
The SEC also appears to have overstepped their authorities when requesting the specific information leading to the lawsuit filed against Gradient Analytics. Call in the business media; they are all over SEC authorities and Constitutional rights.
When the SEC fails to properly protect the public business enterprises and thus fails to protect the investors of those public business enterprises it then falls upon the business to take actions to protect themselves and their shareholders. The actions taken against Gradient Analytics is one that is a freedom provided the company under the US Constitution and thus a right the SEC has no authority to question. But they appear to be.
It was earlier this year the SEC issued subpoenas against members of the financial press seeking information and communications regarding Gradient Analytics where Overstock.com was one of the businesses involved. SEC Chairman Chris Cox later turned tail and ran from the subpoenas citing his efforts to protect the media and their first and fourth amendment rights. Yet here this same agency now stands questioning whether a company has a right to sue another company.
This witch-hunt may very well be a backhanded way of looking into the Gradient issue deeper but this time they are issuing subpoenas against public companies and doing so in a manner to cast a negative cloud over that company. The SEC is seeking proprietary legal work product and are using the investing public to play the role of pawn.
Nobody ultimately knows where this will all play out but one thing is for sure, the SEC opened up Pandora’s Box when they issued this latest subpoena. The eyes are now on them and on the subsequent trading that takes place in this stock.
What impact will this news have on the stock valuation and how much of the settlement failures and short positions will ultimately be covered will be closely monitored. If the SEC Investigation is nothing more that a dead-ended witch-hunt and the SEC actions became nothing more than a catalyst to cure the settlement failure issue at a profit to those failures a follow-up investigation should not be out of the question. This time however the investigation should be against those at the agency who aided the criminals.
Is the SEC attempting to silence a critic? Are they attempting to silence a public Company who feels the SEC is not conducting business to the mission statement defined by Congress?
Speaking to many within the industry, few are willing to become whistleblowers because of how they will ultimately fare in this game. The SEC has already showed their hand regarding whistleblowers when they shunned the whistleblower in the Putnam case. It is more evident that the SEC would rather cover up the issue and attack the messenger before taking appropriate actions against the Wall Street Institutions and hedge Funds. This may simply be another example of that practice.
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 Retaliation; Subpoenas are Served up on SEC Critic – May 10, 2006
David Patch
Heck, we all knew it would eventually come to this. Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne predicted this day would come over a year ago and like good Federal Agents the SEC complied.
After the markets closed yesterday Overstock.com announced that the Company had been issued a subpoena by the SEC regarding a smattering of disconnected issues including all documents relating to the company's accounting policies, targets, projections, estimates, recent statements, new technology systems and their implementation, and communications with and regarding analysts. In addition to business operations issues the SEC also requested all information relating to the filing of its complaint against Gradient Analytics as well as communications regarding short selling, naked short selling, purchases, and sales of the company stock, obtaining paper certificates and stock loan or borrow of the company's shares. The only thing left out of the subpoena was a request for last month’s restaurant bills and the scorecards used to calculate Byrne’s golf handicap.
Yes, the predications made a year ago have come to roost and the lapdogs in Washington DC once again exercised their right to aid the illegal trading of the short seller. The witch-hunt is on and this time the SEC may have barked up the wrong tree. This time the SEC’s actions will be front row viewing by a large population of the investing public.
Understand, this is not the first time the SEC has come to the aid of short sellers who have over extended their short positions in certain companies. We have seen formal SEC investigations initiated into Taser International (NASDAQ: TASR) and Travelzoo (NASDAQ: TZOO) at a time where the reported shorts in the companies grew to near 100% of the public float and the settlement failures resulting from these short positions growing with them. The SEC also opened up an investigation into Novastar Financial (NYSE: NFI) and Allied Capital (NYSE: ALD) as they too accumulated excessive short positions and excessive fails attributed to those short positions.
Adding Overstock into this mix and Hedge Fund manager David Rocker was luckily short each of these companies as the regulators worked their magic.
So whatever came from these SEC Investigations?
The business press had a field day attacking each of these companies, the stock plummeted, and the SEC has yet to come up with a single enforcement case worthy of the destruction to shareholder value created by the bogus investigations. The only positives, the shorts were able to cover for a profit, some of the perpetual settlement failures were erased, and the markets were saved from yet another prime time embarrassing moment of regulatory malpractice.
The timely announcement of an SEC investigation into “accounting issues” being the typical catalyst to allow for one final “Bear Raid” by the institutions to protect their wealthy clients against the best interests of the small investor.
When I questioned SEC Spokesman John Heine on the recent SEC subpoena against Overstock.com his response was that the SEC would not confirm or deny that an investigation exists. That may be true but the SEC does require companies to notify all shareholders of material events or illicit an enforcement action so…theoretically the SEC was a co-signature to the Overstock.com press release.
Heine disputed this assumption claiming the rules are not that straight forward on when a company must identify such a material event such as a subpoena. Companies are supposed to roll the dice and hope for a “good” SEC Attorney if they choose not to. So much for standards rules to insure compliance.
Over the past 17 months the SEC has introduced Regulation SHO and been before the Senate Banking Committee twice whereby Senator Bennett challenged the standing Chairman on the effectiveness of the rule change. Throughout this period in time, Overstock.com has been on the Regulation SHO threshold list for better that 90% of the trading days and has had the short positions more than double in the stock since January 2005. All the while, Insiders and Fund Managers alike have identified that their stock purchases resulted in long extended failures to deliver as the stock prices continued to collapse.
Where has the SEC been? Apparently the SEC has been spending time listening to hedge fund managers complaining about accounting practices.
To address these glaring market concerns the SEC subpoenas the company and the officers of the company to acquire information on the physical certification of their share holdings. Is it now against the law to want to hold in controlled possession what you rightfully purchased? While the SEC has been attempting to direct the markets to a paperless system, they appear hell bent on intimidating every company and every investor who challenges present day operations by seeking physical delivery of shares to prove the SEC is negligent in monitoring the settlement process.
More ironic is that the subpoena to Overstock.com is seeking information regarding stock loan and stock borrow information on the stock. Doesn’t the SEC remember that they put out a position stating the company has no rights or control over company shares once the company registers and issues those shares into the marketplace? [Ref: Release No. 34-49804; File No. S7-24-04] If the SEC wants answers to stock lending, ask Wall street not the issuer who is restricted from finding out how many fails there are in the system.
The SEC also appears to have overstepped their authorities when requesting the specific information leading to the lawsuit filed against Gradient Analytics. Call in the business media; they are all over SEC authorities and Constitutional rights.
When the SEC fails to properly protect the public business enterprises and thus fails to protect the investors of those public business enterprises it then falls upon the business to take actions to protect themselves and their shareholders. The actions taken against Gradient Analytics is one that is a freedom provided the company under the US Constitution and thus a right the SEC has no authority to question. But they appear to be.
It was earlier this year the SEC issued subpoenas against members of the financial press seeking information and communications regarding Gradient Analytics where Overstock.com was one of the businesses involved. SEC Chairman Chris Cox later turned tail and ran from the subpoenas citing his efforts to protect the media and their first and fourth amendment rights. Yet here this same agency now stands questioning whether a company has a right to sue another company.
This witch-hunt may very well be a backhanded way of looking into the Gradient issue deeper but this time they are issuing subpoenas against public companies and doing so in a manner to cast a negative cloud over that company. The SEC is seeking proprietary legal work product and are using the investing public to play the role of pawn.
Nobody ultimately knows where this will all play out but one thing is for sure, the SEC opened up Pandora’s Box when they issued this latest subpoena. The eyes are now on them and on the subsequent trading that takes place in this stock.
What impact will this news have on the stock valuation and how much of the settlement failures and short positions will ultimately be covered will be closely monitored. If the SEC Investigation is nothing more that a dead-ended witch-hunt and the SEC actions became nothing more than a catalyst to cure the settlement failure issue at a profit to those failures a follow-up investigation should not be out of the question. This time however the investigation should be against those at the agency who aided the criminals.
Is the SEC attempting to silence a critic? Are they attempting to silence a public Company who feels the SEC is not conducting business to the mission statement defined by Congress?
Speaking to many within the industry, few are willing to become whistleblowers because of how they will ultimately fare in this game. The SEC has already showed their hand regarding whistleblowers when they shunned the whistleblower in the Putnam case. It is more evident that the SEC would rather cover up the issue and attack the messenger before taking appropriate actions against the Wall Street Institutions and hedge Funds. This may simply be another example of that practice.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006