Post by jannikki on Feb 14, 2007 22:47:12 GMT -4
Rare “No Action” Memo Exposes Inconsistencies – February 14, 2007
David Patch
It started with an early morning column published by Roddy Boyd of the NY Post; SEC Kills Probe of Gradient. After Boyd at the Post broke the news, the Dow Newswire, Reuters, Bloomberg, Hedgeworld, and Globe and Mail soon followed suit.
Suddenly media outlets from around the country and beyond documented the termination of the SEC Investigation into Gradient Analytics. What the investigation was about was not identified but it was terminated.
What makes this story so interesting is that one, Gradient Analytics is not a publicly traded company and two, the SEC provided Gradient a “rare” no-action memo on the termination of the investigation. The memo, drafted by SEC Associate District Administrator Marc J. f*gel, being widely disseminated throughout the financial media by Gradient media relations contact Karen Hinton.
For this author I find this whole episode widely confusing.
Why did the SEC rush, yes rush, an investigation into a privately held company when the SEC typically drags it feet when investigating publicly traded companies and where investors n these public companies run the risk of being harmed by the delays in taking appropriate actions. By all accounts, this investigation lasted little more than a single year from an agency known to drag things on forever allowing investors to be crippled by the delays.
Gradient and publicly traded Overstock.com happen to be in a very public legal battle over short selling abuses. Overstock.com received their subpoena from the SEC at the very same time as Gradient and yet it was the non-publicly traded Gradient that the SEC expedited the investigation on leaving Overstock.com and their shareholders still unsure about the SEC’s intent.
More bizarre, I am aware of SEC investigations exceeding the 5-year statue of limitations due to a lack of interest of the staff with the SEC making several requests for extensions were required to close out the enforcement case.
How about this “rare” no action memo? Boyd, referred to it, Carol Remond of the Dow Newswire referred to it, and Herb Greenberg of Marketwatch.com referred to it as being “rare”. Greenberg called the no action memo an unnecessary document.
So why did the SEC take this extra step to draft a no-action memo to a non-public company when they don’t provide public companies a similar memo when exonerated from the SEC “black cloud”?
Greenberg questions the SEC motives in his blog stating “you can't help but wonder whether an embarrassed agency is trying to send someone a message.” Is that what the SEC does, pass messages to those that question their actions?
Greenberg himself was a participant in this legal tussle as Greenberg was one of several media personalities, along with who else Boyd and Remond, that received a subpoena by the SEC relating to this investigation. While the subpoena was legal, SEC Chairman Chris Cox stepped in and dismissed the requests and, according to Greenberg, the SEC never followed up with any interviews. Makes you wonder who they did talk to.
Damn does this plot get thick and ugly. But ugly hasn’t even started to surface.
Last year, before a Congressional committee investigating this issue and the potential global conflicts between short sellers, analysts, and the media, testimony was taken under oath by former Gradient employees who detailed potential illegal activities. In total 5 affidavits were provide to Congress and the SEC relating to this matter.
So how did the SEC dismiss 5 people who, under oath, detailed the conflicts between the short seller [Hedge Fund] and the analysts posting “hatchet jobs” on companies their clients previously shorted? The accusation being that the fund actually ghost wrote the reports and defined when it could be issued.
That really gets interesting as the SEC either considers these witnesses as liars, which makes their testimony perjury or, the SEC dismissed them without justification. If I were a member of congress who witnessed this testimony I would certainly want to get to the bottom of this considering the most recent SEC - John Mack – Pequot Capital – insider trading fiasco presently under GAO investigation.
The GAO investigating whether the SEC illegally fired the investigating attorney on the case as part of a “political connection” whitewash of illegal trading activities.
Essentially, today’s massive media attention to Gradient Analytics exoneration and the rare SEC action memo only raise greater doubt that some within the financial media are in fact working stories on behalf of the Hedge Funds and that the SEC could care less about it.
Liquidity is good at any cost!
I never expected the SEC to take action against Gradient because for one I never felt they held the integrity to differentiate between political and financial connections and securities fraud. But today’s news came as a blessing because the SEC not only fulfilled my expectations but publicly exposed their alliances.
Members of Congress, already suspect of SEC impartiality, have to be scratching their heads and questioning why a private Gradient Analytics was provided the expeditious investigation and the “rare” no-action memo when public companies are not provided the same courtesies. What gives Gradient the “special status”? Members of Congress have to be concerned at the testimony they hold and how that testimony does not correlate with the SEC’s latest decisions. And Congress must wonder, since the financial press was not interviewed for this investigation, how serious the SEC was at getting to the bottom to this growing and public debate.
This is good news folks because the investigation is over, terminated. That opens up doors that would otherwise remain closed.
People thought the John Mack - Pequot Capital controversy was troubling wait till this is over.
Final thoughts: Consider that we were never informed on what charges the SEC was investigating and terminated. But Overstock.com and Biovail have civil lawsuits pending against Gradient. If either or both case is found in favor of these companies the SEC will be under tremendous pressure to justify how a civil court could find guilt where the SEC staff could not. A troubling thought – for the SEC staff.
Personally, I am amazed but not surprised that the SEC acted this foolishly.
David Patch
It started with an early morning column published by Roddy Boyd of the NY Post; SEC Kills Probe of Gradient. After Boyd at the Post broke the news, the Dow Newswire, Reuters, Bloomberg, Hedgeworld, and Globe and Mail soon followed suit.
Suddenly media outlets from around the country and beyond documented the termination of the SEC Investigation into Gradient Analytics. What the investigation was about was not identified but it was terminated.
What makes this story so interesting is that one, Gradient Analytics is not a publicly traded company and two, the SEC provided Gradient a “rare” no-action memo on the termination of the investigation. The memo, drafted by SEC Associate District Administrator Marc J. f*gel, being widely disseminated throughout the financial media by Gradient media relations contact Karen Hinton.
For this author I find this whole episode widely confusing.
Why did the SEC rush, yes rush, an investigation into a privately held company when the SEC typically drags it feet when investigating publicly traded companies and where investors n these public companies run the risk of being harmed by the delays in taking appropriate actions. By all accounts, this investigation lasted little more than a single year from an agency known to drag things on forever allowing investors to be crippled by the delays.
Gradient and publicly traded Overstock.com happen to be in a very public legal battle over short selling abuses. Overstock.com received their subpoena from the SEC at the very same time as Gradient and yet it was the non-publicly traded Gradient that the SEC expedited the investigation on leaving Overstock.com and their shareholders still unsure about the SEC’s intent.
More bizarre, I am aware of SEC investigations exceeding the 5-year statue of limitations due to a lack of interest of the staff with the SEC making several requests for extensions were required to close out the enforcement case.
How about this “rare” no action memo? Boyd, referred to it, Carol Remond of the Dow Newswire referred to it, and Herb Greenberg of Marketwatch.com referred to it as being “rare”. Greenberg called the no action memo an unnecessary document.
So why did the SEC take this extra step to draft a no-action memo to a non-public company when they don’t provide public companies a similar memo when exonerated from the SEC “black cloud”?
Greenberg questions the SEC motives in his blog stating “you can't help but wonder whether an embarrassed agency is trying to send someone a message.” Is that what the SEC does, pass messages to those that question their actions?
Greenberg himself was a participant in this legal tussle as Greenberg was one of several media personalities, along with who else Boyd and Remond, that received a subpoena by the SEC relating to this investigation. While the subpoena was legal, SEC Chairman Chris Cox stepped in and dismissed the requests and, according to Greenberg, the SEC never followed up with any interviews. Makes you wonder who they did talk to.
Damn does this plot get thick and ugly. But ugly hasn’t even started to surface.
Last year, before a Congressional committee investigating this issue and the potential global conflicts between short sellers, analysts, and the media, testimony was taken under oath by former Gradient employees who detailed potential illegal activities. In total 5 affidavits were provide to Congress and the SEC relating to this matter.
So how did the SEC dismiss 5 people who, under oath, detailed the conflicts between the short seller [Hedge Fund] and the analysts posting “hatchet jobs” on companies their clients previously shorted? The accusation being that the fund actually ghost wrote the reports and defined when it could be issued.
That really gets interesting as the SEC either considers these witnesses as liars, which makes their testimony perjury or, the SEC dismissed them without justification. If I were a member of congress who witnessed this testimony I would certainly want to get to the bottom of this considering the most recent SEC - John Mack – Pequot Capital – insider trading fiasco presently under GAO investigation.
The GAO investigating whether the SEC illegally fired the investigating attorney on the case as part of a “political connection” whitewash of illegal trading activities.
Essentially, today’s massive media attention to Gradient Analytics exoneration and the rare SEC action memo only raise greater doubt that some within the financial media are in fact working stories on behalf of the Hedge Funds and that the SEC could care less about it.
Liquidity is good at any cost!
I never expected the SEC to take action against Gradient because for one I never felt they held the integrity to differentiate between political and financial connections and securities fraud. But today’s news came as a blessing because the SEC not only fulfilled my expectations but publicly exposed their alliances.
Members of Congress, already suspect of SEC impartiality, have to be scratching their heads and questioning why a private Gradient Analytics was provided the expeditious investigation and the “rare” no-action memo when public companies are not provided the same courtesies. What gives Gradient the “special status”? Members of Congress have to be concerned at the testimony they hold and how that testimony does not correlate with the SEC’s latest decisions. And Congress must wonder, since the financial press was not interviewed for this investigation, how serious the SEC was at getting to the bottom to this growing and public debate.
This is good news folks because the investigation is over, terminated. That opens up doors that would otherwise remain closed.
People thought the John Mack - Pequot Capital controversy was troubling wait till this is over.
Final thoughts: Consider that we were never informed on what charges the SEC was investigating and terminated. But Overstock.com and Biovail have civil lawsuits pending against Gradient. If either or both case is found in favor of these companies the SEC will be under tremendous pressure to justify how a civil court could find guilt where the SEC staff could not. A troubling thought – for the SEC staff.
Personally, I am amazed but not surprised that the SEC acted this foolishly.