9) The Deep Capture Campaign

This is not another tirade against Eliot Spitzer, the man who slunk out of the New York Governor’s Mansion to the sound of champagne corks popping up and down Wall Street. As I said at the time in an interview with Neil Cavuto on Fox Business News, I am familiar enough with the culture of Wall Street to know that if we said, “Let he who is without sin pop the first champagne cork,” it would be a dry town.

Instead, it is a tirade against Eliot Spitzer, the man who sacrificed principle to get into to the Governor’s Mansion, a fellow who always acted from ambition and not integrity.

To ease into this, I will pose the reader a question. I note that the crusade for which Eliot Spitzer first made his name was a campaign to root-out conflicted research on Wall Street. Jim Cramer has often written (with no detectable irony) of this heroic Spitzerquest. For example, Cramer wrote in his 2002 book, You Got Screwed!

“The actions taken by the federal government subsequent to the prodding by elected officials such as Eliot Spitzer, the attorney general of New York, who got the ball rolling, certainly helped clarify conflicts, and even shed harsh light on the most revolting of them.”(You Got Screwed!: Why Wall Street Tanked and How You Can Prosper, Simon & Schuster, 2002, page 5).

In keeping with his tough-guy-looking-out-for-you shtick, however, Cramer added that “…within weeks of those actions, the complex of interests that kept you in the dark about how the stock market really works was right back in action.” (You Got Screwed! Page 5.)

Similarly, in Cramer’s latest book, he writes:

“Eliot Spitzer, the New York State attorney general, ended that game when he determined that analysts were no more honest than movie critics who are employed by the movie companies themselves.” (Jim Cramer’s Real Money: Sane Investing in an Insane World, New York, Simon & Schuster, 2005, page 134).

The odd thing about these statements is that, as should be obvious from the post “Jim Cramer is a Complicated Man“, Mr. Cramer is the single most conflicted journalist-money-manager in the history of Wall Street. In fact, the concept of “journalist-money-manager” was invented to describe Jim Cramer, as before his rise to prominence US financial journalism still had editors with integrity. Yet while Spitzer “got the ball rolling” looking high and low for conflicts, “and even shed light on the most revolting of them,” he overlooked Jim Cramer and everyone in Cramer’s circle, without exception. Why is that?

The short answer is that Eliot Spitzer has had a unique relationship with Jim Cramer for three decades. It started when they became roommates and friends at Harvard Law. It continued throughout Spitzer’s subsequent career. Through it all theirs has always been much more than a casual schooldays’ friendship: Cramer has worked hard to aid Spitzer, both financially and professionally, and it appears that this good will was reciprocated.

This essay will explore the implications of their bond.

The Thug Also Rises

Cramer’s cronies have always been Spitzer’s biggest contributors. Nick Maier describes a fundraiser Cramer threw when Spitzer first pursued the Attorney General’s office:

“We invited every broker who covered us to that party, kept track of who came, and, most important, noted who contributed to Eliot’s campaign. The smart brokers made sizable donations and were rewarded for it. (Trading with the Enemy, page 33).

Early on, this connection between Cramer and Spitzer proved troublesome for Cramer. According to Cramer, from 1995 to 1997, Cramer & Co. yielded consistently high returns for investors. In 1997 Jeff Berkowitz was invited to be partner, and the fund became Cramer Berkowitz. 1998, however, was a crisis year for the fund. The melt-down of Long Term Capital Management had led to double-digit declines in the fund’s positions.

“Then, one day in early September, I got a call from one of my biggest investors, Eliot Spitzer, who was making his second bid for New York State attorney general. When Eliot studied with me at Harvard Law he had seen how driven I was and how much I loved the stock market. When I set up the fund he had come in as a partner early on and I had made the man a ton of money. Now the papers were saying that Eliot might be violating campaign finance disclosure laws by getting hidden money from his family. That was a total crock and I knew it, as I had made a boatload for Eliot. But there was only one way to refute his charge and it was to open up the fund. It was an emergency.” (Confessions of a Street Addict, page 186).

Cramer opened up the fund so Spitzer could withdraw. Many of Jim’s other investors chose the opportunity to withdraw as well. With help from Karen the fund did finish up for the year, but still disappointing relative to the averages.

Yet such occasional hiccups could not outweigh the great synergy that existed between the financiers in Cramer’s orbit and the Attorney General of the state where they did business. After Spitzer was elected to the position of Attorney General in 1998, he pursued a variety of targets. He started with conflicted researcher, but expanded his efforts to take on immensely powerful targets, such as AIG and Hank Greenberg, Marsh & McLennan (there targeting Hank’s son Jeffrey), and bond insurers such as MBIA and Ambac. As I will explain, however, Spitzer did not “take them on” in a way that would have been recognized as legitimate in any previous era.

The misdeeds upon which Spitzer focused were generally industry practices that extended beyond living memory. Some of these were obvious evils (e.g., conflicted research on Wall Street). Some were arcane probable-evils (e.g., the way Marsh Mac created insurance quotes for D&O insurance). And some were “evils” worthy of Talmudic dispute: for example, if in some negotiation the firm on the other side of the table offers you highly attractive terms, and you accept, is it your responsibility to approve of, or even know, the accounting method that other company uses to reflect the deal on its own books?

Novel were the misdeeds were for which Spitzer pursued his quarries, and more novel yet was his method. It is a truism that, as former New York Chief Justice Sol Wachtler put it, a good prosecutor “could get a grand jury to indict a ham sandwich.” It is also a given that no financial firm can withstand a criminal indictment: individuals of a financial firm may be indicted, but since it is the business model of financial firms to say, “Give us X now and trust us to give you Y in the future,” a criminal indictment is more or less an order to shut their doors.

Put these two facts together, and it means that it is within the power of every prosecutor to wake up on any given morning and destroy any financial firm in his jurisdiction. How? Here is one of several ways: at the end of each quarter every financial firm has to make thousands of estimates, estimates which in the light of hindsight may prove to be on balance accurate (or even conservative), but some of which will surely prove to be in error. Thus, if a prosecutor can indict a ham sandwich, think how easy it is to indict a firm whose books will, at any given time, always contain estimates some significant fraction of which are false. There are others ways, but its all basically the same idea: financial firms are uniquely ill-suited to be recipients of criminal indictments, and if a prosecutor looks hard enough he can indict …. the proverbial ham sandwich.

Thus every Attorney General is always in a position to destroy any financial firm in his or her jurisdiction. Most people who reach the level of Attorney General have the maturity not to abuse that vast power. Spitzer exercised it with abandon. For example, he went public with allegations of criminal misconduct against Hank Greenberg, the legendary CEO of AIG. Spitzer refused to negotiate with AIG until Greenberg stepped down from the company he had built. Given the dynamic described above, that demand is extraordinary: it is a negotiation where Spitzer was able to force the other side to cave without having anything on him. Spitzer’s power to end Greenberg’s career came not from any legal acumen, but was simply intrinsic to his position as AG: he threatened the destruction of a financial firm by bringing a criminal indictment, thus giving a good leader only one alternative. If you ever wanted to know what a thug would look like as an Attorney General, that’s it. That’s what one would look like.

Months after Greenberg stepped aside, Spitzer’s criminal allegations against Greenberg quietly fizzled out.

The previous example is not, alas, a one-off. In fact, the hallmark of Attorney General Spitzer’s reign was precisely the kind of headline-making bullying that would make the US Chamber of Commerce describe Attorney General Spitzer’s methods as, “the most egregious and unacceptable form of intimidation we’ve seen in this country in modern times.” That “form of intimidation” often bore the flavor of someone who had seen too much TV.

An example of that came in Spitzer’s dealings with the John Whitehead, the former chairman of Goldman Sachs, one of the most highly respected men in modern Wall Street history, and in my view, the kind of man the industry ineeds (that is, heavyweight players who keep the game straight, or at least reasonably straight, by keeping Young Turks in check: other than a few old-school guys like Ken Langone, such men are in short supply these days on Wall Street). John Whitehead had the temerity to write a Wall Street Journal op-ed (”Mr. Spitzer Has Gone Too Far“) that made the simple point that in America, people are innocent until proven guilty. That included Hank Greenberg:

“Something has gone seriously awry when a state attorney general can go on television and charge one of America’s best CEOs and most generous philanthropists with fraud before any charges have been brought, before the possible defendant has even had a chance to know what he personally is alleged to have done, and while the investigation is still under way.”

The day this editorial appeared, Spitzer called Whitehead (a retired octagenerian) and said:

“Mr. Whitehead, it’s now a war between us and you’ve fired the first shot. I will be coming after you. You will pay the price. This is only the beginning, and you will pay dearly for what you have done.”

Whitehead’s account went unchallenged by Spitzer.

The Many Sugar Daddies of Eliot Spitzer

Jim continued to support Spitzer in his re-election campaigns, even after he (Jim) left Cramer Berkowitz. For example, this 2003 New York Post article describes a huge fund-raising event for Spitzer that Cramer helped to organize (I beg the reader to please read this closely, as I will suggest two mental notes about this paragraph):

“Among some of the biggest donors to the day’s event were: hedge fund giant James Chanos, president of $1 billion hedge fund Kynikos Associates; Titan Advisors fund-of-funds chief George Fox and Jeff Berkowitz, manager for the hedge fund Cramer Berkowitz (co-founded with Street.com’s Jim Cramer); real estate mavens Edward and Howard Milstein; developer Donald Trump; class action attorney Melvyn Weiss… Weiss, whose own work in pursuing financial fraud has been bolstered by Spitzer’s prosecutorial zeal, was quick to point out that Spitzer’s work has made him more than a few enemies on Wall Street.” (Jenny Anderson, “Fundraising for a Fund Crusader,” New York Post, December 12, 2003).

The first mental note concerns this: “Among some of the biggest donors to the day’s event were: hedge fund giant James Chanos, president of $1 billion hedge fund Kynikos Associates.” Please stick a pin in the name, “James Chanos.”

The second mental note concerns the absence of critical thought exhibited by the New York Post in publishing this sentence: “Weiss, whose own work in pursuing financial fraud has been bolstered by Spitzer’s prosecutorial zeal…” How do we know that Melvyn Weiss’ work has been, “pursuing financial fraud”? Because Weiss said so? In fact, three years later, Melvyn Weiss was charged by the US Department of Justice with taking part in a now-notorious $200 million kick-back scheme involving one of the most powerful law firms in the United States, Milberg Weiss Bershad & Schulman (as of a few days ago, all three of Weiss, Bershad, and Schulman are convicted felons, as is their former partner, Bill Lerach) Thus, with the benefit of hindsight (or critical thought) it would have been more accurate for the New York Post to say, “Weiss, whose own work in practicing financial fraud…”

However, that would have been poor form of the New York Post, the piano player in the bordello that is the New York financial industry. That is why, as I will demonstrate in a later piece, the New York Post is for folks who move their lips while reading People Magazine.

Connections among Spitzer and Cramer’s cronies, such as Marty Peretz, no doubt proved calming on what may have been otherwise bleak and unhappy occasions. For example, in 2003 Spitzer’s office opened an investigation into an ailing hedge fund controlled by Gotham Partners Management. Shortly thereafter, Gotham closed down the fund, and no charges were filed. The fund’s principle investor was Marty Peretz. (Henny Sender and Gregory Zuckerman, “New York Examines research by Gotham Partners on MBIA, The Wall Street Journal, January 10, 2003.) In fact, in a turn-around which has become a standard operating policy against any who try to expose this group, Spitzer began an investigation in MBIA.

By 2005 this coziness between the Attorney General Crusader and hedge funds was an open secret. For example, The New York Observer eloquently explained in January, 2005):

“The ‘hedgies,’ as they’re sometimes called, love Eliot Spitzer. While Wall Street bankers have tended to steer clear of his campaign - in part because of a state law prohibiting contributions by any corporations that sell bonds to the state, in part because they’re still peeved about his crusade against corrupt stock analysts - hedge-fund managers seem to have Spitzer headquarters on speed-dial. Some of these guys, like Kynikos Capital’s James Chanos, always pop up on Democratic host committees (what else are they supposed to do with their $10 million year-end bonuses?). But others, like Stanley Druckenmiller… are genuine converts to the Spitzer cause.

“And why not? While the Attorney General brought his prosecutor’s wrath down on Canary Capital - a hedge fund tied up in the mutual-fund market-timing scandal - he has, thus far, left hedge funds largely alone. As the hedgies are fond of saying, Mr. Spitzer seems to ‘understand’ hedge funds. After all, some of his best friends are hedge-fund managers, and for many years he was a loyal hedge fund investor, reaping what his good friend James Cramer described in his book, Confessions of a Street Addict, as a ‘boatload’ of money from the Cramer-Berkowitz fund.

“But, perhaps most compelling, Mr. Spitzer’s tactics have been good for hedge-funders’ wallets…

“And, like so many of their breed, the hedgies know a good investment when they see one. ‘It’s a lot like investing,’ said Keith Rosenbloom, a Spitzer fund-raiser who runs ComVest Investment Partners, a $1.4 billion fund-of-funds. ‘When you find an investment that’s really special, you’re supposed to bet more on that one if you really understand it. This is a guy who is really special-and you try to back the guys who are really special.’”

Allying yourself with the wealthiest and most powerful people in your state, many of whom (as Deep Capture is demonstrating) are scofflaws, while donning the mantle of a reformer: that’s some gig.

Governor Spitzer: Tous ca change

Politically astute American know the initials “AG” do not, in fact, stand for “Attorney General”, they stand for “Aspiring Governor”. When New York Aspiring Governor Spitzer set out on the utterly predictable course of turning himself into New York Governor Spitzer, his “hedgie” friends were there for him. As The New York Times put it:

“ALBANY, Jan. 25 - Eliot Spitzer has not angered everybody in the business world.

“In fact, Mr. Spitzer, New York State’s attorney general and the front-runner in the polls for this year’s governor’s race, has taken contributions from some of the biggest names in hedge funds, venture capital, real estate and commodities in building a $19 million war chest for his campaign nine months before the election.

“That figure exceeds the $16.3 million that Gov. George E. Pataki had raised at this same point in 2002, when he enjoyed the formidable fund-raising powers of incumbency. In Mr. Spitzer’s case, his campaign finance filings suggest the influence of his actions as attorney general on political donations in the race for governor.” (Danny Hakim, “Filings Show Spitzer’s Allies in Big Business,” New York Times, January 26, 2006)

Then, less than two weeks later, The New York Times explained that “Spitzer Campaign Getting Money From Sources Spitzer Disavows” (Michael Cooper, February 7, 2006):

“ALBANY - In his run for governor, Attorney General Eliot Spitzer has called for ending the ‘pay-to-play culture that exists in Albany’ and pledged not to accept contributions from anyone with business pending before his office. But in Albany, where campaign donations gravitate toward power, Mr. Spitzer’s early lead in the polls has translated into contributions from lobbyists and special interest groups in amounts that are usually not seen except when incumbents are running.

“When Mr. Spitzer held a gala fund-raiser that added $5 million to his campaign in December, the invitation, which listed some big donors along with members of the host committee, read in places like a who’s who of powerful Albany lobbyists…. The contributions highlight the sometimes blurry line that the campaign is trying to walk as it claims to hold itself up to a higher ethical standard in the area of campaign finance while still raising millions of dollars in a state where lobbyists and special interests are among the most reliable donors.”

Again: allying yourself with the wealthiest and most powerful people in your state, many of them scofflaws, while being portrayed as a reformer. Some gig indeed.

The Comeuppance of the Slowhand

As I said at the outset, I am not going to dwell on the Client #9 aspect of this story. I object to our society’s stigmatization of women such as “Kristen.” I was once friendly with a truly fine woman who was, she revealed in time, a high-price escort. One day she showed me her Rolodex (and she did, in fact, have a Rolodex, an old-fashioned, sit-on-the-desktop Rolodex). It had thick paper stock cards that were intended for individual entries. I would estimate that to 60-75% of them were stapled business cards of Managing Directors of upper-crust Wall Street financial firms, along with a smaller number of cards discretely embossed with the names of the white-shoe law firms which service such financiers (discretion precludes me from mentioning the names of any of these firms, but the ones that jump to the mind of the reader conversant with Wall Street are, in fact, the ones I mean). Incidentally, this was true even though the gal lived and worked a long way from New York.

Thus, Wall Street’s Spitzerschadenfreude strikes me as hollow and disingenuous as… most everything else about our financial Power Elite. If anything, women such as “Kristen” should be embarrassed at being exposed entertaining men of standing in “polite society” while “polite society” mouths hypocritical platitudes about them.

Instead, I will burden the reader with two requests.

The first request is that the the reader consider the possibility that the career of Eliot Spitzer reveals more to us about the topsy-turvy, Alice-in-Wonderland world we inhabit than we are likely to see for a long time. Mr. Spitzer became AG due in large part to the guidance and financial support of Jim Cramer and his hedge fund cronies. As Attorney General, Spitzer made a name for himself pursuing conflicted research on Wall Street while never touching Cramer, who embodies the most clear-cut, deepest conflicts between journalism and money management that the financial world has ever seen. Spitzer augmented this reputation pursuing insurance companies like AIG and MBIA over deeply ambiguous financial arcana worthy of Talmudic debate, but never touched the hedge funds who regularly, on a day-to-day basis, as their very business model, manipulate stock prices, rob Americans of their chance to invest in a fair capital market, and (in the case of one) openly brag about it in books and on TV. Spitzer ran for Governor on a campaign of, “The Sheriff of Wall Street is going to put an end to the pay-to-play ways of Albany,” while to his gubernatorial campaign were donated greater funds than his “pay-to-play” predecessor had raised as an incumbent, and in that campaign Spitzer’s strongest support came from the hedge fund cronies to whose industry Attorney General Spitzer had given hall passes.

Did I miss anything?

Thus to me, Spitzer’s downfall is the least interesting part of his story. The career of Eliot Spitzer was always a sluttish thing. The real question with which it confronts us is: what is the state of our public discourse that it would ever see Eliot Spitzer as admirable? Even as he pursued clear evils (such as conflicted analysts on Wall Street) were there any who doubted he did so out of ambition and a desire for headlines? Is Eliot Spitzer what a righteous man looks like to our present age?

In sum, how shabby has our public discourse grown that Eliot Spitzer could be outed over a secret tryst with “Kristen”, but not over the many with whom he slept around openly, for years, in the bordello of New York financial circles?

The second request is that the reader please remember the name “James Chanos” and the firms mentioned above: AIG, Marsh & McLennan, MBIA, and Ambac.

I would like to address the one interesting and worthwhile point made by the toy army deployed to attack this effort and those people presumed to be part of it.

It came in the form of a question posted to Yahoo’s Overstock.com message board by topangan90065, which reads as follows:

Take a good look at antisocialmedia.net

Go ahead. Take a good look at antisocialmedia.net. Read every word. Help me figure it out.

Just who is the target audience supposed to be? I don’t think anyone not already immersed in the Arcana of Baloney could make heads nor tails of it. You would have at least to have heard of Gary Weiss, and to have given him some credit to be discredited.

And for those of us who ARE immersed, pro or con, what is the goal here? What would it take to make someone STOP thinking Bob is full O’Baloney, and STOP thinking Patty is Wacky?

And suppose, against all odds, they should finally succeed in completely discrediting Gary Weiss?

SO EFFING WHAT? Does that wash out even one KILO of CRUD from the Overstock Warehouse?

Wacky Patty, this whole thing is so DEEPLY WEIRD, it is all past the point of no return.

The question of whom we’re targeting as our audience and what they should learn here is one that this team has been slightly divided over from the beginning.

But here’s what we’ve settled upon:

Just as the existence of a watch requires the existence of a watchmaker, the existence of an organized and well-financed effort to discredit and attack opponents of something requires the existence of proponents of that thing.

In this case, the “thing” is an illegal form of stock market manipulation called strategic failure to deliver. Victims of this form of fraud are many, and include Overstock.com, Novastar Financial and Circle Group Holdings, to name a few (and you’ll understand why those three are mentioned in a moment).

Our goal, from the beginning, has been to demonstrate, with real examples and in real time, the active existence of a “watchmaker” whose job it is to marginalize those who’ve spoken out against the practice of strategic failure to deliver. The past 48 hours have done more than any other period in this blog’s history to demonstrate this and we sincerely thank topangan90065, scippioafricanus, wilburonefor4, azteca_ace, garyweissisright, and the rest of the crew for putting in such long hours for the cause.

That said, let us address a specific point in topangan90065’s comment, but doing so in the context of who topangan90065 really is: Darl J. Dumont of Los Angeles, CA.

Darl, seen here, is a software developer most recently employed by Dolphin Imaging. He at one time lived in Topanga, but now lives nearby, in the 90065 zip code, where the streets are quiet but the incomes don’t generally support heavy duty investing, especially for an old school programmer who at times finds himself freelancing between gigs.

Yet, in the past year, Darl made over 2,540 posts – as many as 55 in one day – to Yahoo message boards. Of those, all but six posts attack three companies: Overstock.com, Novastar Financial, and Z-Trim Holdings (formerly Circle Group Holdings). Of those, the lion’s share of posts are dedicated to attacking the people who run them, especially if they have spoken out against the illegal practice of strategic failure to deliver (following the lead of Gary Weiss, he calls this practice “baloney”).

So when Darl asks:

Just who is the target audience supposed to be? I don’t think anyone not already immersed in the Arcana of Baloney could make heads nor tails of it… And for those of us who ARE immersed, pro or con, what is the goal here? What would it take to make someone STOP thinking Bob [O’Brien] is full O’Baloney, and STOP thinking [Patrick Byrne] is Wacky?

…we hope he appreciates the irony of providing the answer to his own question, and additional weight to our claim.

Post script: In the year since this post was first published, Darl has, very much to his credit, dropped the pseudonym and now posts (at a much lower level) under his real name. Furthermore, his contributions now often border upon objective. The difference, I posit, is anonymity, which I believe will prove to be the Achilles Heel of the Internet.

UPDATE: as explained here, shortly after the following post was published, all of the reviews of each of the five “reviewers” examined were deleted by the reviewer himself, whom we posit to be Gary Weiss. Consequently, the links to the original reviews included in this post lead to blank pages. Still, we leave the post in its original state for your consideration.

Because Gary Weiss was found to be behind the first real example of multi-ID message board bashing to be publicly proved, and because it was apparent from writing and posting styles that one person was making a large percentage of all bashing contributions to the Yahoo boards in particular, we concluded that Gary was generally responsible for most all of it.Well, as we’ve gone on to learn, thanks to more advanced techniques and a few golden tips, we were missing much of the full picture.

The truth is, lately Gary Weiss seems to be playing a decreasingly significant role on the various message boards where the likes of lamborghini751, cupandsaucerwithsugar, state_police_retiree, and bobobaloney once roamed.

And in many places where we long suspected Gary, we’ve instead come to discover Floyd D. Schneider, of Newton, NJ.

Gary: we’re sorry for accusing you of something you didn’t commit…as much as we suspected, anyway.

Floyd: we wish to express our deep disappointment in your decision to make a living out of lying.

Want proof?

Exploiting Yahoo’s Dissembler Sorting Algorithm bug (which we were sworn never, ever to reveal, so please stop asking) we determined that the following seven Yahoo messageboard usernames were tied to the same individual: strethoechasity, returnofstockdung, baloneymarch, zorro20934, china39846, charlesp0nzi, and floydtheoneandonly

Using Google, we found several legal filings, including this one, which make it clear that:

…“floydtheoneandonly,” “charlesp0nzi,” “thetruthseekercom,” are pseudonyms used by Floyd Schneider.”

It seems Schneider has been sued multiple times for making defamatory statements about companies in anonymous message board settings, such as Yahoo and Silicon Investor, and it’s been shown to our satisfaction that he did so for compensation and in coordination with hedge funds shorting the stock (or worse).

In other words, Floyd Schneider is the embodiment of the mythical “paid basher” you’ll find he spends an inordinate amount of time denying exists. In fact, he had been an associate of the convicted naked short seller Anthony Elgindy who, in one of the most famous posts on his siliconinvestor.com website, outted Schneider as a paid stock basher, severing their prior relationship at the same time.

Think about it…someone Elgindy (possibly reading this from his prison cell) considered excessively mercenary. Wow.

A more detailed analysis of Schneider’s posting patterns will soon follow, but here’s a quick summary of the companies he has most ferociously attacked in recent years:

• Xybernaut
• Matrixx Initiatives
• Overstock.com
• Novastar Financial
• Escala Group
• Cenuco
• Hythiam
• Lucent Technologies
• iMERGENT

What do each of these companies have in common? They’re all targets of the illegal market manipulation technique known as strategic failure to deliver, as manifest by their presence on the so-called Reg SHO Securities Threshold List, indicating chronic failed trades of a company’s stock.

To better understand that issue, watch this presentation.

Before reading what follows, it’s important to know that Yahoo! message board aliases ymh_ymh_ymh, ursa_of_245_park_avenue, ursa_383_madison_avenue, and ursa_minor_245 all belong to Yolanda Holtzee. You can read more on these relationships here.

According to a Wall Street Journal story dated April 18, 2006 (reprinted here, one week later):

In 1998, hoping to make more cash, [Holtzee] began managing money, she says, for a handful of wealthy individuals. She says she stopped taking in new investors in 2000 and won’t disclose her firm’s assets under management or its performance.

Ms. Holtzee refers to her company, Alcap LLC, as an “investment club” and says she employs two traders in Connecticut and a compliance officer.

Holtzee’s first apparent mention of the fund appears to come in January of 2002.

11-Jan-02

Yolanda, as ursa_of_245_park_avenue, first mentions the fund, which she called ALCAP, LLP. Here she explains what that name means.

26-Jan-02

Two weeks later, ursa_of_245_park_avenue hints as to her fund’s performance

Heebner’s returns are not as good as mine by any stretch of the imagination

In a subsequent post, Holtzee continues:

It’s not a hedge fund, per se. It’s a private investment partnership called ALCAP, LLP aka Casino Ursa.

30-Jan-02

Here Yolanda, as ymh_ymh_ymh, offers insights into the holdings of “Casino Ursa aka ALCAP,” also noting:

Ursa does a great job making Marc and his boys much Richer.

14-May-02

Here ymh_ymh_ymh discloses the cost of a new trading account at Casino Ursa (ALCAP, LLP)…or is she promoting trading accounts at Bear Stearns?

…Who’s ready to dump SCH, ET, and AMTD and trade up to my boys and girls at BSC? 500K minimum on a trading account, kids. Casino Ursa ain’t cheap but it’s worth the price.

24-May-02

Following much confusion by her fellow posters over several seemingly contradictory statements by Holtzee about the nature of ALCAP, ymh_ymh_ymh offers this explanation:

It’s a trust fund, LLP type and it is known as the holding company, ALCAP. No listing for it. Small and private.

9-Jun-02

Yet two weeks later, Yolanda, as ursa_383_madison_avenue, goes out of her way to suggest that she actually works for Bear Stearns.

…Yes, my firm, took many dogs public and our clients got those shares at offer price. Our clients sold those dogs in late 1999/2000 for the most part and we shorted the living hell out of them and made some very nice money taking them downhill skiing. Our clients are not naive. Our brokers are the world’s best. My firm’s trading within 10% of an all time high. My firm is the might Bear Stearns (BSC:NYSE)…Our clients are happy. Our brokers are happy. Our price chart is BEAUTIFUL. We are the mighty Bear Stearns (BSC: NYSE). BSC stands for Breakfast of Super Champions. For more on my firm, please view my YHOO profile.

ursa_383_madison_avenue’s user profile, static since May 15, 2002, lists as her profession “Hedge Fund Manager.”

14-Nov-02

Five months later, ymh_ymh_ymh says she’s back in the hedge fund business.

I co-manage a hedge fund called ALCAP. We’re offshore, not registered.

At this point, it’s unclear whether Holtzee’s ALCAP is a hedge fund, a trust fund, or an investment club, and why Bear Stearns continues entering the picture.

But much more interesting is the question of what role billionaire Marc Rich plays in this fund.

Recall the above comment from January 30, 2002, in which Holtzee commented: “Ursa does a great job making Marc and his boys much Richer.”

Now compare that comment with the remnants of a comment made by Yolanda as ursa_minor_245 on a since-deleted thread, dated August 28, 2000, and captured by another poster here a few months later.

by: ursa_minor_245

(F/Zug, Switzerland)

8/28/00 3:16 pm

Msg: 9274 of 11531

…For the record, and the 5th time at least: I don’t work for BSC and I have never worked for BSC. I don’t want to work for BSC or ANY hype house. They don’t pay enough. I serve Marc Rich, the best trader that ever lived, Baar none. You make as much money as you want serving him. No rules…just go for it.

Subsequent comments by Holtzee make it clear that she is in fact referring to fugitive billionaire Marc Rich, who at that point had yet to be pardoned by President Clinton.

If true, this admission of directly engaging in commerce with an expatriate fugitive whose indictment on tax fraud in 1983 was called the “biggest in history” is shocking.

Furthermore, the possibility that the shadowy ALCAP/Casino Ursa/Bear Cub Capital Management, which, depending on when you ask the question, is either a trust or a hedge fund or an investment club organized as an LLC or LLP, that either is or is not affiliated with Bear Stearns, might have served as one of Marc Rich’s notoriously numerous offshore money laundering or campaign finance law-skirting vehicles should be investigated.

Third Point, LLC is a hedge fund run by Daniel Loeb, also known on stock message boards as “Mr. Pink.”

Michelle McDonough (formerly Michelle Sarian), is a convicted felon who has spent one year in prison for securities fraud. Today, as before going to prison, McDonough has a company called Magic Consulting.

Floyd Schneider is a prolific message board poster, whose many pseudonyms can typically be found repeating the same drumbeat of fraud and executive incompetence. Schneider’s posts frequently encourage shareholders to file SEC complaints and/or join shareholder lawsuits.

Yolanda Holtzee is also a prolific message board poster, most notably as Ms. Mint Green, who holds herself out at a close associate of Daniel Loeb/Mr. Pink. Holtzee is also frequently found to be encouraging shareholders to complain to the SEC and participate in shareholder lawsuits.

Roddy Boyd is a reporter for the New York Post and frequent online supporter and offline apologist of Floyd Schneider and Yolanda Holtzee.

AntiSocialMedia.net has learned that Third Point has, on multiple occasions, engaged Michelle McDonough to generate support for SEC investigations and/or class action lawsuits brought by shareholders against companies in which Third Point has substantial short interests. (Daniel Loeb refused to comment on the nature of his relationship with Michelle McDonough.)

McDonough, in turn, frequently engages Floyd Schneider and Yolanda Holtzee (among others) to foment and feign support for such shareholder actions on stock message boards. (McDonough refused to comment on the nature of her relationship with Schneider and Holtzee.)

Roddy Boyd has been asked on two occasions to comment on his relationship with McDonough. The resulting exchanges, via email with Judd Bagley, proceeded as follows:

Judd Bagley: “…What do you know about a woman named Michelle McDonough?”

Roddy Boyd: “re Michelle M: nothing. Should I? google has about 1mm entries for that name.”

Judd Bagley: “She used to go by the name Michelle Sarian. Today she runs “Magic Consulting.” I think she did a year in prison back in 2001.”

Roddy Boyd: “re sarian or mcdonough…youre (sic) concern, not mine.”

The second, more recent, exchange proceeded as follows:

Judd Bagley: “While I’ve got you…you recently denied knowing Michelle McDonough (formerly Sarian). Is that still your position?”

Roddy Boyd: “sorry judd, im (sic) not talking to you about anything else, period. if youre (sic) not comfortable with me asking the questions-fine. but im (sic) not anwering (sic) yours.”

That’s right…Roddy Boyd, a reporter, essentially twice gave me a reply of “no comment” when asked about any relationship he may have with Michelle McDonough.

Of course that response falls right in line with Daniel Loeb, Michelle McDonough and Yolanda Holtzee — who also ignored my requests for comment.

As any engineer will attest, the key to an enduring structure is a solid foundation. Builders who choose not to worry about foundation issues will deliver a product that’s worthless at best, and a dangerous liability at worst.

Likewise, arguments crafted without a foundation amount to something ranging from worthless to dangerous.

In both cases, the motives of those responsible must be questioned.

Observers of one Yahoo stock message board were recently treated to the equivalent of a foundation-free high-rise project. It started with a post by New York attorney Howard Sirota, who demanded:

No More Anti-Semitism on this Board!
I just did a search for “Jew” on this Message Board.
There are 428 posts containing the word “Jew.”
That means that this board is infested with anti-semites, which is intolerable.

Sirota went on to claim that some admittedly inappropriate comments made to this blog (which were immediately removed once brought to my attention) were symptomatic of a further anti-Semitic infestation.

In his blog, Gary Weiss reflected on Sirota’s assessment saying:

The subject is a disturbing one — the tendency of the Baloney Brigade anti-short-selling lunatics to use anti-Semitic stereotypes and imagery.

And with that, a set of flimsy and transparent walls were hastily erected.

Sam Antar also chimed in, insisting that the unnoticed words of one commenter somehow equate to the endorsement of the board of directors of my employer.

“The Audit Committee…has a simple choice: wheather (sic) they choose to be associated with such vile ugliness from their inaction in fully enforcing the company’s Code of Business Conduct and Ethics or to take swift action to prevent further vile acts…”

And with that, a particularly leaky and incompetent roof was put in dropped in place and the mass was dubbed a house.

Looking at their work, Gary Weiss and Sam Antar would have the world believe that they’re responsible for creating something great.

But one thing is absent: a foundation, which Howard Sirota neglected to build, rendering the contributions of both Weiss and Antar worthless.

Let’s start with Weiss, who built his claim of anti-Semitism on the part of opponents of illegal market manipulation entirely upon Sirota’s assertion that one company’s stock message board was infested with anti-Semites. This claim, in turn, was based upon Sirota’s observation that the word “Jew” appeared in 428 of the tens of thousands of messages posted there over more than five years.

For the sake of argument, and in deference to Mr. Sirota, who is Jewish and undoubtedly better at recognizing anti-Semitism than a non-Jew, let us assume that this is a reliable metric of a message board’s level of bigotry.

Weiss takes the argument one step further and announces that in addition to being quantitative, this metric is also qualitative, in that from it, blameworthiness can also be assigned. Specifically, Weiss feels the blame for 428 tainted message board posts fall squarely at the feet of all opponents of illegal naked short selling.

Let’s take a closer look at the numbers to gauge the integrity of this line of reasoning.

A search for posts including the word “Jew,” conducted two days after Sirota’s, returned 442 such messages. The authors of these posts were then divided up based on their attitude toward illegal naked shorting (with a third category comprised of those who, like Mr. Sirota, have made no statements on the topic).

The result is very instructive.

• Those in favor of illegal naked short selling authored 323 messages, or 73% of the total.
• Those most likely to be opposed to illegal naked short selling authored 96 messages, or 22% of the total.
• Those without a discernible position on the issue of illegal naked short selling authored 23, or 5% of the total.

But wait, there’s more!

Among those authors in favor of illegal naked short selling, one stands out far above the rest: Lamborghini751, who personally authored 131 messages deemed anti-Semitic by Howard Sirota.

That’s one-third of all of them.

The best part: Lamborghini751 is Gary Weiss (as demonstrated here).

In other words, if Sirota’s method of assessing message board bigotry is accurate, the biggest culprit is Gary Weiss himself, thereby invalidating everything Weiss has written on the topic, whether as himself, as Lamborghini751, or as the blogger Mediacrity.

On the other hand, if Sirota’s method is not accurate, then the entire basis for Weiss’s claim of anti-Semitism being endemic to opponents of naked shorting is flawed, again invalidating everything Weiss has written on the topic.

Now let’s look at Sam Antar.

What Sammy apparently forgot to tell Sirota (a longtime Antar family friend) is that thanks to the Dissembler Sorting Algorithm, it’s possible to determine when multiple Yahoo message board aliases are tied to the same account. In the case of Mr. Sirota, it was quickly discovered that he is behind not only the username hsirota, but also StanleySargoy.

Sirota created StanleySargoy in 1999 and used the account very occasionally to either promote or demote companies primarily in the pharma and biotech space, until 2005.

Then in April of this year, StanleySargoy was called out of retirement and into active combat duty. The target: Usana, a company under heavy short seller attack by convicted felon Barry Minkow and his so-called Fraud Discovery Institute, which just days before had issued an internally authored study accusing Usana of serious fraud.

Oh yeah…Minkow is shorting Usana.

StanleySargoy (who says he hails from San Francisco) has since become one of the more active and negative posters to Yahoo’s Usana message board.

What interest would Sirota have in Usana?

You may recall a March column by Herb Greenberg entitled What Two Crooks Told me Over Lunch, in which Greenberg details his no-reason-given meal with Sam Antar and Barry Minkow.

We can surmise that Antar and Minkow do business together.

Thanks to the actions of StanleySargoy, it appears Sirota and Minkow are doing business together.

By the transitive property, a little common sense, and some educated observation, it now appears Sirota and Antar are also doing business together.

Finally, let’s take a quick look at Howard Sirota.

Sirota’s first demand that certain comments be removed from this site was sent early Friday, June 8. The offending comments were posted June 7. Server logs confirm that, prior to their removal, only Sam Antar (whose IP address is very well known) saw all three.

In that time, no other visitor managed to see more than any one of the offending comments. Thus, assuming he’s even been to AntiSocialMedia.net, Howard Sirota’s complaint — which he likely didn’t write — dealt mostly, if not entirely, with content he likely never saw.

You might want to stand clear, Howard…with no foundation, this flimsy house that Gary and Sam built is in the process of coming down just like all the others.

Take a trip with me, back to early 2006.

On January 7, Jordan Goldstein, general counsel of TheStreet.com, pronounced that company co-founder Jim Cramer had never sold a single share of TSCM stock.

Exactly one month later, Jim Cramer announces, via the adoption of a rule 10b5-1 plan, his intention to exercise 150,000 stock options over the course of one year.

In the announcement, the plan’s purpose is expressed as being:

“…designed to avoid any real or perceived conflict of interest in connection with the trading of company securities. The program is established at a time when the executive does not have material inside information.

“…It is Mr. Cramer’s intention to provide an orderly liquidation of these options through this plan, which provides for the sale of approximately 12,500 shares on a monthly basis.”

Such an orderly liquidation, as outlined in the plan, would have looked like the chart to the right (click to enlarge).

In reality, the record reflects a very different selling pattern by Mr. Cramer; one which looks like the chart to the left (click to enlarge).

You’ll note that 112,500 (exactly 75%) of the options expected to be exercised in an orderly manner over the course of 12 months were actually exercised within two weeks.

What could account for such a deviation from Cramer’s 10b5-1 plan?

A little historical context might add some clarity.

What was not mentioned in the 10b5-1 plan was the fact that just days beforehand, Jim Cramer had received a subpoena by the SEC…something that might be considered by some to be material inside information.

That subpoena would not be disclosed by Cramer until February 27, by which time 100,000 options had already been exercised. Adding this information to Cramer’s TSCM selling chart would tend to raise serious questions relating to insider trading on Cramer’s part, and the low regard Cramer would appear to have for his company’s investors.

NOTE: Thanks to Evren Karpak and another un-named supporter of market reform for their time in handling key portions of the research on this topic.

Preface: A word about the law and the press.

It’s safe to say that, thanks to the protections rightly granted journalists in the Bill of Rights, almost nobody ever successfully sues a reporter. The standard of proof is too high and the weight of case law too overwhelming for even blatantly egregious cases to succeed in the courts. That’s because libel requires that one not merely prove inaccurate reporting and damages as a result, but a reckless disregard for the truth motivated by malice on the part of the writer. It’s that last part – the presence of malice – that presents the highest hurdle to clear, as it requires proving beyond a reasonable doubt, often years after the fact, the state of the defendant’s mind.

Which brings us to Susan Antilla.

In 1994, Antilla was a New York Times business writer. In the fall of that year, she learned of a rumor suggesting Robert Howard, head of Presstek, might actually be Howard Finkelstein, a convicted felon known to use various aliases, including “Robert Howard”. Antilla would not reveal the source of the rumor, other than to acknowledge that it came from short sellers of Presstek stock.

A quick word about good journalism.

There’s an easy way to discern a responsible journalist from an irresponsible one: irresponsible journalists are willing to write about rumors. Responsible journalists may investigate rumors, but insist on reporting facts.

Following interviews with 30 people, including Robert Howard himself and his son, in which Antilla found nothing to support the Howard-as-Finkelstein rumor, she opted to write anyway…about the rumor.

The day the story ran, Howard’s attorneys met with Antilla’s bosses, showing them proof of Howard’s identity. The following day, the Times ran something even Gary Weiss acknowledges is exceedingly rare: a correction.

An article in Business Day yesterday discussed rumors affecting the stock of Presstek, an imaging technology company. The rumors suggested that Presstek’s chairman, Robert Howard, might actually be Howard Finkelstein, a convicted felon. Mr. Howard’s lawyers presented The Times yesterday with documents and other information regarding his identity. After inspecting them, The Times finds no credible evidence to support the rumor. Details appear today on page D1.

The Times regrets having printed the rumor.

Needless to say, Howard sued Antilla, claiming defamation and false light invasion of privacy, for which a jury ordered Antilla to pay Howard nearly $500,000 in damages.

Antilla appealed and a panel comprised of three appellate court judges overturned the jury decision, based – of course – on the inability to prove Antilla acted maliciously.

And indeed, it’s unlikely Antilla was motivated by malice. I believe that in 1994, Antilla was motivated by something much more base.

Draw your own conclusions by considering this pattern:

1. Falsehoods peddled about a CEO of a company by investors shorting that company’s stock
2. A reporter repeatedly told, by those who would know best, that there is no truth to the claims
3. The reporter shoehorning a hatchet job into print anyway

In fairness to Antilla, there was one difference between her tactics then and now: in 2007 she knew enough to insulate herself by calling her work “opinion.”

Preface and editor’s note: As stated previously, we have issues with Gary Weiss, not his wife.

As is happens, one of the more startling examples of abuse of social media we’ve discovered anywhere – and the central theme of this, the fourth and final part of this series on the history of Gary Weiss’s pathology – cannot be told without making reference to that relationship.

However, because her identity is ultimately not material to this situation, we shall only refer to her as “Mrs. Weiss” (though Weiss is not her real last name), and have set this site’s comment filter to immediately reject any comments that contain either her first or last name.

Also, all references to her are redacted from the document included in this post. The only circumstance under which that will change is if Gary Weiss (or his known surrogates) choose to call into question the document’s validity, or claim the redacted name is that of someone else.

Finally, Gary Weiss was invited to comment on the claims that follow, but ignored multiple requests to do so.

Background

Through parts one, two and three of this series, we established that in April of 2005, Gary Weiss created the Mediacrity blog, which from the beginning dedicated a substantial amount of space to attacking writer and former president of the United Nations Correspondents Association (UNCA), Ian Williams.We also established that in March of 2005, Mrs. Weiss, who for three years held UN media accreditation as a correspondent for The Pioneer of India newspaper, suddenly lost her media credentials.

Two months before the launch of Gary Weiss’s Mediacrity blog, in February of 2005, a media criticism website ran suspiciously-timed stories attacking both Ian Williams and his wife, a BBC World Service reporter and native of Uzbekistan; the former for accepting media training assignments from UN agencies, and the latter over what were ultimately shown to be unfounded questions