On Thursday, Patrick made a guest appearance on NPR’s affiliate show “RadioWest“, hosted and produced by Doug Fabrizio. Some of the topics discussed were Patrick’s recent drive to introduce school vouchers in Utah, developmental economics, his take on Wall Street, politics, and life.

Click the Play Button to hear the Interview.

Doug Fabrizio of Utah’s KUER and KUED (our local NPR and PBS affiliates) did radio and TV interviews with me this last month. We had never met before, and he clearly spent time researching and preparing for our meetings. As a result, he asked intelligent questions and we had, I think, two good discussions on everything from Warren Buffett to development economics & Worldstock, school vouchers, Wall Street’s financial corruption, Catholicism, Zen, Daoism, Mormonism, and the new bigotry.

Here is the TV interview: http://kued.org/productions/utahnow/

The link to the radio interview is in the post below.

Compare these to the puerile half-truth-loaded bickerings of CNBC and that ilk. It was great to deal, at last, with a journalist who is able to do his own research, think independently, and is unafraid of stepping away from the conformism that has turned financial journalism into little more than an ongoing cover-up.

Patrick

There is something that I have permission to divulge, but have refrained from doing so. As you will see, there are reasons I must do so now.

There are among the Bad Guys some with conscience. Months ago, one from within the network of Bad Guys got in touch with me and turned over 8,000 emails from a set of message board bashers, convicted stock swindlers, and financial journalists in their cahoots. Shysters all. (Wouldn’t it be funny if there were also some in there from hedge funds and the law firms they use to sanitize their communications, but the law firms did not know enough about hygiene?) They run up through sometime well into 2007.

I am breaking the news of these emails here, in the hopes that this will transfer the legal risk from a certain journalist who wishes to cover this, to myself.  I know that I have them legally, and that the person who gave them to me had them legally as well (I’d just start posting the 8,000 emails and let the world decide, but I want this journalist to get the scoop).

What makes for fun reading are the several thousand emails of those well-known New York financial journalists. Understanding how they operate, and with whom, will be the stuff of textbooks someday.

Among those communications are 1,841 emails from a bent reporter named Gary Weiss.  Among many other things, in several of those emails Gary Weiss freely discusses his editing of Wikipedia. What makes that interesting is that there is a civil war erupting within the Wikipedia community between those who believe Judd Bagley’s claims  (detailed on www.antisocialmedia.net) regarding how Gary has hijacked several Wikipedia pages using the sockpuppets ”Mantanmoreland” and “Samiharris” (with the help of several super-users, such as SlimVirgin), versus those who steadfastly deny that Gary has been editing Wikipedia.

All the normal rules that govern the discourse for 2 million other pages within Wikipedia have been suspended for this discussion. This has all been documented by TheRegister (a highly-regarded British tech journal, something like Wired but on-line). Literally, knowledge of Judd Bagley and his site www.antisocialmedia.net  (where he simply exposes these Wikipathologies) has became such a thought crime within the “open society” of Wikipedia that not only has mere mention of them become grounds for lifetime banishment, but Wikipedia ultimately blacked out 1,000 homes around Judd Bagely’s in an attempt to supress his evidence. (When I think of Wikipedia, I think of North Korea, where happy serfs toil in the sun weeding peas listening to endless “How Free We Are” propoganda blasted on loudspeakers hung from guard towers.)

Through heavily-documented stories on antisocialmedia.net, Judd carefully backed Gary into a corner and exposed him, at which point Wikipedia founder Jimbo Wales personally intervened to free Gary. However, it turns out (and we now also have incontrovertible proof of this also) that while Jimbo Wales has for months been publicly accusing Judd of being a “stalker” and such, Jimbo Wales has known all along that Gary Weiss  was indeed using the sockpuppets that Judd revealed. In other words, Jimbo knew that Judd was right, but he has been lying through his teeth to his own followers.

Again, I am stating this publicly here so that this evidence (including the emails of journalists), can be attributed to me, so that a good journalist can go ahead and publish without fear of legal repurcussion.

Much though I welcome comments, I am bothered by posts from a few readers who bring ethnicity into the equation. These comments seem hateful to me. I want to explain a deep financial crime that is harming our country, but sadly, some seem unable to comment on it without discussing the Jewish ethnicity of some of the Wall Street players who are involved. This makes about as much sense to me as someone who, in a discussion of the Mafia, feels it necessary to introduce Catholicism into the analysis. In addition, given that in my life at least half of my close friends and nearly all of my great teachers have been Jewish, I gently say to these haters, thanks anyway, but I think I can win this one without your support. Therefore, I am going to set this board’s filter so as to block posts containing the word “Jew” or its various cognates.

Respectfully,

Patrick M. Byrne

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.

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 relating to her visa status in the US. At the time, Williams’s wife also held a paid position within UNCA, one to which those familiar with the situation confirm Mrs. Weiss aspired.

But as mentioned, not only did Mrs. Weiss not get that job, one month later she was permanently barred from the UN.

One month after that, Gary Weiss created Mediacrity, which, among other things, he used as a platform for casting further aspersions upon Williams’s wife, calling her an “obscure hack” and continuing the fruitless challenges to her immigration status.

When securing her own permanence in this country, Mrs. Weiss, an Indian national, requested then-UNCA President Tony Jenkins write a letter to the State Department verifying her employment as UN correspondent for the Pioneer of India newspaper, which Jenkins did.

Keep that in mind as you read this document (click to enlarge) in which it is revealed that Mrs. Weiss had no connection to the Pioneer of India whatsoever, and that the three years she spent acting like a reporter at the UN were all a sham.

These circumstances invoke myriad questions, but for now we’ll focus on those involving Gary Weiss; specifically, how could Gary justify attacking another on baseless immigration issues when his own wife’s residence had been founded at least in part on a shockingly brazen and possibly illegal misrepresentation?

Also, it’s generally understood by those I spoke with that Mrs. Weiss is not exactly “computer savvy.” If that’s true, what role did Gary Weiss have in the annual creation of forged documents that the Pioneer’s Chandan Mitra termed “computer generated?”

Gary will likely try to divert the issue, claiming this is an attack on his wife. Indeed great lengths have been taken to ensure that such is not the case. Instead, this is the culmination of a four-part series demonstrating the foundations of Gary’s unfortunate pattern of deception and abuse of social media for personal gain, which his come to permeate his professional and personal lives.

————————-

postscript:

Expecting that claims of unfair attacks against Mrs. Weiss are inevitable, we wish to pre-emptively add some context to that discussion.

In November of 2005, former soc.culture.jewish Usenet newsgroup regular Ted Dichtler (shown here to be Gary Weiss) escalated his ongoing flame war with a particularly repulsive neo-Nazi by posting the man’s home and business addresses, in addition to his wife’s full name.

Weiss then went on to add these personal details to Ted Dichtler’s Usenet posting signature, meaning it was reproduced scores of times across the web.

Gary, for future reference, that’s what it means to unfairly attack your target’s spouse.

At some point on December 4, 2006, the number of reviews of Gary Weiss’s book Wall Street Versus America dropped from 17 to 10, as all of the following reviewers’ contributions were deleted:

Burton (Baltimore, MD)
Dave Watson (Banning, CA)
Luminiere (Miami)
George (Needham, MA)
Marty Ross (Houston, Texas)
Rich Golden (New York, NY USA)
Ted Dichtler (Monroe, NY)

Jim O’Reilly (New York, NY USA), who did not review Weiss’s book, also saw his 16 reviews deleted.

You’ll note that five of the above eight names (in bold) are the same five we concluded were being deceptively used by Gary Weiss to artificially boost his book’s sales while artificially depressing others.

Of course the reviews in situ are gone and the links to them broken, but we will soon post the full text, which we saved pre-delete, here.

We had concluded that the additional three users were also Gary Weiss, but limited our initial report to five, given the need to conserve space and the ease of proving as much.

Our complete list, for those of you playing at home, also includes the following:

Chuck T. (Chicago, IL)
Elliot Baker (Red Bank, NJ)
Johannsen (Atlanta)
Raymond Stella (New York, NY)

At this point, it’s unclear who deleted these reviews, whether it was Amazon administrators or Gary Weiss himself (as users may delete or edit their own reviews) but the following incident suggests it was Gary.

Soon after the reviews were discovered to be missing, a poster on an investorvillage.com message board noted that the user page of Jim O’Reilly, while devoid of reviews, retained a link to Jim O’Reilly’s “Wish List.” Upon clicking the link, he found “Gary Weiss’s Wish List.” A cut and paste version of it can be seen here.

Within minutes of posting this odd Weiss/O’Reilly connection, the wish list was also deleted. We hypothesize that the account was originally called Gary Weiss and the name was changed to Jim O’Reilly at some point, though the name on the wish list was not.

We applaud Gary Weiss for deleting eight of his deceptive reviewer accounts and call on him to now remove the additional four noted above.

From: Christopher Faille [mailto:XXX@hedgeworld.com]
Sent: Saturday, April 19, 2008 3:06 PM
To: XXX
Subject: an e-mail from Byrne to Herb Greenberg last week?

XXX

Thank you for the kind words.

There is something you might be able to help me with. Something on Herb Greenberg’s blog on MarketWatch has me shaking my head.

As you presumably know, Mr. Greenberg is himself one of the centers of controversy about so-called short-and-distort stock price manipulation. He received a subpoena from the SEC in 2006.

Anyway, back in 2008: on April 15, Greenberg announced that he’ll soon be leaving MarketWatch to start an independent research firm.

The following day, he said that he had received an e-mail from Patrick Byrne, which he posted. I’ll paste it below, in italics.

It raises obvious questions. One might of course suspect a prank — some third party could have sent it pretending to be Byrne for whatever reason. So the first question is: does Byrne acknowledge authorship of the e-mail below?

Second: the wording seems odd. As Byrne knows, it is customary when a reporter is asking a source to comment on allegations to be quite concrete about what allegations, from whom, in what context. For example, I recently asked Byrne to comment on a specific cross-complaint filed in a specific court by a specific defendant in an ongoing lawsuit. That is very different from the vagueness of “There are allegations that…”!

Allegations never just “are”! Somebody alleges something. So: is Byrne himself using this wording to make the allegation himself (in essence, that Greenberg isn’t leaving voluntarily)? or is he saying that he has heard such things? in some context or other? are the allegations in any publication or website or whatever, and were they there prior to the moment when Greenberg quoted Byrne’s e-mail?

I look forward to any light you can shed on all this.

Dear Herb,
There are allegations that you were terminated upon CBSMarketWatch’s observation that positions in your columns overlap with the trading positions of certain hedge funds. What is your comment on these allegations?
Respectfully,
Patrick M. Byrne, Journalist

Christopher Faille
Senior Financial Correspondent
Lipper HedgeWorld
XXXX
Enfield, CT 06082
TEL XXXX
XXXX

==========================================================================================================

Dear Mr. Faille,

I will address your questions in the order you raise them.

1) “Does Byrne acknowledge authorship of the e-mail below?”

Yes, proudly.

2) “Second: the wording seems odd. As Byrne knows, it is customary when a reporter is asking a source to comment on allegations to be quite concrete about what allegations, from whom, in what context. For example, I recently asked Byrne to comment on a specific cross-complaint filed in a specific court by a specific defendant in an ongoing lawsuit. That is very different from the vagueness of ‘There are allegations that…’!”

This is quite definitely false. Financial reporters have often called me asking me to respond to rumors with no source the reporter was willing to identify. For example, in June 2006 Herb called me to ask about a rumor then being circulated. When I told him I would respond when he identified his source, his answer was, “You can answer my question, or not answer my question.” Second and third examples came last Q2, from Roddy Boyd and another reporter I will not identify (because he is a good guy), both of whom called me over an identical (largely false) leak they had been fed. So I think that your theory regarding the SOP for financial reporters is false.

3) “So: is Byrne himself using this wording to make the allegation himself (in essence, that Greenberg isn’t leaving voluntarily)? or is he saying that he has heard such things? in some context or other? are the allegations in any publication or website or whatever, and were they there prior to the moment when Greenberg quoted Byrne’s e-mail?”

Yes, I definitely did hear this rumor prior to writing Herb: I’m sorry, as a journalist I cannot reveal my source.

Best always,
Patrick

As will be explored in a subsequent piece, it would be fair to describe my relationship with Bethany McLean of Fortune as “strained”. However, it is not unusual for her to write or call me seeking comment, generally regarding allegations fed her by crony hedge funds which she dutifully regurgitates on command, and sometimes regarding other things, too. I make it a point to respond promptly. On rare occasion when I have contacted her, she has responded promptly as well.

Thus I was a bit surprised at the turn taken by the following correspondence:

________________________________________
From: Patrick Byrne
Sent: Thursday, February 28, 2008 10:46 PM
To: Bethany Mclean
Subject: comment sought

Dear Bethany,

For the record, do you have any comment on either of these stories?

http://community.overstock.com/deepcaptureblog/why-is-sam-antar-the-crook-being-pimped-by-fortune-magazine-and-the-rest-of-the-new-york-financial-media/

http://community.overstock.com/deepcaptureblog/gary-weiss-scaramouch-psychopath/

Respectfully,
Patrick

_____________________________________________
From: Patrick Byrne
Sent: Friday, March 14, 2008 12:37 PM
To: Bethany Mclean
Subject: Three requests

Dear Bethany,

1) I understand Roddy has become a co-worker at your fine magazine. I am not confident I have his correct email. Would you mind sending it to me (or ask him to do the same)?

2) I have posted a new piece about Michael Steinhardt (if I do say so myself, it’s frightfully good). Would you please provide comment it?

http://community.overstock.com/deepcaptureblog/category/9-the-players/

3) If you do not intend to provide comment on this or any of my stories, would you please let me know that? Any further explanation you would be willing to share in that regard would be much appreciated.

Your friend,

Patrick

________________________________________
From: Patrick Byrne
Sent: Thursday, March 27, 2008 12:49 PM
To: ‘bmclean@fortunemail.com’
Subject: Hello

Dear Bethany,

Hello. I hope you are well. As you are perhaps aware, I am working on an article in which you will figure. I want to treat you justly and have your point of view represented fairly. Unfortunately, you have not called or written me back (though I have always been prompt in my responses to your inquiries, I believe). I do not wish to publish and have you feel slighted. Therefore, on the off-chance that the reticence of your reply stems from a fear that I will not quote you accurately, may I propose a solution? I would like to ask you two questions. If you will answer these questions, I will commit to using your answers in full, unedited (I propose an upper limit on the length of each reply: 50 words). Since this is far more generous a deal than I generally extract from the New York financial journalists of my acquaintance, surely it should ease any discomfit you may have in being the recipient, rather than the purveyor, of questions.

Very respectfully,

Patrick

—–Original Message—–
From: bethany_mclean@fortunemail.com
[mailto:bethany_mclean@fortunemail.com]
Sent: Thursday, March 27, 2008 1:57 PM
To: Patrick Byrne
Subject: your email

Hey, Patrick. The only communication I’ve received from you (apart from today’s email) was another email in which you asked me to comment on a piece you’d written on Michael Steinhardt. (I think.) You’re correct that I didn’t respond to that. My editor has asked that you speak to our PR people. You can contact Katy Reitz at katy_reitz@timeinc.com.
Thanks.

—–Original Message—–
From: Patrick Byrne [mailto:PByrne@overstock.com]
Sent: Friday, April 04, 2008 3:07 AM
To: Reitz, Katharine - Fortune/Money
Cc: McLean, Bethany - Fortune
Subject: RE: your email

Dear Ms. Reitz,

As you can see below, I am writing at the suggestion of Ms. Mclean regarding the possibility of her answering several on-the-record questions for a story I am writing. Is this something you would be willing to facilitate?

Respectfully,
Patrick M. Byrne

—–Original Message—–
From: katy_reitz@timeinc.com [mailto:katy_reitz@timeinc.com]
Sent: Friday, April 04, 2008 8:12 AM
To: Patrick Byrne
Subject: RE: your emailPatrick,

Can you please email me the questions and I will see if Bethany is
available to answer. Also, please let me know what your deadline is and
what publication this interview will appear in. Thanks.

Katharine S. Reitz
Director of Communications
Fortune|Money Group
o. 212.522.6724
m. 917.543.9176
katy_reitz@timeinc.com

—–Original Message—–
From: Patrick Byrne
Sent: Friday, April 04, 2008 1:11 PM
To: ‘katy_reitz@timeinc.com’
Subject: RE: your email

Katy,

My questions for Bethany concern her state of knowledge at the time she wrote SGR regarding the investment track record of Jim Chanos prior to Enron (attached please find discussion of Jim Chanos in Bethany’s book on Enron; I can also provide Mr. Chanos partners’ letter if she needs).

What was Bethany’s understanding of that track record? Did she know what it was when she wrote SGR?

If she did not know, why not? Did she ask?
If she did know, does she believe her account on page 319 adequately summarizes it?

An answer within the next week would be deeply appreciated. You may assume that the first place her answer would be published would be within Overstock.com, or at DeepCapture.com.

Most respectfully,
Patrick

—–Original Message—–
From: katy_reitz@timeinc.com [mailto:katy_reitz@timeinc.com]
Sent: Tuesday, April 08, 2008 10:42 AM
To: Patrick Byrne
Subject: RE: your email

Patrick,

Bethany is unavailable to comment.

Thanks,

Katy

—–Original Message—–
From: Patrick Byrne
Sent: Tuesday, April 08, 2008 11:50 AM
To: katy_reitz@timeinc.com
Subject: RE: your email

Dear Katy,

Thank you for your kind response. I can wait, as it turns out, given the collapse of Bear and some subsequent comments made last week in the Senate, my publication schedule has changed. When would she be available for comment?

Very respectfully,

Patrick

============================================================================

I received no further reply, no elucidation of when Bethany would no longer be “unavailable for comment.”

However, this evening, just as I was preparing to leave work, I checked my email, and found this. Since it was sent at a quarter to 1 PM East Coast time, and Bethany gave me to “the end of the day” (which came four hours later for her), the time to respond has elapsed, obviously. And since Bethany neglected to call my office, cell, or assistant, though these are all numbers she has and has called in the past, I was not aware of her email until this evening.

—–Original Message—–
From: Bethany McLean [mailto:bethany_mclean@fortunemail.com]
Sent: Tuesday, April 22, 2008 10:43 AM
To: Patrick Byrne
Subject: Fact checking question

Hi, Patrick -

I’m doing a short book review of a new book by a hedge fund manager named
David Einhorn. The book isn’t about you, and nor is the review. But
Einhorn does write about your August 2005 conference call because you
mentioned both him and his wife on it. You also made some statements about
his business. Einhorn says you were factually inaccurate about both his
business and his relationships. You also made some unsubstantiated and very
negative allegations about his wife. Do you want to comment on this at all?

The column is shipping off at the end of the day, so please let me know.

Thanks,

Bethany

==============================================

I’m new to this reporting gig, so I have to ask: Is that odd? Is it odd that for weeks Bethany would not be “available” to answer two simple questions such as the ones I posed her (even given the generous terms I offered regarding the timing of her reply and the use of her quote), but then would be available to describe vaguely some criticisms David Einhorn has made about me, and ask for my comment by end-of-day? Is this asymmetry of responsiveness, time, and use of quotes, odd?

What makes these people feel so threatened by a level playing field?

Given that I just sat down at my email I have evidently missed Ms. McLean’s timetable: besides, given the vagueness of her description, it is hard to know what a reasonable reply would look like (beyond noting that it is not clear if David Einhorn is saying my allegations about his wife were false, or rather, simply that he felt they were unsubstantiated and negative). But Bethany does raise interesting points with which the reader should become familiar.

David Einhorn’s wife is Cheryl Strauss-Einhorn, who is, or was, an editor at Barron’s. It’s fair to say that Cheryl Strauss Einhorn’s favored sources over the years have been the short-selling friends of her boyfriend/husband. As a couple, they illustrate the intersection of money management and compliant journalism whose description is Deep Capture’s mission.

By way of example, here is Cheryl writing on Jim Chanos (yes, this is the same Jim Chanos mention above, the one about whom Bethany wrote a book-length lotion-job, about which she is now refusing to answer two simple questions). Note also Cheryl’s mention of David Rocker. Importantly, Cheryl notes (as if it’s all kosher) that most “bear” short interest (as opposed to arbitrage) is actually naked shorting (by the way, that is the same “naked short selling” which the New York financial press has spent the last three years denying exists).

Anyway, here are excerpts from this fine example of Cheryl’s work:

===============================================================================

Short Fuses: Romping Dow leaves professional bears Bloodied; is this the sign of a market top?

By Cheryl Strauss Einhorn
1113 words
17 July 1995
Barron’s
15
English
(Copyright (c) 1995, Dow Jones & Company, Inc.) ….

….

“As the stock market charges ever higher, pros are increasingly asked if short selling continues to make sense as an investment discipline,” laments Jim Chanos, head of Kynikos Associates in New York and a dean of the short-selling community. “The frustrating thing has been trying to nail down just what has changed in the market such that it hasn’t had a 10% correction since 1990. Is it a new era? We are questioning the discipline as a whole, wondering if the short side of the market will ever work again.”

Well, it worked last year — for Chanos, at least. Even as other shortsellers were having problems, Chanos’s flagship Ursus Partners reaped a hefty 46.2% return, while the S&P 500 Index was up 1.3%. So far this year, though, Chanos has lost more than 20%, bringing his assets under management to $200 million, down from $250 million on Jan. 1. In recent weeks there have been rumors swirling that Chanos was giving up the shorting game, rumors that he denies vigorously. “It just isn’t true,” he says.

Chanos recently received another large chunk of money to manage on behalf of a wealthy New York family, and as he puts it, “It is our intention to remain fully invested.”

“Besides this one client, though, no one else is stepping up and saying, `Now is the time to give money to a short fund,’” Chanos concedes. “But if not now, when? Valuations are crazy and the public is in the market with both feet.”

Between now and the stock market’s eventual downfall, Chanos expects to see “a lot of shorts throw in the towel.” And a lot already have. By one calculation, assets in funds dedicated to shorting stocks have shrunk to somewhere between $600 million and $800 million in total, down from a peak of $3.5 billion in 1990. Put another way, it’s less than 1% of the $6 trillion that comprises today’s equity market capitalization.

….

There was also talk in the market last week that David Rocker, head of the hedge fund Rocker Partners LP, was thinking about giving up his penchant for going short. Rocker conceded that it’s been a tough year, but he says he remains net short because he believes the market is highly overvalued. With folks like Chanos and Rocker so demoralized, it’s easy to understand why short interest has slipped in such highflying stocks as Boston Chicken and Electronic Arts. Despite all the shorting in months past, these stocks just keep climbing. In fact, Boston Chicken’s short interest fell 17% between May 15 and June 15, and Electronic Arts’ fell 10% during the same period.

Nonetheless, overall short open interest on the New York Stock Exchange rose 3% in the month ended June 15, while short interest in the Nasdaq National Market was about flat. It’s important to note, though, that these numbers do not discriminate between naked short positions, taken by outright bears, and short positions that are part of arbitrage activity, such as a fund buying S&P futures while shorting the underlying stocks.

Short-sellers have been further hurt by a Nasdaq rule put into effect in September 1994 that prohibits shorting a stock on a downtick. “The brutal reality of the short-selling business is that one has to be there before the bad news hits,” says Chanos.

Still, Chanos continues to be drawn like a magnet to segments of the market he sees as most overvalued. Technology stocks, he wrote in a recent letter to investors, “increasingly look like a bubble, with many questionable companies receiving ludicrous valuations. Institutional investors are now horribly overweighted in this sector and most have the view that nothing can go wrong.”

….— Still Flying High

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A more remarkable example of Cheryl’s work can be found in her October, 2000 article regarding the “uptick rule”. As I discussed in my essay “Jim Cramer is a Complicated Man“, this is a rule that were implemented in the 1930’s to curtail the ability of stock manipulators to destroy companies. According to someone who worked for him, Jim Cramer flouted this while managing money at Cramer Berkowitz. The rule was repealed in the summer of 2007. Recently Cramer has been on TV explaining (correctly if insincerely) how the repeal of this rule is a disaster for our markets, allowed hedge funds to steal from hard-working Americans, and perhaps contributed to the implosion of Bear Stearns.

So it is instructive to see in retrospect how Cheryl analyzes this rule.

Cheryl’s article begins with the nice neutral title, “SEC may drop biased trading restrictions”, then goes downhill from there. I will make bold those sentences that represent the point of view of those who think that hedge funds should not be encumbered by the uptick rule. I will italicize those that represent the point of view who think the uptick rule a necessary check on the powers of stock manipulators. I will leave untouched any sentences that are simply factual, about which neither side would disagree.

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Clock Ticks For Short-Sale Rule- SEC may drop biased trading restrictions

By CHERYL STRAUSS EINHORN (Barrons, 10/2/00)

The SEC is considering dropping its restrictions on short sales of securities. The rules were implemented in 1938 to prevent stock manipulators from driving down share prices through short-selling. Proponents of the so-called short-sale rules have long maintained they are needed to help promote stock-market stability. But detractors consider the regulations outmoded in today’s increasingly transparent market. Besides, they point out, no precautions have ever been legislated to rein in manipulators seeking to drive up prices through similar means.

Although the SEC has put out a concept release seeking comment on the restrictions from securities-industry participants, Annette Nazareth, head of the market regulation division, acknowledges the whole subject is up for grabs. “Personally, I can find no economic basis for the short-sale rule,” she says.

Short-sellers hope to profit by selling borrowed shares that they can buy back later at lower prices. Under current restrictions, stocks can be shorted only on an uptick — that is, at a price above the preceding trade.

While the short-sale rule has remained fundamentally unchanged for the past 62 years, financial markets have changed radically since the 1930s. For openers, there has been substantial improvement in market surveillance. And as the volume, velocity and complexity of trading escalate, restrictions on short-selling “may inject unnecessary inefficiencies” into the market, Nazareth says.

John Damgard, president of the Futures Industry Association, agrees. “It makes no sense to prejudice a sale up or down,” he says.

The uptick requirement, he adds, just serves “to make people feel warm and fuzzy, because they like things to go up.”

Short-sellers, on the other hand, make other investors feel neither warm nor fuzzy. Through the years they have often been tarred as naysayers, doomsdayers and all-around troublemakers who love to gloat when the market tumbles. Yet there is little data linking their activities to price movements in the securities markets.

Dan Loeb, a New York hedge-fund manager, would like to see the uptick restriction abolished because it increases the difficulty of implementing short sales. Besides, he notes, “Shortsellers provide a service to the market by increasing liquidity and providing a cap on speculative stocks.” While the evidence in recent years suggests the last is merely wishful thinking, in fact short-sellers’ skepticism sometimes does inject a sorely lacking dose of reality into phantasmic situations.

Many institutions use short selling as a hedging tool, to protect their stock and bond portfolios from market declines. Gains in such short positions theoretically will offset any declines in the value of the firm’s portfolio.

Not all market participants want to do away with the short-sale rule, however. Major brokerages such as Merrill Lynch are conflicted about the shortsale regulations. While trading desks consider the rules excessively cumbersome, investment bankers and brokers believe the restrictions will protect their clients’ shares from potential “death spirals,” in which stocks are hammered by repeated waves of selling.

The SEC, according to its concept release, is considering eight different measures regarding short-sale regulations. In addition to outright elimination, these include suspending the short-sale rule when a stock or the market rises above a certain price threshold; providing exceptions for actively traded securities; focusing shortsale restrictions on certain corporate events, such as mergers, or trading strategies, such as options expirations; exempting hedging transactions and revising the definition of “short sale.”

The commission, which has received many complaints about short-sale abuses in the over-the-counter market, also is exploring whether to extend the rule to non-exchange-listed securities.

The short-sale issue is timely in part because Congress this week is expected to pass legislation lifting the 1982 ban on trading stock (as opposed to stockindex) futures. With trading volume in bond and currency futures down 10% this year, the futures business would welcome the opportunity to move into the equity market. Global competition, too, is propelling the issue forward. Beginning in January, the London International Financial Futures and Options Exchange plans to begin trading futures on a handful of U.S. stocks, including AT&T, Cisco Systems, Citigroup, Exxon Mobil and Merck.

Ironically, if the ban on stock futures is lifted, the short-sale rule could become moot. Not only are there no ticks in futures, but also short-sellers would not have to borrow shares to short them. Thus, they wouldn’t face having their shares “bought in,” which is what happens in a short squeeze, a form of market manipulation. Investors then would be able to sell futures on stocks without cumbersome restrictions or regulatory bias.

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That sure looks like thoughtful, unbiased analysis to me. Please keep in mind that the elimination of this “regulatory bias (sic)” in 2007 is now being brought up in US Senate hearings (as well as by Jim Cramer) as contributing to the take-down of Bear Stearns and the current market crisis in general. Also, note that Annette “Personally, I can find no economic basis for the short-sale rule” Nazareth is a lawyer, not an economist, and is one of the two SEC commissioners who stepped down within days of the publication of the Senate investigation into the whistle-blowing claims of SEC Senior Investigator Gary Aguirre, as is described by my piece on the regulatory capture of the SEC. She is also the person to whom I was referring when I wrote, “who, as we shall see later, is via marriage directly linked to the issue whose exposure is the ultimate purpose of this blog: unsettled trades in our settlement system.” But these are stories for another day.

These two articles demonstrate my point, I believe: writing articles favorable to one’s husband and his friends is a pretty clear conflict of interest. Call me madcap.

In August 2005 I mentioned Cheryl’s work in the Miscreants Ball conference call. The only objections I ever received were claims that she was no longer, in fact, employed at Barron’s. To these objections I simply sent people a link to the Barron’s masthead, which on that day did (and for all I know, still does) list her as an editor. No other inaccuracies were ever reported to me.

About six months later, Mark Mitchell from the Columbia Journalism Review began asking questions about Cheryl Strauss. According to him, her stories literally began disappearing from the Barron’s database within days. That is a good indication of how proud they were of the work of Cheryl Einhorn, née Cheryl Strauss.

In late 2005 I had lunch with Bethany. I mentioned that I had recently been shown the trading records of David Einhorn, and while Overstock was not among his positions, there were other statistical anomalies of note. It was the only time I saw her flinch.

In the summer of 2006 I had lunch with Whitney Tilson, a paymeister of convicted felon Barry Minkow (according to a deposition Barry gave). Whitney invited me to address a group of hedge funds at that year’s Value Investor Congress, which he organized. Whitney’s friend David Einhorn protested my appearance to Whitney, whereupon Whitney rescinded his invitation to me. (One year later a different conference organizer, Brett Goetschius of “The Pipes Report” gave me a similar invitation to address 800 hedge funds. I told him I could accept his invitation, but that he would just have to rescind his invitation later. He replied, “No no, in the last year the whole community has changed: at least 50-60% of hedge funds are now on your side.” I went and gave the talk and received a nice ovation: the recording of this became the body of Deep Capture: The Movie.)

Last year Bethany devoted some serious effort to trying to prove that I was collaborating in a vast secret scheme with someone. Unfortunately for her case, I had never met my supposed collaborator.

But Bethany is nothing if not persistent. Some weeks ago Bethany visited a hedge fund for an interview. According to them, she regurgitated the criticisms of one obscure analyst who was trashing a firm in which they had invested, criticisms they were immediately able to dispel, with documentation (including a recent FDA approval about which she was unaware). She got visibly irritated, then brought up my name. When they told her that they thought I was right about compliant journalists being spoon-fed stories by select hedge funds, she got very irritated, and left somewhat abruptly, they say.

If only there were a pattern….

Your humble servant,

Patrick

PS Bethany, if you know any of the specificities of David Einhorn’s allegations of error on my part, please let me know. Deep Capture is in the final stages of preparing a major piece, and would not want to repeat being “factually inaccurate about both [Einhorn’s] business and his relationships.” Since you are writing a column about his book, you probably are familiar with the substance of his claims (of course, most reporters would have actually given some clearer indication of his claims when asking for my comment on them, beyond saying he thought I was “factually inaccurate”). In any case, out of an abundance of caution, please let me know of any specifics about which you or David Einhorn believe I was in error, so that such error would not be replicated in the coming piece. We journalists have our standards, of course.

PPS To the casual reader: have any of you noticed that, for all that these journalists like to write about me and how improbable are my claims, none of them mentions DeepCapture.com? The Wall Street Journal once practiced a remarkable circumlocution in order to avoid mentioning where to find my blogs. It is almost as if…. they fear their own writing will not stand up on its own. What do you bet Bethany’s upcoming column avoids mentioning it as well?