In October 2011, Ali Nazerali, a Canadian resident who has operated boiler rooms (though he denies it) and whose business relationships drew the scrutiny of DeepCapture, went to court in British Columbia to obtain an injunction ordering DeepCapture to be vanished.  In an ex parte proceeding (meaning that DeepCapture was not even notified of the proceedings, let alone allowed to present any argument),  the Canadian court issued an injunction against the 1st Amendment to the US Constitution. Immediately and also without notification, US corporations Google, Bing, and GoDaddy complied with this foreign court’s order to disappear all trace of DeepCapture like some recalcitrant Argentinian muckracker.

However, in December, 2011 DeepCapture had its chance to speak in court in Canada. Once it had heard our side, the Court  pulled its injunction, and found that Nazerali’s lawyers had misled the Court.

As famed Stoic philosopher Nicholas Cage put it in Con Air, “On any other day that might seem strange.”

But this is, after all, the world of DeepCapture, where dogs and cats dance together and the fire rain falls. So now, the rest of the story….

Early in 2011 Mark Mitchell began a multipart story exploring the way that various elements of transnational Organized Crime, international terrorist financiers, and foreign intelligence services have entwined, infiltrated the global financial system, and are manipulating and destabilizing it.

Which sounds like a lot to swallow, I know, until one considers that on July 25, 2011, President Obama signed an Executive Order declaring a national emergency on pretty much precisely those grounds:

I, BARACK OBAMA, President of the United States of America, find that the activities of significant transnational criminal organizations, such as those listed in the Annex to this order, have reached such scope and gravity that they threaten the stability of international political and economic systems.  Such organizations are becoming increasingly sophisticated and dangerous to the United States; they are increasingly entrenched in the operations of foreign governments and the international financial system, thereby weakening democratic institutions, degrading the rule of law, and undermining economic markets.  These organizations facilitate and aggravate violent civil conflicts and increasingly facilitate the activities of other dangerous persons.  I therefore determine that significant transnational criminal organizations constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States, and hereby declare a national emergency to deal with that threat.

The US National Security Council immediately followed up with this statement:

“Transnational organized crime (TOC) poses a significant and growing threat to national and international security, with dire implications for public safety, public health, democratic institutions, and economic stability across the globe. Not only are criminal networks expanding, but they also are diversifying their activities, resulting in the convergence of threats that were once distinct and today have explosive and destabilizing effects…. The apparent growing nexus in some states among TOC [Transnational Organized Crime] groups and elements of government—including intelligence services—and high-level business figures represents a significant threat to economic growth and democratic institutions… As they expand, TOC networks may threaten stability and undermine free markets as they build alliances with political leaders, financial institutions, law enforcement, foreign intelligence, and security agencies.”

These statements from the White House and NSC are precisely on point with DeepCapture’s thesis. In fact, the Executive Order goes on to name four criminal networks which figure prominently in DeepCature’s story

We knew DeepCapture’s story would raise eyebrows, but we believed, and still believe, that it is important journalism concerning issues that clearly are of global concern and should be part of the public debate.  And as journalists, we at DeepCapture are quite proud of having been so far ahead of the curve, and so shockingly far ahead of the US mainstream media, which (we contend) are (with rare exception) such lapdogs to corporate America, and especially to the financial interests, that they would never have been able to put this story together even if all the relevant evidence were shoved up its nose (which it was).

Deep Capture believes that it is not incidental that only the British journal The Economist has been able to cover this issue, with such recent stories as:

America’s dodgy financial plumbing: TOO A FAIL COUNT –The sheer number of unsettled trades is rattling regulators

Financial terrorism: THE WAR ON TERABYTES – Policymakers worry about attacks on America’s financial system

NAKED SHORT – SELLING:  A not-so-short story

In September 2011 Altaf Nazerali, who, while not a central character in the story, is mentioned numerous times, contacted us raising concerns that certain statements regarding him were inaccurate. Mark looked back at his  reporting and, in cases where he believed it was warranted, modified the story: While we believe that facts should be reported, we are never above taking another  look at the story to make sure that we are as fair as possible. Good journalism stirs good debate.  And we are responsible journalists.

Mark sought further contact with Nazerali in early September but heard nothing further.

Then without any warning to Deep Capture, Nazerali attempted to silence Deep Capture.

On October 18, 2011, without notice to Deep Capture, Mark, or Deep Capture’s internet hosts, Nazerali filed a  lawsuit in Vancouver, Canada and appeared the same day before a judge seeking an injunction  taking Deep Capture off the internet and seizing its domain name. Only Nazerali and his lawyer were in the courtroom when he asked for this injunction so the judge only heard one side  of the story. Nazerali got his injunction.

Ali Nazerali  delayed serving formal notice of this injunction on Deep Capture and its reporters. The first  mailed service was made about 10 days after the injunction was made. The actual personal  service did not occur for several weeks. Nazerali did not comply with Canadian law and  promptly serve Deep Capture with copies of all of the affidavits and legal submissions he put  before the judge on October 19, 2011 at his one-sided injunction application. That only came to  our attention in late November. All of this had the effect of delaying Deep Capture’s ability to  seek relief from the court.

However, Nazerali’s lawyers immediately sent notice of the Canadian court’s injunction against Deep Capture to Google, Bing, GoDaddy, and other internet companies  demanding that they comply with it, and black out the DeepCapture site.

Amazingly (to me), these US companies complied, and blacked out Deep Capture. GoDaddy took down the site. Google and Bing both erased all of DeepCapture from the caches. In the most literal sense, we disappeared down Orwell’s Memory Hole.

On December 13, 2011 Deep Capture and Mark were able to appear before the British Columbia court . We presented our case through affidavits showing the basis for our  reporting. We presented the judge with the governing Canadian law which places severe  restrictions on pre-trial injunctions, limiting them to rare and special circumstances which do not  apply to Deep Capture.

Ruling from the bench (i.e., immediately), the judge denied Mr. Nazerali’s request that the injunction be  extended beyond December 13, 2011.

In addition, the judge expressly ruled that Ali Nazerali’s lawyers had misled the judge who heard  Nazerali’s earlier argument on October 19, 2011.

At that point Deep Capture was free to return to the internet.

However, Ali Nazerali was not done. He had his lawyer send an e-mail to Rackspace citing to the  original October 19, 2011 injunction order and asking that Rackspace refuse to host Deep  Capture.  He neglected to tell Rackspace that the British Columbia court had already refused to extend the  injunction and that it had ceased to have any force. And he certainly did not tell Rackspace that the British Columbia court had criticized Nazerali’s submissions to the original judge on October  19, 2011, finding that Nazerali’s lawyer had misled the court.

Ali Nazerali wants to keep Deep Capture and its reporting away from the public.  But why would Mr. Nazerali sue Deep Capture, a Utah company, in Canada? We can only  speculate. As Gary Weiss (himself a shill for criminal elements, as has been widely documented within DeepCapture) noted in his blog almost immediately after the original injunction was  issued, Canadian law provides far less protection for free speech than is guaranteed by the  United States Constitution. In fact, Canadian defamation law differs in so many key respects  from United States law that at least one federal court has held that Canadian defamation  judgments are unenforceable against United States citizens.

In fact, one key difference is what is meant by “defamatory.” It is true that the Canadian court  noted that Deep Capture’s reporting regarding Mr. Nazerali was “defamatory.” But, importantly, this does not mean that it was not true or that it was not fair reporting. It does not mean that such  statements may not be published. And it does not mean that Mr. Nazerali is entitled to any  damages. Rather, it simply means that the statements regarding Mr. Nazerali tended to harm his  reputation.

“Carole took the cookies from the cookie jar” is defamatory under the law of British Columbia.  Stating that Carole took the cookies tends to harm her reputation even if she did, in fact, take the cookies. Here Mr. Nazerali has been involved with certain individuals and cultivated certain relationships that may harm his reputation as such connections become known. But this does not mean that such relationships cannot, and should not, be fairly and freely reported.

Importantly, no court has held that Deep Capture’s reporting as to Mr. Nazerali was “actionably  defamatory.” After the Canadian Court was given the chance to read Mark’s affidavit explaining the basis for his reporting, it denied Mr. Nazerali’s request for an extension of the injunction  keeping Deep Capture away from the public on the basis that the claims and defenses should be  heard and determined by a jury at a trial.

Most hilariously, I had an idea that seems to have worked. For years a Cone of Silence had surrounded Deep Capture. Once the supine and obedient mainstream press could no longer speak for me, but had to confront me, in my own words, on this website, they revealed themselves for what they are: Barroom bullies who, once called out, stick their faces back in their beers and pretend not to have heard.  But during the time that DeepCapture was blacked out, the Cone of Silence surrounding Deep Capture was finally lifted. Parties that once made great circumlocutions to avoid mentioning us (lest they let readers evaluate the arguments and evidence for themselves) suddenly were pounding their chests.  So I decided to let DeepCapture stay down for a few weeks, to give them a chance to strut. I am utterly confident that, now that Deep Capture is back online, they will return to muttering into their beers, as has been their practice lo these many years.

Now that we are back on-line you deserve to know what happened, especially since the facts should cause concern in everybody that appreciates the role a free press and free speech  play in a free nation (and the offending story will be republished, in full, and with a great deal of new information that Nazerali’s legal jousting caused to come our way: thank you, Ali Nazerali).

The US mainstream media apparently find unremarkable the alacrity with which Google, Bing, and GoDaddy would accede to a foreign court’s injunction to black out a US website.  Thus, Deep Capture was forced to tell the rest of this story (which, we maintain, is but a microcosm of the whole story of capture) in order to continue  our investigative journalism within our constitutional rights to freedom of speech and press.

After all, we are the red pill.

Here’s the Naked Truth About Overstock.com

Gandhi said, “First they ignore you, then they laugh at you, then they fight you. Then you win.” Holman Jenkins Jr.’s April 12 Business World column “Do Nudists Run Wall Street?” moves us to stage No. 3: It contains the normal amount of distortion I have come to expect from financial media, but as it also makes the first attempt to confront the right issue, it is a step forward. Bravo.

Mr. Jenkins claims that I “propound a theory” that Overstock’s “shares are grossly undervalued.” This is wrong: I have never lamented Overstock’s valuation nor connected it to the naked shorting issue. The “elaborate Webcasts . . . found at businessjive.com” cited by Mr. Jenkins never once mention Overstock. He provides no other citations, which is appropriate, as there are none. Last, the quote he attributes to me, “If I’m crazy, why am I running a public company?” is something I never said. I challenge Mr. Jenkins to produce this or any similar quote.

However, Mr. Jenkins correctly depicts me as a jihadi against naked shorting. I do believe blackguards have practiced “failure to deliver” (FTD) for profit, while incidentally destroying businesses and (probably) destabilizing our capital markets. I also think that if this nation ever grasps how its savings have been looted through this mechanism, a few million Americans are going to show up at the corner of Wall and Broad with pitchforks and nooses. Thus, financial journalists spin countless, “Just another CEO who’s mad at shorting” stories, of which Mr. Jenkins’s piece is an example.

Patrick M. Byrne
President
Overstock.com
Salt Lake City

Mark Mitchell’s writings seem to be striking a nerve, at last. After months of no response but silence, in the last few weeks DeepCapture has suddenly been receiving all manner of Nasty-Grams and intimidating phone calls from various people and organizations mentioned in Mark’s work. The similarity of the threats would almost make one think there was a plan. In any case, I will lay out four ground rules here.

1) DeepCapture remains committed to the highest journalist standards.  Any error in our work should be pointed out immediately, and we will rectify it .

2) DeepCapture is better than mainstream media, whose intellectual self-confidence, rigor, and integrity I described in my 2008 piece, “Carol Remond Tells a Joke She Doesn’t Get (DowJones)”:

“Before publishing the following critique of Carol Remond’s recent article on Copper River, I contacted Carol for comment. Unlike Joe Nocera and Floyd Norris (both of the New York Times), who have at least had the integrity to defend their work, however haplessly, Carol refused any on-the-record comment on this subject. Thus she joins that tradition of journalistic worthies which includes Bethany McLean, Herb Greenberg, and Roddy Boyd, who refuse to defend their work. They can critique, but not engage, opine, but not defend: the sophomores of intellectual discourse.“

Because DeepCapture is better, we are happy to engage, and self-confident enough in our work that we practice “right of response” journalism: We will publish, unedited, any response (of any reasonable length) by miscreants named in our stories. If Specially Designated Global Terrorists have spokesmen, we’ll publish them.

3) All goombas should understand that the day anything untoward occurs is the day that The Collected Works of Mark Mitchell 2008-2011 appears in the in-boxes of 41.7 million people.

4) Finally, Mark has been acting entirely at my direction.  So all nastiness should be directed at me, not him.

Very respectfully,

Patrick Byrne

Editor-in-Chief

DeepCapture.com

“A bust-out is a scheme customarily employed by organized crime to deplete the assets of a legit­imate business, thus forcing it into bankruptcy.” State of New Jersey Commission of Investigation 1988 Report, “Subversion By Organized Crime And Other Unscrupulous Elements of the Check Cashing Industry”

“BUSTOUT: a confidence scheme in which an established business is taken over, a large stock of merchandise is purchased on credit and quickly sold, and the business is then abandoned or bankruptcy is declared.”  – Merriam-Webster Dictionary

Mark Mitchell has continued exploring the financial instability of the last four years, including the crash of 2008 and the Flash Crash of 2010.  His conclusion is that various activities associated with market manipulation (e.g., naked short selling, high frequency trading, derivatives such as Credit Default Swaps and synthetic CDOs, sponsored access, regulatory capture, press manipulation) follow a familiar leverage-and-loot pattern and can be traced to fairly cohesive network that includes Italian and Russian organized crime, Sunni extremist financiers with ties to Al Qaeda, the Russian FSB, the Albanian Mafia, agents of the Iranian regime, and “legtimate” American financial operators, many of them among the closest associates of Michael Milken.

The result, “The Miscreants’ Global Bust-Out”, is 230 pages long. DeepCapture will be publishing it in approximately 25 installments over the coming weeks.

To continue, click: Chapter One: Was the United States Attacked By Financial Terrorists?

If this and the story which follows concern you, and you wish to help, then:

1) Use the Social Media buttons at the top of the article to help it go viral;

2) Email it to a dozen friends;

3) Go here for additional suggestions: “So You Say You Want a Revolution?“

On March 10, 2011, Alvin E. Entin, Esquire, counsel to one Barry Minkow, filed with a Florida court a “Motion to Withdraw” as Barry Minkow’s lawyer. Mr. Entin was (unusually for a lawyer) closed-mouth about his reasons, saying only that he and Barry Minkow had reached “irreconcilable differences.”

Here is Alvin Entin’s Motion to Withdraw.

Given that this was shortly after a Florida Judge, Gill Freeman, threw the book at Barry for lying throughout a civil proceeding, and days before Barry pled down to five federal years, one does not have to be Fellini to figure this one out. For those interested in the full back-story, however, including the role of the conniving Sam Antar,  see below.

Today’s “If Only There Were a Pattern” Moment: Sam Antar Crony Barry Minkow Still a Crook. Who Knew?
The Honorable Gill Freeman Throws Book at Barry Minkow, Nicks Paymaster Sam Antar. Plus, A Question for Whitney Tilson, Minkow Paymaster #2
Memo to Barry Minkow and Sam Antar: Roll Early, Roll Often
Rut Roh. The “Stock Manipulator” Meme Finally Escapes the Box. Somebody Call Somebody.
Paragon of Integrity Whitney Tilson Gets Laryngitis, Too

Sam Antar pled guilty to crimes cited in this Wanted Poster

The sounds of squealing could be heard over the low hum of the air recirculation machinery in the drab, windowless federal interview room.  “Please!” Sam Antar wimpered. “Let me write one more smear. Let me feel like I’m a player, one last time!”

The federal agent spoke sharply: “Silence!”  She turned to look at her colleagues with bemusement.  “Jesus, what is it with these finance gerbils? I haven’t seen someone break this pitifully since that bookkeeper in Reno. ” She set aside her Nutcracker Flail, took a long pull on her Gaulioses, and said, “OK, let’s give Sam the night off. We’ll get him cleaned up for the judge in the morning.”

With that, Sam Antar, still restrained in straightjacket, was hauled back to the Shower Room, where he spent the night toe-writing in excrement on the linoleum.

Which would be altogether unremarkable, were it not for the fact that within hours, a Bloomberg reporter named Clyde Eltzrothis called, asking me to comment on it.

No kidding, after everything that has happened, there is still someone, somewhere, who does not get the joke. By all appearances Clyde is  new to the game, may not know the back-story, and therefore deserves the benefit of the doubt (that is to say, I am not going to read too much into Clyde’s calling me within hours of the appearance of Sam’s latest). Some gentle coaching is in order.

Actual Clyde Eltzroth avatar from Google Profiles

Fortunately, gentle coaching is my strong suit. So, Clyde Eltzroth, here are those comments you requested:

1) It is not our job to host DA’s on a no-limits fishing trip, especially when they have not acted in good faith in the past.

2) I do not believe that Mr. Antar is a ‘reformed’ white collar felon.  His co-worker, Barry Minkow, just pled guilty to felonies associated with the very type of conduct in which felon Antar continues to engage.

• Today’s “If Only There Were a Pattern” Moment: Sam Antar Crony Barry Minkow Still a Crook. Who Knew?
• The Honorable Gill Freeman Throws Book at Barry Minkow, Nicks Paymaster Sam Antar. Plus, A Question for Whitney Tilson, Minkow Paymaster #2
• Memo to Barry Minkow and Sam Antar: Roll Early, Roll Often
• Rut Roh. The “Stock Manipulator” Meme Finally Escapes the Box. Somebody Call Somebody.

3) The outrage expressed by Sam Antar and Gary Weiss is selective, disingenuous, and hypocritical.

To fully appreciate Sam Antar and his methods, Clyde, you should read “Why Are Fortune Magazine and the New York Financial Media Suddenly Pimping Sam Antar the Crook? Note that besides angering a sitting state Attorney General enough to write a letter excoriating Sam Antar and warning that, “In light of Mr. Antar’s background as a convicted white collar criminal, we believe that the public should carefully scrutinize and objectively examine any public statements Mr. Antar makes,” in 2007 Sam Antar famously posted the names, ages, and addresses of  6 and 9 year old girls on an Internet message board.

Sam Antar threatens two little girls

Gary Weiss has performed legendary sock-puppetting around the Internet. It became the subject of the greatest Wikipedia scandal in its history, as was ably reported in The Register:

• Wikipedia black helicopters circle Utah’s Traverse Mountain
• Emails show journalist rigged Wikipedia’s naked shorts
• Wikipedia kills Greatest Show On Earth

4) Judd Bagley is the good guy. He is a journalist who helped map out how a network of dirty hedge fund operators and their coterie of shill journalists (including Barry Minkow and Sam Antar) work together to manipulate stocks (as Barry Minkow has just pled guilty to). Judd mapped that network. You can read about it here: The stories behind the Rocker and Gradient lawsuit story

Note that Barry Ritholt made the same accusations against Judd that Sam Antar is now making. Unfortunately for Ritholt, he went on CNN Radio, at which point CNN surprised Barry by bringing Judd on air, giving Barry a chance to make his allegations against Judd, live. Barry, who moments before was full of righteous bluster, folded like a cheap chair. Really, you should listen to it, as Ritholtz went from accusation-overdrive to reverse-and-back-away in some sort of record for cravenness. Podcast: Barry Ritholtz and a tale of two media

Now, Clyde Eltzroth, I have a request for you. You asked me for response to Sam Antar’s latest, and response I have provided. I believe that journalistic ethics require that, when you write about this, you need mention where my response was made: DeepCapture.com.

Good luck with that.

UPDATE:

It turns out that Clyde published his story on Bloomberg precisely 10 minutes after contacting someone at Overstock to let us know he was writing this story.

How’s that for service?

By Clyde Eltzroth

April 12 (Bloomberg) — Overstock.com fell after White Collar Fraud blog questioned whether OSTK is obstructing allegations of consumer fraud in California.

Blog author Sam Antar says he’s a convicted felon, former CPA, former CFO of Crazy Eddie’s; Antar said he doesn’t own any OSTK securities long or short

OSTK had no immediate response

OSTK short interest 6.7% of float: Data Explorers

OSTK down 16% YTD

Link: http://whitecollarfraud.blogspot.com/

Link to Company News:{OSTK US <Equity> CN <GO>}

For Related News and Information:

Top Stories:{TOP<GO>}

To contact the editor responsible for this story:

Clyde Eltzroth at +1-212-617-1879 or

celtzroth1@bloomberg.net

In the summer of 2006  Whitney Tilson took me to lunch, and invited me to speak at his then-upcoming 2nd Annual Value Investing Congress on November 9 – 10, 2006. Here is Whitney’s original announcement:

World’s Most Influential Value Investors to Gather This November in New York City

The 2nd Annual New York Value Investing Congress will feature a compelling speaking program of value investors who have proven over time that their methods and strategies succeed. Some of today’s most prominent value investors will detail the thinking behind their investing methodology, discuss recent successes and offer their latest stock recommendations.

Speakers at the 2nd Annual New York Value Investing Congress will include:

Joel Greenblatt, Gotham Capital

Marty Whitman and Curtis Jensen, Third Avenue Funds

Larry Robbins, Glenview Capital

James S. Chanos, Kynikos Associates

William Ackman, Pershing Square Capital

David Einhorn, Greenlight Capital

Christopher H. Browne, Tweedy, Browne Company

Lisa O’Dell Rapuano, Lane Five Capital

Bruce Berkowitz, Fairholme Capital

Kian Ghazi, Hawkshaw Capital

Patrick Byrne , Overstock.com

Whitney Tilson, T2 Partners and Value Investor Insight

Glenn Tongue, T2 Partners

Some weeks before the conference, Whitney contacted me to let me know that Jim Chanos and David Einhorn were insisting to him that I not be allowed to appear. Naturally, Whitney caved to Chanos and Einhorn, and disinvited me.

There were no hard feelings, on my part, anyway. No blood, no foul. Simply by way of comparison, however, I will tell a related story. In 2007  Brett Goetschius contacted me with an invitation to speak at his upcoming PIPEs conference. I told him of what had happened with Whitney Tilson. Brett said, “Don’t worry, in the last year the hedge fund community has changed their attitude. At least 50-60% of them now understand you are right. Especially the small and mid-sized ones. In any case, I’m extending this invitation, and I won’t back out.” Brett proved true to his word, and I presented to about 800 hedge fund managers a presentation I called, “DeepCapture“, to a warm reception. I launched this site a week or so later.

Given this history, however, about which some men might have felt shame, it was odd to see Whitney Tilson slag me  in a column he wrote in 2008 (as you will see below).

By 2009 Deep Capture was tracking and writing about the activities of Sam Antar and Barry Minkow.  Both were hard-core convicted felons. At the age of 23, Barry had been sentenced to 25 years in prison, and served seven.  Yet we became aware that Barry Minkow was actually working for Whitney Tilson. I was more than a little surprised to see that, as there are normally sharper difference between the riffraff and the simply spineless. While Barry claimed to be doing “research” for Whitney, but we knew that Barry did not actually do anything resembling what a legitimate hedge fund would consider research. As Florida State Judge Gill Freeman later wrote:

“Fact No. 29: Minkow withheld documents he perceived to be harmful to his case. Among other things, the concealed documents demonstrate:

• that Minkow’s investigators questioned the accuracy of statements of fact he included in his report on Lennar;

• the perfunctory nature of Minkow research and investigation before he accused Lennar and its executives of operating like a ponzi scheme, giving its COO a disguised kickback, being a financial crime in progress, and other statements;”

Deep Capture had learned that Whitney Tilson had paid Barry Minkow $40,000 to do something. But if Barry did not do research, what was Whitney paying him to do?

In March, 2011 Barry Minkow was arrested, and last week plea bargained his way down to another five years of jailhouse stew.

So I thought that was a good time to ask Whitney a few questions.

From: Patrick Byrne
Sent: Sunday, March 20, 2011 4:44 PM
To: ‘WTilson@T2PartnersLLC.com’
Cc: ‘feedback@tilsonfunds.com’
Subject: Request for comment on news story

Dear Whitney,

I hope this finds you well. It has been too long since our lunch together.

This weekend I have finalized a nice little piece on Barry Minkow, with whom it appears you are acquainted. You may note that you are invited to respond, and may wish to take advantage of this invitation, before I give this wide distribution.

Very respectfully,

Patrick Byrne

Journalist, DeepCapture.com

The Honorable Gill Freeman Throws Book at Barry Minkow, Nicks Paymaster Sam Antar. Plus, A Question for Whitney Tilson, Minkow Paymaster #2

Posted on 17 March 2011 by Patrick Byrne
Tags: Barry Minkow, Gill Freeman, Sam Antar, Whitney Tilson

Barry Minkow spent last week in plea negotiations regarding a federal indictment on which he is hoping to receive only 5 years, says his lawyer. (LA Weekly: Barry Minkow to plead guilty to insider trading).  In December, 2010, a Florida judge threw her proverbial book at Barry Minkow, and it glanced off Sam Antar, who had been paid Barry’s paymaster to the tune of $250,000, Barry had testified. In addition, the judge found as a matter of fact that Sam Antar destroyed documents necessary for her trial. Minkow also gave sown testimony that well-known New York hedge fund manager Whitney Tilson paid him $40,000: more on this below.

Sam Antar, generally not short of opinion, has suddenly developed laryngitis.

Barry Minkow and Sam Antar are two of the most remarkable swindlers in recent American history, each guilty of frauds measured in the hundreds of millions of dollars. Two decades ago their names gave off the same foul stench that Bernie Madoff’s does today.

Whitney Tilson is invited to explain to DeepCapture’s audience why he would join legendarily convicted financial criminal Sam Antar in making payments to also-legendarily convicted financial criminal  Barry Minkow, who now is pleading guilty to his 58th financial felony. (You know how to reach me, Whitney. DeepCapture will give you 250 words, with no editing. But we may provide commentary.   )

…..

From: Patrick Byrne
Sent: Sunday, March 20, 2011 7:32 PM
To: ‘WTilson@T2PartnersLLC.com’
Cc: ‘feedback@tilsonfunds.com’
Subject: RE: Request for comment on news story

Dear Whitney,

While I am at it, I have two other questions:

1.       You wrote a story ( http://seekingalpha.com/article/80997-nyt-smears-david-einhorn-again ) in which you said:

L) All this is a bit unsatisfying for those who would want to regulate short sellers. But unfortunately, bad news is part of any financial system.

Davidoff is becoming more and more incoherent as he tries to wrap up this hatchet job of a post. He appears to be saying that because the market sometimes (he asserts) is a sucker for media hype (by, I assume, market manipulating short sellers?), there are people who want to regulate short sellers and prevent them from ever saying anything negative about any company. Other than Patrick Byrne, who are these people?

When you wrote this, did you really believe that I “want to regulate short sellers and prevent them from ever saying anything negative about any company.”

a.       If so, on what basis did you ascribe that belief to me?

b.      If not, why did you ascribe the belief to me?

2.       Do you consider Barry Minkow’s plea bargaining to a 5 federal-year prison term (per his lawyer: see Minkow in Plea Talks With U.S. Prosecutors Over Fraud Case, Lawyer Says) an  inappropriate attempt by the federal government to “regulate short sellers and prevent them from ever saying anything negative about a company”?

I look forward to the courtesy of your response. I trust 72 hours will be sufficient.

If you choose to respond on your own blog, I predict you will be so unconfident of your response that you will find a circumlocution to avoid mention of “DeepCapture” (just wanted to get that on the record now).

Very respectfully,

Patrick Byrne

Journalist, DeepCapture.com

Oddly, Whitney, once so voluble on these matters, has been incapable of response. Given the integrity and moral fiber he demonstrated in withdrawing his speaking invitation at the insistence of Jim Chanos and David Einhorn, I cannot say I’m shocked that Whitney Tilson would lazily ascribed to me a claim such as that quoted above, then refuse to defend it, and also refuse to clarify his involvement with the two-time criminal Barry Minkow.

It’s been a tough few weeks for Barry Minkow, as Patrick Byrne has done a fine job chronicling recently. Minkow’s sudden return from ex-felon to current-felon has come as a surprise to some, but not to the Deep Capture team; for we have, over nearly four years, sought to raise awareness of Minkow’s place in a much broader, criminal stock manipulation ecosystem.

Those who need to get caught up will appreciate the following review, with some additional information thrown in for color.

Following his release from prison for stock manipulation, Minkow created the Fraud Discovery Institute (FDI), which, according to a disclaimer on the FDI website, was originally funded by fees collected in return for “various training sessions as well as public speaking engagements.”

FDI’s ostensibly altruistic motivation persisted until spring of 2007. At that time, verbiage was added to the company disclaimer revealing two additional sources of revenue: “short positions” and “third party payers.” This was Minkow’s subtle disclosure of the fact that he would subsequently be paying the bills by means of the profits derived from trading (in this case, short-selling) ahead of FDI’s attacks on public companies, and that these attacks would be financed by third parties who felt Minkow’s motives, one must presume, were aligned with their own.

This evolution in FDI’s incentive structure – from karmic to economic – was a fateful one for Minkow, as it marks the beginning of his march down a path that by all appearances leads to prison. Given its significance, it will be the primary emphasis of the remainder of this piece.

We now know that the change to FDI’s disclaimer was timed in accordance with its publication of an attack on USANA (NASDAQ:USNA), a publicly traded company in whose stock Minkow had previously purchased hundreds of put options, anticipating they would increase in value as the company’s stock fell (that is, buying a put against a company’s stock is just one way to bet that its price is going to fall).

How Minkow came to target USANA is both instructive and well-documented, thanks to the testimony Minkow gave when deposed in the defamation suit USANA brought in response to the attack (though it’s since been equally well-documented that being under oath is by no means a guarantee Minkow will tell the truth).

According to Minkow, one summer day in 2006, entirely without warning, fellow convicted stock manipulator Sam Antar called to announce that he would be sending Minkow $100,000 – no strings attached. Together with $150,000 sent in the months to follow, Antar handed Minkow $250,000 of the nearly $300,000 used to finance the USANA attack.

This payment is interesting for myriad reasons, two of which follow:

First, Minkow currently finds himself in a familiar role as defendant in a defamation suit borne of one of FDI’s more recent attacks – this time against public company Lennar. A source familiar with the lawsuit tells me that in his deposition in the case, Sam Antar testified that the $250,000 he gave Minkow bought Antar access to Minkow’s operation, and that Antar paid it anticipating that he would eventually create a comparable business based on the FDI model. Strikingly, the source also reveals that Antar went out of his way, under oath, to express hatred toward his then-wife Robin Antar, whose personal bankroll was without doubt the actual source of the funds, assuming they did in fact originate anywhere near Sam.

Second, arguing against the possibility that the money was indeed Antar’s is the fact that public records reveal that within months of Antar’s $250,000 gifts, the State of New York issued a warrant for unpaid taxes against him in the amount of $473.15. That tax debt remains unpaid to this day.

In his subsequent divorce from Robin, Sam was unable to cover the cost of his own attorney, and was forced to beg the former Mrs. Antar to pay for both hers and his. Additionally, Antar’s remaining $60,000 SEC-ordered fine (brought about by his involvement in the Crazy Eddie stock scam) appears to remain unpaid. Finally, a 2008 civil judgment ordering Antar to repay a $200,000 debt to real estate financier Morris Cohen has been actively ignored by Antar.

Point being: the $250,000 Antar gave Minkow both financed the USANA attack and bought Antar access to FDI’s operations. What’s less clear is the origin of the money, given the amount of evidence indicating Antar himself has a net worth well below zero.

According to Minkow, he and Antar first agreed to collaborate on the USANA attack in October of 2006.

Interestingly, that’s the same month in which Gary Weiss, an outspoken defender of illegal, manipulative short selling, went out of his way to introduce Antar to the readers of his blog. The occasion was a comment Antar made on a column penned by Herb Greenberg, yet another defender of illegal short selling and the man who would, just days before FDI’s USANA attack, announce to the world that Minkow and Antar had recently joined him for lunch.

From that day on, the blogs operated by Weiss and Antar operated in close synch with one another and both made effusive praise of Minkow a consistent element in their writing.

FDI’s USANA attack was published in February of 2007 but remained largely unnoticed until March 15, when the Wall Street Journal wrote about it.

One month later, a clear anti-USANA PR offensive was launched by FDI.

Within the space of three days, Gary Weiss again made a special effort to introduce his readers to blogging accountant Tracy Coenen, a recent addition to the FDI team. Together, Antar, Weiss and Coenen carefully coordinated their blog subject matter and cross linking, in order to achieve maximum visibility on search engines, all the while heaping thick praise on Minkow’s efforts.

Two more events coincided with this mid-April PR blitz: class action securities attorney Howard Sirota (operating anonymously) became a frequent and rabidly anti-USANA participant in online discussions of the company’s stock. Sirota, as it turns out, is a close friend of Sam Antar’s and has represented the late Anthony Bruan, who is significant in that he contributed $10,000 toward the financing of FDI’s USANA attack.

Clearly, Antar brought both Sirota and Bruan into the picture — Sirota likely with an eye toward leading a shareholder class action suit against USANA, and Bruan hoping to make a quick few bucks shorting the stock.

When his true identity was publicly revealed by me in June of 2007, Sirota defended his several months’ worth of anonymous attacks on USANA and at the same time revealed that he had also bought put options in the stock, anticipating it would fall in response to Minkow’s actions.

In his deposition in the case, Minkow testified that Sam Antar had similarly either sold shares of USANA short or had invested in speculative put options.
Perhaps most significantly, the middle of April 2007 saw a dramatic and sustained surge in delivery failures of USANA shares, which is generally a result of a concerted effort to illegally depress the price of the stock.

In other words, FDI’s mid-April anti-USANA PR blitz appears to have been timed to coincide with a manipulative trading scheme intended to apply significant, artificial downward pressure on USANA’s share price.

Furthermore, this effort involved Sam Antar, Tracy Coenen, Gary Weiss, Howard Sirota, and of course, Barry Minkow.

In the years that have followed, Weiss, Coenen, Antar and Minkow have grown quite close and effusive in their affection for one another. Coenen, who knows nothing about corporate finance, has even joined Weiss in defending illegal, manipulative short selling and attacking companies victimized by the practice.

Antar, for his part, revealed under oath that he was paid $30,000 by Minkow for his support of FDI’s attack on Lennar (though he promises to pay it all back).

Tracy Coenen testified that she was paid $50,000 by FDI for her work on the same project. Gary Weiss has yet to be asked what he got for his trouble, but in light of the phrase he used in the inaugural post on his own blog – “only a fool writes for free” – we can surmise there was something in it for him, too.

To top it all off, Tracy Coenen got Minkow, Antar and Weiss each to pen an enthusiastically positive review of a book related to accounting fraud she published during this period (and while Minkow’s review remains indelibly printed inside the book, Tracy’s had the good sense to remove that one from her website).

We can also surmise that Minkow was beyond pleased with Weiss’s support for FDI’s efforts, given the fact that Minkow tends to cite a post from Weiss’s blog, verbatim and in toto, when explaining away the lawsuit USANA brought in response to FDI’s attack. (As an aside, that particular post by Weiss ends as follows: “Congratulations, Barry, and keep up the good work.”)

Notably, Minkow has been subjected to substantial criticism by the judge overseeing the Lennar suit – in which Minkow is the primary defendant – for, among other things, the destruction of evidence. This includes email communication from Minkow to Antar and Coenen. Most significantly, these same emails have also been deleted by Antar and Coenen – strongly suggesting a conspiracy by these three not only to defraud, but to cover-up.

Thus far, only Minkow has been held to account for these dark deeds, but the gears of justice grind fine yet slow, and the eventual inclusion of — at the very least — Antar and Coenen seems inevitable.

“Minkow’s manipulation of the market … caused a severe drop in the stock prices of a large local corporation. This type of deceit and abuse of trust will not be tolerated… we will investigate and prosecute stock manipulation cases to help protect the integrity of our capital markets…When false statements are disseminated to deceive the investing public, whether they’re designed to prop up a company or tear it down, the FBI will dedicate all available resources to bring disseminators of such falsehoods to justice.” – United States Department of Justice, Press release, March 24, 2011

“Minkow Charged In Stock Fraud, Extortion Case – A financial fraud investigator and ex-convict was charged with conspiracy in a Florida federal court on Thursday, a week after agreeing to plead guilty to allegations that he intentionally depressed a company’s stock with false accusations of fraud.” – Law360, March 24, 2011

DeepCapture is seeing an influx of visitors, many of them new. So I am going to give a concise explanation of the stock manipulation meme that Deep Capture explores.

THE STOCK MANIPULATION MEME

Years ago, Steve Cohen figured out that finding a good company to invest in and waiting for its stock to go from $4 to $28 took acumen and patience, whereas taking a company down from $28 to $4 could be done in weeks, and, through the magic of short selling, was  just as profitable.   For Steve Cohen and a number of associated players this insight led to the emergence of a business model: instead of simply betting against companies (short selling), it would pay to disrupt them (naked short selling, orchestrating smear campaigns in the press, instigating federal investigations and shareholder class action lawsuits, etc.)

In the intervening years a network has emerged that developed this business model into an industry. Michael Milken and Ivan Boesky (two famous criminals from the 1980′s) were financiers to the stock manipulation industry, and brought with them the involvement of Organized Crime (primarily, Genovese Family, and later, Russian Mafia). Its current shining lights appear to include Jim Chanos, David Einhorn, Dan Loeb, and Bill Ackman. Numerous wannabees have circled from time to time, from low-rent (David Rocker) to preppy (Whitney Tilson, it now appears). Profiting from stock manipulation would be difficult without the involvement of prime brokers who turn a blind eye to certain trading strategies, primarily, naked short selling, but also, variants such as married puts (by which hedge funds lay off an aspect of their criminal activity to the prime brokers, and prime brokers lay off an aspect of the crime to market makers).

The journalists who became spokesmodels for these cutpurses range from Pinto (Roddy Boyd, Carol Remond, Herb Greenberg) to Lexus (Bethany McLean), with every make and model in between (some, such as Bethany McLean and Roddy Boyd, have never written a story that was not sourced from this tiny set of hedge funds, and breezily engaged in email conversations which reveal their understanding of their role as puppets). Other financial journalists (e.g., Joe Nocera, Floyd Norris) sided with these now-exposed journalists not from corruption, but from having forgotten their duties as journalists. At the bottom of the food chain, we find a small group of phony “researchers” (Barry Minkow, Sam Antar, Gradient Analytics) who conduct no real research, but who produce endless phony “where there’s smoke there’s fire” allegations for parroting by C-list bloggers (Gary Weiss, Tracy Coenen, Floyd Schneider, Yolanda Holtzee, etc.), which are then imported into the mainstream financial press through the efforts of the shill journalists listed above.

For many years, these schemers made a federal toy of the SEC, whose staffers  gave concierge service to stock manipulators  before going to work for their law firms (e.g., Linda Thomsen), or sometimes, even directly for the hedge funds in question (e.g., Richard Sauer, for whom Rocker Partners and Bethany McLean had a code-name, “Lavaman”). Jim Cramer has participated both as a money manager (as he confessed on video), and also, as a journalist (as DeepCapture has demonstrated). DeepCapture also suspects the involvement of former New York Attorney General Elliot Spitzer’s, due to Spitzer’s proximity to Cramer (Spitzer’s college roommate and lifelong friend) and Chanos (Spitzer’s largest financial backer), the confluence among this network’s targets and the objects of Spitzer’s prosecution, and the slightly salacious fact that Jim Chanos let live rent-free in his house Eliot Spitzer’s main escort, Ashlee Dupree (who should be ashamed of herself for having anything to do with these low-lifes).

THE COVER-UP

Such schemes are illegal, as is the trading that seeks to profit from them. Though these patterns are easy to spot, with this basic scheme distributed so cleverly across so many market participants (hedge funds, prime brokers, market makers) and typists who look enough like journalists to be shielded by the 1st amendment (e.g., Jim Cramer, Herb Greenberg, Carol Remond, Bethany McLean), they are difficult to prove, .  In fact, any attempt to inform the public about these patterns has traditionally been met by tremendous smear campaigns by all the journalist-typists mentioned above. Importantly, these smear campaigns not only attack the messenger, they distort the message, insisting that what is at issue is “short selling”  (a practice which is easy to defend), and systemically refusing even to mention the allegations of stock manipulation (via naked short selling and manipulation of journalists and law enforcement). It has become clear over the last six years that the New York financial press has a mandate to suppress the stock manipulation meme. That is why the New York financial press, once so intense on discrediting this meme,  flipped off like a light-switch the moment we began expressing and documenting it in both particular and pattern on DeepCapture, criticism of which would have led readers to visit and understand the arguments for themselves.

THE CRUSADE

In 2004 Gradient Analytics, a Phoenix-based company putatively in the business of providing research to hedge funds, began a smear campaign against Overstock (a company in which I work by day). The zeal with which they stretched to make any allegation they could muster in literally dozens of poorly-researched publications, and their strange behavior in communication with us (aggressively turning a deaf ear to any attempt to explain to them the accounting basics they had misunderstood) left us certain that they were up to mischief, but puzzled as to their motives. Soon, several sympathetic hedge funds contacted me to inform me that this was Gradient’s business model: any hedge fund could pay them $25k/year, and for that fee, command the preparation of multiple hatchet jobs. Clearly, someone had bought the economy pack regarding us. Not long thereafter, several employees of Gradient Analytics got in touch with me and described, in great detail (and ultimately in three affidavits) how a hedge fund named “Rocker Partners” (run by David Rocker) was the hedge fund behind this stock manipulation scheme (they named Herb Greenberg as participating, and also said that Steve Cohen was “twenty times worse”). As much from a sense of civic duty as anything else, Overstock sued Rocker and Gradient, and then, the entire prime brokerage industry.

Throughout the litigation, pretty much the entire aforementioned set of typists, pseudo-journalists, and C-list bloggers who had spent so many years carrying water in these hedge fund schemes (i.e., Jim Cramer, Herb Greenberg, Bethany McLean, Roddy Boyd, Carol Remond, Joe Nocera, Floyd Norris, Sam Antar, Gary Weiss, Tracy Coenen, Floyd Schneider), tried to convince the public that Overstock’s lawsuits had no merit and that no such schemes exist. All but the most shameless C-list players, however, contracted laryngitis on the subject when Overstock received apologies for and withdrawal of Gradient’s smear campaign, a $5 million check from Rocker (“Rocker Pays $5 Million to Overstock.com to Settle Lawsuit“), another $5 million check from some of the prime brokers, and got going a serious-as-a-heart-attack RICO action going against Goldman Sachs and Bank of America subsidiary Merrill Lynch, with a trial date in December, 2011.

THE BREAKTHROUGH

An identical scheme starring many of these players has come to light in federal court in Florida over the last two weeks. Barry Minkow (like Sam Antar, an ex-convict with a history of enormous financial crimes) “was charged with conspiracy in Florida federal court… after agreeing to plead guilty to allegations that he intentionally depressed a company’s stock with false allegations of fraud.” The company whose stock was being “intentionally depressed… with false allegations of fraud” was a Fortune 500 company named Lennar, Inc. The modus operandi was identical to the David Rocker/Gradient Analytics scheme against Overstock.

The fact that there is such overlap among the cast of characters should not be surprising. As is documented in numerous places in DeepCapture (“The ties that bind Sam Antar and Barry Minkow”, “Today’s ‘If Only There Were a Pattern’ Moment: Sam Antar Crony Barry Minkow Still a Crook. Who Knew?“, “The Honorable Gill Freeman Throws Book at Barry Minkow, Nicks Paymaster Sam Antar. Plus, A Question for Whitney Tilson, Minkow Paymaster #2″, ” Memo to Barry Minkow and Sam Antar: Roll Early, Roll Often“, etc.) these folks all work together. Sam Antar paid Barry Minkow $250,000 for services Barry could not explain;  Gary Weiss re-introduced Sam Antar to the world in 2006; Gary Weiss introduced Tracy Coenen in 2007;  Whitney Tilson paid Barry Minkow $40,000 for “research” in the model of Gradient Analytics’ smear campaign; Barry Minkow paid Sam Antar $30,000 back for cooperation in another smear campaign; Dan Loeb’s hedge fund, Third Point, employed as a cut-out another ex-convict stock manipulator named Michelle McDonough to manage related manipulation campaigns conducted by Floyd Schneider and Yolanda Holtzee. Gary Weiss brags in email to Floyd Schneider about feeding Joe Nocera his material. And so on and so forth.

What is not yet public is who was behind this particular stock manipulation scheme now being pursued in federal court. Barry Minkow’s publications, filled as they were with “false allegations of fraud,” were always closely preceded by large trading activity far beyond the capacity of Barry, Sam Antar, or even Whitney Tilson (who, as his hedge fund is about $120 million, is something of a pisher in the hedge fund world).  That is to say, someone knew every time that Barry was about to publish “research” that would move a stock price, and was betting big that Barry’s publications would move those prices (that is, after all, the point of a stock manipulation campaign: to create a lead-pipe cinch on which to bet). Given the size of the bets, it had to be someone big.

Far bigger than Whitney Tilson.