First, I highly recommend making a habit of listening to NPR’s Planet Money podcast. I’ve been listening for nearly a year (the entire length of its existence) and find the benefits innumerable. If you’re not familiar with podcasting, it’s basically an easy way to have audio content automatically downloaded to your computer or mp3 player as it’s released. That means you don’t need to go looking for it. It’s just there, waiting for you to consume at your convenience.

Planet Money publishes a new episode every Monday, Wednesday and Friday evening. The typical 20 minute edition focuses on some aspect of economics, more often than not related to the present financial crisis, and usually incorporating an interview with somebody fascinating.

Which brings me to thing #2…

The most recent episode of Planet Money includes an interview with Sam Antar, a convicted stock manipulator and known associate of now-defunct short selling hedge fund Copper River Partners (née Rocker Partners) and Gradient Analytics (née Camelback Research). In total fairness, Sam’s interview, which focuses on the crime he enabled as CFO of Crazy Eddie) is very interesting, although I’d say that’s more a reflection on the skill of the interviewers than on Sam himself.

At the conclusion of the interview, hosts Adam Davidson and David Kestenbaum wonder aloud whether Sam Antar is to be trusted.

In response, I added a comment to the segment’s accompanying blog portion, pointing out that in my opinion, Sam Antar remains in the stock manipulation business as evidenced by his involvement in — and financing of — smear attacks on public companies (which go beyond claims of accounting fraud to include accusations of anti-Semitism, marital infidelity, substance abuse, and worse) led by short sellers hoping to profit from an expected drop in the target companies’ share price. In support of my claim, I included this link, which offers a clear example of just such an attack against a company called USANA: http://antisocialmedia.net/when-youre-right-youre-right/

Well, typical of how Sam and his buddy Gary Weiss operate, they reported my comment as “inappropriate” and managed to get it removed (twice).

If you agree that the world could benefit from additional context when deciding whether to trust Sam Antar, you might consider making that clear by adding your own comment here.

Gary Weiss wonders how he managed to get caught sockpuppeting...again.

On the other hand, if you – like me – do enjoy seeing Weiss ensnared in the traps he’s haphazardly laid for others, you’ll appreciate what follows.

Earlier, I wrote about how I successfully confirmed my suspicion that Gary Weiss had spawned a new pro-illegal naked short selling sockpuppet in the form of Daily Kos blogger “Tom Sykes”.

As expected, both Weiss and “Sykes” responded on their respective blogs with furious and indignant denials and repeated insistence that I was lying.

As it turns out, DeepCapture.com reader Andrew Perez also has a blog on Daily Kos (in addition to his contributions to The New Argument), and he took justifiable offense at the con Weiss was attempting to pull on Daily Kos readers, penning a particularly well-written overview of the situation. In that post’s comment section, “Sykes” went on the offensive, but soon began to bob and weave as Perez worked to pin him down.

The key moment in their exchange is summarized below (you can read it in full here):

Perez: Correct me if I’m wrong: you are Gary Weiss. If you take offense with me addressing you as Gary, will you please confirm or deny that you are Gary Weiss? I asked you to do so already and you ignored my request.

Sykes: No I’m not and I’m not going to engage with you anymore. I just read the comments that you made on Deep Capture before you marched over here like a good Soldier of Byrne to write your little smear piece. You are much more of a shill for that creep than I thought you were. You use his tactics, you have his values. You belong there, not here.

Perez and I separately contacted Daily Kos administrators with evidence proving they were being scammed by Gary Weiss. I didn’t hear back, but Perez did. Via email, a Daily Kos administrator told him: “Sykes has been banned based on my evaluation of the material you and others provided.”

We can officially and unambiguously add Tom Sykes to the long list of abusive sockpuppet identities Gary Weiss has unsuccessfully created to trick people into believing illegal naked short selling is somehow a good thing.

The Bizarro World Code

Within minutes of my introduction to the world of short selling hedge funds, I encountered the analogy that remains the best suited to describe the truth to which they subscribe: Bizarro World.

A planet that appears from time to time in the DC Comics universe, Bizarro World is noteworthy for its utter opposition to everything associated with reality on Earth (in fact, another name for Bizarro World is Htrae – “Earth” spelled backwards).

Bizarro World made very infrequent appearances in the DC Comics universe; however what few insights we’ve been able to gain have been telling.

For one, we know that the residents of Bizarro World adhere to a simple moral code: “Us do opposite of all Earthly things! Us hate beauty! Us love ugliness! Is big crime to make anything perfect on Bizarro World!”

Bizarro Superman

For another, consistent with its black-is-white nature, the alpha-superhero of Bizarro World – a Superman-like figure appropriately named ‘Bizarro’ – is in fact a super villain, and one of many.

Fortunately, or possibly unfortunately, the Bizarro World of short selling hedge funds sits side-by-side with our own. Yet, true insights into how it actually operates have been startlingly rare.

Possibly the best behind-the-curtains view came in December of 2006, with Jim Cramer’s infamous admission as to how short selling hedge funds do (and indeed, according to Cramer, “must”) operate, moving the Bizarro World citizenship of that group from theory to undeniable fact.

See for yourself:

Cramer: “You can’t foment. You can’t create yourself an impression that a stock’s down. But you do it anyway because the SEC doesn’t understand it. So that’s the only sense that I would say that it’s illegal.”

Bizarro translation: “Us do opposite of all Earthly things! Us can break law to make money because regulator not understand regulations!”

Cramer: “Look what people can do. I mean that’s a fabulous thing! The great thing about the [stock] market is that is has nothing to do with the actual stocks. Look, over maybe two weeks from now the buyers will come to their senses and realize everything they heard was a lie…”

Bizarro translation: “Us hate beauty! Us pervert capital markets to make them hostile to small, promising businesses and technologies! Us stock market has nothing to do with actual stocks!”

Cramer: “These are all what’s really going on under the market that you don’t see. What’s important when you’re in that hedge fund mode is to not do anything remotely truthful – because the truth is so against your view, that it’s important to create a new truth to develop a fiction.”

Bizarro translation: “Us love ugliness! Us hate truth! Us prefer fiction!”

Cramer: “I think that it’s important for people to recognize the way that the market really works is to have that nexus of ‘hit the brokerage houses with a series of orders that can push it down’, then leak it to the press, and then get it on CNBC (that’s also very important), and then you have kind of a vicious cycle down. It’s a pretty good game.”

Bizarro translation: “Is big crime to make anything perfect on Bizarro World! Us make money by wrecking public companies! And here on Bizarro World, Jim Cramer not even pretend to be friend of small investor! Oh yeah…CNBC official network of Bizarro World!”

(Lest any suppose these clips have been taken out of context, I strongly encourage everybody to download and view the 10 minute conversation in its entirety.)

On Bizarro World, villains are treated like celebrities while the law-abiding are scorned and ostracized. So it should come as no surprise that on CNBC (the official network of Bizarro World), short selling hedge fund managers are called “titans” while those who question them are dismissed with a wink and a smirk.

Of course, this would seem consistent with the seemingly inverted reality that is short selling, where – as opposed to traditional investors who earn profits when they buy low and later sell high – shorts aspire to do the same by first selling high and then buying low.

While on the surface short selling might appear to have been invented on Bizarro World, that’s not true. Shorting is (as has been stated time and again on this blog) a healthy part of a normal market.

What was invented on Bizarro World, however, is shorting’s insidious doppelganger: naked short selling, which is a practice ripped straight from the Bizarro World welcome guide. Unlike legitimate short selling, which requires first borrowing the shares one sells short, naked shorting skips that step, allowing criminals to sell not only something they do not own, but something that does not even exist, except as a tradable electronic ledger entry which they themselves conspire with corrupt brokerages to create.

This, in turn has the effect of artificially increasing the supply of a company’s shares. In other words, on Earth, only companies get to issue stock, whereas on Bizarro World, it’s the naked short sellers that issue shares of a company’s stock, with impunity, sometimes in quantities rivaling the number of legitimate, company-issued shares in circulation (with the expected impact on share price).

Or, should I say, naked short sellers used to be able to do this.

The truth is, since shortly after the onset of the economic crisis naked short sellers themselves helped to spark, naked shorting has become an increasingly difficult crime to commit.

The result?

Despite the fact that we’re in the midst of an epic bear market – when one would normally expect short sellers to thrive – the biggest short selling hedge funds are getting hammered.

Today, Reuters business writer Svea Herbst-Bayliss has a shocking overview of the breadth of the situation, which she begins by comparing to Waterloo – the battle which forever put an end to Napoleon’s aspirations of world domination.

Based on insiders’ insights into forthcoming letters to investors explaining their performance over the first and second quarters of 2009, Herbst-Bayliss predicts that “To anyone considering hedge fund investments in the coming months, the data will illustrate that these managers who cashed in on last year’s financial markets crash now rank as the $1.4 trillion hedge fund industry’s worst performers.”

Specifically, Herbst-Bayliss notes, “In the first six months of 2009 [short selling hedge funds] lost 9.38 percent, compared with the 9.55 percent that other hedge funds gained.”

Most notably, the story quotes Brad Alford, a professional hedge fund advisor and investor, who says, “Every few years short-sellers have their day in the sun. Then things revert to normal where the markets rise and life becomes so difficult for them that many just go out of business,” he added.

In case you missed it, you might want to re-read Alford’s quote to make sure you catch what makes it so telling: that a rising market can be bad for short sellers.

But how can that be, given the recently-ended bull market – possibly the greatest in economic history – saw short selling hedge funds such as SAC Capital, Kynikos Associates and Third Point Capital experience mind-boggling growth, while a month-long rise in what is otherwise shaping up to be one of the greatest bear markets in economic history (when the shorts should be thriving) may prove to be their ultimate doom?

Talk about Bizarro World investing!

The difference, I suspect, is naked short selling: a crutch-like tool that allowed the shorts to defy gravity while the market soared, the effective removal of which has left them atrophied and uncoordinated when forced to fend for themselves in a market where capable, legitimate short sellers should thrive.

Blue vs. Green Kryptonite: Click to see full image

Or maybe a more apt metaphor is that of Kryptonite, the green version of which makes Superman weak and Bizarro strong, while the blue version has the opposite effect. For a long time, a captured media and SEC equipped short selling hedge funds with a big, fat slab of green Kryptonite, which their own hubris has caused to be replaced by a bit of the Bizarro-toxic blue stuff.

Will July of 2009 be the short sellers’ Waterloo?

Will short selling hedge funds’ greed simply assume another form?

Will the economy recover before it’s too late to matter?

Find out what happens in the next episode of Deep Capture!

In the end, we settled on the following:

“Entropy increases” and “The pendulum swings.”

The first sentence is a reference to the Second Law of Thermodynamics.

The second sentence is a reference to the fact that cultural trends will always increase in pervasiveness and acceptance until some limit is broached, at which time opposing forces will be applied that cause society to respond with increasing negativity toward that trend. And, as with an actual pendulum, the higher the upswing, the more forceful the push back will be.

How true both are.

I first encountered the market reform movement near the end of 2005. Over the months that followed, I witnessed the following:

1. An SEC staffer in San Francisco subpoenaed the communications of Jim Cramer, Herb Greenberg, Bethany McLean, Carol Remond and a handful of other “journalists” suspected of colluding with Gradient Analytics and short selling hedge fund Rocker Partners, only to have SEC Chairman Chris Cox personally sabotage the effort. This was followed up almost immediately by the SEC vindictively subpoenaing Patrick Byrne.
2. FOIA requests filed with the SEC intended to give some sense of the scope of the delivery failure problem were regularly denied or spitefully filled with minimal accompanying explanation.
3. Numerous brutal articles were published attacking opponents of naked short selling – Byrne primarily among them – under the bylines of (surprise) Jim Cramer, Herb Greenberg, Bethany McLean, Carol Remond, Joe Nocera, and Roddy Boyd.
4. Audio tape captured by a market reform operative who covertly accessed a panel discussion featuring Herb Greenberg, Joe Nocera and Dan Colarusso (then Roddy Boyd’s editor) hosted by the Society of American Business Editors and Writers. The theme of the discussion was essentially “How do we deal with these lying anti-naked short selling bloggers who are so critical of us?” Among other things, the tape caught Joe Nocera saying (to loud applause) he felt life was too short to bother understanding whether naked shorting is actually a problem, and Dan Colarusso saying he and his newspaper had the capacity to “crush” Patrick Byrne.
5. An all-out PR offensive launched by the Depository Trust & Clearing Corporation (DTCC) attacking opponents of naked short selling.
6. The emergence of Gary Weiss, an ostensibly credible former business journalist and blogger, bursting onto the scene, proclaiming naked short selling beneficial and its opponents crazy.
7. The hijacking and distortion of the Wikipedia article on naked short selling by whom we would soon learn was none other than Gary Weiss. Given journalists’ well-documented over-reliance on Wikipedia, this was undoubtedly a key factor in our difficulty getting them to provide more balanced coverage of the issue.
8. A special session of the Utah Legislature which, catching the banks flat-footed, resulted in passage of a law requiring brokerages with operations in Utah to promptly disclose stock delivery failures. But before it could go into effect, and after the prime brokers managed to rally their armies of lobbyists, the law was handily repealed.
9. Unprecedented growth of companies on the Reg SHO Threshold Securities list, indicating that, contrary to the intended aim of Regulation SHO, naked shorting was becoming increasingly prevalent.

On balance, it was a very dark time for the market reform movement, as every charge was followed by a blistering counter-charge, and every lunge answered by a quick parry. More than once, I recall hearing even the staunchest market reformers openly question the capacity of a rag-tag band of revolutionaries to counter the enormous influence and resources brought to bear by the hedge funds and prime brokers who were getting rich from the practice of manipulative naked short selling, and I couldn’t help but wonder whether I’d picked the wrong battle.

That’s not to say I ever doubted the correctness of the cause – only the correctness of my decision to join a fight that sometimes seemed impossible to win and certain to result in damage to my reputation as it had to Patrick Byrne’s and so many others’.

But in those moments of doubt, I’d remind myself of an eternal truth: the pendulum swings.

In other words, as dark as those days were, there would invariably be restraining forces applied to help slow – and eventually stall and even reverse – the momentum built up by decades of Wall Street villainy and the deep regulatory capture of the institutions intended to counter it.

What we could not have realized – as such perspective only comes with time – is that we (meaning, you, me, and everybody else who’s taken steps to do something about illegal naked short selling) were in fact the very restraining forces so many of us were expecting to arrive, cavalry-like, from some unknown quarter, and that as dark as those days seemed, they appeared quite bright to those who had endured the 1990s and early part of the current decade, when the practice persisted, without restraint, like a drunken orgy.

Of course, the event that finally brought the pendulum to a decisive halt and reversal was the current economic crisis, which saw the term “naked short selling” dragged into the popular lexicon (as determined by Yahoo! listing it as one of its five most popular search terms in September of 2008).

Since then, as the link between naked short selling and the beginning of the crisis itself has been solidly established, valiant members of Congress – most notably Delaware Senator Ted Kaufman – have dragged the issue of naked short selling into the political lexicon, as well.

Where are we today?

1. The SEC recently enacted permanent restrictions on illegal naked short selling, which include greatly enhanced disclosure of delivery failures and shorting activity.
2. Today, the SEC brought its first enforcement cases against illegal naked short selling.
3. Also today, FINRA expelled a member firm for engaging in illegal short selling.
4. Jim Cramer has been deeply and publicly shamed. Herb Greenberg is now a ‘consultant’. Bethany McLean has left business journalism. Dan Colarusso continues looking for steady employment. Roddy Boyd, Carol Remond and Joe Nocera all retain their former positions, but seem to steer clear of anything resembling the issue of naked shorting.
5. The DTCC is mum on the issue as well.
6. Gary Weiss – since abashed and banned from Wikipedia – sinks ever deeper into obscure irrelevance while the Wikipedia article on naked short selling that he once controlled has been liberated and made to read nearly as it should.
7. Substantive legislation with the capacity to end illegal naked short selling and other short-side market abuses once and for all is currently working its way through Congress.
8. As of today, the Reg SHO Threshold Securities list is 23% shorter than it was on the day I met Patrick Byrne (and 90% smaller than it was at its height in July of 2008), and is nearly devoid of the kinds of promising, well-capitalized companies whose inclusion used to be a sure sign of an impending bear raid.

These are all developments that seemed impossible in the dark days of 2006.

But here we are.

Yes, the pendulum is now unambiguously swinging in our direction, but the job is not done. Indeed, we can only be assured of progress to the extent that we each recognize our responsibility to continue pushing.

Apparently aware of the ruin that is his own reputation, Gary Weiss has taken to battling in favor of illegal stock market manipulation on political blog aggregator DailyKos.com, under the pseudonym “Tom Sykes”.

Weiss has a rich history of abusive sockpuppeting, mostly for the purpose of attacking those who advocate ending  illegal naked short selling. At one time, Weiss did this on behalf of the DTCC. Now, exactly who’s paying him is unknown, though it must be someone because the fellow has otherwise been unemployed since 2004 (apart from his less-than-lethargic book sales, the pittance in ad revenue generated by his all-but-mothballed blog, and his tiny handful of ostensibly paid pieces for Portfolio Magazine – a publication whose final coffin nail Weiss personally helped to drive).

And the trend continues up to this very day, with Weiss as Tom Sykes.

To anybody who has followed Weiss for any period of time and come to recognize his overly-ripe writing style, that he and Tom Sykes are one in the same is beyond obvious.

But the Deep Capture team adheres to a higher standard when making such claims with certainty, and so I shall now explain how I can do so now.

Among the many flaws on the Yahoo message boards is one which makes it possible, under specific circumstances, to embed any html code, up to and including javascript, on the site. This, in turn, makes it possible not only to capture the IP address from which a user is accessing the site, but also their Yahoo username.

In other words, one can tie a Yahoo username to a specific IP address, sans ambiguity.

Gary Weiss lives in Greenwich Village, NY, but in August of 2008 he bought a second home upstate (tellingly financed by the property owner, not a bank) in the tiny Sullivan County hamlet of Callicoon Center.

A few months ago, using the above-referenced method, I was able to determine that the Yahoo account belonging to user garyrweiss@verizon.net was accessing the web via IP address 74.64.81.92, which maps to within a few miles of Callicoon Center. Given the tininess of Callicoon Center, this is what one would expect of an instance of Weiss being online at his second home.

(Hint: remember that IP address, for we shall return to it shortly.)

We know that garyrweiss@verizon.net belongs to our Gary Weiss thanks to emails we’ve acquired between Weiss and kindred stock manipulator Floyd Schneider.

With the 15-part series on Dendreon recently completed, and our self-imposed hiatus from posting anything else ended, I decided it was time to prove once and for all that Gary Weiss and Tom Sykes are the same person.

It took a few short hours to hit paydirt.

In short, email sent to tomsykes.kos@gmail.com (the address Tom Sykes lists as his own on dailykos.com) induced the recipient to visit the Yahoo message boards in such a way as to reveal his IP address to me.

The result: 74.64.81.92.

This IP address has been conclusively linked to garyrweiss@verizon.net, which in turn has been conclusively linked to Gary R. Weiss, the bumbling sockpuppeteer and defender of illegal naked short selling.

But wait, there’s more.

Among Weiss’s most notable accomplishments has been epic sockpuppeting on Wikipedia in order to cover-up evidence of the damaging impact of illegal naked short selling. Once this finally came to light, Weiss and his home IP address range, which is well known, were unambiguously banned from editing Wikipedia.

But what about Weiss’s new IP address, tied to his new, second home?

Well, as we’d expect, realizing that it was unknown by Wikipedia administrators, Weiss used it, on two occasions, to remove references to Mark Mitchell’s Dendreon-related reporting on deepcapture.com, which had been previously added to the Wikipedia article on Michael Milken.  To see these edits for yourself, follow this link, which will show you the only two contributions made by IP address 74.64.81.92. To see the substance of the edits, click on the links that say “diff”. What you’ll then see is a before and after comparison, with the text in yellow being what 74.64.81.92 (Weiss) removed.

What could possibly be motivating Weiss to carry on in this manner?

I see one of two possibilities: either he’s like the 80-year-old Japanese soldier living in the jungles of Guam who refuses to accept that his “side” lost the war, or – as I suspect – he remains in active contact with his “side,” which remains mobilized and intent on subverting all that we’ve accomplished.

So what next?

Well, obviously, the editorial staff at dailykos.com will want to know that they’ve given forum to a deeply conflicted contributor who – beyond simply using a pseudonym – is actively pretending not to be Gary Weiss by referring to Weiss in the third person and linking to his own blog as though it were actually really relevant. You can let them know what we’ve discovered about Mr. Sykes by going here.

In addition, any active Wikipedians among you will probably want to make it known there that 74.64.81.92 is in fact the dread sockpuppet Mantanmoreland/Gary Weiss.

Finally, I’d simply suggest the Deep Capture community understand that there are many who are actively working – usually anonymously – to discredit the market reform movement. I encourage you to seek out and bring instances of such to our attention, so that we can investigate further when warranted, in order to better understand their real motives.

And as a postscript, I wish to thank Gary Weiss for being so very predictable. His consistently reptilian-brain-based responses to my occasional prodding has made this aspect of my job not only productive, but very enjoyable, as well.

UPDATE: Both Tom Sykes and Gary Weiss are “separately” expressing outrage at this situation tonight. I encourage each of you to make use of “their” blogs’ comment functions to let “them” know what you think about how “they” have been lying to you.

That’s the motto of the Government Accountability Office, and it almost makes you believe that there really is a functioning watchdog – somebody, aside from us Internet loons, to investigate and report on the incompetence and malfeasance that pervade our public institutions.

Certainly, there were high hopes when the GAO began investigating the Securities and Exchange Commission’s oversight of the Depository Trust and Clearing Corporation (DTCC), a black box Wall Street outfit that is at the center of one of the great financial scandals of our era.

Alas, the GAO has completed its “investigation” and issued a report on its findings. After reading this report, and considering once again that the GAO (“Accountability – Integrity – Reliability”) is the last line of defense against government miscreancy, I have concluded, and am obliged to inform you, that we are, without a shadow of a doubt, totally screwed.

The report begins with an explanation: “An effective clearance and settlement process is vital to the functioning of equities markets. When investors agree to trade an equity security, the purchaser promises to deliver cash to the seller and the seller promises to deliver the security to the purchaser. The process by which the seller receives payment and the buyer, the securities, is known as clearance and settlement.”

In other words, people who sell stock need to deliver real stock. That’s kind of important to the“functioning of equities markets.” If you think it is strange that the GAO ( “Accountability – Integrity – Reliability”) needs to clarify this point, you can begin to understand the scope of a scandal that has helped bring us to the brink of a second Great Depression.

The problem is that many hedge funds and brokers engage in illegal naked short selling – selling stock and other securities that they have not yet borrowed or purchased, and failing to deliver stock within the allotted 3 days. They do this to drive down stock prices and destroy public companies for profit.

Emmy Award-winning journalist Gary Matsumoto reported on the Bloomberg newswire last week that naked short selling is one of Wall Street’s “darkest arts” and contributed to the demise of both Lehman Brothers and Bear Stearns. SEC data shows that an astounding 32.8 million shares of Lehman were sold and not delivered to buyers as of last September 11, days before the company declared bankruptcy.

The collapse of Lehman, of course, triggered the near-total implosion of our financial system.

How could this have been allowed to happen?

One answer lies within that black box – the Depository Trust and Clearing Corporation. The DTCC is a quasi-private, Wall Street owned and operated organization that is charged by Congress and the SEC with ensuring that securities trades are cleared and settled. As is evident from the cases of Lehman, Bear, and hundreds of other companies, however, the DTCC often fails to do its job.

In fact, it enables naked short selling to go unpunished. Rather than track individual trades to ensure that delivery occurs, the DTCC merely calculates a net total of sales and purchases at the end of each day. So we know how many shares of a given company fail to deliver each day, but the DTCC won’t tell us which hedge funds or brokers are responsible.

Meanwhile, the DTCC maintains something called the “Stock Borrow Program,” whereby it purportedly borrows a bundle of shares from cooperating brokers and uses the shares to settle failed trades. These shares are not on deposit with the DTCC, and the DTCC records a trade as “settled” with a mere electronic entry — i.e. by pushing a button on a computer rather than exchanging an actual certificate. So it is unclear that the Stock Borrow Program is actually delivering stock. Moreover, trade volume data suggests that the Stock Borrow Program might be using its bundle over and over again, settling multiple trades with the same “shares,” and generating what is, in effect, massive amounts of counterfeit, or “phantom” stock.

While enabling hedge funds and brokers to engage in their dark art, the DTCC also goes to lengths to deny that illegal naked short selling occurs and to smear the reputations of people who say otherwise. It has orchestrated this vicious public relations campaign in cahoots with a crooked Portfolio magazine reporter named Gary Weiss, who has worked closely with a motley cast of Mafia-connected hedge fund managers and convicted criminals.

There is indisputable evidence showing that Weiss, while posing as a journalist, not only worked inside the DTCC’s offices, but also went so far as to seize total control of the Wikipedia entries on “naked short selling” and “Depository Trust and Clearing Corporation.” Yet, to this day, Weiss flat-out denies that he has ever worked with the DTCC and insists that he has never edited any Wikipedia page, much less the fabulously distorted entries dealing with naked short selling.

That the DTCC facilitates and seeks to cover up naked short selling is not surprising given that it is owned by the very brokerages who profit from catering to hedge funds who commit  the crime. The DTCC’s board of directors has included several market makers – including Peter Madoff, brother of Bernard Madoff, the $50 billion Ponzi schemer with ties to the Mafia — who made a tidy profit from naked short selling.

At any rate, the SEC is responsible for overseeing the DTCC and ensuring that it is doing all it can to enforce delivery of shares and other securities. But the SEC conducts examinations of the DTCC only once every two years, and former SEC officials have admitted to Deep Capture that these visits entail nothing more than “investigators” asking a few courteous questions. Indeed, a number of former SEC officials have told us that the nation’s securities regulator doesn’t even understand what the DTCC does.

Enter the GAO (“Accountability – Integrity – Reliability”). Ostensibly, the GAO was going to determine whether the SEC was properly monitoring the DTCC. However, the GAO’s “investigation” entailed nothing more than visiting the SEC and asking a few courteous questions. In response, the SEC told the GAO that there is nothing to worry about, and the GAO duly issued a report that concluded that the SEC had told the GAO there is nothing to worry about.

Really, that, in essence, is what the report says.

It notes, for example, that the SEC examines the DTCC only once every two years, but offers no opinion as to whether this is sufficient oversight of an organization that processes securities transactions worth $1.4 quadrillion – or 30 times the gross product of the entire planet – every year.

And here’s what the report has to say about the DTCC’s Stock Borrow Program:

“…in response to media criticism and allegations made by certain issuers and     shareholders that NSCC and DTC [units of the DTCC] were facilitating naked short selling through the operation of the Stock Borrow Program, OCIE [a unit of the SEC] also incorporated a review of this program into the scope of its 2005 examination. These critics argued that the Stock Borrow Program exacerbated naked short selling by creating and lending shares that are not actually deposited at the DTC, thereby, flooding the market with shares that do not exist. As part of their review, OCIE examiners tested transactions in securities that were the subject of the above referenced allegations or had high levels of prolonged FTD. The examination did not find any instances where critics’ claims were validated. However, we did not validate OCIE’s findings.” [Emphasis mine]

In other words, the SEC claims to have examined the Stock Borrow Program once – in 2005 — but the GAO (“Accountability – Integrity – Reliability”) has no idea what that examination entailed. The SEC claims to have “tested transactions” in securities that had “high levels of prolonged” failures to deliver, but offered the GAO no credible explanation as to why so many companies have seen millions of their shares go undelivered nearly every day since 2005.

The SEC says it looked into the “critics’ claims” and found them to be without merit. The GAO duly notes this as if what the SEC has to say were the final say in the matter. As to whether the SEC’s own claims might have been without merit, the GAO says only that it “did not validate” the SEC’s findings.

Isn’t the job of the GAO (“Accountability – Integrity – Reliability”) to “validate” – or, as it were, invalidate – the SEC’s findings? It is not exactly an “investigation” to merely ask the SEC what it has to say and then publish a report confirming that that is, in fact, what the SEC had to say.

Last year, more than 70% of all failures to deliver were concentrated on a select 100 companies that short sellers had also targeted in other ways (planting false media stories, issuing false financial research, filing bogus class action lawsuits, harassing and threatening executives, engaging in corporate espionage, circulating false rumors, pulling strings to get dead-end federal investigations launched, etc.), but the SEC told the GAO that the failures to deliver could be mostly the result of “processing delays” or “mechanical errors.”

Billions of undelivered shares – most of them concentrated on 100 known targets of specific short sellers. Many of those shares left undelivered for months at a time. The SEC tells the GAO that this might be due to “mechanical errors.” And what does the GAO (“Accountability – Integrity – Reliability”) do? It transcribes the SEC’s claims, offers no opinion as to whether the SEC might be full of it, and then acknowledges that it is in no position to have such opinions because it “did not validate” anything.

In a written response to the GAO, the SEC noted happily that the GAO (“Accountability – Integrity – Reliability”) “made no recommendations” in its report.

“We appreciate the courtesy you and your staff extended to us during this review,” the SEC told the GAO.

* * * * * * * *

Far better is a report issued last week by the Office of the Inspector General at the Securities and Exchange Commission. Inspector General David Kotz, charged with conducting independent oversight of the SEC, is a heroic figure – an honest man in government. He has consistently lambasted the SEC for corruption and incompetence, and now he has investigated the SEC’s regulation of naked short selling. He found the regulation to be fairly abysmal and offered concrete recommendations for how the commission could reform itself.

The report concludes:

“The OIG received numerous complaints alleging that [SEC] Enforcement failed to take sufficient action regarding naked short selling. Many of these complaints asserted that investors and companies lost billions of dollars because Enforcement has not taken sufficient action against naked short selling practices.”

“Our audit disclosed that despite the tremendous amount of attention the practice of naked short selling has generated in recent years, Enforcement has brought very few enforcement actions based on conduct involving abusive or manipulative naked short selling…during the period of our review we found that few naked short selling complaints were forwarded to Headquarters or Regional Office Enforcement staff for further investigation…”

“Given the heightened public and Commission focus on naked short selling and guidance provided to the public leading them to believe these complaints will be taken seriously and appropriately evaluated, we believe the ECC’s current policies and procedures should be improved to ensure that naked short selling complaints are addressed appropriately.”

As for the SEC’s claims that naked short selling isn’t really a problem, or that failures to deliver could be the result of “mechanical error,” the OIG nicely contrasts this blather with the SEC’s own decision last fall to take “emergency” action against naked short selling (because naked short sellers were contributing to the toppling of the American financial system) and the SEC’s statement that “we have been concerned about ‘naked’ short selling and, in particular, abusive ‘naked’ short selling, for some time.”

In response to the OIG’s rightfully scathing report, the SEC wrote a letter in which it flatly refused to abide by most of the OIG’s recommendations.

The SEC did not thank the OIG for its “courtesy.”

* * * * * * * * *

Meanwhile, that other watchdog – the media – continues to ignore the problem of naked short selling. After Gary Matsumoto’s rather earth-rattling Bloomberg report that naked short selling destroyed Bear Stearns and Lehman Brothers – and, by extension, destabilized the entire financial system – there were a total of two mainstream media stories on the subject.

The first was in Portfolio magazine. Actually, this wasn’t really a story. It was one of those question and answer things. And the Q&A was not with some credible expert. Instead, a Portfolio magazine reporter interviewed another Portfolio magazine reporter about the Bloomberg reporter’s story. Even more shocking to those who believe there is hope for balanced media coverage of this issue, the interviewee was none other than… Gary Weiss, the crooked reporter who sidelines as a flak for the DTCC.

Weiss, of course, smeared the messenger, suggesting that Matsumoto was a “conspiracy theorist.” He cited no data or evidence, but repeated the SEC and DTCC nonsense that failures to deliver might be caused by mechanical errors (which just happen to show up overwhelmingly concentrated in those firms targeted by the hedge funds who serve as Gary Weiss’s sources). And he asserted that naked short selling isn’t a problem because the SEC says that naked short selling isn’t a problem (except when the SEC says that naked short selling is an “emergency”).

Read the full interview here. You’ll get a sense of the way Weiss deliberately employs straw man arguments to distort the truth, though as an example of Weiss’s dishonesty, this is rather mild.

* * * * * * * *

The other magazine to report on the Bloomberg bombshell was the Columbia Journalism Review, which is the most prominent watchdog of the watchdogs – an outlet for serious media criticism. As Deep Capture’s regular readers know, I used to work as an editor for the Columbia Journalism Review. I spent ten months preparing a story for that publication about dishonest journalists (including Gary Weiss) who were deliberately covering up the naked short selling scandal.

In the course of working on this story, I was threatened and, on one occasion, punched in the face. Then, in November 2006, shortly before the story was to be published, a short selling hedge fund that I was investigating announced that it would henceforth be providing the Columbia Journalism Review with the funding that would be used specifically to pay my salary.

The hedge fund that bribed the Columbia Journalism Review is called Kingsford Capital. It has worked closely with criminals, including a thug named Spyro Contogouris. In November 2006, a couple weeks after Kingsford bribed the Columbia Journalism Review, an FBI agent arrested Spyro. This was the same FBI agent who was investigating a cabal of short sellers – SAC Capital, Kynikos Associates, the former Rocker Partners, Third Point Capital, Exis Capital — who were then working with Spyro to attack a company called Fairfax Financial.

Spyro had harassed and threatened Fairfax executives, so he was going to feature prominently in my story. The centerpiece of my story, however, was to be that cabal of short sellers, not only because the Fairfax case was quite shocking, but also because these short sellers and a few others were the primary sources to dishonest journalists (especially MarketWatch reporter Herb Greenberg and CNBC personality Jim Cramer) who were then whitewashing the naked short selling scandal. Moreover, nearly every company known to have been targeted by these short sellers had been victimized by naked short selling, with millions of shares going undelivered, often for months at a time.

Emails in my possession show that Kingsford Capital is closely connected to that cabal of short sellers. Moreover, one of Kingsford’s managers at the time, Cory Johnson, was, along with Herb Greenberg and Jim Cramer (the journalists who were going to feature most prominently in my story) a founding editor of TheStreet.com. (Johnson removed Kingsford from his online resume after I revealed the relationship in “The Story of Deep Capture.”).

For a number of years, Kingsford Capital was partnered with Manuel Asensio, who was one of the most notorious naked short sellers on the Street. Prior to his work with Kingsford, Asensio worked for First Hanover, a Mafia-affiliated brokerage whose owner later became a homeless crack addict.

I was investigating Kingsford and Asensio primarily because they appeared to be among the favorite sources of Gary Weiss, the crooked journalist who was then secretly doubling as a flak for the black box DTCC. Asensio, for example, helped Weiss write “The Mob on Wall Street,” a 1995 BusinessWeek story that was all about the Mafia’s infiltration of Wall Street stock brokerages, but which deliberately omitted reference to Mafia-connected naked short sellers, even though the brokerage that featured most prominently in the story, Hanover Sterling, was at the center of one of the biggest naked short selling fiascos in Wall Street history.

According to someone who knows Weiss well, Asensio was also a source for a Weiss story about the gangland-style murder of two stock brokers, Al Chalem and Meier Lehmann. Chalem was tied to the Mafia and specialized in naked short selling. Multiple sources say that Russian mobsters killed Chalem in a dispute over the naked short selling of stocks that were manipulated by brokerages connected to the Russians and the Genovese organized crime family.

One of these sources – a man who worked closely with Chalem – says that he tried to tell Weiss the true story, but Weiss refused to listen to anybody who would pin the murders on the Russian Mob or accuse Chalem of naked short selling. Instead, Weiss wrote a false story describing Chalem as a “stock promoter” and suggesting that he had been killed by people tied to the Gambino crime family, which was then a fierce rival of the Genovese and the Russians.

On another occasion, the current principals of Kingsford Capital sent Weiss a fax containing false negative information about a company called Hemispherx Biopharma. Another source, who was sitting in Weiss’s office at the time, says that he tried to tell the reporter that Kingsford was working with Asensio, that Asensio might have ties to the Mob, and that Asensio was naked short selling Hemispherx stock. Weiss ignored this information and wrote a negative story about Hemispherx. Hemispherx’s stock promptly plummeted by more than 50%.

Remember, Gary Weiss is the Portfolio magazine reporter who just who just told Portfolio magazine that only “conspiracy theorists” believe that abusive short selling is a problem.

* * * * * * * *

It is too much for me to believe that Kingsford Capital’s managers (along with Gary Weiss and Asensio?) could be influencing the Columbia Journalism Review’s stories, but I do know that the magazine is now an ardent defender of short sellers and has written favorably about several of the dishonest journalists – including Gary Weiss –who were to appear in my story.

And, in its recent piece about Matsumoto’s Bloomberg bombshell, the Columbia Journalism Review cast doubt on the theory that naked short selling wiped out Lehman – never mind those 30 million shares that didn’t get delivered.

The Columbia Journalism Review reporter, who receives a salary thanks to the beneficence of Kingsford Capital, wrote this:

“Now, I don’t have a dog in the naked-shorts fight. I can’t tell you if this is being done illegally on a large-scale and having a real impact on companies. I just don’t know.”

“But one of the first things that comes to mind here is—wouldn’t you expect fails-to-deliver to soar for a company teetering on the brink of bankruptcy under an avalanche of bad news? I’d expect there would be a rush to short a stock like Lehman, which was about to collapse anyway. So, people who usually could expect to borrow shares to short might have found that they couldn’t because everybody else was doing the same thing.”

In other words, people who “could expect to borrow shares,” but “found that they couldn’t” went ahead anyway and sold 30 million shares that did not exist. This was a gross violation of securities regulations that require traders to have “affirmative determination” that a stock can, in fact, be borrowed. Assuming the intent was to manipulate the stock, it is a jailable offense.

It is true that by mid-September of last year, Lehman was on the brink of bankruptcy. Partners backed out of deals and there was a run on the bank. But people got nervous and pulled their money only because hedge funds bombarded Lehman with rumors (which are currently the subjects of a federal investigation) while simultaneously naked shorting the stock to single digits.

In July of 2008, the SEC issued an emergency order designed to prevent just this eventuality. For a few weeks, the order stopped naked short selling of Lehman Brothers and 18 other big financial companies. At this time, Lehman was not on the brink of bankruptcy.

But in early August, the SEC lifted its order and Lehman immediately came under a massive naked short selling attack. On the day the SEC lifted the order, Lehman’s stock was trading at around $20. A few weeks later, the stock was worth around $3 – a fall of 85%.

Only after this precipitous fall did Lehman’s partners begin pulling their money, making bankruptcy inevitable.

But, apparently the Columbia Journalism Review believes that it is perfectly natural for a stock to fall 85%, even though no new information (aside from unsubstantiated rumors) had entered the marketplace. According to the Columbia Journalism Review (which has, no doubt, plowed Kingsford Capital’s money into a thorough investigation of this issue), it is perfectly natural that people who “found they couldn’t” borrow stock nonetheless proceeded to flood the market with 30 million phantom shares.

The truth is, that 30 million share “mechanical error” helped bring this nation to its knees.

That’s one reason why I do have a dog in this fight.

* * * * * * * *

Akahele, if you’re curious, is a Hawaiian word meaning “slow” or “deliberate”, in contrast with wiki, the Hawaiian word for “fast” (and the origin of the “wiki” in Wikipedia).

The following is my most recent contribution to Akahele, and is an examination of the Wikipedia/Gary Weiss saga, with a new twist.

My direct involvement notwithstanding, I feel it’s both fair and accurate to say that the events surrounding the Gary Weiss/Mantanmoreland affair were among the strangest and most polarizing in Wikipedia’s history.

For those lucky enough to have no idea what I’m referring to, here’s the highest of high-level summations (much more in-depth explanations can be found here and here):

Gary Weiss

Former business journalist Gary Weiss used multiple sockpuppet accounts to ingratiate himself with Wikipedia’s inner circle and – thanks primarily to the relationships he established there – gain control of, most notably, the article describing an illegal form of stock market manipulation known as naked short selling.

Weiss then proceeded to dramatically alter the content of this and related articles in order to minimize the perceived negative impact of naked short selling while marginalizing critics of the practice, myself included.

There’s strong evidence suggesting Weiss was paid to do this by the very organization many fault as the primary enabler, not to mention a financial beneficiary of, illegal naked short selling.

I suspect most would agree with my assessment that among the darkest moments in the more than two-year drama between Weiss’s arrival and eventual forced departure were those in which Wikipedia co-founder Jimbo Wales injected himself into the controversy – always seemingly uninvited – and always with the effect of derailing whatever progress might have been made toward bringing about Weiss’s removal.

Among these, the most incomprehensible episode occurred at the crescendo of what is widely regarded the largest and most thorough sockpuppeting investigation in the history of Wikipedia, in which dozens of volunteers dedicated hundreds of hours amassing a body of evidence overwhelmingly implicating Weiss in a deeply disturbing deception.

It was at that time that Wales posted an unprovoked indictment of the process under the heading ‘I have personally seen no persuasive evidence’, resulting in Weiss getting another pass. This, despite Wales having told others, privately, that he knew Weiss was guilty; and many more, publicly, that I was a liar for making the same claim.

What follows is my best explanation for Jimbo’s odd behavior.

But first, I need to explain a little more about the nature of short selling, both legal and illegal.

Legal short selling involves selling borrowed shares with the expectation of buying them back and returning them to their owner at a later date and a lower price, allowing the short seller to pocket the difference.

Naked short sellers, on the other hand, sell shares short without borrowing them first, thereby creating the equivalent of counterfeit shares. This has the effect of artificially swelling the supply of stock, which has a markedly depressive influence on price, making the naked short seller rich, while inflicting immense harm upon legitimate shareholders and the companies in which they’ve invested.

There have been, in theory, rules intended to prevent naked short sales from occurring, or at least, from enduring longer than 13 trading days. Unfortunately, the people behind the practice are quite smart, and the monetary incentive to violate the law quite large.

In other words, they’ve found a path around the rules.

And that path runs right through the heart of Chicago’s financial district.

As it turns out, there is a law, known as the “options market maker exemption”, which permits certain brokerages, specifically those registered as ‘options market makers’, to engage in a highly-controlled form of naked short selling in the course of bona fide options market making – comparable to the permission police officers have to exceed the speed limit under certain extreme circumstances when it’s in everybody’s best interest that they do so.

Naked short sellers have discovered that they can essentially “rent” the options market maker exemption from certain corrupt options market makers, producing massive amounts of counterfeit shares in the process.

It’s as though a corrupt cop rented his police cruiser to a random citizen so he or she could drive it around at 120 mph for a day, without being held responsible for any of the damage they might cause.

Of course, it’s silly to think that either the citizen or the cop could get away this, but in the financial world, such overt violations of the law regularly take place on a grand scale. And though the reason is not immediately clear, research proves that this abuse of the options market maker exemption nearly always takes place on the Chicago Stock Exchange.

Why Chicago?

My guess is that it’s a cultural thing: the same way you’d never even think of bribing a cop who pulled you over in San Diego, while doing the same just 30 miles south in Tijuana is not a big deal.

What does this have to do with Jimbo Wales?

Well it turns out that both he and former Wikimedia Foundation trustee Michael Davis used to work at Chicago Options Associates, where Wales was a research director and Davis was CEO.

To be clear, while it existed, Chicago Options Associates traded options and futures on the Chicago Mercantile Exchange, and was not an options market maker. But because I suspect the Chicago phenomenon is a cultural one, and given the near certainty that Wales counts many equities options market making traders as his friends, I’m not sure it really matters: his professional background is deeply rooted in the same dark corner of the financial world that facilitates the same form of stock fraud Gary Weiss worked so hard to defend on Wikipedia.

Which I suspect explains why Jimbo Wales worked so hard to defend Gary Weiss.

Is Jimbo Wales above influencing Wikipedia content based on his personal relationships?

Rachel Marsden would probably say that no, he is not.

I recently asked Jimbo whether anybody with ties to options market making on the Chicago Stock Exchange sought to influence his decisions in this respect, and was not entirely surprised when Jimbo insisted that they did not.

However I was surprised when Jimbo followed with “it is still to this day completely unproven that the claims you’ve made about Mantanmoreland being Gary Weiss are true.”

Once I’d picked myself up off the floor, I decided to take Jimbo up on his invitation to finally show him the first bit of proof linking Gary Weiss to Mantanmoreland, despite the fact that doing so felt like proving to a skeptic that the moon is not composed of dairy products.

What I ultimately sent Wales were:

Click to enlarge.

1. A scatter graph (seen at right) showing Mantanmoreland’s Wikipedia editing pattern over several months, including a 12 hour time shift limited to the period in which Gary Weiss was known to be visiting India.
2. Email from Gary Weiss (if you want to know how I came to possess Weiss’s private email, read this) in which he told a friend that he intended to edit a specific Wikipedia article to include a reference to a book he wrote.
3. A link showing that Mantanmoreland did in fact edit that very article to include a reference to that very book.

I also made it clear that should these bits of evidence fail to convince him, I’m ready to send much, much more.

Maybe Jimbo was convinced and he decided there was no reason to respond further.

Maybe the evidence simply left him speechless.

Or maybe owning up to his reckless actions in this case would prove unpopular with his friends back in Chicago.

All I know is that once the evidence was sent as requested, the conversation went cold.

Whatever the case, the legacy of Gary Weiss’s campaign of misinformation endures on Wikipedia to this day, due in large part to the apartheid-like probationary status imposed upon the naked short selling article after Wales condemned the inquest into Weiss’s activities as having produced no persuasive evidence.

All the while, Wikipedia remains the first option offered those searching the web for information about naked shorting, and its role in the current financial crisis.

Weiss may have created this problem, but Jimbo Wales — whatever his motivation — has allowed it to persist. The time has come for Wales himself to step in, help find a real solution, and acknowledge the damage this dark episode has caused real people in the process.

- Morpheus to Neo, The Matrix

It is the mission of DeepCapture to show you, dear reader, that the financial world you inhabit, a world vouched-for in dulcet Midwestern tones by actor-spokesmen you recognize and trust, a world inhabited by honest brokers looking after your money, brokers who interact through self-regulating exchanges overseen by diligent regulators, themselves overseen by elected politicians looking out for their constituents, themselves challenged by an adversarial free press maintaining a critical posture towards it all, is in fact a “world that has been pulled over your eyes, to blind you from the truth.” It doesn’t exist: it is a socially constructed reality designed to keep you complacent as you feed your savings to the machine. 

And I can prove it. For that matter, so can you, right now, from your computer. To explain how, I must continue with reference to The Matrix.

There is a point in the movie where Neo and his comrades are walking up a staircase. Neo glimpses a black cat that disappears then reappears:

In this essay I will explain a glitch that is available for you to verify right now, from your computer. I do not know how long it will remain after I write this, but it has existed for many months, and cannot be fixed without causing other problems for those seeking to keep you deluded. I will take you through three steps, and then you will be able to test this theory from your computer, and see a glitch that should not exist.

*****

STEP #1 OF 3: UNDERSTAND WIKIPEDIA

Wikipedia is a social media encyclopedia. That is to say, it is the work of thousands of people collaborating across the Internet to write millions of articles on every subject one would expect to find in an encyclopedia, and many more. People are free to edit other peoples’ words, adding their own knowledge to the sum. The constitutional principles of Wikipedia demand that such edits and additions be written from a “Neutral Point of View”. Every article is backed up by a discussion page, where the people who are working on that article can meet and work out their differences in an atmosphere where good faith is assumed. Ultimately, differences which are not so resolved are put to community vote. In sum, Wikipedia is socially constructed reality.

Wikipedia has drawn its detractors (myself among them) across many fronts. One thing that both supporters and detractors agree on, however, is the remarkable speed with which Wikipedia is updated to reflect the world around us. When any significant event happens, the appropriate page is updated within minutes, or even within seconds, by someone. Be it a public statement of a treasury official, the passing of a celebrity, or a car bomb going off on a street in Beirut, the appropriate Wikipedia pages are updated before the story has finished scrolling across the wire.

*****

STEP #2 OF 3: SCROLL THOUGH THE HEADLINES OF (OR READ) THESE 21 ARTICLES (a-u) CONCERNING NAKED SHORT SELLING AND THE GLOBAL FINANCIAL IMPLOSION

a) July 12, 2006 Speech by SEC Chairman: Opening Statements at the Commission Open Meeting by Chairman Christopher Cox

Second Item – Proposed Amendments to Regulation SHO

The next item on our agenda is the serious problem of abusive naked short sales, which can be used as a tool to drive down a company’s stock price to the detriment of all of its investors. The Commission is particularly concerned about persistent failures to deliver in the market for some securities that may be due to loopholes in the Commission’s Regulation SHO, adopted just two years ago.

At the Commission’s request, the Division of Market Regulation has prepared proposed changes in Rule 203 under Regulation SHO to cut down on failures to deliver.

The need for Regulation SHO grew out of long-standing and growing problems with failures to deliver stock by the end of the standard three day settlement period for trades, some of which were symptoms of abusive “naked” short selling. Selling short without having stock available for delivery, and intentionally failing to deliver stock within the standard three-day settlement period, is market manipulation that is clearly violative of the federal securities laws…

A grandfather provision, however, gave an exception from Rule 203(b)’s mandatory close out provision for any fail to deliver positions established before a security became a threshold security. And another provision of Rule 203(b) – the options market maker provision – provides an exception for any fail to deliver positions in a threshold security if they result from short sales by an options market maker, for the purpose of establishing or maintaining a hedge on options positions created before the underlying security became a threshold security.

We are particularly concerned about the potential negative effect that substantial and persistent fails to deliver may be having on the market in some securities. Specifically, these fails to deliver can deprive shareholders of the benefits of ownership – voting, lending, and dividends from issuers. Moreover, they can be indicative of abusive naked short selling, which could be used as a tool to drive down a company’s stock price. They may also undermine the confidence of investors who may believe that the fails to deliver are evidence of manipulative naked short selling in the stock. In turn, issuers may be harmed, as investors may be reluctant to commit capital to a stock that they believe is subject to abusive naked short selling.

To address these concerns, the Division of Market Regulation is recommending proposals to amend Regulation SHO. The recommended proposals are based on examinations conducted by the Commission’s staff and the SROs since Regulation SHO became effective in January 2005. While preliminary data indicates that Regulation SHO appears to be significantly reducing fails to deliver without disruption to the markets, there continues to be a number of threshold securities with substantial and persistent fail-to-deliver positions that are not being closed-out under existing delivery and settlement guidelines. It appears these persistent fails are primarily attributable to the grandfather and options market maker exceptions to the delivery requirements of Regulation SHO.

The proposals being recommended today would eliminate the grandfather provision, and narrow the options market maker exception. The proposals would include a limited one-time phase-in period following the effective date of the amendment. The proposals also include a technical amendment that would update the market decline limitation referenced in the rule. In combination, these proposals are intended to eliminate the persistent fails to deliver that are attributable to loopholes in Regulation SHO as originally adopted…

*****

b) March 4, 2008 – Reuters: “SEC proposes tougher “naked” short selling rules“

WASHINGTON, March 4 (Reuters) – The U.S. Securities and Exchange Commission on Tuesday proposed tougher rules to curb so-called “naked” short-selling abuses and prevent market price manipulation.

SEC Chairman Christopher Cox said regulation SHO, an existing rule partly aimed at short selling abuses, “needs teeth.”

Short sellers borrow shares they consider overvalued and sell them. If the price drops, they repurchase the shares, return them and pocket the difference. In a naked short sale, the investor sells stock that has not yet been borrowed.

The three-member SEC voted unanimously to propose the rule, which targets sellers who intentionally deceive broker-dealers or purchasers about their ability to meet delivery deadlines.

Sellers sometimes deliberately fail to deliver securities as part of a scheme to manipulate the stock price.

*****

c) March 5, 2008 – Wall Street Journal: “SEC Proposes Teeth for Short-Selling Rules“  by Judy Burns

WASHINGTON — Securities regulators voted 3-0 to propose a rule intended to crack down on lingering abuses involving so-called naked short sales and failures to deliver shares that have been used in such sales.

The proposal is part of a continuing attack by the Securities and Exchange Commission on short-sales abuses, an effort begun four years ago with the adoption of rules known as Regulation SHO.

Separately, the SEC voted to propose changes that could speed the introduction of exchange-traded funds, without review by federal regulators. (Please see related article.)

Short selling involves sales of borrowed shares, producing profits when prices decline, allowing the short seller to replace borrowed shares at a lower price.

In contrast, “naked” short sellers don’t borrow shares before engaging in short selling, and they may have no intention of borrowing them.

Regulation SHO sought to curb such practices by requiring short sellers to locate shares for borrowing before engaging in short sales, but it did not include any new mechanism to enforce the requirement.

Under the proposal, the SEC would create an antifraud rule targeting those who knowingly deceive brokers about having located securities before engaging in short sales, and who fail to deliver the securities by the delivery date.

SEC Chairman Christopher Cox said the proposal would bring needed teeth to Regulation SHO and address concerns about short-selling abuses, particularly in the market for small-cap stocks. “Reg SHO can’t be effective without enforcement,” Mr. Cox said.

Even with the regulation in place, the SEC received hundreds of complaints last year about alleged abuses involving short sales. While most trades settle within three days, as required, the SEC estimates about 1% of shares that change hands daily, or about $1 billion, are subject to delivery failures.

The SEC’s move last year to close off a “grandfather” exception to Regulation SHO, has done little to reduce longstanding delivery failures, according to preliminary data analyzed by SEC staff.

The SEC has yet to announce its plans for a separate pending proposal to scale back or eliminate an exemption for options market-makers.

Brokers who engage in short selling for customers would not face any new obligations under the proposed antifraud rule, and the SEC said it wouldn’t apply to market makers engaging in market-making activities.

Although the SEC already has authority to sue illegal short sellers, SEC officials said a new rule explicitly targeted to naked short sales might affect behavior. SEC Commissioners Paul Atkins and Kathleen Casey expressed support for the crackdown on abusive sales but said they want to be sure it doesn’t result in unintended consequences, such as driving legitimate short sales offshore.

*****

d) July 15, 2008 – Bloomberg: “SEC to Limit Short Sales of Fannie, Freddie, Brokers” By Jesse Westbrook and David Scheer

The U.S. Securities and Exchange Commission will limit the ability of traders to bet on a drop in shares of brokerage firms, Freddie Mac and Fannie Mae as part of a crackdown on stock manipulation, the agency’s chairman said.

Christopher Cox told the Senate Banking Committee that the agency will require traders to hold shares of the two mortgage buyers and the brokerages before they execute a short sale. The emergency order, to be in effect for 30 days, will bar the practice called naked short selling, in which traders avoid the financial cost of borrowing shares when betting they’ll fall.

Cox said the SEC will draft rules “to address the same issues across the entire market.”

Hedge-fund manager William Ackman, who oversees $6 billion at Pershing Square Capital Management, is among those betting that shares of Fannie Mae and Freddie Mac will fall. There’s no indication he is engaging in naked short selling, in which traders never borrow shares from their broker or deliver the stock to buyers.

The SEC has been reluctant to curb short selling “because it would require a major retooling of the plumbing of Wall Street,” said James Angel, a finance professor at Georgetown University studying short sales. “It’s only when the big Wall Street firms are threatened that the SEC does something about it.”

Trading Abuses

The SEC is investigating whether trading abuses contributed to the collapse of Bear Stearns Cos. in March and the 78 percent drop in the market value of larger rival Lehman Brothers Holdings Inc. this year. Fannie Mae and Freddie Mac have each lost about 80 percent of their value amid speculation the mortgage-market crisis may push the firms into insolvency.

Short-sellers, who borrow shares betting that they’ll decline, are spreading rumors about Lehman in an organized attempt to depress the stock, according to Richard Bove, bank analyst at Ladenburg Thalmann & Co. in Lutz, Florida.

“As with Bear Stearns, Lehman has been targeted by the fear-trade,” said Fox-Pitt Kelton Cochran Caronia Waller analyst David Trone in a report yesterday. Lehman should go private so it can avoid the attacks by short-sellers, he said.

Freddie Mac, down as much as 34 percent today before Cox’s comments, erased some of the decline and fell $1.49, or 21 percent, to $5.62 at 2:34 p.m. in New York Stock Exchange composite trading. Fannie Mae shares rebounded from a 30 percent drop and were down 18 percent.

Opposition

“I don’t think the government should ban short-selling in anything as long as it’s fully disclosed, as long as there’s no manipulation,” MFS Investment Management Chairman Robert Pozen said in an interview with Bloomberg News yesterday. “Don’t we want the market to work here?”

John Nester, an SEC spokesman, said the emergency order will “require any person effecting a short sale in the listed securities to borrow the securities before the short sale is effected and deliver the securities on settlement date.”

In traditional short selling, traders borrow stock through a broker and hope to profit by selling shares high and later buying them back at lower prices to repay the loan.

Naked short selling isn’t necessarily illegal, unless authorities can prove fraud, such as a scheme to manipulate stock prices.

*****

e) July 18, 2008 – Op-ed for the Investor’s Business Daily: “Public Statement by SEC Chairman Christopher Cox ‘Naked Short Selling Is One Problem a Slumping Market Shouldn’t Have‘”

The demise of IndyMac, coming on the heels of Bear Stearns’ desperate sale to JPMorgan Chase, is a sure sign of the fragility of today’s markets. What’s needed now, more than ever, is reliable information for investors and confidence that trading can be conducted without the illegal influence of manipulation.

Because financial institutions depend on confidence, they are uniquely vulnerable in the current climate. A “run on the bank” can take hold quickly, and can be fatal. But stampedes are not always rational.

When an irrational panic is fueled by a sense of urgency, false rumors that must be acted on immediately and the fear that everyone else may get out first, market integrity is threatened. It is the job of market cops to provide a measure of confidence that financial information about public companies is accurate and reliable — and when it is not, to punish those responsible.

Who profits from intentionally false information in the marketplace? Those who are in on the scam and positioned to benefit from the predictable response of others who believe the fraudulent information to be true.

The classic “pump and dump” scheme, in which a stock is inflated through false information and then dumped on unsuspecting investors when the perpetrators flee, is one example of how this works. “Distort and short” is the same thing in reverse.

Naked short selling can turbocharge these “distort and short” schemes. In a naked short, the usual process of short selling is circumvented, because the seller doesn’t actually borrow the stock and simply fails to deliver it. For this reason, naked shorting can occur even when actual shares aren’t available in the market. It allows manipulators to force prices down without regard to supply and demand.

Next week, the SEC will implement an emergency order designed to prevent naked short selling in the financial firms that the Federal Reserve Board has designated as eligible for access to its liquidity facilities.

Because these are large firms with substantial public float, honest short sellers can readily locate shares to make good on their short positions. Continued legitimate short selling in these issues will act, as it is supposed to, as a way for market participants to invest in the downside and to hedge other positions.

At the same time, eliminating the prospect of naked short selling will help assure investors that it is safe for them to participate, and that the current declining market is not the product of unseen manipulators and “distort and short” artists.

Our emergency order is not a response to unbridled naked short selling in financial issues — so far, that has not occurred — but rather it is intended as a preventative step to help restore market confidence at a time when it is sorely needed.

Many people think naked short selling is already illegal, but that isn’t true. Shares are normally delivered to the buyers within three days of the trade. But in most stocks, including those covered by our emergency order, that three-day period can be extended indefinitely.

Even without these extensions, and even when a short seller locates shares that can be borrowed, there can be problems because the short seller is not currently required to actually borrow those shares until settlement.

As a result, securities lenders can tell multiple short sellers they can borrow the same shares of stock — a sure recipe for a failure to deliver. Once the commission’s order takes effect, this possibility will no longer exist.

The SEC is committed to maintaining orderly securities markets. The abusive practice of naked short selling is far different from ordinary short selling, which is a healthy and necessary part of a free market.

Our agency’s rules are highly supportive of short selling, which can help quickly transmit price signals in response to negative information or prospects for a company. Short selling helps prevent “irrational exuberance” and bubbles.

But when someone fails to borrow and deliver the securities needed to make good on a short position, after failing even to determine that they can be borrowed, that is not contributing to an orderly market — it is undermining it. And in the context of a potential “distort and short” campaign aimed at an otherwise sound financial institution, this kind of manipulative activity can have drastic consequences.

It was famously — perhaps too famously — said that “markets will fluctuate.” That is certainly true if they are well-functioning. As market referee, the SEC neither can nor should direct the market’s fluctuations. Instead, our most basic role is to ensure a continued flow of liquidity to the markets from participants who are confident the game isn’t rigged against them.

Naked short selling can undermine the market’s integrity. For the financial sector in this crisis, certainly, but as soon as possible for the entire market, this is one worry investors shouldn’t have.

*****

f) July 29 – Bloomberg: “SEC Extends Naked Short-Sale Order on Fannie, Freddie” David Scheer and Edgar Ortega

The U.S. Securities and Exchange Commission extended an emergency limit on short sales in shares of Freddie Mac, Fannie Mae and 17 brokerages as it prepares broader rules to thwart stock manipulation.

The SEC pushed back expiration of its ban on so-called naked short sales of the firms’ stocks from today through Aug. 12, the Washington-based agency said in a statement. The order aims to keep traders from driving down financial stocks to boost profits after Bear Stearns Cos. and IndyMac Bancorp Inc. collapsed amid rumors they were faltering.

The emergency order, focused on companies whose collapse might expose the U.S. government to losses, gives regulators time to weigh wider restrictions. SEC Chairman Christopher Cox last week told lawmakers the agency is examining other proposals, such applying the ban on naked short sales to the broader market.

“It definitely appears that the SEC is interested in making adjustments to short-sale regulations,” said John Standerfer, vice president for financial services at S3 Matching Technologies, the Austin, Texas-based trade processor.

In traditional short selling, traders borrow shares and sell them. If the price drops, they profit by re-buying the stock, repaying the loan and pocketing the difference.

Naked short sellers don’t borrow shares before settling sales. The SEC is concerned manipulative investors may use the sales, legal under some conditions, to drive down prices by flooding the market with orders to sell shares they don’t have.

Arrange to Borrow

The temporary order, which took effect July 21, requires traders to at least arrange to borrow shares before selling short Freddie Mac and Fannie Mae, the government-sponsored mortgage buyers. The order covers brokerages with access to the Federal Reserve’s discount window, which was opened to investment banks after the March collapse of Bear Stearns.

Market makers have an exception under the SEC order that permits them to sell short to maintain liquidity. Investors, such as hedge funds, previously could start trades without an agreement to acquire shares.

Short sales, particularly among retail investors, plummeted after the SEC announced the ban, according to data from S3 Matching Technologies, which processes trades for three of the top five retail brokerages. The sales fell 78 percent on average among the companies named in the order, compared with trades on July 14, the day before the SEC announced the measure, S3 data shows. The company handles about 15 billion transactions daily.

`Pretty Restrictive’

“I see no reason that will turn around,” said Standerfer in an interview yesterday. “It seems like a pretty restrictive rule to put in place for the entire market.’

Cox last week told Congress the agency may also force investors to disclose “substantial” bets on falling stocks and or reinstate a version of the so-called uptick rule, which barred short sales of stocks when prices are falling.

The uptick rule, implemented after the Great Depression and scrapped last year, allowed short sales only if a preceding trade boosted the stock price. The SEC is studying whether increasing the uptick increment, such as to a nickel or dime, might be more effective, he said.

*****

g) August 2, 2008 – The Salt Lake Tribune: “Naked shorting’s early critic starts to see some vindication: Byrne’s Battle Helps Bring Curbs on Naked Short-Selling Practices“. By Steven Oberbeck

Over the past several years, Patrick Byrne’s campaign to clean up Wall Street and end a practice that has destroyed companies and cost unwary investors billions of dollars generated plenty of publicity for him, mostly the wrong kind. Critics labeled him nuts, a conspiracy theorist, a complete wack job. Byrne, the chief executive of the Utah-based discount online retailer Overstock.com, even found himself tagged a member of the “tin-foil hat” brigade, a reference to the flying saucer fanatics of the 1950s who adorned their heads with aluminium to ward off, or enhance, thoughts from aliens in outer space. These days, when people talk of Byrne, the word ‘vindication’ comes up a lot. ‘You can always tell who the pioneers are — they’re the ones with all the arrows sticking out of their backs,’ said James Angel, a finance professor at Georgetown University. ‘You really can’t understate what Byrne has accomplished.’

*****

h) August 13, 2008 USA Today: “Financial stocks suffer after protection ends” By Matt Krant

The SEC’s emergency curb on short selling of 19 major financial services firms stocks expired before Wednesday trading, leaving investors to wonder if the measure helped protect the strained system.

Since July 21, the SEC rule banned “naked” short sales on those 19 stocks. Short sellers hope to profit by selling borrowed shares and replacing them at lower prices. In naked short sales, traders don’t actually borrow the shares; that can intensify the downward pressure on a stock.

The rule’s expiration appeared to have some effect Wednesday as financial stocks suffered sizable losses. That could mean short sellers have been at least partly behind big drops in shares of some financial companies.

“There has to be some sort of correlation between the moratorium ending and these stocks being down,” says Eric Fitzwater, analyst at research firm SNL Financial.

Perhaps more telling: The day the Securities and Exchange Commission announced the rule, July 15, was the day financial stocks bottomed for 2008. “If (the SEC) wanted to protect these companies artificially, it served its purpose,” Fitzwater says.

*****

i) August 17, 2008 The Economist: “Searching for the naked truth“

The real problem with abusive short-selling

“It is impossible to know how big this problem is, but regulators accept it exists. The American Stock Exchange fined two market-makers for precisely this violation in July 2007. A month later the SEC proposed limiting or eliminating the exemption, but momentum stalled in the face of opposition from banks and exchanges. The anti-short lobby, emboldened by the July ban, is again pushing for an end to the market-makers’ exemption. …. How much does all this matter? Deliberate naked shorting has no place in a well-run market…”

*****

j) September 16, 2008 Associated Press: “Naked short-selling blamed in Wall St crisis“

WASHINGTON – With Wall Street engulfed in crisis, the Securities and Exchange Commission is planning measures to rein in aggressive forms of short-selling that were blamed in part for the demise of Lehman Brothers and which some fear could be turned against other vulnerable companies. During emergency meetings between federal officials and investment bank executives over the weekend, SEC Chairman Christopher Cox indicated to the bankers that the agency plans in a few days to impose new permanent protections against abusive ‘naked’ short-selling, a person familiar with the matter said Monday….

*****

k) September 21, 2008 Associated Press: “Dutch ban ‘naked’ short selling for 3 months“

The Dutch Finance Minister is banning “naked” short selling of financial stocks for the next three months to increase the stability of financial markets….

*****

l) October 28, 2008 Wall Street Journal: “Japan Cracks Down on Naked Short Selling” By Takashi Nakamichi and Ayai Tomisawa

TOKYO — Japan moved Tuesday imposed new restrictions on so-called “naked” short selling of stocks, stepping up its efforts to arrest the tumble in domestic share prices.

The Tokyo Stock Exchange has asked member brokers to stop accepting naked short-sell orders, TSE President Atsushi Saito told a news conference.

The TSE’s move followed comments from Finance Minister Shoichi Nakagawa, who said that regulations on naked short selling would be tightened. Mr. Nakagawa didn’t say that the practice would be banned, but the TSE’s move and local media’s interpretation of his comments suggested that the new strictures, to be enforced from today, will be a ban in all but name.

Short-sellers typically borrow stocks and then sell them on, profiting from the fall in price when they buy back the securities. Naked shorting removes the need to first borrow the stock, which means that larger volumes of shares can be dumped on the market. Short-selling generally has drawn fire from regulators across the world, who say it has contributed to the sharp market declines of recent months.

The Japanese government had planned to ban naked short selling from Nov. 4, but the recent plunge in local share prices has caused the new rule to be introduced a week ahead of schedule. The Nikkei 225 Stock Average closed at a 26-year low on Monday, as investor sentiment was battered by the global financial crisis, the rising yen and concerns about an international economic slowdown.

Traders said the naked short-selling ban was one reason for a big recovery in Japanese shares Tuesday.

The ban “was one of the positive factors behind the Nikkei’s gains (in the afternoon), but I don’t think it’s the main catalyst,” said Yukio Takahashi, market analyst at Shinko Securities. The Nikkei ended 6.4% higher Tuesday, erasing most of Monday’s sharp slide, due mainly to the yen’s weakening and firmness in major Asian stock markets, traders said. (See related article.)

The naked shorting ban comes as the government mulls a series of measures to improve confidence in Japan’s financial sector. Among other steps, the government wants to raise the cap on possible injections of taxpayers’ money into domestic banks from ¥2 trillion ($21.37 billion), ease fair-value accounting rules, loosen capital adequacy requirements for banks and enlarge tax breaks for stock investors.

At Tuesday’s news conference, Mr. Nakagawa highlighted the urgency of the task at hand. “I’ve discussed with Prime Minister [Taro Aso] the fact that the coming few days will be very important and that we must take steps immediately,” he said. “Our assessment is that the coming several days will be very important — and therefore dangerous — for the Japanese stock markets.”

Mr. Nakagawa also said the government will immediately open investigations into possible illegal practices linked with naked short selling. The Financial Services Agency, the Securities and Exchange Surveillance Commission and the TSE will work together in looking into past records on such sales practices, he said. “If we find out any violation of the law,” Mr. Nakagawa said, “we will retroactively deal with it strictly.”

*****

m) November 14, 2008 “Australia bans naked short-selling“

CANBERRA: Australia moved to slap a permanent ban on the most controversial form of short-selling yesterday amid an historic fall in share prices, part of a crackdown that is also targeting hedge funds and credit rating agencies.

*****

n) November 20, 2008 – CNBC: Interview with Former SEC Chairman Harvey Pitt:

Interviewer: Let’s talk shorts. Harvey Pitt is former SEC chairman and founder and CEO of Kalorama Partners. Harvey, great to have you with us….Chairman Pitt, do we need to bring back the Uptick Rule? Would that make a difference here at all?

Harvey Pitt: I don’t believe so. The Uptick Rule was almost non-existence in terms of its detrimental affects. There’s a very simple solution and the SEC has it and they know what is. It’s very simply this. If you want to sell a stock short you have to have a legally and forcible right to produce that stock on settlement day. That’s all it takes. If the SEC does that people will not be able to sell short unless they have actually first located and gotten their stock.

Interviewer2: In other words that would do away with naked shorting right?

Harvey Pitt: Absolutely, and naked shorting is what’s causing a lot of the problems in the market.

Interviewer2: Because nobody is forced to deliver. Nobody must deliver. Too much of that going on.

Harvey Pitt: That’s been the real problem. People in affect are just gambling. They’re assuming the stock price will go down. They then spread false rumors to help the stock go down, but they have no skin in the game because they haven’t committed to produce the shares that they purportedly are selling.

*****

o) November 21, 2008 – The Financial Times: “Regulators to discuss short selling rules” By Joanna Chung in New York

Global securities regulators will gather on Monday to discuss rules on short selling and disclosure of credit derivatives, the head of the US Securities and Exchange Commission said on Thursday.

Christopher Cox, SEC chairman, said the meeting, to be held via teleconference, would address “urgent regulatory issues in the ongoing credit crisis.”

The announcement came during yet another tumultuous day of trading in global stock markets.

“In addressing turbulent market conditions, it is essential not only that regulators act against securities law violations, including abusive short selling, but also that there be close coordination among international markets to avoid regulatory gaps and unintended consequences,” Mr Cox said in a statement on Thursday.

The International Organization of Securities Commissions, which includes securities regulators from around the globe, will consider the effectiveness of their recent actions to reduce abusive short selling, without hurting legitimate shorting…

Mr Cox said regulators will explore “possible coordination” on rules relating to naked short sales – when shares are sold without being borrowed first– in particular with regard to position reporting and delivery and pre-borrowing requirements.

*****

p) November 24, 2008 Reuters “Global regulators focus on abusive short selling”

WASHINGTON, Nov 24 (Reuters) – Global securities regulators launched three task forces to study abusive short selling, unregulated financial products and unregulated financial entities such as hedge funds, the U.S. Securities and Exchange Commission said on Monday.

“The working groups were established amid volatile market conditions and designed to support work of the world’s 20 largest economies, which have already agreed to step up oversight of the troubled financial system. “One group will focus on aligning global regulators’ approach to naked short selling, the SEC said.””

*****

q) December 1, 2008 – EuroMoney: “US equity market – Fails to deliver: The naked truth“

Fails to deliver in the US equity market have exacerbated the sharp declines in share prices of financials.

IT IS NO surprise that the stock of Bear Stearns was heavily shorted in the run-up to its government-supported rescue in March, given its high leverage, poor risk management and the fact that its sub-prime bets had gone awry. Short-selling of any financial company would have been understandable by March this year. But just why on March 12, two days before the rescue announcement, almost 1.25 million Bear Stearns shares were shorted is a question that is a little harder to answer.

Up to that point in 2008, cumulative fails to deliver of Bear Stearns’ stock were only between 10,000 and 200,000 on any given day. On March 14, more than 2 million Bear Stearns shares went undelivered, and from then until the end of March, failures increased, peaking one day at more than 13.78 million shares. At the same time, from March 12 to the announcement on Friday March 14, Bear Stearns’ share price crashed from $61.68 to $30, dropping to $4.81 the following Monday.

That the precipitous drop in Bear Stearns’ share price coincided with fails to deliver has forced the market to properly address a long-standing question: are fails to deliver responsible for rapid share price deterioration? Had those failures been averted through better regulation would Bear Stearns have had a slower downfall, or even avoided outright collapse? And what of Lehman Brothers, Fannie Mae and Freddie Mac? Indeed, would all financial companies have enjoyed more resilient share prices, instead of seeing sudden, sharp price declines that were the final nudge to creditors and counterparties abandoning firms and driving them into bankruptcy?

The SEC has since attempted to bring a halt to naked short-selling, which gives rise to fails to deliver, but are its efforts sufficient?

Formal investigations are taking place to look into abusive short-selling of the stocks of both Bear Stearns and Lehman Brothers.

Robert Shapiro, former economic adviser to Bill Clinton, chairman of Sonecon and an adviser to the presidential transition team of Barack Obama, believes there is sufficient evidence that naked shorting accelerated the collapse of Bear Stearns. He says: “Bear Stearns failed because it went bankrupt. However, the pace of the collapse of the stock price was clearly accelerated by the enormous naked short-sale activity. There perhaps could have been a more orderly bankruptcy which would have preserved more of the assets.”

John Welborn, an economist with investment firm the Haverford Group, agrees. “Fails to deliver added to the downfall of Lehman Brothers and Bear Stearns but were not, obviously, the whole story. Fails in Lehman Brothers were never significant enough to drastically alter the tradable float. In Bear Stearns, however, a torrent of fails began on March 12, before the public knew most of the bad news. The important thing to note here is that T+3 settlement essentially allows people to sell an infinite amount of any stock either to precipitate a bear raid or to capitalize on one already in progress.”

Welborn continues: “A bear raid encourages panic selling by long holders. Once enough long holders are induced to sell, then there are plenty of shares available to cover any naked positions ex post. When the long holders have sold their positions and the naked short sellers have covered at a lower price, then the issuer faces a dramatically depressed market. That may make it difficult (or impossible) to recapitalize, especially if that issuer is in the financial sector.”

Naked short-selling can be a confusing topic. A short-seller can only sell short if it can locate a source from which to borrow that security and therefore ensure delivery to the buyer – within the T+3 requirement. In most circumstances it is up to the prime broker to confirm whether it is possible to locate the stock and agree the transaction. If it is not possible to locate a stock, which can happen when certain stocks become illiquid, the trade is not allowed to take place. Market makers are an exception to this rule, and are able to lend stock without having located a source from which to borrow, in order to keep the markets liquid. This type of “naked shorting” is legal. If the source of stock is not a market maker, selling of a stock without having located a stock to deliver is illegal. Illegal, however, means very little when no enforcement penalties are in place.

Up until the end of this summer – not till September did the SEC enforce a crackdown – shorting without locating a source from which to borrow has suffered no penalty in the US, and brokers’ statements about efforts to locate them might be rather vague. “A broker can say he has located a stock, but that’s it,” says a hedge fund manager. “What if five other brokers are looking at that same stock and telling their clients they have located it. Who will get it?”

And if there is no penalty for failing to locate and failing to deliver, then why not just fail to deliver? In equity markets if a short-seller does not deliver, he can simply wait until the stock price deteriorates sufficiently so that he will never have to deliver, and therefore is able to keep the money from his sale. Do short sellers, be they hedge funds or proprietary trading desks, do this often? No. But can they do it? Yes. And were some doing this during the peak of the financial crisis? Absolutely.

One former employee of regulator NASD says he knows of a hedge fund that was shorting Freddie Mac and Fannie Mae on a “massive scale”, with no intention of ever locating stock. “His prime broker let the trade go through regardless as he was a large client of theirs,” he says.

Illegal naked shorting, at its worst, can be implemented to bring a company down. In the present crisis of confidence among financial institutions, it can also simply be a means of jumping on a losing target. If a financial institution’s stock looked as if it was falling, why not short-sell without promising a buy-in within three days and hope that the fall is sufficiently large beyond three days to make an even bigger profit?

A glance at the fails to deliver in the financials market indicates that some investors applied this strategy. A comparison of the average daily reported shares failing to deliver between the first quarter of 2007 and the first quarter of 2008 for the US’s top financial firms showed a clear increase over the period. The data, compiled by Washington publication IA Watch, showed a 335% increase for Freddie Mac, a 226% increase for Citigroup, a 133% increase for Goldman Sachs, a 632% increase for Morgan Stanley and a 1,123% increase for Bear Stearns. One source even suggests that some market participants never intended to buy-in and simply marked their tickets “long” selling shares that they did not even own as they knew they would never have to make delivery.

Fails to deliver: Unheard voices
Fails to deliver in the US stock markets are not a new phenomenon. In response to an increasing number of fails, the SEC introduced Regulation SHO in January 2004. This required that a daily list be compiled of all securities that had more than 10,000 fails to deliver, or more than 0.5% of issued shares failing to deliver for five consecutive days or more. No penalty was introduced to deter fails but it was believed that publication of the list would act as a deterrent. The majority of the stocks on the list were those of small firms on the Pink Sheets or Bulletin Boards and many were regarded as companies with weak business models that were likely to see fails to deliver, as levels of shorting in the stock would be high.

For years, small companies affected, and larger companies such as Overstock.com (which has market capitalization of $500 million) have appealed to the SEC to prevent fails to deliver, claiming that their stock prices have suffered as a result of the practice. In April 2004, in a series of articles, Euromoney warned about the implications for larger household names if fails to deliver were not properly addressed. Shapiro agrees that larger companies are now being targeted. He says: “Ordinarily this doesn’t happen to large institutions with large stock floats but in a panic situation they become vulnerable along with those companies that are always vulnerable – smaller companies that are without large public floats. In a time of panic, mechanisms that allow the markets to overshoot (naked shorts) mean you can drive a stock into the ground.”

Patrick Byrne, chief executive of Overstock.com, continues to lobby against fails but insists it is not a matter of self-interest. “The argument gets reduced to me being upset that stock in my firm might be being shorted. That was never the argument. Shorting has its place, I know. This has always been about why the government is ignoring the loopholes within the settlement system that are allowing for fails to deliver to occur.”

He is certain, as are several other long-standing lobbyists, that the recorded number of fails to deliver is only a fraction of the true amount. “If two broker/dealers clear through the DTCC, and one fails, then the two brokers can turn that failure into a private contract to be dealt with outside the DTCC and it becomes ‘ex-clearing’. After that there is no register of that fail,” says Byrne. If failures are as frequent as suggested, the idea of broker/dealers preferring to cancel out each other’s fails on a private basis is not beyond the realms of possibility.

Wes Christian is partner in a law firm representing 15 companies that allege that their stock price has been driven down by illegal naked shorting and fails to deliver. “We are aware of these deals being ex-cleared and of the failings of Reg SHO. Allowing failures to deliver creates artificial supply and that drives down prices,” he says. The defendants in Christian’s clients’ cases are the majority of broker/dealers on Wall Street.

Fails to deliver in the equity markets are seen to create artificial supply. If a stock can be sold without having to be borrowed, there is a strong possibility that stocks in excess of those issued are being sold. Indeed, several companies, Overstock.com included, have reported instances of more owners of stock than is possible. On March 14 128% of Bear Stearns stock outstanding was traded. These “phantom shares” can be on-lent without delivery again and again, further diluting the stock.

It’s a situation specific to the US markets, say participants. Patrick Georg at Clearstream Luxembourg says there has been no decline in settlement efficiency in Europe. Alan Cameron, head of clearing, settlement and custody client solutions at BNP Paribas Securities Services in London, says he has seen little to indicate similar instances of fails to deliver in Europe. “Some European countries like Spain impose strict fines on failures to deliver, as does Crest. It’s not an issue here in Europe.” Byrne adds that in Europe, the impact on reputation of failing to deliver is a deterrent. A head of a prime brokerage in the UK agrees: “It just does not happen in Europe. Securities get delivered in a timely fashion or business is lost.”

However, settlement is faster in Europe than in the US. It is surprising that the US still operates a T+3 system. Robert Greifeld, chef executive of Nasdaq, questioned the system in March this year at a conference when, in reference to fails to deliver, he said it was hard to believe that in 2008 the market still required three days to settle, and that a T+1 system should be part of a discussion about fails.

The SEC has pussyfooted around enforcing delivery in the US equity market over the past 10 years or so, but the collapse of financials stocks has pushed it to be stricter. On September 17, SEC chairman Christopher Cox announced several actions to “make it crystal clear that the SEC has zero tolerance for abusive naked short-selling.” From that date, fails to deliver beyond T+3 have been subject to a hard close-out. If stocks fail to deliver beyond T+3, the broker/dealers acting on the short-seller’s behalf are prohibited from further short sales in that security unless stocks are pre-borrowed.

This change of tack upsets those such as Byrne who have been fighting to have their voices heard for years. “When companies that had access to the Fed window became victims of fails to deliver, the SEC then had to sit up and take notice,” says Byrne.

Actions taken against naked shorting: Small steps

Since August, the number of companies with stock on the Reg SHO list has fallen from an all-time high of 650 to an all-time low of 90, although this does not take into account ex-clearing data. Shapiro says it is a step in the right direction. “The actions taken are an acknowledgement of the issues regarding naked shorting and fails to deliver at least. Progress is under way. Given there are many issues facing the SEC at the moment, this is encouraging.”

Others, however, are disappointed that more has not been done. Byrne says: “A hard close-out is not nearly enough. To truly stop failures to deliver, the SEC must enforce a pre-borrow where parties have to guarantee that a locate has been found through a contract.” At present, broker/dealers and short-sellers can say they have located a source of stock when several other parties might have also identified the same source. Peter Chepucavage of the International Association of Small Broker/Dealers and Advisers agrees that an initial pre-borrow rule is crucial in preventing fails to deliver. “The industry is resisting an initial pre-borrow rule but it is essential,” he says. “Without it the stock market is like the airline industry. You’re overselling the airplane seats knowing that someone will not be able to board even though they reserved/located, to avoid decrementing their inventory.”

The argument against pre-borrows is that liquidity will dry up, and that shorting will be deterred. However, Greg DePetris at Quadriserv believes the opposite would occur as lending would increase. “A more efficient settlement process should result from recent regulatory changes, and these tighter inventory controls might create new trading opportunities,” he says. “It’s important for anyone in possession of lendable supply to monetize its value, and traditionally that’s been done through the lending spread and reinvestment of cash. The notion of pre-borrows implies that there may be derivative value in the latent supply of securities, which lenders may be able to realize for their clients.”

Welborn says the SEC knows it has to introduce the pre-borrow rule if it wants to eliminate fails to deliver for good. “As long as there are companies on the Reg SHO list, then the problem has not been solved,” he says. “The only sustainable solution to naked short-selling is a rule requiring both a pre-borrow and a hard delivery. With only one of these pieces in place, the system is still open to abuse. For example, a hard-delivery requirement by itself would not have made an iota of difference for Bear Stearns; only a pre-borrow could have put a brake on the naked short-selling.”

Welborn points out that the SEC did precisely this in July when it ordered emergency pre-borrows for Fannie Mae, Freddie Mac and the 17 primary dealers. “The SEC knows what must be done to fix this problem once and for all,” he says.

*****

r) December 9 – Reuters: “SEC urged to do more to curb naked short selling” By Rachelle Younglai

WASHINGTON, Dec 9 (Reuters) – U.S. securities regulators need to do more to crack down on abusive naked short selling — a type of trading blamed for contributing to the free-fall in financial stocks — former and current regulators said on Tuesday. Amid volatile market conditions, the Securities and Exchange Commission adopted a number of rules to rein in those who profit illegally from stock declines. Making bearish bets on stocks is a legitimate investment strategy but the SEC’s rules are designed to weed out abusive practices, such as investors’ failure to deliver stock by settlement date. Short sellers arrange to borrow shares they consider overvalued in hopes of repaying the loan for less and profiting from the difference. A naked short sale occurs when an investor sells stock that has not yet been borrowed, which can distort markets.

Former SEC Chairman Harvey Pitt praised the SEC for taking constructive steps but said the agency has not done enough.

“Naked shorting is a situation in which someone is gambling but they have no skin in the game. They are not required to make any effort to deliver the shares,” said Pitt, one of the panelists speaking at a “Coalition Against Market Manipulation” event in Washington.

The SEC tightened up its rules this year and required short sellers to deliver securities three trading days after shorting the stock.

Rex Staples, general counsel for an association of state securities administrators, said the states are trying to eliminate the problem, but said “this seems to be a solution that the commission is best-equipped to solve.”

“States are ready to act, but we are throwing our support behind the federal regulator at this point,” said Staples, general counsel for the North American Securities Administrators Association.

Pitt and other panelists said the SEC needed to do more to eliminate ambiguity in its rules.

For example, investors are required to locate shares before shorting them. However, SEC rules require broker dealers to have “reasonable grounds” to believe that the security can be borrowed so that it can be delivered by settlement date. Critics say the language is vague.

“If you want to sell short any security, you should have a legally enforceable right to deliver stock on day of settlement. It’s unambiguous, it doesn’t leave any wiggle room,” said Pitt.

*****

s) December 9, 2008 – Wall Street Journal: “SEC Urged To Step Up Attack On Short-Sale Abuses” By Judith Burns

WASHINGTON — U.S. securities regulators need to do more to curb short-selling abuses, a group of academics, business executives and former top regulators said Tuesday.

The Securities and Exchange Commission should close loopholes and enforce current rules against “naked” short selling, said Harvey Pitt, former SEC chairman and now chief executive of Kalorama Partners, a Washington, D.C., consulting firm.

“The agency has to make it clear that naked short selling in any form is prohibited,” Mr. Pitt said at a midday press conference.

Short sellers aim to profit by borrowing shares for sale and replacing them later at a lower price. “Naked” short sellers don’t borrow shares they sell short, which can pummel stocks and facilitate market manipulation.

The SEC has sought to crack down on short-selling abuses in recent years, most recently with an interim rule requiring short sellers to deliver borrowed shares within three days of trade settlement. Mr. Pitt and others urged the SEC to make the requirement permanent and take other steps to stiffen pre-borrowing requirements, provide better tracking of stock-delivery failures, including those outside stock-clearing systems, and force buy-ins when delivery failures occur.

*****

t) December 9, 2008 - MarketWatch: “Obama adviser: Short selling must be disclosed” By Ronald D. Oral

Ambiguous rules limiting naked short selling must be clarified, attorneys say

WASHINGTON (MarketWatch) — A top adviser to President-elect Barack Obama on securities regulation on Tuesday said he wants the Securities and Exchange Commission to require public disclosure of short selling.

“We’re looking for disclosure of positions, with a small delay, after a short sale is made,” said Roel Campos, a former Democratic SEC commissioner and member of Obama’s transition team.

After the precipitous drop in stocks of major investment and some commercial banks including Citigroup Inc. in September, the agency implemented a series of short sell rules, many of which were temporary in nature. Among these, the SEC temporarily banned short sales in roughly 800 financial institutions. That ban expired on October 8.

Regulators and others argued that many short sellers — who make bets that a stock price will decline — contributed heavily to the financial crisis and the collapse of many financial institutions.

The next agency chairman is expected to grapple with whether the agency is doing enough to chill manipulative short selling of shares, particularly when it comes to financial institutions.

Campos is seeking to have the next SEC chairman introduce new rules requiring short sellers to publicly disclose their positions in a manner that is similar to how equity investors are required to reveal their equity stakes.

For example, to comply with the SEC’s 13F rule, investors with $100 million in capital or more are required to publicly disclose their positions 45 days after every calendar quarter. Equity investors with 5% or greater stakes are also required to disclose that information to the agency in either an activist Schedule 13D or passive Schedule 13G filing.

But Campos argues that four-times-a-year public disclosure of short sell positions isn’t enough. He wants to see a requirement that hedge funds and other short sellers disclose their positions publicly more quickly after stakes are made, perhaps as fast as two weeks after each position is taken.

Among the temporary regulations put into place in the fall is a requirement for confidential weekly disclosure of short positions to the agency.

According to the rule, investors with $100 million or more in capital must disclose on a weekly basis to the agency their short positions. However, these investors only must provide that position information to the agency on a confidential basis. The expiration date for the provision was extended in October to Aug. 1 of 2009.

Short seller critics argue that public disclosure will mean their proprietary strategies will be disclosed, enabling rivals to copy their approach. Campos said the delay in public disclosure is intended to protect some proprietary strategies, but that there should be some parity with equity disclosure requirements.

Other ways to rein in short selling

In addition to disclosure, securities attorneys and academics discussed other mechanisms that the SEC could impose that could reign in short selling at an event hosted by the Coalition Against Market Manipulation in Washington.

Participants argued that the agency needs stronger rules limiting illegal naked short selling, the practice of selling shares without arranging to borrow the securities up-front.

The SEC in September adopted rules requiring short sellers and their broker dealers to deliver securities within three days of a trade. Participating investors who fail to arrange to borrow shares in advance are prohibited from making future short sales in the same securities.

But securities attorneys at the event argued that there are too many qualifiers on the naked short selling rule.

Rex Staples, general counsel for the North American Securities Administrator’s Association Inc., said there is a “reasonable” qualification on the delivery requirement. “To the extent you can qualify a word like reasonable, you are going to get that time after time,” said Rex Staples, general counsel for the North American Securities Administrator’s Association Inc.

Former SEC chairman Harvey Pitt, who participated in the discussion agreed that the SEC should eliminate ambiguity when it comes to the agency’s naked short selling provision. The agency should also take steps to enforce the rules.

“The agency must make it extremely clear that any naked short selling is illegal and it has to remove the ambiguities so the rules are very clear,” Pitt said.

Participants also debated bringing back the so-called up-tick rule, a regulation removed last year that allowed short sales only if a preceding trade boosted a company’s stock price.

Georgetown Finance professor James Angel said he wants to see an up-tick rule that would take effect when a stock has fallen 5%. He also sought additional prohibitions when a stock price falls 10% and 15%. Staples argued that the SEC should bring back the same up-tick rule it eliminated in 2007. “It is very helpful in times of financial turmoil,” Staples said.

*****

u) March 19, 2009 (Bloomberg): Naked Short Sales Hint Fraud in Bringing Down Lehman” By Gary Matsumoto

The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts.

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”

*****

In addition to these articles, please note that naked short selling has been implicated in the hobbling of the US financial system by The American Bankers’ Association (1 2), the US Chamber of Commerce (1 2 3 ), the CEOs of Goldman Sachs, Morgan Stanley, JP Morgan, and Lehman, politicians John McCain, Hillary Clinton, Barack Obama, Ron Paul and numerous other congressional representatives, the Chairman of the SEC, the Secretary of the Treasury, and so on and so forth.

*****

STEP #3 OF 3: THE CURRENT WIKIPEDIA PAGE ON NAKED SHORT SELLING OMITS EVERYTHING YOU JUST READ, AND YOU ARE FORBIDDEN FROM FIXING IT

At “the encyclopedia that anyone can edit” it is as forbidden to add information such as that contained in the preceding articles as it would be to sell Adam Smith’s works on the streets of Pyongyang. Instead, right at this second, the Wikipedia page on Naked Short Selling sticks to a thoroughly-discredited two-year out-of-date Party Line that holds that experts think naked short selling is not a problem (or even exists) and the mass media agrees with the experts. Much of the page is written in gibberish apparently intended to make it more difficult for a lay person to confront (which is unusual for Wikipedia). And unique among the millions of Wikipedia articles, it cannot be fixed or updated to reflect any of the information cited exhaustively above.

That’s right. Notwithstanding thousands of articles such as the ones cited above, the current Wikipedia article on naked short selling insists that experts believe that it is not a problem. No mention is made of hearings, statements by economists and SEC Chairmen, emergency federal actions and emergency meetings of regulators from the G-20 to stop the world financial system from implding, etc.

Instead, the tone is set by this quote:

“While concern expressed by the regulator has been echoed by journalists, some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings. Others have discussed naked short selling as a confusing or bizarre form of trading.”

That is, in a 54-word statement about a “concern”, precisely 11 words vaguely describe the existence of the “concern” and 43 say that there is no concern. This, though space is allocated to describe results from two off-topic studies from 2007 (one on failures in the IPO market, the other on the Canadian market):

A study of trading in initial public offerings by two SEC staff economists, published in April 2007, found that excessive numbers of fails to deliver were not correlated with naked short selling. The authors of the study said that while the findings in the paper specifically concern IPO trading, “The results presented in this paper also inform a public debate surrounding the role of short selling and fails to deliver in price formation.”

An April 2007 study conducted for Canadian market regulators by Market Regulation Services Inc. found that fails to deliver securities were not a significant problem on the Canadian market, that “less than 6% of fails resulting from the sale of a security involved short sales” and that “fails involving short sales are projected to account for only 0.07% of total short sales.”

Again, notwithstanding the thousands of articles such as the ones I cited above, the current Wikipedia page maintains that the mass media agrees that naked short selling is not a problem:

Reviewing the SEC’s July 2008 emergency order, Barron’s said in an editorial: “Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there’s no dead bug.” Holman Jenkins of the Wall Street Journal said the order was “an exercise in symbolic confidence-building” and that naked shorting involved echnical concerns except for subscribers to a “devil theory”. The Economist said the SEC had “picked the wrong target”, mentioning a study by Arturo Bris of the Swiss International Institute for Management Development who found that trading in the 19 financial stocks became less efficient. The Washington Post expressed approval of the SEC’s decision to address a “frenetic shadow world of postponed promises, borrowed time, obscured paperwork and nail-biting price-watching, usually compressed into a few high-tension days swirling around the decline of a company.” The Los Angeles Times called the practice of naked short selling “hard to defend,” and stated that it was past time the SEC became active in addressing market manipulation.

The Wall Street Journal said in an editorial in July 2008 that “the Beltway is shooting the messenger by questioning the price-setting mechanisms for barrels of oil and shares of stock.” But it said the emergency order to bar naked short selling “won’t do much harm,” and said “Critics might say it’s a solution to a nonproblem, but the SEC doesn’t claim to be solving a problem. The Commission’s move is intended to prevent even the possibility that an unscrupulous short seller could drive down the shares of a financial firm with a flood of sell orders that aren’t backed by an actual ability to deliver the shares to buyers.”

The Wikipedia page engages in such pettifoggery as: “However, the SEC has disclaimed the existence of counterfeit shares and stated that naked short selling would not increase a company’s outstanding shares” (true only in the narrow technical sense that the SEC does not consider that which is increased by naked short selling to be “outstanding shares”: by the same token, the National Transportation Safety Board could claim that there are no plane crashes because the NTSB considers anything which crashes to no longer be a plane).

And so on and so forth. You will find such gibberish on the naked short selling article on Wikipedia, but what you will not find is any of the information presented in the articles cited in Step #2. It is forbidden to enter that information into Wikipedia.

*****

THE TEST: ARE YOU FORBIDDEN FROM UPDATING WIKIPEDIA WITH THIS INFORMATION?

I know that to many this can be a maddeningly complicated issue, and it may not be easy to know who or what to believe. So I propose that you, the reader, conduct an easy, simple test, using the articles cited above. You can do it in about 2 minutes:

• Log on to Wikipedia (if you do not have an account you can create one in seconds);
• Go to the article on Naked Short Selling;
• Attempt to edit it with any information regarding events, data, or quotes from any of the articles cited above.

You will find that it is forbidden for you to add any information, data, or quotes from those numerous articles, or  to correct any of the glaring omissions and laughable spin of the current article. If you try, your additions will be removed nearly instantaneously. In fact, you may find yourself banned from Wikipedia while all proof that you even made an edit disappears.

On “The encyclopedia that anyone can edit”, a resource that updates in seconds at the passing of a celebrity or the gaffe of a politician, you will find that you cannot insert quotes on this one topic, even when those quotes come from SEC Chairmen, economists, presidential candidates, Congressmen and Senators, G-20 regulators, and Wall Street leaders, even when those quotes appeared months or years ago in The Economist, Reuters, DowJones, Associated Press, or Bloomberg.

Two million English-language articles work by one set of rules, but this article on a grave financial crime turns out to run on a secret set of rules.

And that, dear reader, is the stutter-stepping black cat that should wake you to the synthetic reality you inhabit.

Postscript: If you want to know how this is being done, watch Judd’s magisterial “Lecture on abuse of social media by stock manipulators“.  And if you want the back-story on that, read TheRegister’s article, “Emails show journalist rigged Wikipedia’s naked shorts – Overstock’s Byrne vindicated amidst economic meltdown” by Cade Metz.

I now turn to Gary Weiss. Last year one of the most prominent journalists on Wall Street warned me, “I’ve known Weiss for years. Be careful. He’s a psychopath.” As you will see, he was neither joking nor exaggerating. I think, however, that Gary is better described as a “Scaramouch.”

In a series of brilliant investigations, Judd Bagley, a reporter-investigator-technologist friend of mine (and more recently, I am proud to say, a colleague) studied the IP footprints Gary’s computers have left scattered across the Internet for over a decade, and posted his extraordinary analyses of them on his cleverly-titled site, “Antisocialmedia.net”. Judd’s posts are as disturbing with regard to what they reveal about our society’s discourse, as they are regarding the activities of Gary himself.

It is a complex story that I recount below in as clear and straightforward a manner as I can muster. The best way for me to do that is to break it into 7 short stories. Embedded within each are links to carefully documented research . I respectfully suggest the reader try to understand these as individual stories, before synthesizing them into one complete picture.

#1) Gary’s start in social media

Gary started with simple Usenet group posting in the mid 1990’s, often making productive contributions to newsgroups devoted to matters Judaic. However, as this analysis shows, by the late 1990’s Gary had become a chronic “sock-puppeter,” that is, he maintained a stable of identities and personalities under which he could post in order to steer conversations to his ends (Gary even posted anti-Semitic statements that he could then respond to under other names). Another user caught Gary red-handed and confronted him. Establishing a pattern that would become Gary’s hallmark, when he was caught red-handed Gary Weiss practiced the “deny-deny-deny-then-disappear” school of personal responsibility.

Another pattern of Gary’s emerged as well: that of accusing anyone who disagrees with him about anything as being anti-Semitic. One person whom he has accused of hundreds of times of anti-Semitism complained to the Anti-Defamation League. Showing immense class, the ADL looked into it all and dismissed Gary out-of-hand. Notwithstanding this, Gary continues to level this allegation against that same man (under the assumption, presumably, that he understands anti-Semitism better than the ADL).

#2) Gary’s manipulation of Amazon reviews

For years Gary posted numerous reviews on Amazon praising his own books and trashing the work of other business journalists, as this analysis shows. While Gary’s sock-puppets trash other journalists (e.g., Charles Gasparino), there is one journalist whom he never bashes, but whom he uses his sock-puppets to promote: Jim Cramer. Hilariously, though they were supposed to be the work of various disinterested strangers, Gary’s sock-puppets’ glowing Amazon reviews of his own work began disappearing the moment Judd began exposing Gary’s methods.

#3) Gary goes beserk against another journalist and that journalist’ wife at the United Nations

The following remarkable history is recounted, with thorough documentation, on these two posts.

a) Ian Williams, a British journalist, was president of the United Nations Correspondents Association (UNCA) and UN correspondent for The Nation. Mr. Williams’ wife, a BBC World Service journalist (and native of Uzbekistan), also held a position within the UNCA.

b) Gary’s wife (an Indian national holding herself out as a correspondent for the Indian newspaper The Pioneer of India) applied to work within the United Nations Correspondents Association. To be admitted to the UNCA she had to demonstrate that she was in fact a journalist who covered the UN. Towards that end she submitted copies of her stories from the front page of The Pioneer of India, along with a letter from The Pioneer’s editor, Chandan Mitra, attesting to her employment there. On that basis she was admitted to the UNCA and began working in the UN offices in Manhattan.

c) Gary’s wife coveted the UNCA position above her that was then held by Ian Williams’ wife. Gary attempted to dislodge Ian Williams’ wife from that position by claiming that Mrs. Williams had lied in order to get her visa to enter the US, so as to create an opening which his own (Gary’s) wife could take. Gary’s allegations proved false.

d) Journalists at the UNCA noticed that the stories which Gary’s wife was regularly submitting from The Pioneer to document her ongoing UN coverage were of identical size and location on the front page of The Pioneer. A bit of investigation proved that they were all forged, and had been photo-shopped on a computer. The Pioneer was contacted, and its Editor Chandan Mitra stated that Mrs. Weiss had “never been engaged by The Pioneer for any purpose,” his signature on her documentation was “an outright forgery,” as was the letterhead upon which it had been generated. Simply put, Gary’s wife was a fake : she never was a reporter for The Pioneer of India. Gary’s wife’s UN credentials were revoked and she was escorted from UN premises under armed guard.

e) Within days of the exposure of Gary’s wife and her being escorted out of the UN, Gary was on Amazon writing reviews under the name “Ted Dichtler” trashing Ian Williams’ work, and within 30 days, had founded “Mediacrity,” a blog putatively devoted to media criticism, but actually largely engaged in (anonymously) hammering away at journalist Ian Williams for being “a fourth rate hack” and continuing the demonstrably false smears against Ian Williams’ wife.

f) It should also be noted that when confronting a man on a Usenet group, Gary posted that man’s wife’s name and home address. Pretty sleazy (although the man in question was a bigot, I think good manners demand that one not get even with a guy by revealing his wife’s name and address). In contradistinction to Gary, however, Judd, ever the gentleman, wrote:

“AntiSocialMedia.net has issues with Gary Weiss, not his wife. As it happens, one of the more startling examples of abuse of social media we’ve discovered anywhere and the central theme of this, the third part of this series on Gary Weiss – 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. Comments containing any other personally identifying information belonging to Mrs. Weiss will be immediately deleted and the commenter barred from further use of this site.”

I will follow the same principle here on DeepCapture.

g) Aside from the general zaniness of the story, there are at least two take-aways from this:

i) Gary had accused Mrs. Williams of lying to get her visa, but those accusations were false. Gary did this while Gary’s own wife was forging her credentials, which credentials were the basis of her own employment at the UN. Thus, Gary and his own wife were engaged in the act of which they were falsely accusing another journalist’s wife. That act takes a sociopath (e.g., the kind who could post anti-Semitic comments while continuously accusing others of anti-Semitism).

ii) What was Mrs. Weiss doing for those years when she was given access to the UN, under the guise of being a correspondent for The Pioneer of India?

#4) Gary manipulates stock message boards

Gary also stays busy posting thousands of times per year on stock message boards, as this remarkable piece by Judd exposes. Gary’s stock message board sock-puppeting and “bashing” sometimes involves switching among 6 sock-puppets while going at it for over 24 hours at a stretch, in a remarkable display of intensity and duration. What an odd “hobby.” Curiously, the stocks with which he concerns himself generally mirror the positions of Jim Cramer, Roddy Boyd, Bethany McLean, Herb Greenberg, Carol Remond, etc.

If only there were a pattern…

#5) Gary Weiss, Pyschopath: The Prequel

At this point you are probably wondering, “Who in the hell is Gary Weiss?” Allow me to give you seven pieces of background, a-g.

a) In the 1990’s, Gary made a name for himself with a BusinessWeek series exposing the Italian Mob (in particular, the Gambino Crime Family) and its infiltration of Wall Street. Bravo. But he relied heavily on two sources. One journalist who interviewed them told me that after debriefing them, and examining materials they supplied, “I can safely say that Gary Weiss built his career in the 1990’s just typing up whatever two sources gave him.”

b) In the mid-1990’s a Forbes reporter based in Russia named “Paul Klebnikov” wrote an expose called, “The Godfather of the Kremlin?” about an alleged Russian Mafia figure named Boris Berezovsky.

c) In 1999 Al Chalem and Laier Lehmann, two New Jersey stockbrokers operating a New Jersey securities firm called “Harbor Securities,” were executed in a New Jersey mansion. The same two sources who had supplied Gary so much other material presented him with evidence that this time it was not the Italian Mafia, but the Russian Mafia, and in particular, Boris Berezovsky. Gary then ran a story that (they maintained) fabricated everything they had told him in an attempt to divert attention from Russian involvement and focus it on (in this case non-existent) Italian Mob involvement. One of Gary’s sources actually sued Gary in an attempt to get public that which he felt Gary was suppressing.

d) In 2000, Forbes’ Paul Klebnikov completed a book, The Godfather of the Kremlin. It reiterated his earlier allegations about Mr. Berezovsky, but without the question mark. Quickly there appeared a series of anonymous Amazon reviews trashing Mr. Klebnikov’s book and discounting its conclusions. On the same days these reviews appeared on Amazon, Gary had a rash of positive reviews of his work. This and the language of the reviews trashing Mr. Klebnikov’s work raise an obvious question: if these startling coincidences of timing were not in fact coincidences, why was Gary adding to his normal routine (that is, going on Amazon with sock-puppets to promote his own work) the additional labor of trying to discredit the work of a Forbes journalist (Paul Klebnikov) who was trying to expose the Russian Mob? And is this related to the claim of his own two sources that his coverage of the execution of the two stockbrokers was designed to move attention away from the Russians and onto the Italian Mob?

e) On July 9, 2004, Paul Klebnikov was assassinated leaving the Moscow offices of Forbes.

f) Days later in July, 2004, Gary left BusinessWeek. If you ever want to shut a BusinessWeek reporter up, ask, “What were the circumstances surrounding the departure of Gary Weiss from BusinessWeek?” In a notoriously gossipy crowd, it is a closely guarded secret.

g) One of the first things Gary seems to have done after departing BusinessWeek was to join Project Klebnikov, “The global media alliance investigating the July 9th, 2004 murder of Paul Klebnikov, the editor-in-chief of the Russian edition of Forbes magazine.” I’ll bet O.J. Simpson finds his wife’s real killer before Gary solves that investigation.

#6) Gary covers-up for the DTCC from within DTCC offices:

Speaking of strange places from which to post: at the heart of our nation’s stock settlement system, and hence, at the heart of the issues of concern to DeepCapture, is a nearly unknown corporation called “The DTCC.” The company provides settlement for the nation’s capital market: $1.5 quadrillion in trades are settled there every year (that is, about 30X the economic output of the entire planet). For most of its history it has largely escaped regulation: state regulators are admonished that they cannot peer inside because the DTCC is federally regulated, and the DTCC has told federal regulators it escapes their regulation due to its strange ownership structure (one former federal regulator, and one former employee of the DTCC, have both told me the feds would not know where to begin if they tried to regulate it).

In short, at the heart of the world’s economy is an enourmous black box that is regulated except on the days it’s not, and through which 30X the economic output of the world flows. It is my contention that much of Wall Street’s illegal activity is funneled through this strange entity.

The huge, nondescript building in downtown Manhattan that houses the DTCC is something of a Fort Knox. Long-gun toting guards watch the entrances, and journalists who have been inside tell me that entering it is tougher than getting into the Federal Reserve or any comparable institution.

Gary recently made a slip that revealed he was inside the offices of the DTCC, using one of their computers to post on Wikipedia about the DTCC. Given that it’s like getting into Fort Knox, I’m pretty sure that’s odd. However, it casts some light on why Gary has been stridently denying that the DTCC is dirty and that none of the issues I have been raising regarding stock market manipulation are legitimate, and why he has (according to a colleague of his in the financial press sympathetic to me) devoted 93% of his blogs to criticizing my efforts to expose the illegal Wall Street activity which, I claim, intersects within the DTCC. Just as interestingly, when given opportunity to comment, the DTCC went into cover-up mode straight out of Bizarro World.

#7) The Finale

The following heavily-documented story qualifies as “mind-blowing.” It is so extraordinary, in fact, many people find it almost impossible to synthesize. Therefore I am going to tell it by first giving a three paragraph synopsis, then by recounting the story in 14 steps, a-n, with documentation for each.

The synopsis:

The intellectual battle over the existence of criminal naked short-selling has been won. As is demonstrated throughout DeepCapture, what was dismissed three years ago as a fringe theory is now no longer in serious dispute. There is an ongoing criminal prosecution and regulators and SRO’s have recently imposed multimillion fines over it. Papers by academic and government economists have confirmed it and reputable journalists have broken news stories concerning its effects. A Bloomberg documentary concerning naked short selling was nominated for an Emmy for long-form investigative journalism. Last summer SEC Chairman Christopher Cox aknowledged that it is real and illegal. Just last week, SEC Chairman Cox again publicly and matter-of-factly discussed the reality of this crime in a hearing at the United States Senate, in answer to sharp questioning from US Senator Bob Bennett. Earlier this week, Dr. Robert Shapiro, a Fellow of the National Bureau of Economic Research, Brookings, Harvard, and a former US Undersecretary of Commerce for Economics, explained the reality and implications of this crime on Canada’s Business News Network (start at minute 17).

Yet throughout the evolution of this awareness, the Wikipedia page on naked shorting has fought a steadfast rearguard action. It will be a matter for a future historian to reconstruct in detail, but at all times the thrust of that page has been to deny and deride the emerging understanding of the issue. Since the time when complete denial became impossible, it has labored mightily to minimize the problem of naked short-selling and all the attendant issues discussed in Deep Capture, citing every critic (Gary Weiss, Floyd Norris, Joe Nocera, and Holman Jenkins of the WSJ) while allowing only barest mention of the positive attention it has received from investigative journalists and economists.

I believe that the chief reason this happened was because Gary Weiss used the name “Mantanmoreland” (and later, “Samiharris”) to hijack the Wikipedia articles on naked short selling, Patrick Byrne, and Overstock.com (as well as the page on Gary Weiss himself). In addition, all the mechanisms within Wikipedia which are supposed to prevent such an act were subverted by Wikipedia’s elites on Gary’s behalf. Judd exposed Gary within Wikipedia, but Wikipedelites suppressed Judd’s evidence. When he began posting it off-Wikipedia on AntisocialMedia.net, Wikipedelites fought to make mention of “Antisocialmedia.net” or “Judd Bagley” a thought-crime within Wikipedia (under the spurious reasoning that someone mentioning either of them had to be a sock-puppet of Judd). Hence, no evidence contrary to official doctrine was permitted at “the free encyclopedia that anyone can edit.” However, evidence slowly circulated within the Wikipedia-in-Exile-community until the conventional Wikipedians began looking into Gary. Wikipedia ’s founder Jimbo Wales did everything possible to stop their investigation, although it turns out he knew all along that Judd was right. It has turned into a civil war within the Wikipedia community.

I turn take the paragraph immediately preceding this one, and serve its full story, cut into 14 bite-sized pieces, a-n.

The evidence:

a) Judd posted evidence that Gary was manipulating Wikipedia under the name “Mantanmoreland” (and later, “Samiharris”).

b) When confronted, Gary denied it, saying, “Similarly [Judd Bagley] continues to publish the lie that I am this ‘Mantanmoreland’ long after it was, again, denied by both myself and Jimbo Wales of Wikipedia.”

c) Judd sent evidence to a Wikipedia uber-administrator named “SlimVirgin,” who was posing as a neutral arbiter. However, as this demonstrates, when SlimVirgin received Judd’s evidence she immediately forwarded it to Gary (without even opening it herself).

d) A community debate ensued over whether Mantanmoreland was guilty of a Conflict Of Interest violation when he created and dominated the “Gary Weiss” page (i.e., whether or not he was in fact Gary Weiss). A highly regarded Wikipedia figure named “Cla68″ (apparently a former military officer living in Asia with encyclopedic knowledge of so many subjects that he is revered within Wikipedia) got close to taking sides against Gary. In a step that was extremely unusual given Wikipedia’s philosophies of transparency and strict retention of all sides of a debate, Wikipedia-founder Jimbo Wales personally intervened to delete the record of the debate. As Jimbo Wales wrote:

“The page contained wildly inappropriate speculation that a notable author was sock-puppeting. As I am sure you are aware, many authors have had their careers badly damaged by being caught sockpuppeting at Amazon, etc., and it is deeply wrong for people to ask me to restore a page with such speculations in Wikipedia after the claims have already been investigated and dismissed. If there are further problems in the future, there will be no problem restoring the article at that time. In the meantime, it is my position that MOST AfD pages for living persons or active companies should be courtesy blanked (at a minimum) as a standard process, and deleted in all cases where there was inappropriate commentary. This is not the current policy, but current policy does allow for deletions of material which is potentially hurtful to people.–Jimbo Wales 01:42, 13 November 2006 (UTC)”

e) Taking things to an Orwellian extreme the “ArbCom” (”Arbitration Committee”) attempted to pass a “BADSITES” policy prohibiting mention of “Judd Bagley” and “antisocialmedia.net,” the site Judd had started to post evidence as he gathered it (all evidence having been prohibited within Wikipedia itself). The debate ran for many weeks, but throughout it, it was prohibited even to name “Judd Bagley” or “antisocialmedia.net.” That is, for many weeks a debate raged in which the accused (Judd Bagley and his site antisocialmedia.net) could not be named, nor was the accused allowed to have a voice, nor were dissenting opinions permitted (on the grounds that anyone who wrote one must be a sock-puppet of the accused). All this happened on Wikipedia, “the free encyclopedia that anyone can edit.”

f) Throughout that process, anyone trying to mention Judd or Antisocialmedia.net, or positions supported by either, was banned as a Wordbomb sock-puppet (note the circularity of this position: WikiTruth demands that Goldstein be banned, and anyone sounding like he might agree with Goldstein will be banned, because clearly, he must be a sock-puppet of Goldstein. Hey, it worked in 1984, right?)

“Any user who creates links to the attack site or references it (other than in the context of this Arbitration) may be banned.”

g) Eventually, this was actually proposed as a matter of official policy for Wikipedia (”the free encyclopedia that anyone can edit.”)

“After warning, or without warning in the case of users familiar with the issue, users who link to the attack site or reference it may be blocked for an appropriate period of time.” (emphasis added)

h) As if that were not enough, in an attempt to prevent Judd Bagely from pointing out to observers the manifest circularities, fabrications, and sheer Orwellianism of the BADSITES debate, Wikipedia blocked Overstock and 1,000 homes around Judd Bagley’s neighborhood, as was exposed in this article that appeared in the well-regarded online British tech journal, The Register.

i) That effort collapsed of its own foul weight. However,  as this other investigative piece in The Register exposed, it did spawn the creation of a secret email list for Wikipedia elites wherein they plotted how to shape the discourse within Wikipedia.

j) Just when you thought this story could not be any weirder, an email has surfaced that was written by Jimbo Wales in September, 2007 at the start of this conflagration, where he admitted already believing that Mantanmoreland was Gary Weiss (this exchange occurred on another of those secret elite-only email lists):

Mantanmoreland@gmail.com: “…I am not going to reveal my real identity to prove that just because Judd Bagley is making a fuss. Rest assured that after all that has happened I am more determined than ever to not reveal my real identity to any person associated with Wikipedia.”

jwales@wikia.com(Jimbo Wales): “I just want to go on record as saying that I believe the reason for this is that Mantanmoreland is in fact Gary Weiss.”

k) Despite this private admission, Jimbo spent the next four months publicly defaming Judd and intimidating anyone who explored Gary Weiss’s activities on Wikipedia. For example, he wrote to the renowned Wikipedian Cla68:

“I fear that you have been manipulated by lying stalkers and trolls, and I am happy to talk to you about it privately, but I am sick of the drama around this issue on this page, and it absolutely has to come to an end…– Jimbo Wales 01:32, 21 October 2007 (UTC)”

l) Despite Jimbo’s opposition (and in the face of his attempts to derail it), over the last two weeks the Wikipedia community has to its credit performed exhaustive analysis of the Mantanmoreland account (as well as “Samiharris”, an additional Gary Weiss sock-puppet) and come down overwhelmingly in favor of Judd’s original thesis.

m) Even in that setting, Wales again attempted to derail the process and deny his earlier recognition of a link between Gary Weiss and Mantanmoreland. Here Jimbo dances on an arcane postmodern distinction between “knowing” and “believing it is a fact that” (in this context it’s a distinction without a difference, Jimbo). Jimbo’s statement is a compendium of fallacies from Logic 101 (e.g., argument from authority, ignoring contravening evidence, ad hominem attacks, non sequiturs, and straw-man rebuttals).

“Because there has been unseemly and false speculation in some quarters that I know this (or related claims) to be true, and that I have admitted as such in private forums, it is important for me to state what I know and what I don’t know.

“Claims about Mantanmoreland being author Gary Weiss have been floating around for a long time. Various claims of ‘proof’ have been made, none of which I have found convincing. At times I have believed one way, at times I have believed another way. I have investigated the claims to the best of my ability and I have been unable to find proof one way or the other.

“An email I sent to Mantanmoreland and others has been widely quoted as evidence that I supposedly ‘know’ this claim to be true. Such interpretations are malarky, and most of the people making the claims appear to me to be acting in bad faith. What I said, at a point in time, was that I believed it to be true that Mantanmoreland == Gary Weiss. This was specifically in the context of a conversation in which I was trying to get more evidence… a proof, one way or the other. Me believing at a point in time in an investigation that something was true, is not the same thing as an assertion that it is true, nor of an “admission” or anything else.

“Mantanmoreland steadfastly denies being Gary Weiss. Ask him yourself if you want to know.

“Related allegations that I am protecting a ‘friend’ are nonsense. Mantanmoreland and I do not get along well at all.

“Related allegations that I have some vested interest in the underlying content dispute are even worse nonsense. I have no opinion about ‘naked short selling’. I have never sold a stock short in my life. I have no financial interests of any kind in this case. If you read anything otherwise, or hints to that effect, on the overstock.com blog or elsewhere, well, I don’t know was else to say but: nonsense. I think such allegations tell more about the people who are making them than anything else.

“Regarding the specific claim at issue here, whether Samiharris and Mantanmoreland are the same user, I can say quite firmly that I do not believe it to be true. I have interacted (argued!) with both users over an extended period of time by private email, and I have not seen any reason to think it true. The offsite ‘evidence’ relating to this comes from a highly questionable source, and furthermore strikes me as completely unpersuasive. For all we know, these are faked screenshots from someone who has engaged in a campaign of harassment and bad behavior (on-wiki and off-wiki) that has been really astounding to witness.

“I have reviewed my email archives to look for similarities between the users. I have examined email headers. I have looked for textual similarities, time patterns, etc. I see nothing to lead me to a conclusion that Sami Harris and Mantanmoreland are the same user.

“For these reasons, I do not believe it to be true that Mantanmoreland == Samiharris. –Jimbo Wales (talk) 02:19, 15 February 2008 (UTC)”

n) All but Weiss’s most dogmatic defenders were silenced, however, when a law student from Chicago published a graph showing the dates and times of all Mantanmoreland’s Wikipedia edits. In it, one can clearly note two things: the rich posting patterns of Mantanmoreland and Samiharris never overlap (statistically, highly improbable); and more importantly, a perfect “phase shift” of precisely the right duration corresponding to a period in which Gary’s own Forbes work revealed him to be in India.

Conclusion

Gary Weiss is a psychopath and a Scaramouch, but this is incidental. Here is the moral of the tale: the great dilemma that journalists face is that they want to be first with a story, but most do not have the nerve to publish a story that is too far ahead of the pack. I believe Gary Weiss went to such effort to hijack these Wikipedia articles because somewhere, someone understands that professional journalists, much as they deride Wikipedia, will never depart more than a few degrees from a Wikipedia consensus. Thus if one can hijack a page so that it simply repeats the accusations of a few co-opted journalists, then rare is the new journalist who will come along and escape that equilibrium. Thus, by hijacking the Wikipedia consensus one can corral much of the industry of modern journalism (this is all the more reason why those few journalists who departed from that consensus over the last year, however meekly or bravely, deserve admiration).

The deeper question, then, is this: how many social institutions have failed when a “journalist” is manipulating the discourse within both the news and social media, and all the mechanisms that should curtail him are short-circuited? Or, more to the point of DeepCapture, trying to drown out a scandal while simultaneously manipulating social media from within the corporation that is at the heart of that scandal?

Postscript: There is a side matter that, in all fairness to Gary, I should mention to condition your reading of what I wrote about him. It is this: I have a lady friend who for 13 years has managed and been part-owner of a superb Italian restaurant in Manhattan. Her restaurant generally receives a Zagat’s rating of 23 or 24 (with a 24-rating being the threshold for the serous foodies). In fact, the restaurant is regularly one of the lowest-priced Zagat-24’s in Manhattan. Its reviews generally range from good to stellar. Weeks after Gary joined Forbes, a harsh, puerile review of her 10-employee restaurant appeared in Forbes magazine. I’m pretty sure that’s odd, too. Because the writing was florid and made no sense it is natural to suspect Gary of having written it (note to Gary: how does a pasta dish like orecchiette taste like it is from Bombay? And “branzino” is Mediterranean sea-bass, which explains why it tastes like fish.) Of course, it could have been just a coincidence that, weeks after Gary began his relationship with Forbes, the magazine suddenly felt the need to review a small Italian restaurant managed by the woman then displaying the unfortunate judgment of dating me (full disclosure: since then she has decided to display better judgment). I don’t really know if Gary was behind it, pursuing a personal vendetta by misusing his position as a journalist to hurt my magnificent lady friend.

But it sure is his style.

If this article concerns you, and you wish to help, then:

1) Let Forbes know how you feel about their columnist by writing Forbes Managing Editor Carl Lavin at clavin@forbes.net (post a copy in the comment section here!);

2) email it to a dozen friends;

2) go here for additional suggestions: “So You Say You Want a Revolution?“

Two and a half years ago, Overstock.com CEO Patrick Byrne penned an editorial for The Wall Street Journal, warning that widespread stock manipulation schemes – including abusive naked short selling – were threatening the health of America’s financial markets. But it wasn’t published.

“An editor at The Journal asked me to write it, and I told him he wouldn’t be allowed to publish it,” Byrne says. “He insisted that only he controlled what was printed on the editorial page, so I wrote it. Then, after a few days, he got back to me and said ‘It appears I can’t run this or anything else you write.’”

The Journal never changed its stance. But last week, the editorial finally saw the light of day at Forbes – after Byrne added a few paragraphs explaining that naked shorting had hastened what could turn out to be the biggest financial crisis since The Great Depression. (get the rest here)

We asked Joe.

Joe doesn’t know.

It all started on January 10, 2006, when Business Week writer Tim Mullaney clumsily fell into the very trap he had set for Overstock.com CEO (and Deep Capture reporter) Patrick Byrne. You can read all the gruesome details here and then here.

One week later, Gary Weiss launched his blog. We know from emails between Weiss and Floyd Schneider (read this to learn how I came to posses them) that at about that same time, Weiss began trying to convince journalists and editorial columnists to pen attacks on opponents of illegal naked short selling, particularly Patrick Byrne and Bob O’Brien (whom Weiss calls “Bob O’Baloney”), the pseudonymous author of the highly influential Sanity Check blog.

Weiss did this with little success, until February 22 of 2006, according to the following two emails Weiss sent to Floyd Schneider:

From: garyrweiss@verizon.net

To: Floyd3491@aol.com

Subject: Re: (no subject)

Date: Wed, 22 Feb 2006 18:34:19 -0500

Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@70.23.60.180 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 22 Feb 2006 23:34:15 -0000

—–

Incidentally, don’t tell nobody! — but was preoccupied today. Interview with Joe Nocera of the Times for his Saturday column. Seems he is focussing on the naked-Mullaney situation. Mullaney tells me Nocera is sympathetic. We shall see……

Mullaney obviously is extremely nervous but me, I am fairly pleased I must say. I was… oh… shall we say unfavorable toward our Mr. O’Baloney.

The above is confidential!

Followed shortly by…

From: garyrweiss@verizon.net

To: Floyd3491@aol.com

Subject: Re: (no subject)

Date: Wed, 22 Feb 2006 18:56:25 -0500

Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@70.23.60.180 with login) by smtp102.vzn.mail.dcn.yahoo.com with SMTP; 22 Feb 2006 23:56:21 -0000

—–

Yeah, well I want to shift on to be a little quiet and modest between now and Friday. Yes, O’Baloney seems to have run up the white flag it would seem, at least for the time being. I think the SABEW blog seems to have brought him to reality. That is what was picked up by Nocera, by the way. This is totally my doing! Yuk yuk yuk.

The Mullaney thing really touches a raw nerve, you know.

Based on the above, we can conclude that at least three days ahead its publication date, Gary Weiss knew all about Nocera’s February 25, 2006 column Overstock’s Campaign of Menace.

Note, in the first of the two emails, Weiss insisted that “The above is confidential!”

This is with good reason, as it’s considered a serious breach of ethics for a business writer to reveal the nature of his or her coverage of public companies to outsiders ahead of time, lest the information be used to the advantage of an unscrupulous investor (ie, “trading ahead” of the story).

And yet, Weiss knew. And boasted about knowing.

Recently, Patrick Byrne asked Joe Nocera to comment on this apparent ethical misstep.

Here is Nocera’s response:

From: Joe Nocera

To: Patrick Byrne

Subject: Re: that gary weiss email

Sent: Thursday, July 17, 2008 11:31 AM

—–

I have no idea why Mr. Weiss would make those claims, nor has he ever had any “inside information” about any of my columns. I don’t give out such information. all best, Joe Nocera

I welcome Joe to explain how reality, and his apparent interpretation of it, can possibly co-exist.

Like any responsible journalist, it’s my policy to allow the subjects of my reporting an opportunity to respond when they are cast in a critical light. However, when approached for comment on something I wrote about him one year ago, Boyd made it quite clear that he would rather I not contact him for any reason, ever again.

Based on that exchange, I did not ask Roddy for comment when I recently wrote about what I perceive is his role in DTCC’s January 2006 PR campaign aimed at deflecting criticism of the organization’s role in enabling illegal naked short selling.

Recently, Roddy contacted me to take issue with four points I made in that piece:

1. While I reported that Boyd appeared to be running interference for DTCC’s Goldstein when answering – on Goldstein’s behalf – my long-ignored request for comment on Gary Weiss’s apparent use of a DTCC computer, Boyd insists he was merely doing us both a favor by personally conveying to me Goldstein’s comments on the issue.
2. While I suspect Gary Weiss has had an extensive relationship with DTCC, Boyd says DTCC’s Goldstein has personally denied as much to him on multiple occasions.What remains unclear is why, for 18 months, Goldstein has insisted on answering my questions through Roddy Boyd.
3. While I reported that the publication of Roddy’s review of Gary Weiss’s second book appeared to be timed to support the launch of DTCC’s January, 2006 PR initiative targeting critics of naked short selling, Boyd denies this.Indeed, it is reasonable to consider the possibility that instead of Roddy timing the publication of his review of Weiss’s book to coincide with the launch of DTCC’s January 2006 PR initiative, the initiative itself might have instead been timed to coincide with the publication of Roddy’s review. This is a likely explanation, given Weiss’s apparent foreknowledge of the review’s publication date.
4. While I reported that Boyd and Weiss had a relationship that predates Boyd’s review of Weiss’s book, Boyd says he and Weiss didn’t connect until just before January 22, 2006, and that Boyd received the book not from Weiss himself, but from the publisher sometime in early December, 2005.I based my original reporting upon an email exchange between Roddy and Floyd Schneider (read this to learn how I came to posses emails between the two) which leaves no doubt that by at least January 15, 2006, Boyd knew enough about Weiss know he and Schneider were friends, and that Boyd could confidently ask Schneider to dig up negative information about public companies featured in stories Boyd was working on at the time. Boyd insists that knowledge came not from his relationship with Weiss, but from reading Weiss’s book, which does prominently mention Schneider.

Though Roddy and I may not completely agree on our respective interpretations of the facts surrounding this episode, I appreciate his willingness to address them with me on the record.

Finally, I would suggest that anyone entertained by DTCC’s bizarre approach to public relations read this exchange between Stuart Goldstein and Fox Business News host Alexis Glick, to see that I’m far from the only person receiving inadequate responses to reasonable requests for comment made of Stu Goldstein.

The basis for that conclusion is explained here.

This may not seem like a big deal to most, but it turned out to be a huge deal to those of us who had spent a full year enduring Weiss’s attacks without any clear understanding of his motivation.

We knew his aim was to discredit and marginalize high profile opponents of illegal naked short selling. Yet his book, which seemed to be the launch pad of Weiss’s campaign, was quite critical of both hedge fund and prime broker culture: the two obvious sides of the naked shorting equation.

So who was paying Weiss to spend all day, most every day, publishing his attacks via his blog, message boards, and Wikipedia?

Nobody had ever considered the DTCC.

But once we knew Weiss had used a DTCC computer – given the uniquely Fort Knox-like nature of the institution, and the fact that it could not have happened unless Weiss had official access – everything fell into place.

Suddenly, we noticed a very striking set of coincidences, commencing January 22, 2006.

On that date:

1. Roddy Boyd, then business writer at the New York Post, published his review of Weiss’s book Wall Street Versus America (an unheard-of six weeks before the book would be available in print). In his review, Boyd writes:

“The most provocative argument in Weiss’ book is that naked shorting — or short-selling a company’s stock without being able to borrow it first, per long standing rules — is not only a good idea, but a necessary one…This is guaranteed to send Overstock CEO Patrick Byrne and the other disciples of his “stop naked short-selling crusade” — Weiss dismisses the lot of them as the “Baloney Brigade” — into further spasms.”

2. Weiss published the first naked short selling-related post on his week-old blog.
3. Weiss Yahoo! Finance message board IDs lamborghini751, cupandsaucerwithsugar, and baloneysmasher were created and immediately put to use attacking opponents of illegal naked short selling.
4. One day later, DTCC issued the first of what would be eight naked short selling-related media releases over the next seven months. By way of comparison, during the seven months prior to January 23, 2006, DTCC issued zero releases on the topic.

Further examination made it clear that Weiss had an unusual relationship with those DTCC media releases, in that Weiss would promote them via his blog, stock message boards and Wikipedia articles in a rather systematic way, often long before anybody else was even aware of them.

Here’s an example:

• 1/27/2006 at 17:08 DTCC issued a media release
• 1/27/2006 at 23:55 Weiss published a blog item about the DTCC release
• 1/28/2006 at 09:22 Weiss adds DTCC release to Wikipedia article on naked short selling
• 1/28/2006 at 09:49 Weiss promotes DTCC release on Yahoo message board

Taking all these factors together, I’ve concluded that January 22, 2006 represents the beginning of an aggressive public relations campaign by DTCC, aimed at countering a growing perception that the organization is a key enabler of illegal naked short selling. I further conclude that a that time, Gary Weiss was operating in support of that effort and likely remains so today.

I requested a comment of DTCC spokesman Stuart Z. Goldstein – the likely architect of the above-mentioned PR campaign – but received only two strange responses, neither of which addressed my question.

When I persisted in asking Goldstein for comment, his came – and I cannot overstate how shocked I remain by this even today – from reporter Roddy Boyd, then of the New York Post.

It read:

From: Boyd, Roddy
Date: Feb 09 2007 – 1:03pm
Subject:
—–
judd,
I spoke to corp comm at DTCC and they told me, on the record, that weiss is not, nor has he ever, been employed or used by DTCC in any capacity, formally or informally. They categorically reject it and tell me that none of them have any recollection of ever talking to him, meeting with him or having any dealings with him.
categorically rejects it.
thats a big hump for a real reporter to get over.
let me put this politely:
As an investigative reporter, laughably per PB, you really,really are a much better PR person

In case you’ve forgotten, it was Roddy Boyd’s six week premature review of Weiss’s book, published January 22, 2006, that seems to have been the launching point of the DTCC’s PR campaign, described above.

For his part, Weiss called my conclusions of a relationship between him and DTCC a “malicious lie” and “absolute crap.”

At that point, I had a ton of circumstantial evidence pointing to DTCC as Weiss’s patron, and direct proof that Weiss had used a computer on DTCC’s network.

I also had the strangest denial, on the part Stuart Goldstein at DTCC, that I’ve ever seen.

But most importantly, I had the benefit of an extremely low-set hurdle to cross in order to prove that Weiss, Boyd and Goldstein were all engaged in a ridiculous lie.

After all, as Goldstein said through Boyd, nobody at DTCC has “any recollection of ever talking to [Gary Weiss], meeting with [Gary Weiss] or having any dealings with [Gary Weiss].”

What follows is the story of how we’ve sailed over that particular hurdle, thanks to some emails from Gary Weiss to paid stock message board basher Floyd Schneider. (Read this to learn how I came to posses these emails).

********

In addition to being the month in which DTCC launched its PR campaign against opponents of naked short selling, January of 2006 is also a significant time in that Mark Mitchell, then assistant managing editor of the Columbia Journalism Review, started work on what would go on to become The Story of Deep Capture.

Back then, as now, Gary Weiss seemed to be about the only non-pseudonymous person willing to go on the record in defense of naked short selling, which naturally made him a frequent point of contact for Mitchell.

Mitchell recalls as many as a dozen conversations with Gary Weiss in the first couple of months working on the story. In several of those conversations, Mitchell remembers Weiss awkwardly seeking to gauge Mitchell’s opinion of any recently-published DTCC media releases.

Among the topics Mitchell discussed with Weiss was Dr. Susan Trimbath, a former DTCC employee turned outspoken critic of that organization’s role in enabling illegal naked short selling. Mitchell recalls being surprised by how much the subject of Trimbath seemed to bother Weiss.

Given that bit of background, consider the following email exchange between Gary Weiss and Floyd Schneider.

It starts on March 13 at 9:41 AM, when Floyd emails Weiss a reference to a speech Dr. Trimbath had given a few months earlier.

To this, Weiss replies:

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: (no subject)
Date: Mon, 13 Mar 2006 09:49:27 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@151.202.90.90 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 13 Mar 2006 14:49:22 -0000
—–
Say, what is with this Trimbath? I ask because a particularly dimwitted reporter for Columbia Journalism Review is doing a story on media coverage that is widely expected to lean toward the balonies, and he is relying heavily on her.

Floyd immediately begins to pepper Weiss with every googled reference to Trimbath he can find – all of them quite positive – to which Weiss replies:

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: (no subject)
Date: Mon, 13 Mar 2006 10:49:12 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@151.202.90.90 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 13 Mar 2006 15:49:08 -0000
—–
Yeah, all pretty innocuous, which is she is a perfect front woman. I presume she expects to cash in as an expert witness or somesuch for the balonies.

The next day, DTCC issued a media release attacking Trimbath’s expert status and minimizing the importance of the position she held there.

The day after that, Weiss places a standing order with Floyd for any negative information on Dr. Trimbath he can find (searching for this sort of information is how Floyd spends an alarming portion of his days, by the way):

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: Aha!
Date: Wed, 15 Mar 2006 13:38:35 -0500
Received: from unknown (HELO maincomputer (garyrweiss@verizon.net@151.202.90.90 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 18:38:29 -0000
—–
Incidentally this Susanne Trimbath is the primary source of info on nekkid shorting for a complete idiot who is wriiting a story for the Col. Journalism Review. If you can think of anything particularly wacky that she has said, let me know.

A few minutes later, Floyd responds with something fairly unremarkable, to which Weiss replies:

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: Aha!
Date: Wed, 15 Mar 2006 13:47:54 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@151.202.90.90 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 18:47:49 -0000
—–
You know, the thing that is bad is that this statement below would not be considered extreme by the doofus doing this article for CJR. Several of us are concerned that it is going to be a total baloney-piece. He is a real ham bone.

After Floyd sends still more non-scandalous Trimbath references, Weiss replies:

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: Aha!
Date: Wed, 15 Mar 2006 14:00:54 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@151.202.90.90 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 19:00:49 -0000
—–
It has to be something fairly extreme. This guy really has me (and others of us a lot more than me) worried. I’ve drummed into this nitwit’s head about O’Baloney and it all just bounced off his concrete skull.

About an hour later, Floyd sends the prior day’s DTCC media release to Weiss, prompting this reply:

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: the whole article with link
Date: Wed, 15 Mar 2006 15:09:17 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@151.202.90.90 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 20:09:12 -0000
—–
Yes I sent this to the bozo at CJR earlier today. The jerk emailed back indicating that he is chewing away at baloney. Very depressing.

In his emails to Floyd, Weiss makes it clear that he’s involved in active consultations with other individuals, who feel deeply concerned about the prospect of Dr. Trimbath’s influence on Mitchell’s story.

Because Dr. Trimbath addresses illegal naked short selling almost exclusively from the standpoint of the DTCC’s role, it’s very difficult to imagine that, when Weiss refers to “Several of us” and “others of us,” he’s not referencing officials at DTCC.

Armed with these emails as confirmation that Goldstein was not being honest, when he stated, through Roddy Boyd, that he “categorically rejects” the idea that anybody at DTCC has so much as spoken with Gary Weiss, I again asked Goldstein for a comment.

Goldstein refused to answer the question.

Here, Weiss is telling Floyd about his inclusion in Weiss’s forthcoming book.

(Read this to learn how I came to posses email between Gary Weiss and Floyd Schneider).

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: (no subject)
Date: Thu, 29 Dec 2005 16:18:47 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@70.23.42.100 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 29 Dec 2005 21:18:48 -0000
—–
Well, it so happens sir that you are featured prominently in two chapters, so I don’t think they would be up for the project! I will get you a copy when one is available.

What’s most noteworthy about this email is the IP from which it was sent: 70.23.42.100, which is the same I claimed proved Weiss established his pattern of online deception and sockpuppeting long ago as a poster to several Usenet groups.

It also reinforces my claim that Weiss — contrary to Weiss’s insistence — he writes the anonymous blog Mediacrity.

(Read this to learn how I came to posses email between Gary Weiss and another individual).

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: sia fleesing public according to bob o’brien
Date: Mon, 25 Sep 2006 21:17:34 -0400
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@151.202.72.132 with login) by smtp102.vzn.mail.dcn.yahoo.com with SMTP; 26 Sep 2006 01:17:30 -0000
—————
Off the record, don’t breathe a soul about this, that joker Liz Moyer once tried to get a job at BW years ago and I successfully lobbied against it. She used to be at Insitutional Investor and is a total shill for CEOs.

I figured this out, initially, by figuring out that Gary was commenting on his own blog as “Lamborghini751″.

In response, Weiss swore that indeed, he had posted Lamborghini751’s comments, but that it had been at Lambo’s request.

Apparently it was easier for Lambo to email the comments to Weiss than to actually post them himself.

(snicker)

At the time, Weiss took the additional step of swearing that he’d never actually posted anything to Yahoo Finance.

Well…let’s see what his email to Floyd Schneider has to say on the matter.

(Read this to learn how I came to posses email between Gary Weiss and Floyd Schneider).

On February 17, 2006, Floyd sent Gary Weiss a link to a story relating to securities fraud. For some reason, this prompted the following reply from Gary:

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: Each year, Americans lose an estimated $40 billion to securities fraud
Date: Fri, 17 Feb 2006 11:16:24 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@70.23.27.10 with login) by smtp102.vzn.mail.dcn.yahoo.com with SMTP; 17 Feb 2006 16:16:28 -0000
—————
Excellent! Reminds me to transfer my google alerts over to my new Verizon account.
One damn thing about Verizon is that it has prevented my gnomes from posting on the Yahoo boards! The link is sometimes down for hours on end.

Any guesses as to what Weiss means when he refers to his “gnomes”?

As it happens, I know precisely who Weiss’s gnomes were. But the point is, unless Weiss employs faerie-world creatures to do his dirty work for him, he was lying when he claimed that he never posted anything to Yahoo Finance.

A great example of this is his denial of so much as editing Wikipedia, in the face of evidence that not only has he been a very active Wikipedia editor, but that he’s also engaged in an concerted effort to inject misinformation into the Wikipedia articles on naked short selling, prominent opponent of naked short selling Patrick Byrne, and Overstock.com, which is the company Byrne heads as CEO.

To give a little background, here’s what Weiss originally wrote (and later deleted) in his blog in response to my repeated claims that he was the now-infamous Wikipedia editor “Mantanmoreland”.

Bagley didn’t even pretend to have contacted me, not that it would have prevented him from publishing his smears — just as Wikipedia’s denial, and mine, has never prevented him from repeating, again and again, his malicious lie that I have edited Wikipedia.

About that same time, Weiss added this comment to his blog:

I think that it is indicative of Judd’s (and his boss’s) malice — in every sense of the word — that he would publish an outright lie while knowing that it is a lie. Both I and the DTCC have denied the total rubbish that he posted on his website.

Similarly he continues to publish the lie that I am this “Mantanmoreland” long after it was, again, denied by both myself and Jimbo Wales of Wikipedia.

Since ASM is an extension of Overstock.com, operated with the blessing and open and enthusiastic support of its CEO, I think that what you have here goes clearly beyond ethical issues. Of course corporate ethics is clearly never a consideration for Patrick Byrne, in earning the merit badges required to gaint he sought-after title of “America’s worst CEO.”
Gary Weiss | Homepage | 02.09.07 – 11:07 am | #

Before proceeding, let’s make sure everybody agrees that Gary Weiss insists my claim that he has edited Wikipedia is a “malicious lie.”

Everybody clear on that?

Good. Now on to Gary’s email. (Read this to learn how I came to posses email between Gary Weiss and another individual).

On 1/28/2006 at 7:19 PM, Floyd Schneider became aware of the battle that was raging for control of the Wikipedia article on naked short selling, and sent a link to Gary Weiss.

The next morning, Weiss sent the following two replies:

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject: Re: (no subject)
Date: Sun, 29 Jan 2006 11:13:46 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@70.23.85.112 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 29 Jan 2006 16:13:43 -0000
—————
Note that they’re hijacking that page. However, anyone can unhijack. You just go into edit mode, select all and copy the page when it is in good shape, and save it as a text file. That makes it easier to replace the page when it has been baloneyfied. I may insert a reference to my book at some point…..

From: garyrweiss@verizon.net
To: Floyd3491@aol.com
Subject:
Date: Sun, 29 Jan 2006 11:21:46 -0500
Received: from unknown (HELO maincomputer) (garyrweiss@verizon.net@70.23.85.112 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 29 Jan 2006 16:21:43 -0000
—————
right now, for example, it is in pretty good shape. In fact….. well, here
is what one simply has to plug in… attached.

You can see the document Weiss attached here.

So, those are the emails.

Here’s what they tell us.

First, we now know that as early as 1/28/2006, Gary Weiss clearly had edited Wikipedia, which is not itself a big deal. Yet, Weiss calls the claim a “malicious lie.”

Indeed, it is Weiss who is lying.

Second, we now know (as if there were any doubt) that Weiss was “Mantanmoreland”. Here’s how:
Note Weiss’s IP address on January 28 and 29, 2006 as reflected by these two emails: 70.23.85.112. Now, look at the Wikipedia edit history of IP address 70.23.85.112.

As you can see, someone using the IP address 70.23.85.112 was eagerly editing the Wikipedia article on naked short selling on January 27 and 28, 2006 and then stops abruptly.

The final act of the editor at IP address 70.23.85.112 was to edit the article to appear precisely how it did in the file Weiss sent Schneider.

Wikipedia editor “Mantanmoreland” is created shortly thereafter and his first act is then to restore the naked shorting article to how it appeared where 70.23.85.112 left off (again, precisely mirroring the content of the attachment Weiss had sent to Schneider).

Weiss sent his second reply to Schneider before any edits were made to that version, noting “right now, for example, it is in pretty good shape.”

From this, we know that Gary Weiss = 70.23.85.112 = Mantanmoreland, and that Weiss’s MANY ongoing denials are among the more deeply disturbing lies I’ve witnessed another human concoct.

While hardly germane, given the gravity of the above, I’d like to make out two additional points (a little running up of the score, if you will).

First, the act of recruiting others to mimic one’s position when editing an article on Wikipedia is known as “meatpuppeting”, and is regarded as a serious offense in that silly culture. This is precisely what Weiss has done here, although there is no evidence that Schneider acted upon Weiss’s request.

Second, for all the times he has lied, Weiss certainly told the truth when he said, “I may insert a reference to my book at some point.”

Beginning one week after the publication of his second book on April 6, 2006, Weiss added (and very jealously guarded) dozens of references to his book, many of which persist to this day.

Almost immediately after publishing the first such post, I began to receive email from readers who were confident that any scam involving Gary Weiss was all but certain to involve a fellow named Floyd Schneider, as well.

Curious, I googled “Floyd Schneider”, and quickly found the 2002 BusinessWeek story entitled “Revenge of the Investor”, in which Floyd is painted as a crusading folk hero fighting against corporate fraudsters.

With that, I concluded that Floyd Schneider could not possibly be an associate of Gary Weiss.

Time passed, and I began to gain a better understanding of how Gary Weiss was not only a corrupt blogger, but how he had also been a corrupt reporter, often using his by-line at BusinessWeek to further the interests of his short selling patrons by casting black as white, and white as black.

Indeed, as anybody who’s followed his career knows, the First Law of Gary Weiss is: If Gary says something is bad, it’s probably good; and vice versa.

I’m ashamed to admit that the obvious “A-ha!” moment finally came in December of 2006. That’s when it occurred to me – rather randomly – that I ought to take another look at the 2002 piece on Floyd Schneider…particularly the story’s by-line (which BusinessWeek.com tends to print at the end of stories).

Looking back, what I found probably should have come as no surprise…

…the author of the story lionizing Floyd Schneider was Gary Weiss himself. Indeed, Floyd is also lovingly featured in Weiss’s second book.

Those facts, when viewed in the context of the First Law of Gary Weiss, were all I needed to know that the individuals who suggested Floyd Schneider was involved in the coordinated public attacks I had observed against Patrick Byrne and other opponents of illegal naked short selling, were correct.

At that point, I sought to determine which message board aliases Schneider was using at the time. The answer was to be found in this legal opinion filed in one of the (multiple) lawsuits brought against Schneider by companies defamed and libeled by his message board posting.

It reads:

…“Floydtheoneandonly,” “charlesp0nzi,” “thetruthseekercom,” are [stock message board] pseudonyms used by Floyd Schneider…

From there, the Dissembler Sorting Algorithm revealed that on Yahoo Finance alone, additional Schneider aliases included strethoechasity, returnofstockdung, baloneymarch, wackypat, zorro20934 and china39846.

As an aside, the alias zorro20934 was used by Schneider to post attacks (since deleted) against Matrixx Initiatives, in direct violation of an agreement Schneider signed stipulating that he would not do so.

Over time the vast majority of Schneider’s message board contributions have been deleted for their abusive nature. Possibly the best and most recent example of this appeared briefly on Yahoo’s INVESTools board, in a series of posts in which Schneider attempted to blame INVESTools management for former employee David Ragsdale’s tragic decision to murder his wife earlier this year.

Analysis of the thousands of posts made by Schneider revealed that they attacked – almost without exception, companies appearing on the Reg SHO Threshold Securities list – which is comprised of firms targeted by hedge funds engaged in manipulative naked short selling.

In addition, Floyd’s posting patterns tended to be very abnormal; meaning, he would focus intensely on one or two companies for a time, then abruptly shift focus to attacking another and never return to the prior. This, I reasoned, was what one would expect of someone being directed in their efforts, as opposed to someone whose attention naturally evolved over time.

The next breakthrough came when I discovered this message board post made to SiliconInvestor.com by former Schneider business partner and convicted stock manipulator Anthony Elgindy, reading:

From: Anthony@Pacific
4/21/2001 8:28:44 PM

Notice of termination of all association with The truthseeker.

As of Yesterday.

I wish him luck in his current business venture as a paid researcher/basher..

I dont pay for any posts..period and I’m not gonna start ever doing that.
Please dont ask me to elaborate , just know that he is being paid now by outside parties.
He has done some good work and we have had some good times , but all good things must come to an end..someday.

I first wrote about what I had discovered, vis-à-vis Floyd Schneider, in December 2006.

In early April 2007, a mysterious comment was added to the Schneider post, claiming to have been made by Floyd’s long-deceased father. It read…

The Truthseeker is incapable of ever telling the truth!

How do I know? That’s easy I was his father. Currently my wife and other 4 sons have completely disowned him and will have nothing to do with him anymore.

I passed away on 2/7/1996, let me tell you some of my own experiences with my 3rd son, Floyd D. Schneider.

TIMELINE:

1976-1979 while attending the University of Miami he has gambled with bookies losing thousands of dollars I had to bail him out of, and committed credit card fraud stealing credit card numbers.

1982 stock broker for Moore Schlay, embezzled monies from family and friends brokerage accounts and lost it all buying options, He was fired and I had to bail him out again.

1983 stockbroker for Shearson American express, again he did the same thing and he was fired, I had to mortgage my house this time to bail him out.

1983- 1988 in between this time there were a few more bets with bookies and in 1988 he married a con artist and became her 6th husband. They both ran an Insurance agency in Bradley Beach, NJ “The F. D. Schneider Insurance Agency” This was a total disaster, they both were issuing insurance cards to people and had them make out their premium checks directly to them and cashing the checks for money for themselves, never putting the policies through and having these people driving with no car insurance without them knowing.

Yup again this cost me money in 1991, my whole half years retirement package in fact to bail him out of this mess.

Floyd came home to live again and in 1992 became a Mortgage broker for Weichert Realtors. He got in more trouble in those years by having people sign lock-in agreements and not locking the interest rate in, hoping rates would go down and lock it in then making loads more money for himself. Problem was more often the interest rates went up and he had to arrange to pay large lump sums of money to the borrowers to keep them from getting him fired.

Thank goodness he was a “so called” top producer, giving him them means pay his way out of a mess for himself for once. Floyd is a compulsive liar and you never can get the Truth from him, always nothing but another lie after another. Guess that’s why now he feels a need to seek truth from others, lord knows he could never seek it from himself.

He has a very convoluted way of justifying things. I remember back in 1983 when he was with Shearson in that mess, he forged a signature from his Godfather’s account, when I sat down with him to explain he did something very wrong all he told me was:  “dad I never forged anything, I just signed the check Floyd Schneider, it’s my fault Shearson didn’t check to see if it was the right Floyd Schneider or not, so really it’s their fault not mine!” You see Floyd was named after his uncle and Godfather “Floyd Schneider” of Carpenter and Smith Oil in Monroe, NY.

I never could convince him he did anything wrong either, he really believes he has never done a wrong thing in his life. I died 6 months after Floyd was married to his second wife. His father-in-law has no idea of what his daughter married! I am starting to feel I am the lucky one now six feet under, but finally in peace!!!

Not feeling comfortable with a comment from a dead person appearing on my blog – particularly one leveling such extreme accusations – I removed it and contacted its author: not to ask for proof of the claims, but to discern with reasonable certainty that he or she was actually in a position to know whether or not they were true.

What resulted was a long and fruitful conversation with Roger Schneider, Floyd’s brother and – until days before – Floyd’s boss at the Ramsey, NJ branch of mortgage brokerage Nationwide Equity.

The circumstances behind Floyd’s dismissal from Nationwide provide what might be the most interesting and valuable bit of insight yet gained in my effort to prove that contrary to their repeated claims, some individuals are indeed paid to “bash” public companies on stock message boards on behalf of short selling hedge funds seeking to profit from a drop in the target company’s share value.

Here’s how Roger Schneider himself describes the situation:

“Floyd was writing up invoices on Nationwide Equity’s letterhead to Magic consulting instructing Magic to pay Nationwide for some phony service he made up, and too have Magic consulting make out the checks payable directly to Floyd D. Schneider. He did this many times before it was discovered and he was fired.”

(More on Michelle McDonough and Magic Consulting in a moment)

As Roger described the above scene to me, when Floyd was presented with the evidence of his history of illegally disguising payments from Magic Consulting as mortgage brokerage commissions, Floyd’s only defense was to point out that in this most recent case (the one for which he was caught), Magic owner Michelle McDonough had instead opted to pay him directly as a contract “stock researcher.”

This is a vital detail, because it confirms Anthony Elgindy’s claim that Floyd had engaged in a “business venture as a paid researcher/basher.”

It was while cleaning out Floyd’s desk a few days later that Roger discovered a print version of the same legal filing I had found online months before, and the partial listing of Floyd’s confirmed message board aliases. Then, while seeking additional information on what he’d found, Roger happened upon AntiSocialMedia.net and my post about his brother.

As it turns out, Floyd left behind many compelling insights into his relationship with Michelle McDonough’s Magic Consulting.

It seems that when hedge fund Third Point Capital needed some dirt spread about specific companies, they would enlist the help of McDonough, who would in turn enlist the help of individuals such as Floyd Schneider. McDonough would provide Floyd with a list of “talking points” and, moments later, these were the things Floyd would begin posting on stock message boards across the web, including Yahoo Finance, Raging Bull, and Silicon Investor.

Very soon, these were also the things business reporter Roddy Boyd (currently of Fortune, previously of the New York Post) was writing damning stories about.

Very frequently, Boyd would contact Floyd, asking for help digging up negative information on officers of specific companies. In every case, these companies were known to be under active and vicious attack by short selling hedge funds.

On one occasion, Roddy Boyd refers directly to Michelle McDonough as an acquaintance of his and Floyd’s…which is what makes the following email exchanges between Boyd and myself so strange:

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

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

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

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

And later…

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

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

We’ve since learned yet more about Michelle McDonough and Magic Consulting.

Most notable is the fact that McDonough apparently offers her services to multiple hedge funds, not just Third Point Capital, as originally suspected.

It’s also emerged that, prior to leaving for prison, McDonough (then known as Michelle Sarian) was a very active message board poster, herself. Sources suggest that in those days, she primarily attacked the companies targeted by Evan Sturza, a former hedge fund manager who went on to publish Sturza’s Medical Investment Letter.

Based on evidence he saw, Roger Schneider estimates McDonough paid Floyd at least $14,000 in 2006 alone. A few years before that, Roger observed Floyd receive at least one payment of $10,000 from Paul C. Harary, who – it should come as no surprise – was recently imprisoned for securities manipulation.

Paul C. Harary.

Michelle McDonough.

Anthony Elgindy.

Sam E. Antar.

All convicted securities manipulators.

All past and present associates of paid stock message board basher Floyd Schneider.

By all accounts, the resulting mass of evidence vastly exceeded any previous effort and produced a “case” supporting the claim that Gary Weiss has, in extreme violation of Wikipedia policy, deceitfully operated multiple accounts in an effort to skew the articles relating to naked short selling, Overstock.com, Patrick Byrne, and Gary Weiss himself.

Those unfamiliar with Wikipedia policy might not appreciate just how big a deal this really is.

It’s very satisfying to see so much support for the claim that has, over the past year, created so much misery for the few who have believed it.

That misery was occasioned, in large part, by the inexplicable obstructionism of Wikipedia founder Jimbo Wales, who intervened on multiple occasions to halt efforts threatening to tie Weiss to his many wiki sockpuppet identities.

Initially, it seemed reasonable to assume that Wales’s unreasonable behavior was based on bad information, and that he was otherwise acting in good faith.

That changed, however, when several of Wales’s contributions to a very small and private email list were recently leaked to me.

Of these, the most interesting, dated September 15, 2007, reads as follows:

From: jwales@wikia.com (Jimbo Wales)
I just want to go on record as saying that I believe the reason for this is that Mantanmoreland is in fact Gary Weiss.

Before lauding Wales’s apparent enlightenment on this topic, note the comment he made one month later, in reference to his support of an effort to block model Wikipedia editor Cla68 from making the most reasonable changes to the Gary Weiss article autobiography:

“Cla68, I fear that you have been manipulated by lying stalkers and trolls…”

In case it’s not clear, this is one of Wales’s many references to me as “lying stalker” and “troll.”

Kindly re-read the previous few paragraphs in case the following point is not made crystal clear to you: in private, Wales admitted knowing that I was correct about Gary Weiss, and yet in public, continued protecting Weiss, defaming me and castigating those who recognized and acted upon the truth as reported here.

What could possibly motivate someone to be not only deceitful, but deeply, irresponsibly and libelously deceitful?

Before you answer, consider the insights we can glean from the examples of Rachel Marsden and Jeff Merkey.

Rachel Marsden
Marsden is a controversial Canadian media personality and political consultant whose Wikipedia article has consistently tended toward the disproportionately negative.

While the full extent of their relationship is unknown, the emergence of a series of IM chat transcripts between Marsden and Wales makes it clear that in early February of this year, the relationship was…shall we say…a physical one.

Confronted with an overwhelming body of evidence, Wales conceded to a single “meeting” with Marsden, which took place on February 9, 2008.

While other evidence would suggest Wales isn’t telling the truth here, let us none-the-less focus on the circumstances surrounding that meeting.

In the following excerpted IM chat exchange between Wales and Marsden leading up to the February 9 meeting (originally published in Valleywag.com), the two discuss a specific point of inaccuracy in her article.

Wales: I wrote an email to the internal editors list about your entry recommending some changes, etc. I said that I would run it by you for clarification/comment and email again if there were any updates I think we have two major problems right now first, the timeline is wrong about the recent cop case… that is the worst error and easy to fix

Wales: right so the way it is told now, hang on a second let’s actually do this right now because the last thing I want to do is take a break from f**king your brains out all night to work on your wikipedia entry

“In September 2007, on her blog Marsden wrote about and posted a picture of a counterterrorism officer for the Ontario Provincial Police with whom she had an affair. She claimed that he had leaked secret anti-terrorism documents to her, then posted email messages from him as evidence that he had been pursuing her, and sent to the National Post these along with sexually explicit pictures of him that she had received. She was investigated for criminal harassment for this behaviour, but was not charged. The OPP’s criminal investigations branch cleared the officer of any wrongdoing.”

so our timeline is wrong we say
(1) wrote about him on your blog
(2) posted email messages from him
(3) as a result he files harassment charges

Marsden: exactly. it was a retaliatory complaint on his part that was launched 2 months after they initiated their investigation into his stuff.

Wales: but the correct timeline is
(1) wrote about him on the blog
(2) he files harassment charges
(3) you post email messages to show how his harassment charges are bullshit

Marsden: you’re a sh*tdisturber. right I only posted the emails after he went public trying to create trouble. NOT before that.

Wales: so we can get that sorted and then this makes the story clearer

Marsden: that’s good of you to do. really.

Comparing the substance of this chat session with the edit history of the Rachel Marsden article in the days leading up to February 9, 2008, we see something rather striking: On February 7, wikipedian Guy Chapman (aka “JzG”) commits two changes (1)(2) which have the net effect of making precisely the content alterations Marsden requested.

Jeff Merkey
Merkey is a computer scientist and entrepreneur whose Wikipedia article came under attack by several editors critical of his professional associations.

According to Merkey, in 2006, Wales told him that in exchange for a substantial donation, Wales could use his influence to make Merkey’s article more agreeable, and to place Merkey himself under Wales’s “special protection” as an editor.

Merkey made a $5,000 donation and hinted at the possibility of something much larger in the future.

Merkey claims, and the record confirms, that following his donation, Wales personally made several edits to the Merkey article, including a complete blanking of the article and destruction of its edit history (extreme steps to take under any circumstances, and doubly so considering it happened without any effort at reaching consensus, which is supposedly the coin of the Wikipedia realm).

When he announced his unilateral “start-over” on the article, Wales offered:

I have deleted the old discussion because of the unpleasantness of it. Please be extra careful here to be courteous and assume good faith. We are nearing a resolution of this longstanding conflict. Play nice, everyone.

A priceless response came 20 minutes later by wikipedian Aim Here, who asked:

“…Have you been making secret dealings behind everyone’s back? So much for Wikipedia’s openness.”

To which Wales nervously responded:

“Secret dealings? What on earth are you talking about?”

To which wikipedian Aim Here replied:

Whether or not the original article was a mess, you did use the phrase ‘nearing a restitution of this longstanding conflict’, which suggests, despite the complete lack of evidence available in public, that there is an actual conflict going on, as opposed to one which had been completely dormant for ages now. After all, suddenly and with no warning, wiping out an article and ordering everyone to start again over some sourcing problems is rather heavy-handed and drastic. The normal WP procedure is to stick some tags on it and telling everyone to change the bad bits. The ’secret deals’ phrase was of course total speculation, and sorry about that, but I’d be very surprised if there wasn’t something happening in private that sparked off this wholesale deletion of yours, either a deal or a threatened lawsuit. After all, pretty much the last thing Merkey said on this whole stupid subject was that he had been trying, in private, to throw $2 million at you and/or Wikipedia and threatening his usual bag of lawsuits. Well, whatever…

If this exchange seems familiar, it may be because it roughly resembles this one, which followed Jimbo Wales’ unilateral blanking of the debate over the proposed deletion of the article autobiography on Gary Weiss:

The page contained wildly inappropriate speculation that a notable author was sockpuppeting. As I am sure you are aware, many authors have had their careers badly damaged by being caught sockpuppeting at Amazon, etc., and it is deeply wrong for people to ask me to restore a page with such speculations in Wikipedia after the claims have already been investigated and dismissed. If there are further problems in the future, there will be no problem restoring the article at that time.

As an aside, based on Wales’s promise that “If there are further problems in the future, there will be no problem restoring the article at that time,” wikipedian Cool Hand Luke asked Jimbo for permission to un-delete the deletion debate in order to reference it during the present ArbCom case relating directly to the matter of Gary Weiss and his conflict of interest on Wikipedia.

Jimbo’s response: “I see no benefit in doing so.”

Conclusion
As the Rachel Marsden example demonstrates, when he’s “getting something” in return, Jimbo Wales is willing to use his position to influence Wikipedia article content.

As the Jeff Merkey example demonstrates, in addition to female companionship, that “something” can also come in the form of donations to the Wikimedia Foundation.

As the Gary Weiss example demonstrates, Jimbo Wales is willing to use Wikipedia as a tool of libel and disinformation when doing so suits him.

Only one question remains: what exactly is Jimbo Wales getting in return for continuing to publicly defame me and shield Gary Weiss from accountability for his two-year campaign of malice and disinformation, in support of illegal stock market manipulation?

A longshot from the beginning, that effort failed despite the principled efforts of Cla68, an exemplary contributor and a truly bright light in what can seem an otherwise dark place.

A couple of interesting things happened through the proposed article for deletion (AfD) process. One is that Gary Weiss himself basically came unglued. The other is the subsequent deletion of record of the AfD debate (and with it record of Weiss’s mental decomposition).

As it turns out, the deletion of that debate will be hard to undo, since it came from the top of the Wikipedia organization: Jimbo Wales himself. Wales claims the debate was filled with “discourteous commentary” and as such meriting elimination from the record.

Last week an anonynmous editor asked Jimbo about his decision. That conversation, at least for now, may be read here. Not surprisingly, that editor was soon banned as a WordBomb sockpuppet.

Thanks to an enterprising administrator with the requisite permissions, the deleted debate has been recovered and is reproduced here for your enlightenment. Please inspect it and then comment on what you see as commentary of so discourteous a nature as to require elimination.

“Bravely spoken, by the coward who hides behind a pseudonym.”

And here we go…
The first thing you need to understand is that in late January of 2006, Gary Weiss’ IP address was 70.23.85.112.

Here’s how we know that.

The website Wikipedia endeavors to be an online encyclopedia that anybody can make changes to. Fortunately for mankind, a record is kept of each of those changes. Here’s just such a record: a summary of edits made by a user at the IP address 70.23.85.112.

Note the date range: January 27-28, 2006, and the article edited: Naked short selling. Such rapid succession of edits, as seen here, is suggestive of what’s called an “edit war.”
Now, let’s look at who else was editing that article during that period, to learn more about this edit war.

Starting at the bottom and working up, we see the editor identified by the IP address 70.23.85.112 editing heavily until 7:19pm when that user’s edits abruptly cease.

79 minutes later, a brand new user calling himself Mantanmoreland arrives, picking up right where 70.23.85.112 left off. A few days later, Tomstoner arrives, forging an unusually strong “tag team” relationship with Mantanmoreland. Together, Mantanmoreland and Tomstoner become the primary antagonists of the novice and disorganized bloc of Wikipedian naked shorting opponents.

On February 20, 2006, as if to put a fork in their soundly defeated opposition, Tomstoner adds a link to Gary Weiss’ blog to the naked short selling article.

Fast forward six weeks.

On April 6, Gary Weiss sees his second book published. Bravo, Gary.
On April 9, Tomstoner adds a reference to the three-day-old book on the article about Gary Weiss’ alma mater, the City College of New York.
On April 13, Mantanmoreland creates the Gary Weiss article on Wikipedia, and goes on to take ownership of it, including going so far as to know when one Weiss quote is more suitable than another.
On April 14, Mantanmoreland adds a link to a nearly decade-old Business Week article originally written by Gary Weiss
On April 15, Mantanmoreland decides the article on Arthur Leavitt would be better with a link to the nine-day-old book by Gary Weiss.
On April 17, Mantanmoreland adds a link to the first book by Gary Weiss
On April 30, Mantanmoreland feels one more article could benefit from a reference to the three-week old book by Gary Weiss.
Make that two more articles
On May 13, Lastexit, one of Mantanmoreland’s admitted “sockpuppet” alter-egos, feels the article about Julian Robertson could benefit from a link to a six-year-old bit of journalism by Gary Weiss.
On May 19, Mantanmoreland decides the article on hedge funds is incomplete without a link to the Weiss Book.
On July 12, Lastexit concludes that a three year old Business Week piece on naked shorting penned by Gary Weiss would perfectly round out the Wikipedia article on the same topic.

Anybody not convinced that 70.23.85.112 = Mantanmoreland = Tomstoner = Lastexit = Gary Weiss raise your hand.

Ok good. So we can all agree that in late January, 2006, 70.23.85.112 = Gary Weiss (remember that…it’s on the final exam!).

Now, let’s go back to January 22, 2006.

On that day, two relevant things happened.

First, the New York Post published an effusive review of the Gary Weiss book, which would not go on to be available for purchase for another 3.5 months.

Second, Yahoo user ID lamborghini751 is created and soon makes his first message board post in the form of a question as to his “wife’s” career options.

Four minutes later, his second post, to Yahoo’s Overstock.com message board, announces to the world that Gary’s book, though a full financial quarter away, had been the subject of a glowing review by the New York Post.

On January 24, 2006, Yahoo user ID cupandsaucerwithsugar is created. As his first act, at 1:29 pm EST, he provides an answer to lamborghini751’s two day old question.

(A quick scan of the subsequent postings of both lamborghini751 and cupandsaucerwithsugar makes it obvious that the same person is behind both. But Yahoo’s delightful dissembler sorting algorithm bug confirms this, as those familiar with the DSA will easily see.)

As his second act, less than 60 seconds after the first, cupandsaucerwithsugar chooses to honor Gary Weiss, as follows:

“yeah and weiss just ripped boobo and co a new one on his blog”

How sweet.For those keeping track at home, that post brings us to 1:30 EST on January 24, 2006.
Interestingly, according to the header info on the sample chapter posted on his website, Weiss’ publisher would complete the book’s soft proof 82 minutes later, at 2:52pm.

So what had the NY Post reviewer been reading?

Hmmmm.

Nevermind such details!

Six hours later, at 8:35pm, Gary Weiss publishes a new blog post, which opens thusly:

“Bob O’Brien,” the bravely anonymous leader of the Baloney Brigade…

Just 25 minutes later, on the above-mentioned Bob O’Brien’s blog, first time commenter cupsandsaucer has this to say to the same Bob O’Brien:

Bravely spoken, by the coward who hides behind a pseudonym.

A quick review of the corresponding server log entry (time zone set to GMT) confirms what we all already suspect, and poetically brings us full circle:

How much more ironic is the accusation,

…coward who hides behind a pseudonym…

when you consider it was posted by cupandsaucer Gary Weiss (aka 70.23.85.112, Mantanmoreland, Lastexit, Tomstoner, Lamborghini715, and cupandsaucerwithsugar), who’s turned pseudonymity into a way of life?

In February of this year, some felt that question was answered in the form of a minor yet tremendously significant incident from which it could be fairly deduced that Weiss was, on the morning of January 19, 2007, using a computer on the network of the Depository Trust and Clearing Corporation (DTCC).

The basis of that deduction is explained in detail here.

Given the enormous value of the financial assets over which the DTCC is steward, and the high level of security that must necessarily mediate access to the organization’s premises, much less data networks, one can immediately rule out any scenario in which Weiss might have been using that computer in anything other than a sanctioned capacity.

Over four days, DTCC Spokesman Stuart Goldstein ignored two emailed requests for comment on this situation. When he finally did respond to a third request received by a staffer over the phone, it was in the form of a blank email. A quick request to re-send the missing content was denied, and five repeat requests over the space of one week were ignored.

Then, in one of the strangest turns of events observed in this saga to date, on February 9, 2007, Goldstein’s reply was delivered, unprompted, by New York Post reporter Roddy Boyd.

From: Boyd, Roddy

Date: Feb 09 2007 – 1:03pm

Subject:

judd,

I spoke to corp comm at DTCC and they told me, on the record, that weiss is not, nor has he ever, been employed or used by DTCC in any capacity, formally or informally. They categorically reject it and tell me that none of them have any recollection of ever talking to him, meeting with him or having any dealings with him.

categorically rejects it.

thats a big hump for a real reporter to get over.

let me put this politely:

As an investigative reporter, laughably per PB, you really, really are a much better PR person.

Lest its meaning be lost on anybody, please carefully re-read and reflect on the sweeping significance of Mr. Boyd’s second sentence:

They categorically reject it and tell me that none of them have any recollection of ever talking to [Gary Weiss], meeting with him or having any dealings with him.

Now, please carefully read and consider the meaning of the following:

In recent weeks, a confidential source has delivered to AntiSocialMedia.net multiple emails, all pre-dating Mr. Boyd’s DTCC proxy denials, in which Gary Weiss refers to active consultations between himself and unnamed DTCC officials on a specific media-related matter.

These emails make no reference to the basis (whether paid or otherwise) of the relationship, but given the extreme lengths to which DTCC leadership has gone to deny so much as a conversation with Weiss, this development is suggestive of what can only be interpreted as unmitigated deception at the highest levels within that organization.

In February, Weiss called claims of a relationship between himself and the DTCC “absolute crap.”

Wishing to rule out the possibility that Roddy Boyd delivered anything but an accurate reflection of the DTCC’s position, earlier this week Stuart Goldstein was asked to affirm the accuracy of Boyd’s statement, as well as to comment on the existence of unspecified evidence that Gary R. Weiss has or has had a professional relationship with the DTCC.

Goldstein’s pithy reply consisted of three words:

From: Stuart Goldstein

date: May 23, 2007 3:01 PM

Subject: Re: Request for comment

Send your evidence.

Because the nature of the evidence does nothing to change the facts at hand, and in order to honor commitments of confidentiality made to sources, Goldstein’s request was not honored.

An additional request for comment has been ignored by Goldstein.

Given the length to which Goldstein has gone to obscure the truth in this matter, and the length to which Weiss regularly goes to specifically malign critics of the DTCC’s defense of illegal and abusive stock trade settlement failures, a disturbing picture of that organization’s policy of defamatory, surrogate-driven, scorched-earth public relations is beginning to emerge.

Update: 5/31/2007

An alert reader brings to our attention an earlier incident appearing to confirm Goldstein’s lax regard for truth when confronted with questions relating to the DTCC’s role in empowering illegal market manipulation by crooked stock lenders.

The following originally appeared here on May 11, 2004.

FinancialWire received a confidential email between a reporter and Stuart Z. Goldstein, Managing Director of Corporate Communications for the Depository Trust and Clearing Corp. in which Goldstein was represented as denying that a lawsuit filed by Nanopierce Technologies exists.

The chief spokesperson for the DTCC, whose board of directors represent a who’s who of financial entities, including Lehman Brothers, Citigroup / Solomon Smith Barney’s Corporate Investment Bank, and Morgan Stanley, was quoted as stating that the “lawsuit” did not exist and was simply “charges being leveled by internet crackpots.”

FinancialWire sent Goldstein a scanned copy of the actual court filing, which occurred April 29 at 12:15 p.m., and asked Goldstein if he or the DTCC still denied its existence or had any comments. No response was received.

It would be strange, but not unreasonable, had Goldstein himself not yet heard of the lawsuit when asked. But if that were the case, the proper response would be to explain as much. Instead, Goldstein was dismissive and insulting: the general embodiment of his employer.

But beyond Goldstein’s obviously striking social shortcomings, these are the mannerisms of an organization with something dark to hide, but utterly lacking in accountability.

What is that dark thing?

We know that it includes records of billions upon billions of dollars of failed stock trades (the one thing the DTCC is tasked with completing successfully). Some allege that beyond the records, there is also proof that elements within the DTCC are profiting wildly from this fraud.

Given what I’ve seen, I’m inclined to believe it’s true.

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.

Preface and editor’s note: AntiSocialMedia.net has 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 third part of this series on Gary Weiss – 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. Comments containing any other personally identifying information belonging to Mrs. Weiss will be immediately deleted and the commenter barred from further use of this site.

Background: In parts one and two of this four part series, we established that Gary Weiss is the would-be anonymous writer of the blog dubbed Mediacrity, which considers itself “A media insider’s occasional rants on goofs, bias and hypocrisy in the media.”

Also, a prior post on this blog demonstrated Gary Weiss’s proclivity for creating fake Amazon.com book reviews for the purpose of boosting of his own books’ ratings while deflating the ratings of those authors with whom Gary has tangled in the past.

You’ll need to keep both of those facts in mind as you read the following.

While researching links between Gary Weiss and the targets of his abusive Amazon.com book reviews, we hit a dead end when it came to understanding exactly what Gary had against author Ian Williams, whose two books were trashed by reviewers Ted Dichtler (reviews since deleted) and Raymond Stella in the spring of 2005. What made this instance so curious was the fact that soon after we announced the forthcoming investigation on the topic of Weiss’s fabricated Amazon.com reviews, Gary Weiss (as Ted Dichtler) quietly deleted his one-star thrashing of Williams’ book, United Nations for Beginners, replacing it with a tepid review of another author’s book about the UN.

The Williams book review, which we captured prior to Gary’s replacement of it, read as follows:

Trash. A superficial book that offers a la-la land version of the UN, failing to mention entire areas in which the UN has failed miserably.
Also, since it was recently disclosed that Ian Williams has actually worked for the UN as a media trainer and pamphlet writer, it seems to me that the validity of this book is entirely questionable. He boasts about his UN work on his website. That only adds to the tastelessness of this rubbish. (Ted Dichtler)

Most would probably consider those sentiments a little harsh for an illustrated book aimed at school-aged kids.

While we did finally discover the reason for Gary’s acrimony toward Ian Williams, that knowledge arrived too late to be included in the Amazon.com review fabrication story.

Which is why we’re telling you about it now.

Two independent sources confirm that Gary Weiss’s wife was at one time credentialed as a reporter for the Pioneer of India newspaper, covering the United Nations. As a credentialed UN correspondent, Mrs. Weiss was eligible to join the United Nations Correspondents Association (UNCA), which she did. Subsequently she sought a paid position with UNCA, held at the time by Ian Williams’s wife. Mrs. Weiss had apparently sought other paid positions within the UN proper as well. Williams, UN correspondent for The Nation, was former UNCA president.

For reasons that don’t matter now (but will explored in part four), in March of 2005, Mrs. Weiss lost her media credentials and was ordered never to set foot on UN property again. Obviously, she was also taken out of consideration for any position within the UN and UNCA that she had sought.

Those familiar with the situation feel Mrs. Weiss blamed Williams for the circumstances surrounding this unfortunate turn of fate.

A few days after this incident, Gary Weiss – through Amazon.com reviewer Ted Dichtler, called Ian Williams’ book “trash.”

Exactly 30 days after that, Weiss launched the Mediacrity blog, and with it, an attempt at a recurring series called, “Hypocrites on Parade,” focusing on Ian Williams.

Weiss’s first examination of Williams in Mediacrity reads in part as follows:

…Williams is a fourth-rate hack. But fourth-rate hackdom has not prevented other ethics-deprived journos from being publicly pilloried. What is keeping Williams from the gallows?
… If you go on his website, http://www.ianwilliams.info/, you see what I’m talking about–if you can read it. This guy is such a dummy that he’s got black print on a dark blue background.

We feel secure in classifying the above as “mean-spirited.”

“Hypocrites on Parade” would go on to be replaced by “Creeps on Parade” and dozens of drive-by attacks on Williams, in which he is named, among other things: “The Payola Pundit,” “Fourth-rate Hack” (later promoted to “Fifth-rate Hack”), and “Bloated UN Minister of Propaganda.”

The final part of this series, coming very soon, examines the strange circumstances surrounding Mrs. Weiss’s gaining and losing her media credentials, the role Gary Weiss played in that process, and a new wrinkle that even we find difficult to believe.

1. In June of 1995, Gary Weiss told the world that his personal email address was garywbw@aol.com.
2. Gary would go on to use that account to identify himself when posting on Usenet newsgroups for the next 10 years.
3. Primary among those newsgroups were soc.culture.jewish (scj) and its moderated (scjm) subgroup.

During garywbw’s decade long tenure on that newsgroup, several regular and semi-regular posters emerged, including:

• Yitz pascalamb@aol.com / pascalamb@verizon.net
• Daveumansky daveumansky@aol.com / daveumansky@verizon.net
• Ted tdichtler@hotmail.com
• Teddydichtler teddydichtler@hotmail.com
• Tdicktler tdicktler@hotmail.com
• Annieschwartz annieschwartz@hotmail.com
• Brenda catallergest@aol.com

These eight accounts often posted in close temporal proximity to one another, usually in support of each other’s increasingly venomous flame-wars with an uncommonly obnoxious contingent of anti-Semitic trolls.

Then, exactly two years ago on December 20, 2004, Gary found himself in a fix, which you can read unfold in its entirety here, or summarized below.

Basically, fellow scjm newsgroup user cindys confronted garywbw as follows:

cindys: Hey, Gary! I’m really curious to know why you didn’t share with us that you and Dave Umansky are the same person?

garywbw: If this is a joke…you’ll have to tell me the punch line.

cindys: It’s not a joke. A poster on another group, someone who never posted to that particular group before yesterday, told me that I seemed like a “pretty bright person” and gave me weblink to a certain yahoo group and suggested that I might like to read that particular yahoo group for a while. When I clicked over there, I found that “Daveumansky” was a sometime poster to that group and guess what his email address was? garywbw@yahoo.com How do you explain that?

Garywbw: Well, I can’t explain it and I have no idea how that can be, since I don’t have a yahoo address and have never heard of a “daveumansky” or even heard of the existence of same until you mentioned it. So I think someone is pulling your leg. I don’t see the humor, frankly.

Despite his protestations and ten year posting history, within a few days of this exchange garywbw would disappear from Usenet forever.

In December of 2004, cindys referred to an undisclosed Yahoo group whose membership included a user named daveumansky with email garywbw@yahoo.com.

A year earlier, the Yahoo Narcissistic Personality Disorder (NPD) group counted among its active members a user named garywbw, whose email address was daveumansky@aol.com.

By June of 2005, garywbw was replaced by username stopthewarrrrr, though the email address remained daveumansky@aol.com.

By exploiting Yahoo’s dissembler sorting algorithm bug, we learn that indeed, garywbw@yahoo.com = stopthewarrrrr@yahoo.com = daveumanskyfromny@yahoo.com.

On another Yahoo group, this one dedicated to Gary Weiss’s high school alma mater Bronx High School of Science, we observe garywbw using the email address pascalamb@aol.com, and this time, conveniently, Gary signs off using his real name and high school graduation year: 1971.

Usenet posts carry with them header data that’s hidden by default, but which includes important information identifying the origin of a post.

Look at this post by Yitz with its header data included (limited to the most relevant data below):

From: "Yitz"

Date: 18 Nov 2005 17:51:21 -0800

NNTP-Posting-Host: 70.23.102.179

 Compare that with this post by Ted (truncated below):

From: "Ted"

Date: 27 Nov 2005 09:25:49 -0800

NNTP-Posting-Host: 70.23.102.179

Note that between the two posts, one element is identical: Posting-Host. This means both of these posts, while nine days apart, were made from the same computer.

In fact, identical Posting-Host data are also shared by daveumansky, teddydichtler, tdicktler, Ted, annieschwartz and Brenda, suggesting they’re all the same person.

The IP address used in the above example (70.23.102.179) is owned by Verizon and assigned to dsl customers in the pool designated as NY325. Most subscribers in that pool see their IP address (and thus Posting-Host) address change randomly, on roughly a monthly basis.

Some time in the first half of December, 2005, the Posting-Host of garywbw, daveumansky, teddydichtler, tdicktler, Ted, annieschwartz and Brenda all changed to 70.23.42.100 in unison: consistent with a single user scenario posited here.

The point of this exercise is conclusively demonstrate that Gary Weiss = garywbw = daveumansky = pascalamb = Yitz = Ted Dichtler

And here’s why that’s really important…

In April of 2005, a blog called Mediacrity appeared, calling itself a “media insider’s occasional rant on goofs, bias and hypocrisy in the media.”

Mediacrity’s inaugural post is dated April 24, 2005. The first reference to Mediacrity on Usenet occurs the next day, thanks to Ted Dichtler, who read that first post and comments “this guy nailed it on the head.”

Within two hours of Mediacrity’s second post, Dichtler is back on Usenet spreading the word.

This time two interesting things happen.

First, a real person, Susan Cohen, asks Ted to clarify the identity of Alison Weir, the post’s subject. Soon thereafter, Mediacrity appends the post with:

A reader informs me that the Jew-baiting pinhead who met with Okrent is not to be confused with a distinguished historian also named Alison Weir.

Second, a couple of days later a new poster arrives on the thread started by Dichtler. His name is Rick Ruby, and his email address is: mediacrity@hotmail.com (the original email used by the writer of Mediacrity, recently replaced by a gmail account).

To be certain, let’s compare the header data of Ted Dichtler and Rick Ruby’s respective posts.

Ted Dichtler (full version here):

From: "Ted"

Date: 26 Apr 2005 12:10:24 -0700

NNTP-Posting-Host: 64.12.116.66

Rick Ruby (full version here)

From: "Rick Ruby"

Date: 29 Apr 2005 07:03:57 -0700

NNTP-Posting-Host: 64.12.116.66

The IP data (corresponding to AOL at that point) are identical, confirming Ted Dichtler and Rick Ruby posted from the same location, and are most likely the same person.

At this point, it seems we can confidently add two elements to the growing list of identities that begins with Gary Weiss:

Gary Weiss = garywbw = daveumansky = pascalamb = Yitz = Ted Dichtler = Rick Ruby = Mediacrity blogger.

If each of those relationships is accurate, this chain of equalities may also be correctly expressed as Gary Weiss = Mediacrity blogger.

Knowing Gary is the blogger behind Mediacrity opens up a whole universe of conflicts and complications to examine, as we shall do in Part Three of this series, set for publication on Saturday, December 23, 2006.

————————————————

Bonus material: a little running up of the score

“Ted Dichtler” as the name of one of the five fake amazon.com book reviewers we demonstrated were created and abused by Gary Weiss to artificially boost his own books’ ratings while artificially depressing the ratings of those authors who’ve tangled with him in the past.

“Catallergest” (see the email address of Brenda above) is the nickname used by Marty Ross, another of Weiss’s false Amazon.com book reviewer sockpuppets whose reviews have since been deleted.

“Chuck T” is among the remaining five amazon.com reviewers we claim Gary Weiss created and used abusively, but whose reviews have yet to be deleted. According to Technorati.com, Mediacrity belongs to chucktatum, presumably named for the character of the same name starring in the 50s flick “Ace in the Hole” and seen in this image, which is also used on the Mediacrity About Me page.

A reader tells me that originally, Technorati.com listed “Ted Dichtler” as the owner of Mediacrity. We’ve yet to find independent verification of this claim, but are inclined to believe it.

Except for a brief note on Nov. 1, 2006, Mediacrity went dark from Sept.10 – Nov.21: a period encompassing the unprecedented break in Gary Weiss’s blogging and Wikipedia editing seen while Gary was in India.

This is the first of a four part series on the origins of the pathology apparently afflicting our subject, Gary Weiss. This pathology is manifest as a compulsion to invent false identities online for personal gain, and, when discovered, to lie, deny, and attack his accusers.

Gary himself provides a beautiful launching point in the form of a story written for Business Week in June of 1995, entitled Online Investing. Around halfway, Gary offers this lynchpin piece of information:

My AOL address is Garywbw@aol.com. I also have a Prodigy address (NNEL28A@prodigy.com) and an address at an Internet provider known as NETCOM On-Line Communication Services Inc.: garyrw@ix.netcom.com. But initially, I was only at AOL.

It seems safe to assume that garywbw stands for “Gary Weiss Business Week.”

It also seems safe to assume that in 1995, Gary Weiss was among the many oblivious to the future implications of printing one’s personal email address in Business Week.

That future is here.

Exactly six months prior to Gary’s publication of his email address in Business Week, he made what appears to be his first newsgroup posting, to the misc.writing group.

The next post made as garywbw wouldn’t come until September of 1996, simply reading:

Looking for people who have had any dealings with [Monitor Investments, Global Equities Grp., State Street, Norfolk, Biltmore], as well as Sovereign Equity Management and First Hanover. Kindly email me at garywbw@aol.com.

Three months later, part one of Gary Weiss’s BusinessWeek story The Mob on Wall Street would make extensive reference to four of the firms inquired about in the above post.

Point being, garywbw@aol.com is our Gary Weiss.

Garywbw spends the first part of 1997 as a surprisingly constructive participant in a few support-related groups. Then, in March of that year, we see Gary’s first, fateful post to the newsgroup soc.culture.jewish:

This newsgroup sucks

Is there a better one somewhere — a moderated one, preferably to keep out the kooks, flames and so on? One where “Jewish culture” is actually discussed? Pls advise.

We consider that post “fateful,” because it represents Gary’s first apparent contribution to the newsgroup where the seeds of his habitual deception were sown.

Part two of this series examines a few of those seeds; and, if we may be so bold, will likely freak you out.

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.

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

Which brings us to Susan Antilla.

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

A quick word about good journalism.

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

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

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

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

The Times regrets having printed the rumor.

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

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

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

Draw your own conclusions by considering this pattern:

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

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

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.