Tag Archive | "Wall Street corruption"

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Fortune Magazine Stonewalls Exposure of Bethany McLean Perfidy


Summary – This post contains two emails I sent Fortune Magazine regarding Deep Capture’s work documenting an inappropriate relationship between journalist Bethany McLean and hedge fund Rocker Partners. If after reading this you agree that mine were fair questions deserving of reply, then please do me this small service: write Fortune and tell them you think they should answer these questions (you might even post a copy of your email as a comment to the bottom of this post, so there be public record of it):

Managing Editor: Andrew Serwer – aserwer@fortunemail.com

Time, Inc. Communications Director Katy Reitz – Katy_Reitz@timeinc.com

Dear Reader,

When Fortune Magazine contacts me I always respond (excluding unnoticed emails they send at day’s end hours before press-time). Yet Fortune Magazine has refused to comment on  DeepCapture’s documentation of the perfidious behavior of Fortune Magazine Reporter Bethany McLean. Two DeepCapture posts (“Bethany McLean: Your Benefit of the Doubt is Hereby Revoked” and “Rocker Partners and Bethany McLean: the Smarmiest Guys in the Room“) reconstruct how Rocker Partners sought out Bethany McLean to target a firm, took out a large short position 10 days after her cooperation was secured, then doubled down two months later, just three days before Bethany published her hatchet job (a time-line that suggests, of course, that they were privy to the content and timing of Bethany’s article). In addition, Bethany’s  reporting relied heavily upon Spyro Contogouris, a conman, now imprisoned, about whom she spun apologetics while regurgitating his criticisms (criticisms that with the passage of time proved baseless). When the share price of the target company rose, Bethany commiserated with the short-selling hedge fund that had assigned her the story, sending this email:

From: Bethany McLean
Sent: Thursday, March 22, 2007 6:12:48 PM
To: Marc Cohodes
Subject: Re: ffh

Sorry to be a little bad-tempered. This FFH story almost killed me, so I hate hearing that it was pointless. Maybe it’ll be a long, slow thing..

Thinking that Fortune Magazine might be troubled to learn that one of its journalists had provided such white glove service to a hedge fund, I sent Fortune two emails (below) giving opportunity to comment. They have refused. Please read the correspondence below and, if you agree that Fortune Magazine should address these concerns publicly, please let  Fortune know it (following the instructions at the top of this essay).

I thank you in advance for considering this request.

Respectfully,

Patrick M. Byrne

========================================
On Mon, Dec 22, 2008 at 7:03 PM, Patrick Byrne wrote:

Dear Ms. Reitz,

Happiest of holidays.

Last week I sent you a link to an exposé on erstwhile Fortune journalist Bethany McLean. https://www.deepcapture.com/bethany-mclean/

Today DeepCapture posted the sequel: analysis of the trading records of Rocker Partners (a.k.a. Copper River) confirms that Rocker did front-run Bethany’s story, both shortly after she met with Rocker Partners’ representative Richard Sauer (a.k.a. “Lavaman”, himself a former SEC attorney whose federal career seems to mirror Bethany’s approach to journalism), and then again immediately before Bethany published. https://www.deepcapture.com/rocker-partners-and-bethany-mclean-the-smarmiest-guys-in-the-room/

Note the data in that exposé regarding failures to deliver, and the likely provenance of those failures, in my recent critique of a DowJones reporter (“Carol Remond Tells a Joke She Doesn’t Get“).

I am preparing this as a story to be included in an Overstock email that gets sent to 17 million of my closest friends. It would explain that a crooked hedge fund (since imploded) cooperated with a bent reporter to break the law, the reporter used her offices at Fortune to indulge their illegal acts, that Fortune had been warned of this possibility and engaged in a cover-up, and that Fortune practices shill journalism for favored Wall Street elite, many of whom are crooks (a message that will, I expect, resonate). In short, Bethany’s emails and Rocker’s trading records will be used to demonstrate how the standards of journalism evinced by Fortune are more bent than a streetwalker’s stumble.

I understand the legal ramifications of suggesting to 17 million Americans that Fortune has taken part in a criminal conspiracy, of course, and will happily provide our lawyers’ address for receipt of service, upon request.

On the other hand, an abundance of journalistic caution leads me to contact Fortune once again to offer opportunity for comment, and in particular, to correct me if I am in error. In fact, I would like to offer you the opportunity to respond in up to 50 words that I will commit not to edit or abridge, an offer that is surely more generous than those your publication generally makes (setting aside whatever unknown arrangements it or its journalists make with hedge funds such as Mr. Rocker’s, of course). Please feel free to respond to the allegations above, or the questions below, or simply respond more generally, as you prefer.

I look forward to hearing from you. Until then, I remain,

Your humble servant,

Patrick Byrne

Journalist, DeepCapture.com

PS Please tell [a long-time acquaintance at Fortune] that I return her regards…

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

From: Patrick Byrne
Sent: Wednesday, December 17, 2008 2:22 AM
To: Katy_Reitz@timeinc.com
Subject: Respectfully request on-the-record response

Dear Ms. Reitz,

Please find a blog that DeepCapture posted today regarding 2006-2007 communications between a hedge fund manager and erstwhile Fortune reporter Bethany McLean concerning Canadian financial company Fairfax. I have obtained these communications pursuant to the decision of a New Jersey State court.

As is evident from the emails, the hedge fund manager put Ms. McLean up to the story hoping that a report in Fortune magazine would move the stock down. When the stock instead went up it rendered Ms. McLean’s story “pointless” in her eyes (which makes [sense] only in a world where her “point” was to move the stock down). After commiserating with the hedge fund Ms. McLean expressed her wish that the targeted company’s demise would be “a long, slow thing.”

Questions:

1) What is Fortune’s policy regarding journalists working with short selling hedge funds to drive down stock prices?

2) Has Fortune conducted an internal investigation into the relationship between Ms. McLean and hedge funds, including the one mentioned in the blog?

a) What were the results of that investigation?

b) Did this investigation have anything to do with Ms. McLean’s departure from Fortune?

3) Has Fortune conducted an internal investigation to determine the accuracy of Ms. McLean’s reporting on Fairfax and on other companies?

a) What was the result of that investigation?

b) Did this investigation have anything to do with Ms. McLean’s departure from Fortune?

4) Is Fortune aware that nearly every story written by Ms. McLean since 2001 was sourced from the same group of hedge funds, and that she never once contradicted their analysis? By Fortune’s standards, does this constitute “balanced” reporting?

5) In one email, Ms. McLean mentions Spyro Contogouris, who was employed by a group of hedge funds to harass and threaten Fairfax executives. After Mr. Contogouris was arrested by the FBI, Ms. McLean continued to characterize him as a credible financial researcher who worked independently of hedge funds. Does Fortune stand by that characterization?

I do not know when I am going to publish, but would expect it would be next week. However, I sincerely wish to represent fairly the point of view of Fortune.

Most respectfully,

Patrick Byrne

Reporter, DeepCapture.com

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

1) Let Fortune know how you feel about Bethany McLean’s work by writing Managing Editor Andrew Serwer (aserwer@fortunemail.com) and TimeLife’s spokesperson Katy Reitz (Katy_Reitz@timeinc.com) (post copies in the comment section below!);

2) email it to a dozen friends;

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

Posted in Journalists Tried to Be Players But Became Pawns, The Deep Capture CampaignComments (67)

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Regulators Spring Into Action Against Naked Short Sellers. Or not.


As is explained in numerous pieces in DeepCapture, there are many cracks in the settlement system, one of them being the DTCC’s Continuous Net Settlement system, or CNS. I am highly confident that the federales (at least, the SEC) are not permitted to explore the other cracks, that the failures to deliver that they see within the CNS are thus but a small fraction of all that exist, and that, therefore, trying to gauge the depth of the naked short selling problem from the level of FTD’s in the CNS is like trying to guess the condition of an automobile from the level of water in its radiator.

But it’s a start. Given that the CNS system is the one place the SEC can look, and might be able to do something about, it is instructive to see how well they are cleaning up unsettled trades there.  Towards that end, DeepCapture has analyzed the data that the SEC released last week. These graphs show their fine progress in that regard.


============================================================================
Any questions?

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

1) email it to a dozen friends;

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

Posted in Deep Capture the Data, Our Captured Federal Regulator the SEC, Unsettled Trades & Systemic RiskComments (37)

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Hedge Funds to US Soldiers: "I need a Maybach, so… You can all die too."


This story gets told in pictures, mostly.

Take a Mercedes, stir in a couple hundred thousand dollars, and you get a car called a Maybach. Hedge fund guys in New York and Connecticut buy them.

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

This is a Humvee. US military personnel drive them around war zones.

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

This is an Improvised Explosive Device. Extremists set them up on roadsides in Iraq and Afghanistan.

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

When a Humvee meets and IED, this is the result:

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

Fortunately, there is a company in South Carolina called “Force Protection, Inc.” They manufacture “Mine Resistant Ambush Protected” vehicles (“MRAP”).

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

Under their skin, MRAPs have V-shaped hulls that deflect bomb blasts, making them nearly impervious to IED’s. The last time I checked (June, 2008), there had been 300 IED attacks in Iraq against MRAP’s, and only one death (that, when the explosion caused a roll-over which killed the soldier in the gun turret).

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

The Department of Defense has placed huge orders for MRAP’s. Force Protection revenue has soared, and they are nicely profitable.

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

The stock price of Force Protection was holding its own….

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

A natural move at this point might have been to do a secondary, that is, to sell some more of their stock into the public market, raising capital with which they could expand their production to keep up with DOD demand.  However, someone started naked short selling them:

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

Force Protection is thus not able to complete a secondary, and remains unable to meet DOD’s demand.

Thus, this month more of these will be sent home from Iraq……..

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

….. so that soft hedge fund guys can have more of these:

.

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

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

1) email it to a dozen friends;

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

Posted in Deep Capture the Data, Ruined Firms & Looted PensionsComments Off on Hedge Funds to US Soldiers: "I need a Maybach, so… You can all die too."

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Hedge Funds to US Soldiers: “I need a Maybach, so… You can all die too.”


This story gets told in pictures, mostly.

Take a Mercedes, stir in a couple hundred thousand dollars, and you get a car called a Maybach. Hedge fund guys in New York and Connecticut buy them.

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

This is a Humvee. US military personnel drive them around war zones.

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

This is an Improvised Explosive Device. Extremists set them up on roadsides in Iraq and Afghanistan.

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

When a Humvee meets and IED, this is the result:

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

Fortunately, there is a company in South Carolina called “Force Protection, Inc.” They manufacture “Mine Resistant Ambush Protected” vehicles (“MRAP”).

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

Under their skin, MRAPs have V-shaped hulls that deflect bomb blasts, making them nearly impervious to IED’s. The last time I checked (June, 2008), there had been 300 IED attacks in Iraq against MRAP’s, and only one death (that, when the explosion caused a roll-over which killed the soldier in the gun turret).

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

The Department of Defense has placed huge orders for MRAP’s. Force Protection revenue has soared, and they are nicely profitable.

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

The stock price of Force Protection was holding its own….

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

A natural move at this point might have been to do a secondary, that is, to sell some more of their stock into the public market, raising capital with which they could expand their production to keep up with DOD demand.  However, someone started naked short selling them:

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

Force Protection is thus not able to complete a secondary, and remains unable to meet DOD’s demand.

Thus, this month more of these will be sent home from Iraq……..

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

….. so that soft hedge fund guys can have more of these:

.

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

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

1) email it to a dozen friends;

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

Posted in Deep Capture the Data, Ruined Firms & Looted PensionsComments (18)

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Hedge Funds to Non-Cancer Patients: "You also die."


Stock manipulators think not just cancer patients can die to pay for ski trips to Gstaad. They also think those suffering from various pulmonary and blood diseases can die, too.

InterMune, Inc., is a California firm that focuses on the research, development, and commercialization of therapies in pulmonology and hepatology. It generates over $50 million/year in revenue, primarily from Actimmune, for patients with osteopetrosis and chronic granulomatous disease. It’s candidate drug Pirfenidone is in phase III clinical trials for the treatment of idiopathic pulmonary fibrosis. Its candidate drug ITMN-191, a hepatitis C virus protease inhibitor, is is in Phase Ib clinical trials to treat patients with HCV infections. It has license and collaboration agreements with some of the most prestigious names in biotech: Hoffmann-LaRoche, Inc. and F. Hoffmann-LaRoche, Ltd.; Genentech, Inc.; Connetics Corporation; Boehringer Ingelheim International GmbH; Novartis Corporation; Array BioPharma, Inc.; Eli Lilly & Company; and ALZA Corporation.

Stock manipulators think people with such medical problems can die, as they express by manipulating the price of InterMune stock so that InterMune cannot fund its research by accessing the capital market at the true market-clearing price of its stock.


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

In the interests of journalistic integrity, I should disclose that I don’t much like the people doing this.

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

1) email it to a dozen friends;

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

Posted in Ruined Firms & Looted Pensions, The Deep Capture CampaignComments (21)

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Hedge Funds to Non-Cancer Patients: “You also die.”


Stock manipulators think not just cancer patients can die to pay for ski trips to Gstaad. They also think those suffering from various pulmonary and blood diseases can die, too.

InterMune, Inc., is a California firm that focuses on the research, development, and commercialization of therapies in pulmonology and hepatology. It generates over $50 million/year in revenue, primarily from Actimmune, for patients with osteopetrosis and chronic granulomatous disease. It’s candidate drug Pirfenidone is in phase III clinical trials for the treatment of idiopathic pulmonary fibrosis. Its candidate drug ITMN-191, a hepatitis C virus protease inhibitor, is is in Phase Ib clinical trials to treat patients with HCV infections. It has license and collaboration agreements with some of the most prestigious names in biotech: Hoffmann-LaRoche, Inc. and F. Hoffmann-LaRoche, Ltd.; Genentech, Inc.; Connetics Corporation; Boehringer Ingelheim International GmbH; Novartis Corporation; Array BioPharma, Inc.; Eli Lilly & Company; and ALZA Corporation.

Stock manipulators think people with such medical problems can die, as they express by manipulating the price of InterMune stock so that InterMune cannot fund its research by accessing the capital market at the true market-clearing price of its stock.


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

In the interests of journalistic integrity, I should disclose that I don’t much like the people doing this.

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

1) email it to a dozen friends;

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

Posted in Ruined Firms & Looted Pensions, The Deep Capture CampaignComments (20)

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Ford Motor And General Motors (F & GM) naked short selling


Given that a couple million American jobs rely directly or indirectly upon the survival of Ford and GM, and given that they are running out of capital and are standing on the steps of Congress with tin cups in their hands, wouldn’t it be nice if we had a functioning capital market that was determining the true market clearing price of their equity?

Once again, the following are just the failures in the CNS system, which is some unknown (but small, I believe) fraction of the total:

I guess these car guys don’t have “the juice” with the SEC that their Wall Street counterparties have. Perhaps that is because fewer staff within the SEC dream of getting jobs in Detroit than in Manhattan.

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

1) email it to a dozen friends;

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

Posted in Ruined Firms & Looted Pensions, The Deep Capture CampaignComments (14)

Tags: , , , , , ,

Ford Motor And General Motors (F & GM) naked short selling


Given that a couple million American jobs rely directly or indirectly upon the survival of Ford and GM, and given that they are running out of capital and are standing on the steps of Congress with tin cups in their hands, wouldn’t it be nice if we had a functioning capital market that was determining the true market clearing price of their equity?

Once again, the following are just the failures in the CNS system, which is some unknown (but small, I believe) fraction of the total:

I guess these car guys don’t have “the juice” with the SEC that their Wall Street counterparties have. Perhaps that is because fewer staff within the SEC dream of getting jobs in Detroit than in Manhattan.

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

1) email it to a dozen friends;

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

Posted in Ruined Firms & Looted Pensions, The Deep Capture CampaignComments (14)

Tags: , , , , , ,

The DTCC's CNS naked short selling residue


In a previous post I named various places where unsettled trades can accumulate: in the desks of brokers, in pre-netting among brokers, in the Continuous Net Settlement (CNS) system, in the Stock Borrow Program (SBP), through ex-clearing, and in delivery mechanisms from offshore exchanges. For all I know, these represent just a subset of the cracks in the system. The great unanswered question is, How much financial toxic waste has naked short selling and its various equivalents left scattered throughout these cracks?

The answer is: I don’t know, and I think no one knows. I suspect no one agent has the full picture of what is going on across all of these cracks. In fact, I suspect some of these cracks are so obscure no one has a clear picture of what is going on in them individually, let alone collectively.

To some degree this is knowable a priori. We have a system that is shielded from scrutiny of every type. State regulators cannot successfully subpoena it (as various state regulators have told me) because the DTCC argues it is shielded by federal regulation. Yet when Feds try to look inside it they are simply rebuffed, and are helpless to assert themselves (as a high-level SEC official told some colleagues of mine). The Feds do not understand it (as a former DTCC employee and various Feds have told me). On those occasions that the Feds do get to look inside the system,  they get shined-on (as a former DTCC official tells me and a former SEC official confirms).  In fact, four years ago when I began this quest, the first thing I tried to do was to find out who regulated the DTCC, and quickly discovered that, other than a brief mention in an obscure GAO report, even the Feds are not sure if they regulate it.  And yet, through this opaque system the treasure of the ages passes every week. Such system-design is a recipe for disaster.

To a lesser degree this is knowable a posteriori, though getting data about the system from the system is an exercise in Kafkaesque futility. There are endless anecdotes of trades that won’t settle, of course. There is also the partial information expressed by the Reg SHO list.  There are various FOIA responses which have been pried from the SEC. And for the true aficionados, there are, lately, data files that the SEC periodically releases to the public regarding failures in one of the cracks mentioned, the CNS. Making use of these files is impractical for any members of the general public who do not employ an economist, statistician, and database expert to work the data.

Fortunately, DeepCapture employs an economist, a statistician, and a database expert to work the data. In the following series of posts I am going to reveal their output, stressing again that the failures I will be disclosing are not the totality of failures, but simply a fraction of the total, residing in just one of the cracks (the CNS) into which our federal regulator is permitted to peer.

Here is a chart showing the CNS failures from 2004, the year Reg SHO was adopted, through Q1, 2008:

Here is the same data with some key Reg SHO dates noted:

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

1) email it to a dozen friends;

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

Posted in Deep Capture the Data, Unsettled Trades & Systemic RiskComments (0)

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The DTCC’s CNS naked short selling residue


In a previous post I named various places where unsettled trades can accumulate: in the desks of brokers, in pre-netting among brokers, in the Continuous Net Settlement (CNS) system, in the Stock Borrow Program (SBP), through ex-clearing, and in delivery mechanisms from offshore exchanges. For all I know, these represent just a subset of the cracks in the system. The great unanswered question is, How much financial toxic waste has naked short selling and its various equivalents left scattered throughout these cracks?

The answer is: I don’t know, and I think no one knows. I suspect no one agent has the full picture of what is going on across all of these cracks. In fact, I suspect some of these cracks are so obscure no one has a clear picture of what is going on in them individually, let alone collectively.

To some degree this is knowable a priori. We have a system that is shielded from scrutiny of every type. State regulators cannot successfully subpoena it (as various state regulators have told me) because the DTCC argues it is shielded by federal regulation. Yet when Feds try to look inside it they are simply rebuffed, and are helpless to assert themselves (as a high-level SEC official told some colleagues of mine). The Feds do not understand it (as a former DTCC employee and various Feds have told me). On those occasions that the Feds do get to look inside the system,  they get shined-on (as a former DTCC official tells me and a former SEC official confirms).  In fact, four years ago when I began this quest, the first thing I tried to do was to find out who regulated the DTCC, and quickly discovered that, other than a brief mention in an obscure GAO report, even the Feds are not sure if they regulate it.  And yet, through this opaque system the treasure of the ages passes every week. Such system-design is a recipe for disaster.

To a lesser degree this is knowable a posteriori, though getting data about the system from the system is an exercise in Kafkaesque futility. There are endless anecdotes of trades that won’t settle, of course. There is also the partial information expressed by the Reg SHO list.  There are various FOIA responses which have been pried from the SEC. And for the true aficionados, there are, lately, data files that the SEC periodically releases to the public regarding failures in one of the cracks mentioned, the CNS. Making use of these files is impractical for any members of the general public who do not employ an economist, statistician, and database expert to work the data.

Fortunately, DeepCapture employs an economist, a statistician, and a database expert to work the data. In the following series of posts I am going to reveal their output, stressing again that the failures I will be disclosing are not the totality of failures, but simply a fraction of the total, residing in just one of the cracks (the CNS) into which our federal regulator is permitted to peer.

Here is a chart showing the CNS failures from 2004, the year Reg SHO was adopted, through Q1, 2008:

Here is the same data with some key Reg SHO dates noted:

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

1) email it to a dozen friends;

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

Posted in Deep Capture the Data, Unsettled Trades & Systemic RiskComments (26)

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