The Jailhouse

[Ignutz]

“60 Minutes” threatening to cut to the heart of the matter ...

March 24, 2006 (FinancialWire) General Electric’s (NYSE: GE) “Dateline NBC” didn’t quite make it all the way out of the “can” with its truncated piece on naked short selling, believed by most to have been intimidated by the Depository Trust & Clearing Corp., which has been known to exercise blatant media interference, including with this newswire.

Now comes Viacom’s (NYSE: VIA).CBS network’s “60 Minutes” Sunday night, threatening to cut to the heart of the matter – the battle between Biovail (NYSE: BVF) and a major hedge fund, SAC Capital, with Gradient Analytics in the middle, and possibly including a major financial news personality, James Cramer, co-founder of TheStreet.com (NASDAQ: TSCM).

“Investment pools for the very rich are known as hedge funds. One of the major ones is being accused of spreading negative information about a major company and then betting on its falling stock price,” the network is trumpeting at http://www.cbsnews.com/stories/1998/07/08/60minutes/main13502.shtml

Meanwhile, another of the journalists, Herb Greenberg, formerly of TheStreet.com and now with Marketwatch, a unit of Dow Jones (NYSE: DJ), will welcome U.S. Securities and Exchange Commission Chair into a lion’s den of supporters when both speak at the annual conference of the Society of American Business Editors and Writers. The announcement is at http://www.sabew.com It may be the venue in which the Commissioner unveils the SEC’s proposed new “guidelines” for the circumstances under which journalists may be subpoenaed.

Greenberg will discuss the subpoenas himself on a panel with Joseph Nocera, a New York Times (NYSE: NYT) columnist, Dan Colarusso, business editor for the New York Post, and Dave Beal, columnist for the St. Paul Pioneer Press, who will moderate the panel.

Greenberg, who has been alleged in affidavits as having close ties with Gradient Analytics and whose reporter has been accused of having ghost-written some of the research firm’s reports, was more recently famously associated with Cramer in a joint TV appearance where Cramer wrote “BULL” on his subpoena and tossed it ceremoniously on the floor.

Also, Myron Kandel, the retired TV business news reporter, will moderate the annual Gary Klott Ethics Symposium, focusing on hedge funds, short sellers, regulators and the ethical challenges for journalists and editors working in that realm. Participating will be Dave Kansas, Money & Investing Editor of The Wall Street Journal; Jane Kirtley, Silha Professor for Media Ethics and Law University of Minnesota, and Ed Wasserman, Knight Chair of Ethics at Washington and Lee University.

At the same time, Cramer and TheStreet.com’s current President, James Lonergan, have been selling shares in the company. Lonergan sold 10,000 shares last Friday. Cramer exercised an option to buy 12,500 shares at $1.73 to $2.93 on March 15, and turned them over immediately at a price range of $7.76 to $7.87, enjoying about $5 differential.

In another strange turn of events, a TheStreet.com publication, RealMoney, has been stringently arguing for a higher valuation for Overstock.com, leaving observers scratching their heads, knowing Cramer’s and Overstock (NASDAQ: OSTK) CEO’s Patrick Byrne’s histories of animosity. The writer even visited Overstock.com and came out claiming Byrne is a genius manager, and not at all “crazy.”

Finally, there have been questions raised about the early history of the “subpoenas,” with one online publisher calling it “SubpoenaGate.”

According to the website, when U.S. Securities and Exchange Commission Chair Chris Cox first reacted to the news that three journalists, Herb Greenberg and Carol Remond, both of Dow Jones, and CNBC’s television personality James Cramer, a co-founder of TheStreet.com, had been issued subpoenas by enforcement, he indicated that neither he nor other Commissioners were aware of them.

The subpoenas, issued by the SEC’s office of enforcement, are part of an investigation into whether there was front-running and fraudulent reports, as well as certain media witting or unwitting cooperation as part of an alleged collusion between hedge fund Rocker Partners and Gradient Analytics as part of a possible naked short selling and/or short selling campaign against Overstock.com and other public companies.

The Commission has held the subpoenas until it can set new guidelines for subpoenas issued to journalists, guidelines that according to the SEC’s proposed schedule, appear slightly overdue at this point.

Dave Patch, editor of Stockgate Today, published by http://www.investigatethesec.com, is questioning whether the Commissioner’s statements were accurate. He says that before subpoenas can be issued to anyone, the enforcement attorneys must fill out a standard form that outlines specifically what the attorneys are seeking and who they are seeking it from. According to Patch, Chairman Cox or one of his designated staff members must approve the case, including authorization for all subpoenas.

While Cox’s schedule is not precisely known before the dam broke, he had been hospitalized for more than a week sometime just before the episode.

Patch said that SEC Spokesperson John Heine, when asked, neither confirmed nor denied that the Chairman or the Chairman’s office had approved the case and the subpoenas when presented the prescribed document by the San Francisco office that was afterwards vilified for allegedly “not” giving the Commission advance notice of its intentions.

If Cox did not give direct approval, did he misspeak when he initially threw his enforcement division to the wolves? He is new, and might not have known the procedures. Or did he know the procedures and deliberately give the impression the enforcement division had not followed them? Or are these not the procedures, or if so, were they actually not followed?

Patch is calling for an independent investigation into the matter.

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