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4/7/05 - Financialwire: StockGate: DATELINE NBC Cancelled And Attorney Accuses DTCC Of ‘Cheap Thuggery’

StockGate: DATELINE NBC Cancelled And Attorney Accuses DTCC Of ‘Cheap Thuggery’

April 7, 2005 (FinancialWire) It’s now zero days until the airing of the DATELINE NBC expose on illegal manipulative shortselling, which has suddenly been “indefinitely delayed” by the General Electric (NYSE: GE) network, and the Depository Trust and Clearing Corp. has received a letter from Marshal Shichtman, Esq., warning the DTCC not to destroy or tamper with evidence relating to its alleged successful plot to interfere with the media.

On February 7, Investors Business Daily asked MarketWatch, then co-owned by Viacom (NYSE: VIAb) but now owned by Dow Jones (NYSE: DJ) to shut off its FinancialWire feed that it also re-propogated to Yahoo (NASDAQ: YHOO). Is it possible that now, NBC has also fallen victim to a halt-the-media conspiracy that has outgrown even FinancialWire?

No one is talking, but DATELINE is reportedly blaming the Pope’s death, the Prince Ranier death, and the Prince Charles wedding and other events as causing the delay.

However, a desk person at the network revealed that the story is actually being replaced by an Al Roker interview with Ruben Studdard of American Idol fame, and not by pieces on either the Pope or Ranier or Prince Charles. When asked how Studdard was more important than a major financial expose, she stuttered that “this is the answer I’ve been told to give.”
An investigation by FinancialWire revealed that the newsfeed was shut down at the request of an official of the DTCC, who had complained to Investors Business Daily that FinancialWire publishes “opinions and not news.” FinancialWire learned that this is contained in emails sent by Investors Business Daily to the Dow Jones publication.

Despite the purported efforts by the DTCC, however, FinancialWire has since been provided to another 300 outlets.
The producers of DATELINE NBC, which suddenly became unresponsive to FinancialWire inquiries after multiple communications over the past few months, is thought by some to have some possibly concerned reporters and producers.

On April 1, In what may or may not be a coordinated offensive to further disparage a competitor, a Dow Jones Newswire reporter published statements about FinancialWire’s coverage, claiming that facts were omitted in a series of FinancialWire articles about SEC filings related to Global Links (OTCBB: GLKCE) that were widely quoted in various media and cited by U.S. Senator Robert Bennett (R-UT) in an exchange with SEC Chair William Donaldson.

Not only were the facts and events cited by the Dow Jones Newswire as missing contained in the series, but FinancialWire had actually scooped the Dow Jones in publishing almost all of them by nearly a month, in follow-up articles March 12, 14, 18 and 21.

Since these articles were so readily available using the simple “Site Search” feature at FinancialWire (http://www.financialwire.net) or referencing them a hundreds of news portals under the Global Links stock symbol, it is not yet known if the effort by Dow Jones reporter Carol Remond was simply “sloppy journalism,” to borrow a phrase from the DTCC’s Thomson when he was referring to EuroMoney, published by Institutional Investor and presumably the then-upcoming DATELINE NBC expose, or if there was further collusion with the DTCC related to the February 7 events.

Informed legal sources have volunteered to FinancialWire that Remond published a court’s order related to Jag Media Holdings (OTC:JAGH) before it was available in the legal data system while claiming that was where she had obtained it, and that she is very close to short sellers, having used Anthony Elgindy as a source regularly before he was charged and convicted. Informed sources have also said that Remond, an avid biker, was seen laughing in the court room at the sight of Elgindy crying after he broke down, which was seen as odd given Elgindy had reportedly been a “trusted, informed source” for the Dow Jones Newswires. Thus it is not unreasonable to suspect murky motivations may have resulted in the factually erroneous article.

For hardened conspiracy buffs, there is also the fact that 47-year-old Floyd Schneider, a Fredon Township, NJ mortgage broker who dabbles in online message boards as “TheTruthseeker,” or as his protagonists call him, “TheGossipSeeker,” and a self-acknowledged source for the Dow Jones Newswires, has, with precipitous timing, suddenly undertaken an online crusade “revealing” that the CEO of FinancialWire’s parent company had once been the target of a lawsuit aimed at a Nasdaq company where Investrend’s CEO served as Chairman of the Board of Directors, and all of its officers and directors, including the partner of Ted Turner, who was then the major shareholder in Time Warner (NASDAQ: TWX), and who also was, perhaps ironically, former president of CBS and CNN.

The lawsuit had been summarily dismissed as lacking merit just over two years ago, but the timing of the posts by a purported Remond confidante, within a day of FinancialWire’s article about Remond’s erroneous column, was termed suspicious by more than one observer who forwarded the posts to FinancialWire.

Schneider is already under court orders barring him from posting “false or defamatory” statements on the internet, has by his own admission had to pay over $60,000 in court costs, and has been the subject of at least three suits, one for as much as $1 million. “TheTruthseeker” was featured in a book by John Emshwiller, national correspondent for the Wall Street Journal, “Scam Dogs and Mo-Mo Mamas.”

The ribbon on the conspiracy package is that court transcripts purportedly show that Schneider’s legal bills were eventually paid directly to his attorney by members of the Elgindy website. Elgindy was also one of those named in the EagleTech Communications (OTC: EATC) court proceedings as a major naked shortseller, along with Jonathan Curshen, who was charged by the SEC for fraud and corruption for a deal developed by Timothy Miles, the proprietor of the discredited Our-Street.com, and another participant in “bashing” FinancialWire, who court proceedings last week revealed has apparently fled to Slovenia ahead of the SEC trial. Curshen is also reportedly out of the country.

One observer said that from all the scrambling and disinformation by so many purportedly reputable and disreputable individuals under the same blanket, something momentous must be afoot.

In his letter to Larry E. Thompson, counsel for the DTCC, Shichtman told the organization that its actions and those of its potential co-conspirators are of “grave concern to my client in a myriad of aspects, including but not limited to, my client’s reputation, my client’s business relationshsips, and First Amendment Principles as your organization operates under the auspices of a Self Regulatory Organization, or a subsidiary thereof.”

The principal trustees for the DTCC are the New York Stock Exchange and the NASD, which owns Nasdaq (NASDAQ: NDAQ).
Shichtman demanded that the DTCC “preserve” all communications regarding the media’s disruption, since these are evidence that is “part of an ongoing investigation into the culpable conduct” related to the events.

“Lastly,” concluded Shichtman, “I am shocked and appalled that your organization, one of the cornerstones of an orderly market, that has done such tacit yeoman’s job, could engage in such cheap thuggery as utilizing strong-arm tactics more suitable to organized crime than an SRO. I would have thought that as a pre-eminent organization, and what should be a model to the world, the DTC would be above such acts.”

The DTCC has been accused by many of acting with impunity, and is hardly a role model for unconflicted governance. Its 21 directors include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); and Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C).

The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined. Transparency is not of the DTCC’s strong suits. In the past it has stonewalled all requests for full and complete trading records.

The DTCC’s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the Nasdaq and until recently, the American Stock Exchange.

Eagletech was represented in a recent winning motion to require the DTCC to produce trading records by the law firms of Christian Smith & Jewell of Houston, Texas and Koerner Silberberg & Weiner, LLP, of New York City.

Eagletech is a plaintiff in a stock manipulation action pending in the state of Florida.

Attorney Wes Christian commented: "This is a significant victory in our on going battle to bring restitution to our clients for the brazen manipulations that were perpetrated against them. Our ability to obtain these records is essential. The judge's clear ruling takes us further down that road."

Other DTCC board members include Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);

Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).

In their comments to the U.S. Securities and Exchange Commission regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTCC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.

In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition.”
This is one of dozens of lawsuits filed by the same law firm. Many of the pleadings allege that the DTCC operates a “stock lending” program that aids and abets illegal naked short selling, and in doing so, admittedly takes in $1.67 million annually.

In a further rare display of transparency, however, while framing it in terms of a small percentage of daily transactions, Thompson has admitted in an interview posted at http://www.dtcc.com that some $4.9 billion, involving an estimated 20,000 daily transactions remain unresolved “fails to deliver and receive.”
“The markets check to see if the amount of fails to deliver is more than 1/2 of 1% of the total outstanding shares in that security,” said Thompson.

“If it is, then it goes on a ‘Threshold List.’ If it is then on the Threshold List for 13 consecutive settlement days, restrictions on short selling then apply. The “close-out” requirement forces a participant of a registered clearing agency to close out any “fail to deliver” position in a threshold security that has remained for 13 consecutive settlement days by purchasing securities of like kind and quantity. If the participant does not take action to close out the open fail to deliver position, the participant is prohibited from making further short sales in that security without first borrowing or arranging to borrow the security. Even market makers are not exempt from this requirement.”

In his questioning of SEC Chair Donaldson, Senator Bennett suggested, however, that a loophole in the regulation allows market makers to “pass along” these “fails to deliver” from one to the other, leaving them “unclosed out” indefinitely. A video of that exchange is posted at http://www.investrendinformation.com While in the overall scheme of the U.S. markets system, the fails to deliver of that magnitude represents the entire market caps of upwards of 500 smaller public companies every trading day, which if victimized in this admitted fashion, can find their survivals and the safety of the entire investments of their shareholders questionable indeed.

This comes hard on the heels of an ad in the New York Times (NYSE: NYT) from The Washington Legal Foundation, located at http://www.wlf.org, which has considerable clout in the Bush administration, with ten of its board members now serving in various capacities, including three, headed by U.S. Attorney General John Ashcroft, in the Bush cabinet. Its “In All Fairness” advertorial, “What’s Up With The SEC?” may be seen at http://www.wlf.org/upload/032805IAFSEC.pdf
The advertorial alleges that class action lawyers are colluding with short sellers “right under the noses of SEC investigators,” whose abuses cause “investors, employees, pensioners and companies” to “lose millions of dollars in stock value each year.”

The WLF said that the SEC has been “sitting on several complaints of misconduct” that it and the U.S. Chamber of Commerce have filed that detail “examples of questionable stock manipulation by short sellers and class action attorneys.”
The group says that the SEC is “looking the other way while class action attorneys enjoy a free-for-all, reaping millions in windfall fees to the detriment of shareholders,” and asks “why isn’t the SEC taking legal and regulatory action to prevent stock manipulation and to protect investors from the looting by plaintiffs’ lawyers? Shouldn’t there be rules and oversight to deter these trial lawyer abuses?”

It concludes that “the SEC must show America that it can get tough with more sinister villains than Martha Stewart.” Stewart’s firm, Martha Stewart Living Omnimedia (NYSE: MSO), ironically is one of those on the NYSE’s “Threshhold List.”
Recently also, Motley Fool lambasted regulators for letting what it called “71-year-old laws” against naked short selling go unenforced.

The article is at http://www.fool.com/news/commentary/2005/commentary05032407.htm?source=eptyholnk303100&logvisit=....
One thing is certain, said an observer, tongue-in-cheek: “Stockgate is getting interestinger and interestinger.”
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