This is a better read than Ragingbullchit ...
STOCKGATE TODAY-August 23, 2005
An online newspaper reporting the issues of Securities Fraud
Naked shorting; It’s not a big thing…..August 23, 2005
David Patch
For anybody that has ever talked to a financial news reporter regarding naked shorting, you have to have heard them say “It is not a big thing” spew out of their mouths like it was gospel. They say it so casually; it is like these guys actually had the evidence proving that it really was nothing. For me, I always wondered where they obtained such definitive information. I mean the SEC has never provided such documentation and I have been fighting with them for years. Wall Street won’t provide such critical information as they fight ever motion for discovery. So where did the media obtain such critical information and, if they have it, why not publish it.
Due to circumstances that transpired last week, the discussions surrounding naked shorting have elevated in the press. Outside of one theStreet.com reporter that appeared to look deeper into the issues, all others who reported on the Overstock.com lawsuit against Rocker Partners and Gradient Analytics crucified everybody or anybody who spoke of the subject matter. Ironically, the lawsuit against Rocker Partners and Gradient analytics didn’t even mention naked shorting. The lawsuit was about the denigration of Overstock.com in calculated negative reviews and press releases. A lawsuit where the legal team for Dr. Patrick Byrne is two former Attorneys from the SEC’s Division of Enforcement, one a former regional manager and the other a key member of the naked shorting team at the SEC.
But while reporters such as MarketWatch columnist Herb Greenberg, Dow Newswire columnist Carol Remond, Motley Fool columnist Seth Jayson, NY Post columnist Roddy Boyd all wrote repeated articles on Dr. Byrne and CNBC Analyst Ron Insana ridiculed the efforts of Dr. Byrne none actually came up with any definitive facts that could refute what Dr. Byrne had to say. Nobody has yet to explain why a company like Overstock.com has been snuggled nicely on the SEC’s Regulation SHO threshold list for nearly 8 months with excessive shares oversold and unsettled; definition of naked shorting. Worse, none could explain why there was so much focus on refuting a “non-issue.” Certainly none picked up on the legal team for this cause.
Ron Insana, host of CNBC’s Street Signals, went so far as to bring forth a debate between Dr. Byrne and RAM Partners Hedge Fund Manager and Overstock critic Jeff Mathews. While Dr. Byrne read from a reportedly signed affidavit from a third party witness that implicates reporter Herb Greenberg in the scheme to denigrate, host Ron Insana could only use personal friendship with Greenberg as a counter to refute the signed affidavit. Ron didn’t have any proof the affidavit was false; he only knows that Herb is an upstanding guy who repeatedly trashes Overstock.com and other Rocker supported short positions because he is a good evaluator of performance. The fact that Greenberg, Mathews, and Rocker were also columnists for theStreet.com created by CNBC correspondent James Cramer was never mentioned.
Now what Mr. Insana also never divulged was the massive amount of film footage and dollars parent station NBC and Dateline NBC spent covering the naked short selling story. Dateline NBC filming hundreds of hours of footage and dedicating over 18 months of time and energy on the story that remarkably covered less air time than their commercial segments.
Dateline actually obtained access to convicted criminals willing to tell all about how US Brokers were being paid to raid small stocks. Footage never presented to the public.
Mr. Insana also never indulged the audience with the evidence Dateline had in their possession regarding the owners of the settlement failures in the collapse of Eagletech Communications (EATC), the flagship to their ultimate story. Hundreds of thousands of trades executed at near $10.00 levels that resulted in settlement failures persisting for over 250 trade days and were only covered at $0.50/share. The evidence hand delivered to Eagletech by the Securities and Exchange Commission under court subpoena and in the hands of Insana. But naked shorting is not real! It is a myth because upstanding guy Herb Greenberg says it is.
For hedge fund manager Jeff Mathews in this mockery, Mr. Mathews could not explain why he has focused so much time and energy into refuting the claims of people with “tin-foil hats” instead of focusing on his business at hand. Jeff Mathews writes his own blog with every month focusing attention on the “lunatics fighting naked shorting” and Dr. Patrick Byrne specifically. Mr. Mathews ridicules CEO Patrick Byrne on a regular basis for focusing on short sellers when Regulation SHO claims Overstock.com is oversold with excessive settlement issues yet Mr. Mathews himself focuses on what every reporter and hedge fund calls a myth. So who is crazier?
Ultimately the issue comes down to something simple. The SEC needs to come clean with full transparency to the problem.
The SEC claimed that naked shorting was not an issue yet held in their possession evidence of an increase in the number of trade fails taking place. The number of fails increasing as our markets was becoming more efficient and more electronic. The SEC admitted, in preparation to Reg SHO, that in some cases the fails had become so pervasive that the number of fails exceeded the entire public float of some companies thus incapable of satisfying buy-ins. SEC Attorney in charge of drafting regulation SHO Jerry Carpenter stating “We cannot force mandatory buy-ins because there are more shares unsettled than shares to settle with.”
To combat this issue the SEC created regulation SHO citing its sweeping reform potential yet grandfathered all prior settlement failures from requiring closeout. Why, because the fails were too pervasive to be cleaned up during a six-month window between approval and implementation. Six Months grace period to clean up the books!!! The SEC claiming they feared creating “short squeezes” if they forced a rapid closeout of trades once the rule was implemented.
If this were your local police, and they told you there was no speeding problem yet they set up speed traps all over town you would question their honesty. Now if they set up speed traps but offered no radar guns you would question their motives. SHO is that speed trap without the radar guns.
Why every reporter would rather attack the messenger instead of evaluating the evidence is beyond me. Wall Street has never proven a place of ethics or a place of integrity. Hedge funds sound the battle cry of being abused yet it is repeatedly the hedge funds we find Wall Street breaking laws to aid. Hedge funds bring too much wealth to the industry to turn down their needs regardless of the laws.
Bottom Line: If it is such a non-issue, show us the proof. Explain the companies entrenched for months on the SHO list. Explain the massive level of fails that remain in the system today, the DTCC claiming over $6 Billion in unsettled trades in their control, with our markets being presented as the most efficient in the world. Finally explain the grandfather clause in light of the SEC claiming the fails are not pervasive. If it is so small, why bother to violate Section 17A of the Securities Exchange Act of 1934 when drafting new law.
Follow the stench of Reg. SHO and ask the simple questions the SEC refuses to answer.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2005
