Free Speech, or Conduct? On Subpoenas to Journalists…
Location: Blogs Bob O'Brien's Sanity Check Blog
Posted by: bobo 2/27/2006 9:49 AM
(UPDATE: This article just broke on Reuters, wherein the contention is that Cox rebuked the SF office of the SEC for issuing the subpoenas to Herb and Carol and not seeking Washington HQ's approval. Here's a question: is there any rule that mandates that the SF office get Washington's approval? If so, that was a goof. If not, this is a bunch of political BS and grandstanding. Anyone know the answer to this?)
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Today, in the matter of Carol Remond and Herb Greenberg, SEC Chairman Christopher Cox came out with a statement that the issuance of subpoenas to journalists was highly unusual, and that the Commission would have to consider the step further before proceeding. Here are the SEC’s comments:
“Until the appearance of media reports this weekend, neither the Chairman of the SEC, the General Counsel, the Office of Public Affairs, nor any Commissioner was apprised of or consulted in connection with a decision to take such an extraordinary step," SEC Chairman Christopher Cox said in a statement.
"The sensitive issues that such a subpoena raises are of sufficient importance that they should, and will be, considered and decided by the Commission before this matter proceeds further," Cox said.“
Now, folks, I may only be a holiday bunny, but it seems to me that there is a pretty clear issue here.
This isn’t about protecting 1st Amendment rights for journalists.
This is about conduct, specifically the investigation of whether there is any truth to the allegations, made in sworn testimony, that the journalists in question colluded with hedge funds and research analysts in timing their articles, in order to cause maximum downside impact on the targeted stock.
Conduct.
Not speech.
I don't have any idea whether the allegations are true, but then again, neither do any of the windbags claiming that this is a 1st Amendment issue. Nobody does, as we haven't seen all the evidence. But the SEC has seen a lot of it, and they felt justified in issuing subpoenas. Doesn't that give one pause, before whining and mewling about the big bad old government trampling the poor little journalists' cherished rights? Apparently for some, consideration of the facts isn't obligatory. Merely knee-jerk indignant outrage, and lots of ink.
Now, if the SEC is investigating a conduct issue related to these journalists' interactions with Gradient and Rocker, how, precisely, are they supposed to do so if journalist correspondence with the hedge funds and research outfit in question are off-limits?
Put another way, does carrying a press card excuse one from the rule of law, and allow one to collude to manipulate the price of a stock – with impunity? I’m not saying that the allegation is true, but if it is, does a press card equate to a "get out of jail free" card? I didn’t think so, but we will get to find out soon enough.
So while an irate NY press corps is acrimoniously wrapping itself in the flag, and proclaiming that the subpoenas are an outrage, let’s stop for a second and consider that at no point did any press member have to take an oath to be honest. In point of fact, the Abelow and HealthSouth matters very recently indicated that some journalists are more than happy to take money to write stories supporting whoever is paying them off. If one uses a simple common-sense percentage to allow for the range of human behavior, and one agrees that journalists are likely no more honest than priests, or cops, then it is reasonable to assume that at least 2% of the reporters are bent, and crooked.
If there are 500 financial reporters and journalists, that would mean 10 are bad to the bone.
That’s a pretty low percentage, BTW. Far lower than I think is correct. But play along.
So is it possible that 10 members of the US financial media machine have been eating forbidden fruits, and abusing their privilege as journalists? I would argue that it is not only possible, but that statistically speaking, it is a certainty.
But more to the point, is it the nature of what is being investigated that is making it so easy to get up on the collective press' high horse?
If the journalists in question were being investigated for being pedophiles, would there be an outcry, filled with outrage? How about if they were being investigated for trafficking narcotics? What about conspiring with a murder-for-hire ring? How about working with a terrorist cell?
Would everyone still be arguing that subpoenaing their records is an outrage?
Put another way, how much pedophilia or terrorism would a press pass buy?
I’m guessing none.
So why is investigating another crime, namely stock manipulation, suddenly an assault on freedom of speech and the sanctity of the press? Would it be different if there was a kid in a cellar that was going to run out of air and water within 48 hours? How about a reporter that knew about the next plane to go into a building? If that would not be protected, why would it make a difference, at an ethical level? Still an investigation into wrongdoing, not just invented, but supported by a ton of sworn testimony.
In the late 1980’s, they had to do the same thing, in the Wall Street Journal Foster Winans matter – and he was guilty, did 8 months of hard time. Winans was convicted of fraud in 1985 for tipping off brokers who traded stocks based on information he fed them about the paper's upcoming "Heard on the Street" column. Sound familiar?
So there is precedent.
I can’t help but think that the whole moral outrage that's being manufactured is a smoke screen, to convert a straightforward stock manipulation investigation into something else – an assault on God and Country.
Is anyone stupid enough to buy this?
Let’s examine Herb’s track record, and see if there's any basis for considering his alignment with the defendants with a jaundiced eye: Here's an analysis of his articles on NFI, for a one year period, along with trading patterns indicating front-running of his articles.
Folks, what we have is a regulator that is faced with a difficult choice, and who is being targeted as a bad guy by the press corps – I’m not sure why – as again, there is precedent for this type of action, and there is reason to investigate. They are trying to play the Commissioner of the SEC, force him to put the kabosh on discovery. Get him to intercede, to stop the investigation. And using public media outlets to do so.
So ask yourself a question.
Are Herb and Carol’s emails to Rocker and Gradient vital secrets that will divulge the source of valuable info on government malfeasance? No. Are they protecting sources that the bad old government wants to persecute due to information leaks? No. They are nothing more than possible evidence of their collusion with a hedge fund and a research company for the oldest reason in the world: money. So why is that being framed as an invasion into journalistic freedom?
Is it the role of journalism to engage in stock manipulation? If not, then there is no argument for this being a 1st Amendment issue. It isn’t. It is merely being spun that way so that the gathering of evidence is obstructed.
As an aside, Rocker’s attorneys are using a free speech argument to try to delay discovery in the civil suit, so this doesn’t come as a surprise. That anyone is taken in by these arguments, when Rocker has threatened to sue me for the same expression of free speech he argues covers colluding to doctor and front-run research reports, is astounding to me. Especially given that this patriot, this defender of free speech, this embracer of Constitutional rights, sued another message board poster once before in order to silence criticism – and it got thrown out of court.
Here’s a fun little story that Patrick told me. He indicated that per several of the affiants, when Gradient couldn’t convince a new prospective customer to open their checkbook and sign up, that they would ask what stock the prospect was short, and then issue a negative alert, coupled with a damaging article – to demonstrate their abilit to impact a stock's price. Once the PPS dropped 5% or more, the checks were cut. I’m sure the truth will come out in court, but if accurate, that doesn’t sound like 1st Amendment stuff to me. It sounds like a brazen, flagrant abuse of information and privilege - to manipulate stocks, for profit.
Now, Christopher Cox is well aware of the NFI/media/Rocker story, as a group of shareholders apparently brought it to his attention 3 years ago, when he was a state representative. Then, when he was made Chairman, he again received a number of letters about it. So he can’t claim ignorance.
What this is going to come down to is whether the Chairman of the SEC will cave to deliberate attempts by the Wall Street media machine to influence the progress of an investigation, and whether he is willing to throw hardworking staffers who are doing their job under the bus, in order to appease those Wall Street special interests.
This will be a marvelous opportunity to see whether the new Chairman is a lackey to Wall Street billionaires, or whether he is interested in pursuing his mandate to protect the investing public from the predations of Wall Street billionaires.
This isn’t about the 1st Amendment. It is about whether the outcome of investigations can be bullied or bought.
Simple.
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