HERB GREENBERG About my subpoena Commentary: When the SEC comes after reporters' notes
marketwatch.com
Last Update: 1:02 AM ET Feb 24, 2006
SAN DIEGO (MarketWatch) -- And to think I was foolish enough to believe I lived in America and there were these things called the First Amendment and freedom of the press.
That was before I got a subpoena from the SEC recently as part of its investigation into Gradient Analytics -- a research outfit that has served and continues to serve as a valued source for this column. It appears the investigation stems from the recent publicity surrounding Overstock.com Inc.
The subpoena seeks "all" unpublished "communications," including emails and phone records, between me and people and organizations I've quoted -- and at least one I've never quoted -- regarding five stocks. Never mind that I have never written about one of those companies. And never mind that the other four (yes, including Overstock) deserved every word I wrote -- and then some.
Dragging the press into this kind of investigation is hardly standard operating procedure for the SEC, whose job is to enforce securities laws. We're not talking national security, here.
It would be one thing if I were trading stocks or options (I don't own any or short any -- never have since I started writing this column for the San Francisco Chronicle in 1988); or if I was getting paid by someone involved in these stocks (I'm not); or if I was coordinating the publication of my stories with sources (not doing that either).
It's another thing, if your reputation is all you have, to get pulled into a ridiculous investigation of an alleged conspiracy imagined by a bunch of knuckleheads merely for doing what reporters are supposed to do: talk to sources. For business reporters those sources are often employees, competitors, suppliers, investors and -- oh, yes -- people who are biased and bet against companies; also known as those good-for-nothing (he said, sarcastically) short-sellers.
Some of my best tips, as a stocks columnist who prefers flying red flags instead of green ones, have come from people who short shares. That's because their research is often the best. (Notice you don't see any alleged conspiracies of pump-and-dump artists whose promotions elevate stocks to unrealistic levels.)
I've been a business reporter for nearly 32 years at half a dozen newspapers and two financial news websites.
I value the freedom I have to do my job.
That freedom lets me talk to anybody I want as often as I want -- via email, phone or in person -- in the effort to get stories. It's what reporters do without the fear that, short of a court order based on rigorous findings of some paramount, genuine and unavoidable necessity, the government can attempt to seize unpublished information. I can engage in whatever conversations and solicit whatever information I desire as long as I'm not violating the law or my own company's code of conduct.
The freedom to report has provided access to information that otherwise might not have found its way to me and, ultimately, you. With tips from a variety of sources I've been able to pursue stories that have led to multiple investigations, indictments and even (for one worthy and sorry Silicon Valley CEO) jail.
This isn't the first time a conspiracy between hedge funds and the press has been alleged. A few years back a company called AremisSoft even filed a lawsuit against several funds and one of my former employers, TheStreet.com (TSCM : TheStreet.com, Inc. for a series of stories I had written. The suit was dropped after AremisSoft was deemed a major fraud. Last June AremisSoft's former CEO, Roys Poyiadjis, agreed to "disgorge" about $200 million of his profits from trading AremisSoft stock to resolve the SEC's securities fraud charges against him. It was among the largest recoveries the SEC has ever obtained from an individual.
But if my unpublished communications aren't safe from government eyes, then the tools of every business reporter in this country become fair game for any company that doesn't like scrutiny and chooses to play the "conspiracy" card.
If that happens, sorry to say -- dear readers -- you will be on your own when it comes to policing public companies.
Oh, if you're wondering, my employer, Dow Jones (DJ : dow jones & co inc com , and I have objected to the subpoenas. And I don't plan to bullied into changing the way I do anything. For me, it's business as usual. Next victim, please!
Herb Greenberg is senior columnist for MarketWatch, based in San Diego. He does not own stocks (except for shares of his employer), and he does not sell stocks short or invest in hedge funds. |
