Overstock’s Byrne: One of Many Fighting Against Naked Short Selling
Thomas Catino
June 8, 2006
Patrick Byrne, CEO of Overstock.com (Nasdaq: OSTK)
All hell broke loose when subpoenas were issued to numerous journalists, including Jim Cramer of TheStreet.com, Herb Greenberg of CBS Marketwatch and Carol Remond of Dow Jones Newswires. In response, Securities and Exchange Commission (SEC) Chairman Chris Cox was infuriated and immediately said that “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.” The subpoenas were issued in connection with a probe centered around allegations against short sellers and an investment research firm manipulated shares of Overstock.com.
In an exclusive with Ant & Sons, Byrne exclaimed that Cox’s stance on the matter was “outrageous.” In regards to the impact it would have on his company’s legal battle with Gradient Analytics, Byrne responded that the “SEC will not interfere with our ability to get justice. In fact, I believe our efforts are complimentary.” As a sign of things to come, Byrne says that “there are elements in the media who are starting to understand the truth, and the icepack is about to start breaking up.”
Scott Blevins, investor relations spoke person for Overstock.com helped give some insight into the story as well. When asked how Overstock plans on helping the media understand that the financial performance of your company is separate from the alleged stock manipulation scheme, he replied that “we will tell our side of the story until our faces turn blue. Blevins believes that “when our lawsuit is allowed to proceed, the facts will speak for themselves.”
In the past few months, Ant & Sons has covered Overstock and has published updates on the Overstock related subpoenas. Focusing in on Cramer's subpoena, the most stunning part of it all was his reaction. He said that the SEC took action because he "said the stock was going lower. I didn't get the subpoena because I'm corrupt, I got it because I tried to get people out of a stock that we said was going lower, and went lower." During his CNBC Mad Money show, Cramer outrageously wrote "bull" on what appeared to be his subpoena and then threw it on the ground as if to show he was above the law.
Finally, will SEC reluctance, due in part to the "first amendment concerns" of journalists hamper Overstock's ability to seek justice? Blevins says no because the company will continue to pursue the lawsuit, which is “rock solid.”
Bob O’Brien, freelance blogger, founder of TheSanityCheck.com
O’Brien believes that “the public outcry against the manipulative practice known by the misnomer "naked short selling" has gathered a lot of steam in just the last 12-18 months. He attributes this increase to when the SEC instituted the Regulation SHO Threshold, which identified companies for which delivery failures constituted a meaningful segment of their outstanding shares. That could be viewed as one of the milestones, as it became obvious that there was a problem.
He also says the system is doing everything it could do to protect itself, evident by the “egregious grandfathering of all past delivery failures so disturbed many that new shareholder advocates came to the forefront of creating visibility for the abuses. I had been active as an advocate with NFI for two years prior, but shifted to a non-company specific role once I understood that the manipulation I'd seen in NFI wasn't isolated, but rather was a widespread issue that extended to companies like OSTK, TASR, etc. It was clear to me that we were seeing an orchestrated, intelligent design, and that naked short selling was an important part of the manipulation, which also includes media slams, class actions suits, bogus research hatchet jobs, frivolous regulatory probes, and a host of other techniques - all being directed by an operator, or operators - much like the stock pools of the 1920's, or the insider trading made famous by Milken and Boesky and Levine et al in the mid-1980's. The current illegality and flagrant disregard for the law is nothing new, and naked short selling is simply the latest flavor of a very old food - thievery via stock manipulation.”
Rodney Young, President and CEO of Eagletech Communications (OTC: EATC)
Although his company’s shares were revoked by the Securities and Exchange Commission, Rodney Young still has faith that the truth will be known, because he has taken into account the extraordinary amount of evidence Eagletech has compiled against the criminal conspirators in the U.S. District Court. This includes evidence from a ruling of the Supreme Court of the State ofNew York, wherein the DTCC was compelled to produce the company’s trading records. There is still a glimmer of hope because the judge who revoked Eagletech said that the policy argument of the short selling in Eagletech shares, as evidenced by the criminal short sellers, should be addressed and indicates that the Commission would again have to take a closer look at the dilemma. With this in mind, it may turn out to be a “long drawn out process,” says Young. He fells confident about his company’s future and is hoping to create a “domino effect” that would lead to other companies standing up for their rights and asking for justice.
In an exclusive interview with Ant & Sons, Rodney E. Young, chief executive officer of Eagletech Communications, believes that “the case would be ready for trial in one year.” Furthermore, in an Administrative Prehearing Conference, Young stated that “a jury award would generate enough money to bring Eagletech's periodic filings current and allow it to implement its business plan.” Young, an ardent protector of shareholder rights, told Ant & Sons that he believes potentially thousands of companies are facing extinction from the public equity markets due to this type of criminal conduct. He claims that numerous small publicly traded corporations, which are prime targets for abuse, are being “manipulated out of business.”
Others in the naked short selling battle who have either declined to comment, or could not be reached for comment;
Thomas Megas, founder of BCIT (OTC: BCIT)
In a statement, Megas said that he is “presently constrained from making any public statement on the situation facing BCIT.”
Members of the CMKM Task Force and CMKX Owners Group
Bill Frizzel of the CMKM Task Force could not be reached for comment, John Martin of the CMKX Owners Group did not comment on the matter.
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