Overstock VP essay
Every day, millions of stock trades worth billions of dollars fail to settle as a result of an illegal and systemic market manipulation known as “naked short selling.” One sign of significant and illegal naked short selling is a company's persistent presence on a Securities and Exchange Commission watchlist known as the "Regulation SHO threshold list." Even with this SEC-mandated alert in place, the financial press largely ignores the issue rather than investigate and expose this illegal practice and its perpetrators. Consider a few examples of companies whose persistent presence on the Regulation SHO threshold list has gone virtually unreported.
Force Protection Armor makes Mine Resistant Ambush Protected (MRAP) vehicles. These vehicles are resistant to improvised explosive devices and rocket-propelled grenades. They have proven a valuable tool in saving American lives, particularly in Iraq. Force Protection has been on the Regulation SHO threshold list for 218 trading days.
Dendreon Corp. has developed and received preliminary FDA approval for an experimental prostate cancer vaccine. It has been on the list for 246 trading days.
Osiris Therapeutics, Inc. researches and develops therapeutic products for the regeneration of human connective tissues and is focusing its initial product development efforts on the regeneration of bone marrow stroma following high-dose cancer chemotherapy, and on the regeneration of bone in long bone and spinal defects. It has been on the list for 273 trading days.
Northfield Laboratories is developing an alternative to transfused blood for use in the treatment of acute blood loss. It has been on the list for 392 trading days.
Antigenics Inc. has immunotherapeutic vaccines in clinical trials in renal carcinoma, melanoma and gastric and colorectal cancers. It has been on the list for 479 trading days.
Hundreds of similar companies, many of which provide valuable and life-saving products to society, have suffered because of naked short-selling stock manipulation.
SEC Chairman Christopher Cox has acknowledged this systemic problem. At an open meeting of the SEC commissioners on March 4, 2008, he said, “Illegal naked short selling is an especially serious threat." He also said that "extreme abuses ... are reflected in securities being chronically listed on Reg SHO's threshold security list for months and years at a time [and are]... aimed at driving down a stock's price.”
Mere acknowledgement of the problem is not enough. The SEC's current proposals to address the abuses are half measures that will not stop this manipulative and illegal activity.
In these turbulent financial times, the specter of millions of unsettled trades executed by Wall Street profiteers hangs over our markets and the financial health of small, innovative enterprises. In the three years since Regulation SHO has been in place, nearly 6,600 unique securities have appeared on the Regulation SHO threshold list, many for hundreds of trading days. We do not know how many of these companies are the victim of illegal manipulative naked short-selling, because investigative journalists have failed to investigate.
In light of this ongoing market manipulation, the public has a right to ask: Are the government and victim companies solely responsible for outing this fraud? Where are the journalists to hold regulators and manipulators accountable and bring transparency and order to the market? Before ignoring these questions, the press should ponder another Edmund Burke bon mot: “The only thing necessary for the triumph of evil is for good men to do nothing.” Good men and women of the Fourth Estate, now is the time to answer the call.
Jonathan E. Johnson III is the senior vice president of corporate affairs and legal at Overstock.com, Inc., a company that has been on the Regulation SHO threshold list for 770 trading days. |
