Russian Mafia Conspiracy on Wall Street in Media and Government - 17
basserdan edit: The following cut and pasted excerpt is from the 17th and final (also the longest) chapter of what I would characterize, in it's entirety, as "a monumentally fascinating and important read" that is consistent with the direction of this fine board and certainly one that I would recommend/urge other contributors and lurkers to read from the beginning.
In total, the 'series' is quite lengthy, but is not something that necessarily has to be consumed in one sitting as I have just done.... and boy, are my eyes tired! <g>
Hedge Funds, Naked Short Selling, Phantom Stocks and Stock Market Collapse -17
In January, 2007, Patrick accepted an invitation to meet an offshore investor in a greasy spoon diner in Long Island. They had never met, but over the previous year the man had fed Patrick bits and pieces of information about the workings of the phantom stock scam, and the hope was that he might have something more to say in person.
But that day at the diner, all he had was a message.
“I’ll make this quick,” he said, with two other witnesses present. “I have a message for you from Russia. The message is, ‘We are about to kill you. We are about to kill you.’ Patrick, they are going to kill you. If you do not stop this crusade, they will kill you. Normally they’d have already hurt someone close to you as a warning, but you’re so weird, they don’t know how you’d react.”
In a later phone conversation with an associate of Patrick’s the man described how he received this message. He said he returned home one night and his wife told him there was a package on his desk. “And there was a beautiful little box, and inside was a matryoshka.”
Matryoshkas are those lacquered Russian dolls - the kind with multiple dolls of decreasing size inside of them.
“And I opened up the last matryoshka,” said the man, “and inside is an `F’ with a cross on it — which is from Felix.”
That’s Felix Sater, a Russian immigrant described in a federal complaint as an “unindicted co-conspirator” in a money laundering and stock fraud ring involving organized crime figures from four Mafia families. The New York Times has reported that Sater was once also “embroiled in a plan to buy anti-aircraft missiles on the black market … in either Russia or Afghanistan….” Apparently, Sater offered to buy the missiles from Osama Bin Laden in exchange for amnesty in his Mafia fraud case.
Also, according to the Times, Sater once “grabbed a large margarita glass, smashed it on the bar and plunged the stem into the right side of [a] broker’s face. The man suffered nerve damage and required 110 stitches to close the laceration on his face.”
Sater seems to have been involved in the feud that raged between the Gambino and Genovese crime families in the mid-to-late 1990s. A soldier in the Gambino family once tried to extort money from Sater, and Sater got a Genovese soldier to intervene on his behalf. This is the same feud that embroiled Carol Remond’s source, Pacific International, and the two stock promoters who were murdered in 1999. It is the same feud that possibly inspired a cast of criminals, some linked to the Genovese (and by extension, the Russians) to develop relationships with that peculiar BusinessWeek reporter, Gary Weiss, who wrote stories pinning various crimes on the Gambinos.
Gary Weiss, a demonstrable liar and creep whose only job for the past two years has been to author a blog devoted to badmouthing Patrick Byrne and denying that phantom stock is a problem - a former BusinessWeek reporter whom Judd Bagley has shown to have posted on the Internet from within the Black-Box DTCC, a reporter who is a close friend of known crooks, and who controls several phantom stock-related Wikipedia entries with the support of a one-time British intelligence agent who calls herself SlimVirgin - this unconscionably bizarre character has defended Felix Sater on his blog. He wrote, “Sater has every right to turn his life around, as apparently he has done. Good for him.”
In January 2007, Sater was turning his life around by putting a note in a Russian matryoshka doll. Apparently, Sater had discovered that the man in the greasy-spoon diner had been in contact with Patrick. So Sater sent a message in a doll. Then he delivered a verbal message. “He said, tell [Patrick] if he doesn’t….we’re going to fucking take it private,” the man from the diner says. “You know, they’re not going to mess about with this.”
“These things don’t happen anymore to me,” the man continues. “I mean, I’ve been out of that world for a dozen years or more. These….there are defined signals here that lead me to believe they [the Mob] have been disturbed. The only way they coulda been disturbed is if they own Rocker or if he is using them for leverage.”
* * * * * * * *
The month that followed was perhaps the lowest point in Patrick’s life. Overstock’s operations had been going through a rough patch for a year. As Patrick put it, “In five years we grew from $2 million to $800 million on a shoestring, and in 2006 the shoestring broke.” Patrick struggled to fix the company, but intrigues swirled around him, and he now had armed security details following those close to him. One of Overstock’s board members, meanwhile, had just left the company after trying to get Patrick fired over Patrick’s crusade against Wall Street. Two other board members - including, even, Patrick’s father - had already resigned, citing similar reasons.
All this hassle and grief - and for what? It seemed like Patrick’s crusade wasn’t making much progress.
Indeed, it suffered one of its worst blows in February, 2007, when the Utah legislature voted to repeal a law making it illegal to sell phantom stock in Utah-based companies. This had been an effort to bypass the SEC, which was doing nothing to enforce federal laws.
The previous May, the Utah law had been passed almost unanimously - and in the face of considerable pressure. At one point, Utah State Senator Curt Bramble received a call from Morgan Stanley’s general counsel, who yelled into the phone with such vengeful fury that Bramble slammed the phone on his desk and left the room. The state governor, meanwhile, was holed up in his mansion, taking similar abuse from the SEC’s general counsel and a cast of seething lawyers representing the securities industry.
For a while, Bramble and the governor vowed not to cave in to the pressure. But that was before state legislators were treated to the most elaborate lobbying campaign ever to hit Salt Lake City. First, the governor agreed to delay implementation of the law for a year, to see whether the SEC would begin enforcing its own laws against selling phantom stock.Then, suddenly, Bramble, who’d been the law’s most fervent supporter, jumped ranks. In February, he led the state legislature in overturning it in a late-night action that bypassed all the normal committee processes.
The Securities Industry and Financial Markets Association had hired a lobbyist specialized in greasing the machine for the local real estate industry. Bramble is a tax accountant with a small accounting firm. In the months leading up to February 2007, when the Utah legislature made one of its most dramatic reversals ever, Bramble’s firm received a considerable amount of new business from the local real estate industry.
That lobbyist did a really good job.
* * * * * * * *
A lot of people bowed out of the fight, but Patrick did not relent. In answer to the threat from the Russians, Patrick asked for a week “to think about things.”
During the week, the man from the diner called to ask one of Patrick’s colleagues, “Is it going to take Byrne having a gun in his mouth before he backs down?”
At the end of the week, Patrick received a phone call: “The Russians want to know your answer.” Patrick said he needed just another few days to think.
Two days later, he filed a $3.5 billion lawsuit against the entire brokerage industry, which he accused of helping hedge funds sell phantom stock.
Patrick received one last email from the Russians’ intermediary: “Nice raise. LOL.”
Meanwhile, he continued to hammer Herb, Cramer, Eisinger, Nocera and the other journalists who refused to acknowledge phantom stock and short-seller crimes. He got his message out any way he could - rallying the pajamahadeen, meeting U.S. senators, posting missives on stock message boards.
He was sustained by the knowledge that he had some supporters. There were the Easter Bunny and the other oddballs. But there were also some mainstream journalists. Liz Moyer of Forbes magazine had written a number of stories highlighting the plight of companies victimized by phantom stock. Charles Gasparino, a CNBC anchor, had called Patrick a “hero” for bringing this issue to the forefront. (For that, it is said that Gasparino drew a lot of flak from the powers-that-be at CNBC).
There had also been some victories. Like that time that Patrick called Senator Richard Shelby (R - Alabama) a “gangster.” It was in October 2006, and Shelby, the chairman of the Senate banking committee, was spending a lot of time on television defending hedge funds accused of selling phantom stock. When the Senate held hearings on hedge funds, Shelby stacked the panel with friends of David Rocker.
So Patrick went on a radio program and called Shelby a “gangster.”
Shelby invited Patrick to meet him on Capitol Hill. Patrick made the trip. He waited in an ornate conference room for an hour. Then Shelby entered. The Senator referred to himself in the third person: “The Chairman of this Committee believes that you are trespassing on matters that are under his jurisdiction.” Then he just sat there and stared Patrick down. It was as if…well, it was as if Shelby were a gangster.
So Patrick said good bye, and went on another radio program. This time he called United States Senator Shelby “an ignorant cracker.”
That was fun.
So Patrick had these memories to sustain him.
* * * * * * * *
Then, in March 2007, Patrick got a break. Gary Matsumoto of Bloomberg Television did “the right thing.” He ran his expose on naked short selling. video.google.com
The half-hour piece was a year in the making, and the DTCC’s lawyers bombarded Bloomberg with threats aimed at killing it. For a while, it seemed as if the documentary might not happen at all. Then for many months it was on-again off-again. But at the end of January, 2007, at cocktail party in Washington, D.C., Patrick was introduced to Michael Bloomberg, the mayor of New York and founder of the Bloomberg news service. When Patrick suggested that Bloomberg look into the documentary, the mayor stiffened, pulled out an index card, and wrote down the details.
A week later, the documentary was again given the green light. The General Counsel of the DTCC was threatening the General Counsel of Bloomberg until just a few hours before it ran.
So it happened - the first major news story about the phantom stock problem. And, really - the documentary says pretty much all you need to know. It has been nominated for an Emmy for Long Form Investigative Journalism. Watch it here.
The same month, Dave Kansas, formerly of TheStreet.com, left the Journal’s Money & Investing Section. Jesse Eisinger, formerly of TheStreet.com, also left the Journal. Perhaps as a result, in June 2007, the “Money & Investing” section was able to publish a tepid story, “Blame the `Stock Vault’” about phantom stock and the DTCC.
“There is no dispute that illegal naked shorting happens,” the Journal reported.
A month later, the American Stock Exchange levied a big fine on a trader named Scott Arenstein and his brother, Brian, for selling massive levels of phantom stock in several companies - including Overstock.
So even Carol Remond had to admit that phantom stock exists. But she did her best to soften the news.
“Turns out that one guy did, in fact, illegally trade shares in [Overstock],” Carol wrote on the Dow Jones newswire. “[But the] improper trading doesn’t come close to amount to [sic] the massive conspiracy alleged by Overstock.”
The other journalists — Herb, Nocera, Floyd Norris, Gary Weiss, Roddy Boyd, Bethany McLean, Barron’s magazine - continue to ignore phantom stock while toadying to miscreant hedge funds and their criminal associates.
In March 2007, right at the time of the Bloomberg expose, Nocera writes that “most people on Wall Street, or most regulators, for that matter, don’t believe that there is much naked short selling going on.”
Gary Weiss, with characteristic understatement, writes on his blog that Nocera’s article is “a seminal piece that will be cited by market scholars for years to come.” Meanwhile, Nocera is nominated for a Pulitzer prize for columns including “Campaign of Menace,” in which he ridicules Patrick for his stance on naked short selling.
And in the year that follows, these journalists grow only more energized, viciously attacking anybody who even mentions the words “naked short selling” or “phantom stock.” For example, in January 2008, Citigroup analyst Heather Hunt writes in a report that she believes that naked short selling might be depressing the stock price of MBIA, the company that Spitzer investigated and Bethany McLean maligned with help from William Ackman. Floyd Norris, the green grape at The New York Times, writes a column dismissing Hunt. Gary Weiss smears Hunt, too, writing that “all the naked shorting conspiracy theories and scare-mongering, promulgated by Byrne…and a motley assortment of internet crackpots-and now a Citigroup analyst-are sheer hooey.”
Chapter 17 continues at "Fortune on Sam Antar - Takes One to Know One" via the link immediatly below.
real-debt-elimination.com
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Chapter 1 begins here:
real-debt-elimination.com
With special thanks to Bruce Thompson @Ihub for bringing this series forward. |
