SEC-STONE COPS By CHRISTOPHER BYRON
'ANSWER OR ELSE': The subpoena-happy SEC, under Chairman Chris Cox (above), is opening another front on the war against free speech.
Photo: Getty
nypost.com
February 27, 2006 -- CHAIRMAN COX SHOULD GO FOR TARGETING JOURNALISTS
EVERY once in a while, a public official will embark upon a mis sion of such majestically misguided folly that you want to break out in song.
But what began unfolding last week at the U.S. Securities and Exchange Commission goes beyond mere laughter and the poking of fun.
For reasons that defy common sense and ought arguably to result in his immediate ouster, SEC Chairman Christopher Cox has abruptly and bizarrely emerged as the White House's latest stalking horse in the war of attrition against free speech.
We'll turn in a minute to the details of what Cox either authorized or simply let happen in his name two weeks ago. For the moment the most likely scenario suggests that without Cox's apparent approval — but acting instead on the authorization of his underlings in Washington — the SEC's San Francisco enforcement division issued what amounted to fishing expedition subpoenas to two Dow Jones & Co. business journalists who had been reporting on matters the SEC wasn't even formally investigating.
As best as can be determined, the subpoenas relate to contacts the two reporters may or may not have had with an investment research firm called Gradient Analytics and a hedge fund called Rocker Partners, which may or may not be part of a rambling SEC examination of abusive practices by so-called "naked short-sellers."
But the fact that the subpoenas lacked any details of the activities being investigated suggests plainly enough that even the SEC didn't know what it was looking for, and had simply issued the subpoenas to help develop a case it didn't yet have.
One source in the matter said that once news of the subpoenas hit last week, the SEC's D.C. headquarters went into something approaching "panic mode" as officials raced about to make sure that the finger of blame didn't fall upon them.
Result: A portrait of a chairman who either approved the subpoenas when any sensible official would have known better, or of someone who simply had been left out of the loop by subordinates.
In either case, the White House itself must share at least some of the blame — not for issuing the subpoenas, but for helping foster a climate in which woolly notions like privacy and free speech have to give way if the U.S. is to achieve victory in Iraq. From that belief we now get the handiwork of these faceless SEC bureaucrats, who seem to think themselves empowered to paw through a reporter's files for no obvious reason at all.
Whether or not the Cox bunch were so out to lunch that they failed to foresee the obvious storm of protest their subpoenas would unleash (or were perhaps so arrogant that they simply didn't care), they soon found out what a mistake they'd made, and by late last week were struggling to distance themselves from the affair.
FOR the moment, the backpedaling has gone no further than an ac knowledgement toward week's end by an SEC official to Dow Jones that the commission had decided not to pursue enforcement of the subpoenas "at this time."
In fact, the statement came across as both grudging and half-hearted, and rooted more in embarrassment than anything else.
What was missing? Any sense on the part of the SEC that it had grossly and outrageously overreached by issuing the subpoenas in the first place.
The government's power to seize the books and records of private citizens and coerce testimony from them has grown greatly over the years. But it still remains anchored ultimately in the requirement that such power be exercised only when an actual and lawful investigation is under way.
And when it comes to subpoenaing evidence from journalists, that power is even more circumscribed. Since 1972, U.S. Department of Justice guidelines on contacts with the media have required that the attorney general personally sign off on all contested subpoenas to journalists.
What's more, the AG is not permitted to act one way or another until a rigorous internal review of the case by the department concludes that the matter under investigation is of serious national importance and that there is simply no other way to obtain the needed information except by subpoenaing it from an uncooperative journalist.
Last week, a spokesman for the SEC said much the same thing, claiming the commission only subpoenas journalists when it is "absolutely necessary" to do so. This left open how such a subpoena could be deemed absolutely necessary on Feb. 7, following which it could become no longer necessary at all just two weeks later.
So, do we really want a country controlled by apparatchiks who think themselves empowered to wander the countryside handing out fishing expedition-type subpoenas in the hunt for something to keep them busy next week?
Well, that's what things seem to have come to for reporter Carol Remond of the Dow Jones News Service, and columnist Herb Greenberg of MarketWatch.com, a financial Web site that is also owned by Dow Jones.
They are the two recipients of subpoenas, issued earlier this month by the SEC's San Francisco office, to turn over any documents they may possess regarding contacts with Gradient Analytics and the Rocker Partners hedge funds group.
Both Gradient and Rocker Partners are named as defendants in a California state lawsuit, filed last August, by a company called Overstock.com, that accuses them of conspiring to drive down the price of Overstock's Nasdaq-traded shares.
And just last week, a Canadian company called Biovail Corp. filed a similar suit, this time in a New Jersey state court, accusing Gradient Analytics and a large Connecticut-based hedge fund called SAC Capital Managament of the same type of behavior.
There seems little doubt that Overstock.com's president, a strange individual named Patrick Byrne, helped stir up the interest of the SEC's San Francisco office in subpoenaing the books and records of Greenberg and perhaps Remond as well.
Both have written unflattering stories about Byrne's company in the past, raising questions about its business prospects and Byrne's own strange theories about how the world really works.
In a conference call with investors following the filing of his Overstock lawsuit against Gradient and Rocker Partners last August, Byrne stunned listeners by claiming that Wall Street is actually controlled by a murky and demonic figure he called the "Sith Lord," in reference to evil characters of "Star Wars" fame.
THEN, on Feb. 7 the SEC served Dow Jones with its subpoe nas for Greenberg's and Remond's research, and though news of the subpoenas had not yet been made public, Greenberg nonetheless received a rambling, angry and sometimes gloating e-mail from Byrne a couple of days later. The e-mail referred to certain unspecified problems Byrne now knew Greenberg faced, and he seemed to relish what awaited him.
Plainly, this is someone the SEC shouldn't be taking advice from about anything, let alone which journalists to subpoena and for what. Let's hope this whole thing can be written off to bureaucratic stupidity, and not something worse.
cbyron@nypost.com |
