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To: rrufff who wrote (2064)	5/16/2006 2:50:39 PM
From: StockDung	Read Replies (2) \| Respond to of 2595

=DJ IN THE MONEY: 'Get Shorty' Campaign Suffers New Setback By Carol S. Remond A Dow Jones Newswires Column NEW YORK (Dow Jones)--The "Get Shorty" campaign suffered another blow Monday when a federal judge dismissed a complaint filed by Whistler Investments Inc. The lawsuit is one of several brought by struggling public companies and a group of class-action lawyers who have been trying to build cases against short sellers - those investors who profit as share prices drop. The law firms and their clients generally allege a wide-ranging conspiracy to illegally depress stock prices. Their crusade has taken several forms over the last four years, evolving from allegations involving so-called death-spiral financing and illegal short selling to more complex accusations that brokerage firms and the entire securities clearing system managed by the Depository Trust and Clearing Corporation, or DTCC, are complicit in bear raids on snsuspecting companies. Whistler, now known as Hybrid Technologies Inc. (HYBT), sued DTCC in November 2004 in Nevada state court, alleging that its stock-borrow program resulted in the creation of non-existent stock and contributed to naked short selling of the company's shares. The case was later removed to the U.S. District Court for the District of Nevada. Short sellers typically borrow shares to sell them short and profit when the price drop. Trading without a borrowing agreement is called naked short-selling. It is illegal for most investors, but legal for firms that make markets in stocks and bring liquidity to the market. Under its stock-borrow program, DTCC facilitates the lending of shares from one brokerage firm to the other in the event a firm is unable to deliver stock to settle a transaction on time. The program is designed to facilitate trade settlement and is approved by the Securities and Exchange Commission. The Whistler complaint is identical to one filed by Nanopierce Technologies Inc. (NPCT) against DTCC in July 2004 in the Second Judicial District Court of the State of Nevada, Washoe county. That case was dismissed a year ago after a judge found that federal law preempts Nanopierce's claim for relief. Nanopierce is appealing the ruling in front of the Nevada Supreme Court. Federal & State Regulators Battle A lot is riding on these two cases and federal and state regulators have taken notice. The SEC in February took the unusual step of filing an amicus brief in the Nanopierce case in support of DTCC, arguing that the company's "lawsuit threatens to disrupt or to impose substantial and unwarranted costs" on the clearing system. Earlier this month, the North American Securities Administrators Association, or NASAA, also filed its own legal brief in support of Nanopierce's appeal, arguing that claims filed in state courts shouldn't be preempted by federal law. Whistler and Nanopierce share a Nevada counsel, Michael Morrison, a lawyer who has worked with the legal consortium - led by Texas law firms O'Quinn, Laminack & Pirtle and Christian Smith & Jewell - which represents a number of plaintiffs in suits alleging illegal short selling. Although it focused solely on the Nanopierce case, Morrison introduced the amicus brief filed by NASAA in federal court to counter DTCC's motion to dismiss Whistler's complaint. Even NASAA's law firm, Bailey Merrill, has ties to the consortium of plaintiff lawyers led by O'Quinn and Christian. Every lawyer listed on Bailey Merrill's Web site used to work at Lionel Sawyer & Collins, a Nevada law firm that also represents Nanopierce and Jag Media Holdings Inc. (JAGH), another penny-stock company that claimed illegal short selling of its stock. What is clear is that the SEC didn't take lightly NASAA's challenge of the federally approved clearing and settlement system administered by DTCC. In a strongly worded letter addressed to the Nevada Supreme Court's clerk, the SEC said that, while the brief filed by NASAA "argues that conflict preemption is not applicable in [the Nanopierce case], that brief in fact brings into stark highlight why this lawsuit is in direct conflict with the federal regulatory regime and why it is critically important that the case be dismissed on preemptive grounds." The SEC in its May 12 letter to the court said that Nanopierce's claims, and that of Whistler's since they are the same, are "preempted because evaluating these claims of alleged defects has been entrusted by Congress to the Commission, not the state courts." "The national regulatory regime should be permitted to function as Congress intended it, not disrupted and displaced by state law actions brought against key participants in the clearance and settlement process for obeying Commission-approved rules," the SEC said. It isn't the first time that NASAA appears to side with those alleging that illegal short selling is rampant and that federal regulators are doing little to combat it. A panel discussion on naked short selling organized by the state regulators association last November included three consultants who have in the past worked with the legal consortium lead by O'Quinn and Christian. So far, the "Get Shorty" legal consortium hasn't succeeded in making its point in court. Most of the cases brought forward have been dismissed or are languishing in courts. Late last month, a lawsuit brought by Utah online closeout retailer Overstock.com Inc. (OSTK) against hedge fund Rocker Partners and research firm Gradient Analytics was put on hold, possibly for as much as a year, as the defendants appeal a trial court's refusal to dismiss the case. (Disclosure: Two columnists for Dow Jones & Co. (DJ), this columnist and Herb Greenberg, have received subpoenas from the Securities and Exchange Commission requesting information in connection with an SEC investigation. Dow Jones, publisher of this newswire, objected to the subpoenas. The subpoenas were put on hold and the SEC recently announced new guidelines for requesting information from journalists.) (Carol S. Remond is an award-winning columnist and one of four who write the "In The Money" feature. Most recently, she won a 2005 Gerald Loeb Award for best news service content with "Exposing Small-Cap fraud," a series of articles that described how three small companies unscrupulously pumped up their stocks.) -By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@dowjones.com (END) Dow Jones Newswires 16-05-06 1802GMT Copyright (c) 2006 Dow Jones & Company, Inc.