New York – An article in CNN Money yesterday evening described the settlement of the lawsuit between the former Rocker Partners and Overstock.com? The case was settled with Rocker Partners (now Copper River Partners) paying Overstock.com $5 million. In turn, Copper River Partners agreed to drop its countersuit against Overstock.com and CEO Patrick Byrne. The link above is an excellent review of the settlement and the history of the case, so we will confine our comments to the broad issues. A letter from Patrick Byrne to shareholders, claims that “the good guys won”.
The Ongoing Need for Compliance
The issue of manipulating research to improperly create short trading opportunities is, of course, an extremely serious crime and every allegation of stock manipulation needs to be investigated. To avoid complaints, research providers have beefed up their policies and procedures, insured that a designated compliance person exists, and have instituted tracking reports and metrics, clarified stock ownership policies, etc. to ensure compliance. To be sure, there is an ongoing need to be vigilant in compliance and reporting to quell temptation of investors and research providers.
The Rub
While Overstock.com’s CEO seeks to position himself as a champion of goodness and fairness, it seems that he may in fact be addicted to litigation. Overstock and Mr. Byrne have also filed suit against Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York, Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., and UBS Financial Services, Inc, alleging that that these firms conspired to manipulate share values through engineering “failed delivery” short positions in order to drive down the value of shares. Further, Mr. Byrne accuses financial journalists, including Jim Cramer, Herb Greenberg, Joe Nocera and Dan Calaruso of talking down Overstock.com’s share value; vilified the SEC as being in the pocket of the Wall Street firms and; alleges that former New York Attorney General Eliot Sptizer was in the pocket of hedge funds. Wow.
The Take Away
Of course, the main lesson from this long suit should be that all efforts should be made to suppress improper trading practices and information flow in the financial community in order to protect shareholders.
Unfortunately, another take away from the Overstock saga may be that if you file multiple lawsuits, you have a greater chance of success (or at least settlement).
1 Comment
Dear Thomas,
I commend you for getting your facts straighter than most. However, “The Rub” section makes me scratch my head more than it does you. Let us go through it line by line:
“While Overstock.com’s CEO seeks to position himself as a champion of goodness and fairness, it seems that he may in fact be addicted to litigation. Overstock and Mr. Byrne have also filed suit against Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York, Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., and UBS Financial Services, Inc, alleging that that these firms conspired to manipulate share values through engineering ‘failed delivery’ short positions in order to drive down the value of shares.”
Well, yes, 3-4 years ago I filed lawsuits against a hedge fund (which just paid me $5 million to settle) and against the major prime brokers for engaging in a manipulative practice which they all said did not exist, until it happened to them in 2008, at which point they demanded emergency federal protection against the thing they had been saying did not exist. And filing said two lawsuits makes me “addicted to litigation”? Really? Because…. why? Because they were just so far-fetched that the hedge fund paid me $5 million to settle that far-fetched suit and the prime brokers demanded federal protection from the far-fetched thing? What am I missing?
“Further, Mr. Byrne accuses financial journalists, including Jim Cramer, Herb Greenberg, Joe Nocera and Dan Calaruso of talking down Overstock.com’s share value;”
That’s a falsehood, but not, in my experience, a deliberate one: its the kind that people utter when they are so highly indoctrinated that they cannot synthesize words in front of them. So for the nth time, here is my claim: Jim Cramer has been engaged in the practice of manipulating stocks for his whole career, and a decade ago reach a position where he could do it wholesale. Herb Greenberg spent his career as a journalist shilling for hedge funds. When I began pointing out their pattern and the harm it was doing to our capital markets, a cover-up occurred whereby they and their friends Nocera, Calaruso, and others tried to convince the world that no one should see the pattern that was already widely understood by anyone within a country mile of the “smart money” set. We taped the journalists planning just this cover-up, and made that public around the same time that a video appeared of Jim Cramer explaining how he did precisely the thing of which I accused him (http://www.deepcapture.com/the-stories-behind-the-rocker-and-gradient-lawsuit-story/). What does any of that have to do with “Overstock.com’s share value”?
“vilified the SEC as being in the pocket of the Wall Street firms;”
I really have to defend that 2004-2005 assertion, Rip van Winkle?
“alleges that former New York Attorney General Eliot Sptizer was in the pocket of hedge funds.”
Eliot Spitzer’s gal “Ashley” happened to be living rent-free in the beachfront villa of one of Eliot Spitzer’s biggest donors, a hedge fund manager named Jim Chanos, and while this has been reported (http://files.wallstreetfolly.com/wordpress/2008/03/spitzers-hooker-called-short-seller-jim-chanos-uncle-jim-and-frequented-his-hamptons-parties/), no journalist has brought himself to consider the possibility that any hedge fund manager who provided (or simply knew of) Eliot Spitzer’s hookers owned himself an Attorney General. Oh, and it happens that Attorney General Spitzer targeted firms that hedgie Jim Chanos happened to be short. Oh, and did I mention that Jim Chanos happened to be among Eliot Spitzer’s biggest donors (http://www.deepcapture.com/eliot-slowhand-spitzer-his-many-sugar-daddies/). But I’m sure there’s an innocent explanation for that constellation of facts.
“Wow.”
Wow is right.
So I missed the part of “The Rub” that was so far-fetched.
Patrick Byrne