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From: StockDung1/6/2006 7:55:35 PM
   of 1821
Tables Turned, Cramer Claims Defamation Over Dave Patch Comments In Stockgate Today / FinancialWire®

January 4, 2006 (FinancialWire) James Cramer, the ?Mad Money? guy at General Electric?s (NYSE: GE) CNBC and co-founder of (NASDAQ: TSCM) is best known for his ascerbic attitude, quick retorts and no-holds-barred commentary about public figures, CEOs and public companies. But naked short gadfly Dave Patch has succeeded in getting his goat and Cramer clearly does not relish it when the tables are turned.

January 4, 2006 (FinancialWire) James Cramer, the ?Mad Money? guy at General Electric?s (NYSE: GE) CNBC and co-founder of (NASDAQ: TSCM) is best known for his ascerbic attitude, quick retorts and no-holds-barred commentary about public figures, CEOs and public companies. But naked short gadfly Dave Patch has succeeded in getting his goat and Cramer clearly does not relish it when the tables are turned.

Because Patch?s article apparently appeared in FinancialWire, despite FinancialWire?s disclaimer that Patch?s views do not necessarily match those of FinancialWire?s, Cramer has threatened it as well. The emails were flying Tuesday. At the end of the day, even Overstock?s (NASDAQ: OSTK) CEO Patrick Byrne, whom Patch had copied, told Cramer he plans a ?little talk about you,? and asked Cramer what his ?sensibilities? are so as not to further hurt the television commentator?s feelings.

The tongue-in-cheek appeared to be tit-for-tat after Cramer?s recent column ?praising? Byrne.

Despite requests to do so, Cramer did not respond to a FinancialWire invitation to identify what Patch had said that ?defamed? him, as he had claimed, saying only that a ?reckless disregard for the truth? constitutes libel. General Counsel Jordan Goldstein in a separate email promised, ?I will provide, in short order, a list of the many factual inaccuracies and unsupported insinuations contained in the Patch article. Criticism is one thing; libel is quite another.?

At press time, the list had not been received, but FinancialWire has offered space as needed for Cramer & Company to recover his reputation or get his point across, whichever he or his attorney chooses. FinancialWire is also awaiting Cramer?s identification of the article or language that upset the applecart.

At the heart of the heat is naked short sales, which Cramer more or less claims is ?in your head,? and which Byrne believes could be the ?greatest financial scandal to hit our market system in the last hundred years.?

Patch?s website is . He recently received recognition by the multi-state task force investigating naked short sales when the head of the task force, Connecticut regulator Ralph Lambiase, credited Patch with bringing the manipulative trading practice to the regulator?s attention, and he appeared as well on CNBC.

Cramer?s final take, inexplicably after receiving a ?cc? in a thread started by his own counsel: ?Please stop cc?ing me.?

For up-to-the-minute news, features and links click on

FinancialWire is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on

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From: StockDung1/7/2006 4:54:20 PM
   of 1821
James Cramer/David Patch/Stockgate Today/INvestrend Communications/

From: James Cramer
Sent: Tuesday, January 03, 2006 5:52 AM
To: David Patch
Subject: RE: Cramer, Rocker,

At this point, because you have chosen to defame me all correspondence will be through lawyers. I am very sorry.. but a reckless disregard of the truth­is libel even for public figures. Have a nice day. Please send me the address of 1. Stockgate Today, INvestrend Communications, thanks.jjcramer

From: XXXXXXX / (name)
Sent: Tuesday, January 03, 2006 9:33 AM
To: Jim Cramer
Subject: Re: FW: Cramer, Rocker,

=== Jim, how are you? Enjoy your show although it is a bit frenetic for me. I like that other one, too, "Deal or No Deal."

David Patch, who you may know is an aggrieved shafted shareholder turned commentator and SEC critic, is provided space in FinancialWire to contribute a periodical column on the subject of naked short sales. FinancialWire does not censor its contributors, as I'm sure you do not censor contributors.

I'm also assuming CNBC does not censor you.

In each "Stockgate Today" column, there is a disclaimer that the opinions expressed do not necessarily reflect the opinions of FinancialWire or its publishers. As Dave knows, we have disagreed with various of his conclusions in the past. I have not thoroughly reviewed the piece regarding your claim of "libel" but will be glad to do so if you will send it to me and point out the specific language that you feel defames you.

FinancialWire is published by Investrend Information, a division of Investrend Communications, Inc., and it is protected by the First Amendment, as are its editors and contributors.

There are public figures and there are PUBLIC figures. You fall into the latter category, and a substantial part of your public personna is to sharply, harshly and without reservation criticize other public figures and entities, sometimes to the point of ridicule. Your criticism of Mr. Patch would seem to be one of those instances former President Truman was talking about when he remarked about heat, kitchens and fire.

You have also opened the door for fair comment with your publication of column after column critical of the very issues that Mr. Patch espouses.

It is inconceivable that you would seriously contemplate damaging your own public personna, in effect, as the "sticking it to the man" commercial moralizes, libeling yourself by showing that you can dish out but not take criticism. However, that is your decision to make.

Nevertheless, FinancialWire stands prepared to offer you whatever space you need to correct any inaccuracies, point out any defamations you perceive to have been made, disagree with statements made, or to take issue with any positions taken.

Fire away when ready.

Best ... (name)

From: James Cramer
Sent: Tuesday, January 03, 2006 09:38 AM
To: (name)
Subject: RE: Cramer, Rocker,

Please make no attempts to contact me personally, all correspondence must be through our lawyers. The First Amendment does not protect any news organization from malicious and patently false statements. Once again, if an entity that calls itself a news entity is put on notice that something is patently false, the standard of libel applies to even public figures. . Please talk to your attorney and please do not attempt to contact me again

From: XXXXXX / (name)
Sent: Tuesday, January 03, 2006 8:05 AM
To: James Cramer

=== Jim, my note was as close to warm and fuzzy as I could get under the circumstances where you are threatening. If you want to throw out all pleasantries and persist in legal mumbo-jumbo, I don't need to hear that. Please direct that to:


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From: StockDung1/10/2006 10:17:36 PM
   of 1821
STOCKGATE TODAY, On to the revised Article!!


An online newspaper reporting the issues of Securities Fraud

Regulation SHO; Results Leave Questions More than Answers (corrected) – January 4, 2006
David Patch

(Note: The Original December 29th Article has been revised based on a response from Jim Cramer and his attorney claiming defamation of character. Mr. Cramer and his attorney had promised a response by end of business today as to what exactly that defamation was but that response never materialized. I had notified the attorney that I would pull the December Article today out of respect for Mr. Cramer yet respect was never afforded back. While I remain unsure of exactly what it was that Mr. Cramer claims was truly defamatory, I did find an error in my presentation of the position Mr. Cramer held at the time went public in May 1999. I have corrected that error as well as the implication that he was responsible for the miserable performance in the stock, and the loss to shareholders, as CEO. Mr. Cramer was not CEO of at the time of the offering. I can only believe that since Mr. Cramer and his attorney have had ample time to respond to several inquiries on the alleged defamation by myself and Financialwire, and have failed, they have assumed that the bully tactic to threaten me had solved Mr. Cramer’s personal issue with criticism received vs. criticism given. On to the revised Article)

On January 7, 2005 the first Regulation SHO threshold lists were published representing companies with excessive oversold securities into the markets. Each company published achieving a threshold greater than 0.5% of the issues outstanding in trade settlement failures. On the first published lists were companies such as Taser (NASDAQ: TASR), Allied Capital Corp. (NYSE: ALD), Novastar Financial (NYSE: NFI) and Travelzoo (Nasdaq: TZOO).

But what made Taser, Novastar, Travelzoo, and Allied Capital somewhat unique is that while each company was from a separate business sector, each held a common trail of similarities. For example, each of the three companies had a mysterious Federal Investigation initiated into the accounting records or representations made by Company executives. Investigations that eventually closed without cause. And, each had David Rocker and Hedge Fund Rocker Partners reportedly short the stock.

David Rockers short positions were not limited to just these three Regulation SHO threshold stocks however.

Rocker was also reportedly holding short aaiPharma (NASDAQ: AAII), (NASDAQ: OSTK), Krispy Kreme (NYSE: KKD); and Take-Two Interactive (TTWO) among those we know of. For each of these stocks all but Take-Two interactive has staunchly held a position on the Regulation SHO threshold security publication for excessive trade settlement failures. As for Take-Two Interactive, they just concluded the ordeal of an SEC Investigation into accounting practices. No action taken by the SEC.

When the SEC released Regulation SHO in June of 2004 a special “grandfather clause” was drafted into the regulation allowing for all outstanding settlement failures to be immune from the mandatory closeout provisions of the new rule. While this contradicts the bylaws passed down by Congress in the Exchange Act of 1934, the SEC claimed this clause would prevent any possible buy-side volatility associated with the covering of large blocks of fails. The SEC never considered nor addressed sell side volatility in the rule-making provisions.

This past week Wall Street Journal reporter Karen Richardson discussed the stellar performance turned in by Hedge Fund Manager David Rocker in 2005. The article identified a near 50% return, after fees, in the fund managed by Rocker. The article unknowingly also brought insight into Regulation SHO.

According to Richardson, Rocker Partners started 2005 with a net short position of 60%. By my calculations that equates to an 80% short position 20% long position in the fund. Richardson also reports that Rocker will close out this year at a net 10% short position, 55% short 45% long. This represents a significant buy-side investing strategy that Rocker undertook in 2005. Was it timed with the release of Regulation SHO?

Richardson reports that Rockers major profits came from covering some of his short holdings in issuers such as Krispy Kreme, Take-Two, and Tempur-Pedic for example.

Looking back on the investments Rocker reportedly held, the SEC Investigations and results, and the Regulation SHO list, I would say that Rocker was not only smart, he was extremely lucky.

Federal Investigations announced against Rocker Shorts Allied Capital, Taser, Take-Two Interactive, Travelzoo, and Novastar yielded ‘no cause’ actions by the authorities by years end. The damage was already done. Allied Capital went so far as to publicly identify that the investigation into the Company was initiated based on repeated complaints by short sellers over accounting practices. As for the performances, Taser is down 75%, Take-Two is down 50%, NFI is down 42%, Travelzoo is down 76%, and Allied Capital is up 20% for 2005. Travelzoo actually being honored by Forbes Magazine, as with being one of the top 200 small businesses in America but it is still down 76%.

Rockers other reported SHO shorts also had horrendous years as aaiPharma wound up losing 99.6% in 2005 after filing for Chapter 11 Bankruptcy, Krispy Kreme is down 52%, and Overstock has had an abysmal 57% loss since January 2005.

As all these companies have David Rocker being short in common each has also resided primarily on the Regulation SHO threshold list for greater than 90% of this trading year. Only Allied Capital and Take-Two have not been on the list for that window of time. Ironically, Allied Capital is the only company within the entire bunch that has yielded an investor profit on the year with all others exceeding 40% in losses. All others!

Talk about your stock pickings.

I asked Ms. Richardson about this complicated but circumstantial picture and whether she had any opinion as to whether settlement failures could any way relate to the performance Rocker Partners returned to its client base. Ms. Richardson either became confused over the data or wanted to ignore it as she failed to respond thereafter. She has not been alone.

The media has vilified CEO Patrick Byrne of over his battle with the illegal short selling that has nested his company on Reg SHO’s threshold list for much of this trading year and for what he has identified as a systemic problem in the markets.

Instead of investigating such concerns over possible systemic abuse CNBC’s Joe Kernen, earlier this month, asked Byrne why he didn’t simply leave the shorts alone claiming “they can go after any stock they want in America.” I am not sure that is something good but have at it Joe.

Kernen having access to communications between Byrne and his Broker whereby Byrne’s broker admits they can’t settle the trades because there are no shares available in the market avoided the conversation on the evidence. As expected, Kernen has never asked the Institutions that frequent his show why they do not simply settle the trades and leave and other Issuers alone. Be done with this mess and settle the trades.

Likewise Jim Cramer, CNBC’s Host of Mad Money and the largest individual shareholder of, found time to fodder Byrne in a articles over Byrne’s management skills citing too much of the CEO’s efforts have been against abusive short sellers. Byrne’s focus on the short sellers has become a detriment to insuring profitable business operations according to Cramer.

As luck would have it Cramer, a self-proclaimed short seller extraordinaire, has identified that he was a co-founder in the public offering of a company; (NASDAQ: TSCM). A public offering which quickly turned ugly for those who invested in the stock.

In the May 1999 stock offering, the public’s access to trading in the stock ranged between $59.50 and $70.00/share with trading volumes in excess of 2.5 times the shares offered by the company. Since that opening day, has had a performance others would term “a pig.”

While TSCM has recently improved to nearly $7.00/share on takeover rumors, it was less than a year from the initial offering date that TSCM trading had fallen to this same $7.00/share threshold. The drop resulted in a 90% loss in share value over a period of 1 year. For much of the next 5+ years, the stock has actually qualified as a penny stock trading below the $5.00 watermark.’s business fundamentals have not fare much better than the stock during these years.

As Cramer questions the motives and qualifications of the Board and CEO of, It would suffice it to say that the performance of Board and CEO should raise equal objective criticism from the financial media and shareholders.

In the circles of financial critics should be ripe for the taking has seen little by way of the negative fanfare that and Jim Cramer personally interject on similar companies and company executives of like performance. Fortunately for the short sellers also remain remarkably hidden from the stock. Fortunately for Mr. Cramer is a Director and thus less objective publicly of than he may be of other companies he critiques.

Who is the second largest single shareholder in this “pig” called however? None other than…you guessed it…David Rocker.

Oh the irony.

It is no wonder Kernen, Cramer, and others fail to understand the nature of the beast we have before us. Laziness, conflicts, and a desire to keep the mainstream sponsors appeased have resulted in media coverage that is sanitized for a certain investing class. The wealthy buy the subscriptions not the average Joe. The media must keep subscriptions up and to do so media must avoid confrontation with the readers.

As for the Securities and Exchange Commission and Regulation SHO, more questions have come from 2005 than answers. While the Commission remains silent in confusion and purposeful avoidance, the manipulation on concerted stocks remain and remain at a detriment to our global economy. Small businesses are being destroyed as are those investors not connected enough to be protected from the abuses.

Who has financially benefited from these issuers and others nestled dormant on the threshold lists with excessive settlement failures while the market capitalizations in the securities listed get trashed? How is it that with new rules that require closeouts in settlement failures [buy-side pressure] are put in place, and major short positions are being closed out [buy-side pressure] the stocks still tank on convenient sell side volumes?

All these forced buyers and everybody is a seller.

I personally would like to know how much profit went into the hands of David Rocker and the wealthy clients of Rocker Partners because of short positions that knowingly or unknowingly may have resided as excessive settlement failures in localized securities. Settlement failures the SEC themselves admit create the added leverage to drive down the value in a security.

How much of the SEC’s actions to protect those that conducted trading strategies, including heavily selling securities into settlement fail, resulted in investor financial ruin? How much of that financial ruin was merely a means to divert the wealth of the average investor into the wealthy Hedge Fund pools and the greedy clientele they administer to?

Whether smart or just plain lucky, it was awfully convenient for this Hedge Fund to have found the pot at the end of the rainbow that was filled with aiding SEC investigations, free passes handed out by the Federal Government to settlement failures, and mainstream media so eager to overlook the obvious questions.

Someday maybe somebody of importance will look into who owned the fails that hold these companies on the SHO list forever. When they do look maybe they can focus on who is ‘working the stocks’ to insure that those fails are closed for a profit and not a loss.

Maybe, just maybe, the two are interrelated.

For more on this issue please visit the Host site at .

Copyright 2006

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To: bob wallace who wrote (1766)1/14/2006 3:52:26 PM
From: Bwe
   of 1821
What happened to Gary B. Smith? I let my subscription to RM lapse and was looking around the site for the first time yesterday in quite a few months. It's like he never wrote for the site. His name is MIA from "Featured Commentators" and I see that Helene Meisler has taken over his "Chartman's Top Stocks" service.


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From: StockDung1/15/2006 5:57:27 PM
   of 1821
Jim Cramer Chronicles; Paranoid Lap Dog makes threats

Jim Cramer Chronicles; Paranoid Lap Dog makes threats
Location: BlogsDave Patch's Blog
Posted by: dpatch 1/15/2006 7:17 AM
This New Year started off with a bang. Two Stockgate Today articles apparently struck a nerve with the infamous James Cramer, lap dog to the Hedge World, and Jimmy responded with legal threats of defamation and libel.

Being an engineer and not part of the “media” world, I was at first concerned and then concern led to intrigue. EVERYONE I told this bizarre story to said the same thing – “Why would Cramer care about what you had to say.” I thought I had answers; Ego being on top of the list.

But then as I dug deeper into the articles and the statements I made, I thought maybe there were other issues Jimmy didn’t want discussed in the open public anymore.

First and foremost; IPO. The foolish management sold the company stock to the public with the preferred clients of the underwriters benefiting far greater than the company itself. Jimmy, the Wonder Pup who thinks he can move markets, created a royal blunder as this co-founder of took the company public at $19.00 yet the open public trading ranged between $60 - $70/share. The relationship between jimmy and the underwriters was---cozy as some might say. The IPO snafu resulted in a Lawsuit against; IPO, et al v., Inc., et al (CIVIL DOCKET FOR CASE #: 1:01-cv-10970-SAS). Results of the case are unknown.

For the record, Jimmy has continued to perform handsomely as Director of as the company has increased the accumulated debt to $155 Million with the first profitable quarter taking place --- last quarter. A pig if I ever saw one. With a quarter profits of $1.6 Million it will take some time to eliminate the debt accumulated. But Jimmy is good at judging the performance of management and Directors.

I also called Jimmy a self proclaimed short seller extraordinaire and that has to be defaming, Jimmy being so critical of short sellers and all. I think in his December 30th article he called them the smartest people on Wall Street and we know that since Jimmy is not, it has to be libelous.

Maybe it was Jimmy’s past he was worried about. A checkered past that led to an SEC investigation into claims of Cramer hyping the stocks in his personal trading book. While the SEC investigation closed without action, former Cramer & Company employee Nicholas Maier wrote a book detailing how Cramer worked closely with others to aide the funds in moving positions. Could it be that Jimmy is still aiding today and doesn’t want his past brought back up? Some that track his stock picks see a pattern forming. Heavy volumes after calls are absorbed by sellers getting out and once the volume, and calls, dries up the prices collapse. A modern day public scam? I really don’t know and wouldn’t know how to prove it one way or another. I would suggest you watch for patterns before buying into the Cramer shuffle.

And then there were those parallels between Jimmy and David Rocker. It appears that any reporter that tries to link to David Rocker and Gradient gets one of these nasty grams from Jordon Goldstein, General Counsel to Apparently Jimmy is trying to distance himself from one of the largest shareholders in Jimmy even claims he has never met the guy outside of one occurrence at the grocery store. But Jimmy, David Rocker, and Jimmy’s wife all worked for the same firm around the same time. Jimmy and the wife were not married at that time. And Jimmy lives only a few blocks away from his best supporter in And they never met?

There is a litany of other possible explanations for the bizarre behavior out of Cramer and the boys. None too appealing to the integrity of this man who claims he is out to aide the little guy in “making you money.” Is he really looking out for the “Average Joe” or is he out to make himself and those Hedgies he befriends money as he uses the average investor as the pawns?

Ff you want to see first hand this chronicle of events, including the Cramer Complaint and my response go to and scroll down to the section titled "Cramer Chronicles" You can read the e-mails (check the date stamps) and the complaint that came from You will also see the formal response that was carefully crafted by a friend as well as the counter complaint I filed with A little tit-for-tat.

Ironically, the bluster of to intimidate me and harass me was respected enough by me to respond. does not have such equal integrity as they simply blew off the evidence I provided Goldstein regarding Cramer’s published article. The published article was bogus and riddled with factual inaccuracies but it fit the agenda and it was written by a director of the company.

Cramer, the man, has been reduced to a mouse. A lap dog to the Wall Street Hedgies and Jimmy has no way out.

As for this whole legal matter, think about this. Cramer has enough financial capital to afford his own attorney’s if he feels he has been PERSONALLY defamed. Instead, Cramer uses the legal counsel of as his personal attorney. Defamation is a personal matter, should the Director of a pig company like be using employees of the company to fight a personal issue? Is this proper use of assets and expenses? Is this attorney available to all employees for private use or is Jimmy just one of the lucky ones?

Just more things to think about as you read the claims, e-mails, and watch Jimmy on TV. The articles in question remain at and can be read against the allegations made. They are in the exact form they were at the time the claims were submitted by Mr. Goldstein. Note how factually inaccurate the claims were and yet the claim was about factual inaccuracies.

Of course for arguements sake...This is all my personal opinion.

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Re: Jim Cramer Chronicles; Paranoid Lap Dog makes threats By Blackbartpo8 on 1/15/2006 10:08 AM
DOUBLE BOOYAH DAVE! I look forward to following this story. I am sure that the good ole boys are not done with you and that you will have many more exciting tales to tell in the future that will be just as ridiculous. Maybe you will even get your own TV show titled "Crybabies and Crookson Wall Street" BOO HOO YA!


Re: Jim Cramer Chronicles; Paranoid Lap Dog makes threats By blackbartpo8 on 1/15/2006 10:33 AM
When you get your new show called "Crybabies and Crooks on Wall Street" you can have a fast paced period at the end called the Merry-go-Round where callers can yell YABADABABOOYA DAVE and you answer YABADABABOOYA! Then they can submit names for you to identify as Crooks or Crybabies. You scream the answer and then bring on the sound effects such as baby sounds or jaildoors slamming!


Re: Jim Cramer Chronicles; Paranoid Lap Dog makes threats By Patchie on 1/15/2006 2:48 PM
FWIW.. All the Cramer Corrspondence including complaint and my response is available at Just scroll down to the Cramer Chronicles section and enjoy the reading.


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To: Bwe who wrote (1771)1/17/2006 6:06:10 PM
From: bob wallace
   of 1821
Gary B was never one of my favorites, but he did in fact retire a month or two ago - very low key, not too much of the "we are going to miss you" stuff except for a note from the publisher. the fact he has been purged is curious - that usally only happens to the plagiarizers

OK, I just looked it up and the editor posted a message that Gary would be leaving at the end of the month on 12/20 (can't read the article again as my sub has expred) - after that time Gary had very few picks

that's all I know

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To: Bwe who wrote (1771)1/17/2006 6:14:09 PM
From: bob wallace
   of 1821
I just found this:

A few people have asked me (and I've gotten a lot of hits from Google searches) if I knew why Gary B. Smith is no longer writing for I have no idea why he's no longer writing for them. I just looked at his profile on Fox News' site and saw something that was new news to me -- he's managing partner of Exemplar Capital. Maybe Gary's too busy working at Exemplar to write for TSCM any more. If anybody knows more please chime in.


who is Exemplar Captal?

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To: bob wallace who wrote (1774)1/17/2006 10:03:47 PM
From: Bwe
   of 1821
Thanks, Bob. On this week's Bulls & Bears show on Fox News channel, it said Exemplar Capital under Smith's name. Must be a hedge fund or some money management firm.


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From: StockDung1/18/2006 9:38:10 AM
   of 1821
"In an email to FinancialWire Tuesday, Cramer said, "You have to get something out right now about What Cuban Is Saying, don't you? I mean isn't he a lapdog for the hedge funds? Tell the Patricks to get on this. Outrageous. This will hurt my efforts to get Byrne the Nobel for either Peace or Economics, but I am not giving up. I thought Cuban played fair? Outrageous .. And get Patrick away from the day to day Overstock business so he can focus on this Cuban.. Get to work man, or the shorts will have their way.""

"Requests to Cramer for clarification were not answered."

StockGate: DTCC Association Cited As Political Liability By New Jersey Newspaper / FinancialWire®
January 18, 2006 (FinancialWire) The nominee for state treasurer in the Jon Corzine administration in New Jersey has been cited as a possible political liability to the new Governor by the Trenton Star-Ledger due to his directorship at the Depository Trust & Clearing Corp., saying that "some of the company's complex practices have come under scrutiny from securities regulators," including its role in "Stockgate."

January 18, 2006 (FinancialWire) The nominee for state treasurer in the Jon Corzine administration in New Jersey has been cited as a possible political liability to the new Governor by the Trenton Star-Ledger due to his directorship at the Depository Trust & Clearing Corp., saying that "some of the company's complex practices have come under scrutiny from securities regulators," including its role in "Stockgate."

The nominee, Richard Abelow, was a former colleague of Corzine at Goldman Sachs (NYSE: GS). In other Stockgate news, a war of words appears to have erupted between Patrick Byrne, CEO of (NASDAQ: OSTK), Mark Cuban, the billionaire seller of to Yahoo (NASDAQ: YHOO), and James Cramer, founder of (NASDAQ: TSCM), and commentator on CNBC.

The state capitol's Star-Ledger noted that Abelow, 47, had retired as head of global operations for Goldman Sachs in July 2004, but that he had "served on a securities industry board (DTCC) that has been a focus of controversy," noting that it has been "the target of 12 lawsuits on behalf of bankrupt companies that contended they were victimized" by naked short sales.

It quoted Stuart Goldstein, spokesman for the DTCC, who said "all of the legal challenges have been dismissed," and that while some of the lawsuits named Abelow, "he had no involvement in the trading practices that were the focus of regulators and was never personally implicated." It quoted Goldstein as saying "Brad was only named there by virtue of the fact that he happened to be a board member."

A Corzine spokesperson said the transition team was "aware of Abelow's peripheral involvement in the controversy and is not concerned about it."

In an email to FinancialWire Tuesday, Cramer said, "You have to get something out right now about What Cuban Is Saying, don't you? I mean isn't he a lapdog for the hedge funds? Tell the Patricks to get on this. Outrageous. This will hurt my efforts to get Byrne the Nobel for either Peace or Economics, but I am not giving up. I thought Cuban played fair? Outrageous .. And get Patrick away from the day to day Overstock business so he can focus on this Cuban.. Get to work man, or the shorts will have their way."

Requests to Cramer for clarification were not answered.

Connecticut securities head Ralph Lambiase has assembled a multi-state task force to investigate and possibly take action on manipulative and illegal naked short selling, and now informed sources say that a similar multi-state task force headed by Connecticut Attorney General Richard Blumenthal may bring actions any day now to curtail abuses by currently unregulated hedge funds.

The transcript for a recent forum sponsored by the North American Securities Administrators Association has been posted at

The issue, exclusively covered by FinancialWire for 3-1/2 years (since June 17, 2002), has recently become mainstream news as Overstock (NASDAQ: OSTK) has sued, Refco (OTC: RFXCQ), behind the torment of Sedona (OTCBB: SDNA) and its shareholders, has imploded, and coverages have expanded to Fox News (NYSE: NWS), NBC and CNBC.

NASAA brought James Brigagliano, assistant director of the Division of Market Regulation, who served as new SEC Commissioner Annette Nazareth's second-in-command when she was head of the division, face-to-face with detractors who have questioned that division's commitment to enforcing the provisions of SEC Regulation 17A(a)(1)(A), which states: "The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors."

It was Nazareth who in a now-infamous New York Times interview, inferred that concerns about naked short selling is simply about investors "who want the price of their stock to go up." It was Brigagliano who has been accused by gadfly David Patch of lying to Congress, and who told Euromoney that what appears to be monumental profit-taking by short sellers at the expense of small investors whose shares were apparently "counterfeited" prior to January, 2005, was "grandfathered" by the SEC to avoid "market disruptions."

After the implosion of Refco, whose bankruptcy auditors have found an apparent $10.5 billion item related to short sales, it became apparent to observers that the term "market disruptions" was a euphemism for the possibility of a cataclysmic meltdown in the U.S. financial system, a possibility that appears still possible given the abject failure of Regulation SHO to dent ongoing market manipulations.

Connecticut Securities Director and immediate past president of NASAA Ralph A. Lambiase will moderate the Forum. In a letter to Patch, Lambiase said he had formed a multi-state task force to investigate naked short sales, which many saw as a prod to the SEC whose Regulation SHO has only spotlighted the size of the manipulative abuse but according to members of the U.S. Senate Banking Committee has done little to curtail it.

Lambiase has also been a critic of the Depository Trust and Clearing Corp., whose "stock borrow program" has been accused of aiding and abetting violations of SEC Regulation 17(a). The organization has admitted to $6 billion a day in "fails to deliver," another euphemism, in this instance for counterfeit shares.

The NAASA panel was perhaps more defined by the fact that no one representing the DTCC appeared.

Other panelists included James J. Angel, Associate Professor of Finance at the McDonough School of Business at Georgetown University, who spoke three years ago at an Investrend Information sponsored CEO Council event, Peter J. Chepucavage, General Counsel of Plexus Consulting Group, LLC in Washington, D.C., and an advisory board member to Investrend Research-covered Public Company Management Corp. (OTCBB: PUBC), and John Finnerty, Professor of Finance at Fordham University Graduate School of Business Administration and a Principal with Analysis Group, Inc., and

Also, Anand Ramtahal, Vice President, Division of Member Firm Regulation, New York Stock Exchange; Robert Shapiro, co-founder and chairman of Sonecon, LLC, and former U.S. Under Secretary of Commerce for Economic Affairs; Susanne Trimbath, Chief Executive Manager of STP Advisory Services and Senior Research Economist; and a representative of NASD.

NASD, a representative of the NASD has been invited.

The event was meant to prod the SEC to "consider additional measures to limit the detrimental impact of abusive naked short-selling of the stock of small businesses," according to Patricia D. Struck, president of the North American Securities Administrators Association.

NASAA had previously signaled its growing discomfort with the pace of the SEC response to a scandal that some believe could implode the entire U.S. financial system the same way Refco was brought down after what may have been a mammoth $10.5 billion exposure to what bankruptcy accountants entered as "securities sold, not yet purchased."

The DTCC has furiously fought to punish and impede any media that has dared to mention it in connection with StockGate.

Recently, Larry Thompson, Chief Counsel for the Depository Trust and Clearing Corp., mounted what appears to be a brazen and open libel of FinancialWire directly in the face of warnings that members of his Board of Directors received only days before for what Attorney Marshal Shichtman, Esq., referred to as reckless and apparently willful misbehavior against the media.

All 20 members of DTCC's board, including Jill M. Considine, Chair and CEO, and Donald F. Donahue, COO, DTCC; Jonathan E. Beyman, CEO, Lehman Brothers (NYSE: LEH); Randolph L. Cowen, Global Head of Technology and Operations, Goldman Sachs Group (NYSE: GS); Dianne Schueneman, Senior VP, Merrill Lynch & Co. (NYSE: MER), New York; Douglas Shulman, President, NASD, Inc., Washington, DC; and Timothy J. Theriault, President, The Northern Trust Co. (NASDAQ: NTRS); and Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange, had been asked by Shichtman to "reign in" Thompson and other high executives of DTCC following two documented instances of media tampering involving FinancialWire.

The latest attack came in a letter to Financial Express in India, in response to Sucheta Dalal's column, 'Pitfalls ahead in new Sebi proposal?" Stating that the reference to the Depository Trust & Clearing Corporation is "largely inaccurate," Thompson said that "DTCC's stock borrow programme is not being probed by NASD or any other regulator."

Earlier in the year, the DTCC's counsel had also said it had not been sued despite public evidence that it had been.

Thompson said that DTCC's subsidiaries serve as the central infrastructure in the US for post-trade clearance and settlement of virtually all trading of equities and fixed income securities. "Our activities are highly regulated by the US Securities and Exchange Commission, the Federal Reserve and the New York state banking department.

"Ms Dalal's reliance on Financialwire is unfortunate. It is not a legitimate news source."

He added that on her reference to lawsuits, DTCC has been sued by a handful of companies and investors in regard to naked short-selling. In every case but two (which are still pending dismissal motions), the cases have been dismissed or withdrawn by the plaintiffs.

"DTCC does not regulate short selling (naked or otherwise) or other marketplace transactions, and has no power either to allow or stop it. Regulatory and enforcement powers rest with the SEC and with the exchanges upon which the transactions are conducted."

The published statement is very similar if not the same as has been made to distribution vendors of the newswire in attempts to directly interfere with its publication.

Financial Express has been asked by FinancialWire to ascertain Thompson's "proof" behind his assertions, noting that its team of editors and reporters, most of whom are profiled at , have extensive journalism backgrounds, and that there is no basis whatsoever for what now appears to be libelous comments.

The most recent effort followed the DTCC's successful interference with FinancialWire's distribution via Investors Business Daily and Yahoo, Inc. (NASDAQ: YHOO) on February 7, 2005, a deed to which attorneys for the DTCC admitted to in a letter to Shichtman in April, in what appears to have been at the time a full-court press against unfriendly news.

On April 10, for example, a much-vaunted expose on General Electric's (NYSE: GE) Dateline NBC program was abruptly and suspiciously cancelled, and run weeks later in an extremely truncated form that made no mention of the DTCC, said to have been the program's primary target. The extent of potential interference in that programming remains a mystery, as those close to it have all declined to discuss it.

If there was interference, it would surely denigrate NBC in stark contrast to the standards set by CBS's 60 Minutes in the infamous "Big Tobacco" expose that became a highly-acclaimed movie, "The Insider," and more recently the movie "Good Night, and Good Luck," about how that network stood up to Joe McCarthy in the Communist media-baiting era of the 50s.

On or about the same time, the DTCC had castigated EuroMoney after a March, 2005 article on illegal naked short selling quoted then U.S. Securities and Exchange Commission Head of Market Regulation Annette Nazareth's assistant, James Brigagliano that prior lawbreakers were "grandfathered" because "we were concerned about generating volatility where there were large pre-existing open positions, and we wanted to start afresh with new regulation, not re-write history." Nazareth, now an SEC Commissioner, had previously told the New York Times that naked short selling amounted to no more than complaining shareholders "who want their stock to go up."

Since, one of those "large pre-existing open positions," apparently in the neighborhood of $10.5 billion, has come back to haunt the SEC, in the form of a line item, "securities sold, not yet purchased" in the bankruptcy filing of Refco (NYSE: RFX; OTC: RFXCQ), according to the Financial Times. These events apparently have created a huge crisis of confidence in the institutions previously believed to be there to protect the individual investor and create a level playing field.

A recent Investrend Poll at showed that a whopping 89% of online respondents believe the SEC should be "hugely" blamed for the Refco meltdown. An even more lopsided 92.05% stated that the DTCC should "be punished" for censorship violations of the First Amendment. And in the current Investrend Poll, 50% so far believe that these new scandals will keep individual investors on the sidelines and out of the markets.

The DTCC remains under intense pressure from regulators over its controversial "stock borrow program," its move to automated settlements that has unsettled many in the financial community, including foreign exchanges such as Sebi in India, according to the Financial Express, that are now reconsidering copying such a system, and from a score of lawsuits claiming the agency's policies and loans have undermined the financial system and hurt hundreds of small public companies and thousands of individual investors who have lost millions.

The DTCC itself admitted in its front-page editorial complaining of Euromoney and the charges it expected from Dateline NBC, that $6 billion of securities go unsettled every day. The admittance was in the form of a boast that this amounted to just a small segment of each day's clearances.

In his letter, Shichtman noted that while the DTCC's standing of an SRO, is "highly disputed," and with it "any claim to any type of immunity," that it has a "heightened responsibility to the public" as a quasi-SRO "solely owned by SROs," meaning NASD and the NYSE. He asked the DTCC directors to set a proper "tone at the top" by reigning in the media-bashing and news interferences practiced by the DTCC's top executives."

He said that the DTCC's guise of its interference as "free speech" does not excuse slander, libel and tortuous interference, nor, if the DTCC is held to be a government-aided organization, the clear violation of FinancialWire's First Amendment rights.

DTCC board members include Gerald A. Beeson, Senior Managing Director and CFO, Citadel Investment Group, Chicago; Jonathan E. Beyman, CEO, Lehman Brothers (NYSE: LEH), New York; Frank J. Bisignano, CEO Global Transaction Services, Citigroup (NYSE: C), New York; Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD), J. Charles Cardona, Vice Chair, The Dreyfus Corp.; Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc., New York; Arthur Certosimo, Executive VP, Bank of New York (NYSE: BNY), New York;

Also, Jill M. Considine, Chair and CEO, The Depository Trust & Clearing Corporation (DTCC), New York; Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB), Charlotte, NC; Randolph L. Cowen, Global Head of Technology and Operations, Goldman Sachs Group (NYSE: GS); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC), New York; Norman Eaker, Principal, Edward Jones, Des Peres, MO; Allan D. Greene, Executive VP, State Street Corp. (NYSE: STT), Boston, MA; and

Also, Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange, Boston; Heidi Miller, CEO, JPMorgan Chase & Co. (NYSE: JPM); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR), New York; Ronald Purpora, CEO, Garban LLC, Jersey City, New Jersey; Dianne Schueneman, Senior VP, Merrill Lynch & Co. (NYSE: MER), New York; Douglas Shulman, President, NASD, Inc., Washington, DC; and Timothy J. Theriault, President, The Northern Trust Co. (NASDAQ: NTRS), Chicago.

Citing FinancialWire's coverage of the widening financial scandals associated with naked short sales, Financial Express had said the Securities and Exchange Board of India (Sebi) must rethink any automated trading systems such as those used and proposed by the Depository Trust and Clearing Corp., which it said American investors no longer trust.

Columnist Dalal cited manipulative scandals involving Refco (NYSE: RFX) and (NASDAQ: OSTK) as reasons M. Damodaran, Sebi chief, should go slow on permitting short-selling by institutional investors. Short sales abuses have vexed and embarrassed American regulators as well as institutions such as Goldman Sachs (NYSE: GS) and Credit Suisse First Boston (NYSE: CSR).

Financial Express said that automation has its downsides. "Unless the regulatory system is constantly alert, ingenious crooks are always working to identify weak links."

The article is at

Dulal said that a "lending and borrowing mechanism is expected to prevent rampant price manipulation and keep out naked short-sales, that led to the demise of the old badla-based system of forward trading. Will it achieve this aim?

"It is pertinent to look at the growing US controversy over illegal naked short-sales and its consequences. FinancialWire . posted an article in March 2005 about a Michigan man, Robert C Simpson, who acquired 100% of the issued and outstanding stock of Global Links Corp. Two days later, he found over 50 million shares of the company shares were traded on the bourses. This case came up for discussion by the Senate Banking Committee and was probably the earliest official acknowledgement of naked short-sales (without first borrowing shares, as is legally required)."

"Since then, Patrick Byrne, CEO of a company called Overstock has gone public with the fact that his company's float changed hands four or five times in a day. How, in a perfectly functioning lending and borrowing mechanism? And where are all the extra shares coming from to give delivery, unless there is a large incidence of illegal naked short-sales? Byrne has publicly alleged his father failed to get delivery of 200,000 shares purchased by him through a blue-chip brokerage firm. He is quoted as saying anywhere between 5-20 million counterfeit shares are currently in the marketplace, presumably on the major exchanges alone.

"The US debate is important, as their trading system has become the global standard for capital markets. It is, hence, pertinent to note that extraordinary trading volumes (yet unexplained phenomena in highly manipulated Indian stocks as well) and short delivery during settlements are increasingly being flagged as manifestations of a possible scam.

"More startling, many investors have accused The Depository Trust & Clearing Corpo-ration (DTCC), a holding company that clears and guarantees almost all trades in the US, of engineering naked short-selling schemes. The DTCC has faced 12 lawsuits in this connection. Most of these were dismissed, but the corporation itself has admitted, in a Q&A posted on its website, that naked short-selling occurs, but the extent to which it occurs is unclear.

"The DTCC's stock lending and borrowing programme also continues to be under regulatory scrutiny by the NASD and other government agencies. The US debate attributes naked short-selling to counterfeiting and collusion between brokers, dealers and, of course, shadowy hedge funds. In most cases, the sales, accompanied by large, unexplained trading volumes, aimed to destroy the value of small companies.

"An October 13 report by FinancialWire also suggests research analysts, especially Net-based ones, also have a role to play in setting the stage for shorting. It quotes specific examples of alleged collusion between broker-dealers and independent research firms to publish negative information, to beat down the prices of target companies.

"This raging American debate over rampant price manipulation and misuse of automated trading systems is extremely relevant for us, since Sebi plans to permit short-selling by institutional investors. Indian investors, too, have noticed that a large and unexplained spurt in trading volumes always signals the start of a big price ramping operation. Our stock exchanges and regulators simply sleep over this phenomenon, even when these are pointed out to them.

"Second, Indian regulators are clueless about the true beneficial ownership of the most powerful market segment, namely, foreign institutional investors. Add Sebi's record of poor prosecution of important cases and our slow judicial system and we have a recipe for serious trouble. Sebi may end by attempting to regulate institutional short-sales, while remaining partially blindfolded."

Meanwhile, according to Financial Times, the $10.590,379,000 "securities sold, not yet purchased" line item in the Refco (NYSE: RFX) bankruptcy balance sheet is not only naked short selling, it is under intense investigation by authorities. The article is at

FT says that the firm's IPO underwriters Goldman Sachs (NYSE: GS) and Credit Suisse First Boston (NYSE: CSR) both have investigators looking into the illegal but allegedly widely practiced manipulative practice among essentially unregulated hedge funds and other financial institutions that now appears to be a naked short sales bubble that could imperil the U.S. and worldwide financial markets.

Overstock's CEO Patrick Byrne appeared on News Corp.'s (NYSE: NWS) Fox with Neil Cavuto to state that there are at least twelve Refco's "buried in the system," and Cavuto said some say it could be as many as 60 institutions ready to implode. He said a "systemic" problem could cost the Depository Trust and Clearing Corp. as much as $100 billion to clean up.

The video for this is at

The line item was so unbelievably monumental that two of the major critics of naked short selling, Dave Patch, of, and Bob O'Brien, director of the National Coalition Against Naked Short Short Selling, were reluctant to positively identify the $10.5 billion as Refco's naked short position. The Financial Times says investigators are not so reticent, and "have been unable to find which shares, if any, were involved."

The document is at

Critics have said that if you lift the covers off similar financial institutions and hedge funds, and even many of Wall Street's top investment banks and brokerages, the $10 billion exposure at Refco could be multiplied 100 times over, and may inhabit every nook and cranny on the Street. Few companies initiate buy-ins, and such exposure is just bounced around, or "borrowed" from a DTCC. that may also be at significant risk should it be forced to call in its "loans." The DTCC has also said that there are $6 billion in "fails to deliver" every single trading day. That could add up to some $1.5 trillion every year, not counting attrition from late deliveries.

Already the SEC and the U.S. attorney is probing a $1.4 billion hedge fund, Alexandra Investment Management LLC, and it is not yet known what that investigation will uncover. The fund has revealed that regulators are investigating "numerous participants" in PIPEs, an anacronym for private investments in public equities. Often such investigations end, however, with only a knuckle knock, with no restitution to shareholders of targeted small public companies.

The U.S. Securities and Exchange Commission is under heavy scrutiny as well over Refco since many claim it is just the tip of the iceberg in the illegal naked short selling scandal known as StockGate.

Said the New York Post:

"It is believed the monies at the heart of the Refco scandal are in fact unsettled funds related to the illegal naked short selling, and many have theorized that there may be untold billions of dollars in other financial institutions and hedge funds in the same leaking lifeboat."

The Post said no new laws are needed. "Enforcement is needed."

In his Fox appearance, Byrne said he does not expect the SEC to be able to clean up this situation, and hinted that it will require either judicial or Congressional intervention.Gadfly David Patch's CNBC interview questioning the SEC's involvement is at

His site,, has long held that the SEC has scrambled to protect illegal manipulators for fear that the lawbreaking had gone on so long and that it is so huge that it threatens the nation's financial underpinnings. On CNBC, Patch again asked why the SEC can sit by and watch scores of companies listed on the Regulation SHO threshold list for almost a year, signifying that they are in continuous default of settlements required by the law.

He also asked why the SEC would try to "grandfather" the millions of settlement failures that preceded Regulation SHO, which went into effect in January. The "grandfathering" still hasn't been court-tested as to whether it may be a kind of "pardon" that only a President may issue.

The SEC and the Depository Trust and Clearing Corp. continue to stonewall any attempt to require transparency in the marketplace as to the extent of fails to deliver, which some see as just a euphanism for "counterfeit shares."

This scandal comes hard on the heels of allegations of misdeeds by Gradient Analytics and employees of (NASDAQ: TSCM), in conspiracy with David Rocker and Rocker Partners in manipulating the stock of (NASDAQ: OSTK) and others comes another explosive case, this time against Refco Inc. (NYSE: RFX), one of the primary alleged miscreants in destroying Sedona Corp. (OTCBB: SDNA), once a Nasdaq-listed company.

Not since the Enron and Worldcom scandals has the financial markets been under such growing suspicion, except this time the cancer is not just in a treatable part of the body. This time it has spread through the lymph nodes and appears to be present in every vital organ as scores of companies seem permanently entrenched in the threshold lists maintained by Nasdaq and the NYSE, signifying over three-quarters of a year of the existence of counterfeit shares and unsettled trades.

Overstock CEO Patrick Byrne, for instance, has released transcripts of discussions between himself and Morgan Stanley (NYSE: MWD) over shares that he could not get delivery on, and says his father has still not gotten delivery on 75,000 shares that he bought.

Byrne said that he believes between 5 million and 20 million counterfeit shares are currently in the marketplace, presumably on the major exchanges alone.

He has also added libel to the list of legal charges against Rocker and Gradient and others.

Former Refco CEO Phillip Bennett has been arrested on charges of deliberately misleading shareholders when they purchased shares in the company's recent public offering. He had been placed on leave by his company as it launched an investigation into $430 million the company said was owed by an entity he controlled in a transaction that was hidden from the public.

The company had already lost $1.65 billion in market value, leaving investors in the public offering extremely angry.

Also fired was Santo Maggio, president of Refco Securities, whom the company said was believed to have known about Bennett's activities.

According to the New York Post, Maggio was already "in the middle of an SEC probe that would have probably gotten him suspended one year from his supervisory duties" related to Refco's relationship with Rhino Advisors, a hedge fund that illegally shorted the stock of Sedona Corp.

The new case winds its way right back to the growing StockGate scandal as the Post quotes a "source familiar with the investigation" that the receivables in the latest probe "probably came from short sale positions made from a shuttered hedge fund."

The levees protecting the underworld of naked short selling, despite efforts of many regulators to try to prop up a system on weakened stilts appear to be crumbling, forecasting a potential Wall Street disaster that would not be unlike what happened in New Orleans and in other low-lying real estate.

An undermining of confidence in the "independence" of subscription-based institutional research, in the financial media that could even involve General Electric's (NYSE: GE) CNBC and of course, the undeniable clout of already besieged hedge funds and the "King of Shorts," David Rocker, whose targets are said to include Martha Stewart Living Omnimedia (NYSE: MSO), would be disastrous in the event of any one of them, but altogether, it could result in a total collapse as investors look for safer investment and savings venues than "crooked" markets.

In a commentary, Motley Fool said any "mirth" regarding "sith lords" and other irrelevant allegations are "obscuring a case with fairly broad implications for security analysis, First Amendment rights, and the credibility of our public markets."

It said that in an affidavit recently acquired by The Motley Fool, and also apparently acquired by DealFlow and others, Demetrios Anifantis, who identifies himself as a former employee of the research firm Gradient Analytics, alleges that the company conspired with David Rocker of the hedge fund Rocker Partners to publish damaging information "for the purpose of negatively influencing the price of Overstock shares so that Rocker could profit from its existing or intended short positions in Overstock shares.

"Two additional sworn statements in our possession, ostensibly by former Gradient employees Robert Ballash and Daryl Smith, also allege that Gradient provided biased research on behalf of its clients. Both Anifantis and Ballash additionally accuse Gradient of running a hedge fund advisory called Pinnacle Investment Advisors, contrary to the company's public statements at that time."

Motley Fool notes "the most detailed and apparently most damaging affidavit, if it is true, was delivered by Anifantis. He worked as a customer service representative for Gradient from November 2003 until November 2004. New York Post reported that he was fired from the research firm for forwarding his employer's client list to his personal email.

"According to his statement, Anifantis recalled being on phone discussions, during which "David Rocker, Marc Cohodes, or other representatives of a hedge fund called Rocker Partners, LP, requested that the special report contain more negative information, or that the report emphasize a specific negative fact and that the report downplay any positive facts.

"Anifantis also states that customers like Rocker would ask that Gradient not disseminate a negative report 'to the public for a specific period of time, so the customer could get their own position in the stock before the public got the information.' This conspiracy went beyond just Vickrey and Rocker, according to Anifantis, who also says that it "appeared" to him that Herb Greenberg, who then wrote for, joined in coordinating the attacks on Overstock.

"At first glance, the affidavits raise troubling questions about the nature of 'independent research.' If the three former employees of Gradient are telling the truth, the alleged conspiracy between the research firm and Rocker Partners would represent an egregious example of market manipulation, which most likely would have seriously harmed individual investors, as well as Overstock itself."

The Fool points out that "the veracity of these individuals has not been established, and Rocker Partners and Gradient vigorously deny the charges.

"As New York Post has reported, at least two of the affiants may have credibility issues or reasons to hold grudges against Gradient. If this case makes it to trial, Anifantis, Ballash, and Smith will have to testify in court and withstand cross-examination by top defense attorneys. It will be interesting to see whether their charges are supported by documentary evidence, such as emails, revised reports, notes of phone calls, and the like. Within the affidavits are charges that would prove quite persuasive if supported with concrete documents.

"For example, in support of the charge that Rocker had considerable input on the creation of reports, Anifantis's affidavit refers to an "exhibit 5" (which we did not receive) allegedly containing revised reports on Overstock with Rocker's revisions in brackets.

"Ultimately, we believe that these affidavits raise important questions for investors about the integrity of our financial system. Unlike a lot of the silliness in the media relating to Overstock, this complaint is not frivolous on its face, and although Overstock will need to prove its allegations, the case must be taken seriously. The question to us is why the atmosphere around this lawsuit has, from the beginning, been comical. If the behavior set forth in these allegations is true, then the implications of the ease at which the financial professionals can manipulate the public markets are stark."

The affidavits, from former employees of Gradient, according to DealFlow state that the research firm provided "hatchet jobs" on companies chosen by clients "coordinated to deliver maximum trading benefits to them." The affidavits state that reporters for "leaked" Gradient's negative reports to the market ahead of their release. It notes that Rocker Partners is the largest shareholder in and that Rocker is a contributing columnist. The affiants also say that former columnist Herb Greenberg had an office at Gradient where he ghost-wrote research reports for Gradient clients such as Rocker.

The former employees, one of whom had been fired after raising questions about Gradient's practices, said the firm stated its team of 18 to 20 analysts were comprised of CPAs and CFAs when none of them had advanced credentials, and were instead recent college graduates with business-related degrees.

They also note that the research firm's executives, Donn Vickery and James Carr Bettis, also managed hedge funds and a mutual fund that traded in the securities of companies covered by the research side.

If so, this, among the other allegations, is a violation of the "Standards For Independent Research Providers" at

Gradient is a member of InvestorSide, which told FinancialWire that a violation of its code of ethics, if proven, would disqualify any member from further participation in that organization.

Former employee Demetrios Anifantis, in a sworn statement, said that Gradient would regularly generate "custom reports" for clients, after receiving specific instructions from the clients on whether it should be a "negative" or "positive" report.

Many of the reports were redistributed to PIPES traders and hedge funds by Sagient Research, which distributes the Placement Tracker database of PIPES transactions. Sagient reportedly said it has not distributed Gradient reports since August, 2004. Release dates on the reports were said to have been often delayed for three to five days while Rocker and other Gradient partners secured short positions. These allegations were contained in several affidavits.

The affidavits said that an associate editor working with Greenberg, now at, Brian Harris, worked for Gradient to draft research, and had an office in a Gradient office in Seattle. It was noted that removed Harris' name as an associate editor shortly after Overstock's lawsuit was filed.

The affidavits contain numerous other explosive allegations.

In other naked short selling developments, the Depository Trust and Clearing Corp., reportedly itself under NASD scrutiny for its controversial stock lending program that some, including an 11 state state North American Securities Adminitrators Association task force headed by Connecticut's chief securities officer, and former NASAA president, apparently believe facilitates the illegal naked shorting industry, has been very secretive about the status of shares for individual companies, stonewalling even companies' efforts to determine their true ownerships and short positions.

Brokerage and clearing firms are apparently under intense NASD pressure to settle failed short trades in Regulation SHO threshold securities or have their clearance firms do it for them at possible substantive losses.

The NASD is in turn acting under political and regulatory pressure from the 11-state task force.

Lambiase had publicly asked the SEC to "fix" the DTCC "problem" as it was considering the adoption of Regulation SHO last year, but taking a page from numerous U.S. Senators, he and other state regulators have grown tired of waiting for Regulation SHO to do more than simply shine a magnification light on the massive fails-to-deliver problem.

DealFlow said NASD officials are concerned that stock loan programs are being used to settle failed short trades in Reg SHO threshold stocks, which must be closed out voluntarily or through forced buy-ins within 13 days. "The regulators are concerned that the stock loan are being used instead of market purchases to provide the shares needed for settlement, creating new transactions that will ultimately fail to settle as well."

The state regulators, DealFlow said, have been "highly critical of the SEC's decision to 'grandfather' settlement failures resulting from naked short sales up to levels that trigger threshold status under Reg SHO."

NAASA was particularly concerned about Regulation SHO, because it excluded the small cap market from any meaningful regulation. "NASAA said the proposal included replacing the so-called 'tick test' with a rule that would provide a uniform price test using the "consolidated best bid" as the reference point for permissible short sales. This, however, would not address problems relating to the naked short selling of smaller, less liquid securities, because , NASAA argued, the requirement of the consolidated best bids meant it could not be applied to securities that were not subject to real-time consolidated quotes. That included Nasdaq Small Cap, OTCBB, and Pink Sheet securities.

NASAA also questioned the wisdom of grandfathering settlement failures under the threshold level, asking why the SEC was willing to permit significant settlement failures at all."

"While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy," Lambiase warned the SEC.

According to DealFlow, Lambiase urged the SEC to reconsider its stance regarding the role of the stock borrow program operated by the Depository Trust Corp. (DTC). NASAA wrote that as a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The utility of the overall proposed rule would be severely impaired unless the Commission undertakes to implement such a prohibition."

Brent Baker, an attorney with Woodbury Kesler in Salt Lake City and counsel to naked shorting target and eight-month old threshold list company, previously spent 14 years at the SEC, including time in the Division of Enforcement, was quoted as saying he believes that the SEC tried, with Regulation SHO, to put "their finger in the dike" but failed.

"Three or four years ago naked short selling was being perpetrated by promoters in the micro cap world," he says. "they would publish 'exposes' on the Internet... and they would bring pressure on these little companies."

"However, short selling has changed," noted DealFlow. He believes the SEC does not realize that abusive short selling practices have been adopted by others and are now built into business models of large, mainstream hedge funds.

Meanwhile, the NY Post has reported that traders in Nasdaq stocks are racing to beat a rumored regulatory deadline to close out their positions - or take huge losses as clearing firms do it for them.

"Naked short sales are trades executed without borrowing stock beforehand. Naked short sellers can overwhelm an orderly trading market, since unlike traditional short sellers, there is technically no limit to how much stock can be sold short illegally, noted the Post.

The Post also reported recently that the NASD and numerous state securities regulators, led by Ralph Lambiase of Connecticut's Division of Securities and Business Investments, have vowed to increase scrutiny of naked short sales.

"A buy-in is the worst possible development for a short-seller, since he has to accept any price given," it stated.

In a letter to constituent investor advocate Dave Patch, whose persistence in criticizing Federal regulators over the past several years for shareholder losses at the hands of illegal manipulators was at times a lone quest, often covered only by FinancialWire, Connecticut Division of Securities Director Ralph A. Lambiase, the immediate past president of the North American Securities Administrators Association outlined for the first time the efforts a "working group" of state regulators have been undertaking to assail abusive market practices that Lambiase said has been directly responsible for "an unmistakable loss of investor confidence by the arguably millions of investors who have lost their monies."

It was an unusual move by Lambiase to outline the states' enforcement plans in a letter to Patch, who has been vilified and scorned by many top regulators and institutions for his efforts, which includes the maintenance of a website, .

Lambiase said that his efforts, and efforts of others, such as Tanya Solov, Director of the Illinois Securities Department, Tanya Durkee, Deputy Commissioner, Vermont Department of Securities, and Rex A. Staples, General Counsel for NASAA, was stimulated by Patch, and an ever-growing group of concerned citizens who have "continued to champion the issue of reform in the naked short selling area for so long," and added that it has been those grassroots efforts that constitute the "primary reason we are beginning to see reform of any sort." Lambiase was clear in stating that it is "your determination and persistence in seeing that this wrong is righted is in part responsible for my interest, as well as that of other state regulators."

Lambiase, whose initial letter to the U.S. Securities and Exchange Commission stated that the SEC needs to look at the role of the Depository Trust and Clearing Corp. in allowing these abuse practices to continue, said that it seems "clear that had the SRO's and the SEC exercised greater diligence in enforcing pre-existing rules, Reg SHO would likely have been unnecessary."

He said his working group has begun meeting with SRO's and issuers alike, and that it will "continue to exert substantial effort to remedy the remaining abusive practices in naked short selling until we are confident at the state level that the companines in our communities and citizens that invest in them will no longer be the possible targets of abusive naked short sellers."

It had been previously rumored that the reason the NASD has been issuing subpoenas to a dozen or more brokerages over their "fails to deliver" and their failures to enforce buy-ins is due to those regulating at the Federal level not wanting to be trumped again by a state investigation such as occurred in several Spitzer reform efforts.

Lambiase so far appears to be taking the posture that the state group is ready to step in if the Federal regulators do not, thus "inspiring" the current efforts rumored to be occurring at the Federal level.

To make the point, he told Patch in the letter obtained by FinancialWire that "there remains a substantial distance between REG SHO and the ultimate goal of including substantive protections for small business issuers."

It is these small businesses in our communities, Lambiase pointed out, "who take entrepreneurial risks to grow their companies through listings on the OTCBB and Pink Sheets. These small businesses not only provide employment for the residents of their communities, but also offer the general public the opportunity to invest in local businesses with promising products or services.

"While it may be true that a number of small companies lack the financial depth to succeed, they are nonetheless entitled to succeed or fail by their own honest business decisions and not as a result of the corrupt acts of abusive short sellers.

In what some believe is another swipe at the secretive DTCC, he said that "without transparency, we cannot, as yet, precisely identify each small business that failed as a direct result of abusinve naked short selling nor quantify the exact number of jobs lost to our local economies when these companies are forced to close their doors."

In what is an unmistakable prod to the SEC, Lambiase said that institution is "moving slowly forward as Reg SHO in its current state is studied and debated seemingly ad infinitum. While slight modifications to the existing Rule may result from such an approach, a far more threatening pattern of abuse is certain to continue unless wholesale reforms are made to remedy the concerns of the small business community."

He said that even Congress, whose members have also called the SEC on the carpet for the slow progress associated with Reg SHO may in fact be missing the point that "abusive short selling poses a direct threat to the economic well being of small business and the entire community."

The 11-state task force reportedly was in serious strategy sessions a few weeks ago.

New York Post quoted one regulator as saying there is "an epidemic" of naked shorting. Regulation SHO has made that evident for the world to see. Numerous U.S. Senators have called the Regulation fully ineffective, and have repeatedly called upon the SEC Commissioners to get the practice under control.

The Post said that an SEC official confirmed to it "that no complaints have been brought in the nine months since Regulation SHO went into effect."

It quoted one state securities regulator, Bill Reilly of Florida, as saying he expects the increased effort will result in more voluntary compliance from dealers, as well as enforcement activity.

That may or may not resolve the DTCC "problem." Recently a stock transfer agent, Transfer Online Inc., had asked then-SEC Chair William Donaldson to put a stop to the control the Depository Trust & Clearing Corp. and Automatic Data Processing (NYSE: ADP) are fast gaining over the transfer business, and to demand DTCC transparency.

Excerpts from the letter, posted at , states: "Over the years as the amount of shares held at DTC has increased it has become more and more difficult to determine who owns the shares, who is trading them and if the trading is proper. This trend, and the resulting problems I will detail below, continues to increase because a minority of the total number of shareholders are reflected on the books and records of the corporation, most activity takes place behind the wall of ownership that is designated as Cede & Co. and neither the company nor the transfer agent has any access to the underlying information.

"Furthermore, DTC recently managed to put through a rule change (Release No. 34-50758A; File No.S7-24-04) that prohibits a transfer agent from representing any company who seeks to withdraw from the DTC system. This change effectively leaves companies with no voice or choice in the management of their stock and their ability to have any transparency as to what is actually taking place in the market in regard to their stock.

"I receive calls from companies seeking information as they watch millions of shares trade in a single day, who watch their share price decrease in value and who have no access to information regarding who is behind the trading of these shares, or if in fact the trades are at all legitimate. As the system now operates, most companies have a large percentage of shares on their books registered to Cede & Co.

"Given the importance of shareholder voting and communication one would assume that the same requirements placed on transfer agents as to accuracy and reporting would be placed on ADP and Cede & Co. as they usually hold or service the majority of the shares owned in any given company.

"I have found; however, that when presented with the tabulation reports from ADP the share totals they report sometimes exceed the total number of shares outstanding for the company. Let me restate this because it is a very important part of my concern about a system that is more and more headed in the direction of increased control by DTC. The shares presented by ADP, that are the shares voted by the brokers on behalf of the shareholders for whom they hold accounts, EXCEED when added to the shareholders of record the total number of shares outstanding.

"Where are these extra shares coming from? Why are there no controls on the number of shares held in the nominee name Cede & Co. vs. the ownership on the books and records of the brokers and why is the company not privy to any information unless it pays whatever fees it is told it must pay by the organizations that control the data?

"In fact, as the system is evolving, DTC is de facto becoming the largest transfer agent in the industry even though it is an organization formed by and working for the interests of the brokerage community. If, ultimately, the S.E.C. is in place to protect investors then this issue can not be ignored because in the end when the market is completely under the control of the brokers and the organizations that represent them then the market can neither be transparent nor fair."

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From: Rutgers2/7/2006 10:06:12 AM
   of 1821
Cramer and CEO Clarke Adopt 10b5-1 Plans...

Tuesday February 7, 9:29 am ET

NEW YORK--(BUSINESS WIRE)--Feb. 7,, Inc. (Nasdaq: TSCM - News), a leading provider of financial commentary, analysis, research and news, announced today that James J. Cramer, its co-founder, director and largest shareholder, intends to donate 100,000 shares of stock to the James J. and Karen L. Cramer Family Foundation, Inc., which in turn plans to donate the proceeds from the sale of the shares to The Connection For Women and Families, a charitable organization in Summit, New Jersey. Mr. Cramer owns, directly or indirectly, an additional 3,748,451 shares.

In addition, Mr. Cramer intends to enter into a selling agreement with Smith Barney that will provide for the sale and exercise of 150,000 stock options held by Mr. Cramer over a 12-month period in accordance with Rule 10b5-1 under the Securities and Exchange Act of 1934 and the company's policies with respect to insider sales.

A Rule 10b5-1 program is designed to enable an executive to avoid any real or perceived conflict of interest in connection with the trading of company securities. The program is established at a time when the executive does not have material inside information. Once a written program is executed, the executive does not retain or exercise any discretion over the shares traded under the program. The broker administering the program is authorized to trade company securities in volumes and at times determined independently by the broker subject to the limitations set forth in the program.

It is Mr. Cramer's intention to provide an orderly liquidation of these options through this plan, which provides for the sale of approximately 12,500 shares on a monthly basis. Proceeds from the sale will be used to pay withholding taxes and the option exercise price and to assist in the diversification of personal assets. Mr. Cramer has options to purchase an additional 540,000 shares that are not subject to this plan. also announced that its chairman and chief executive officer, Thomas J. Clarke, Jr., also intends to enter into an unrelated selling agreement with Smith Barney. Mr. Clarke's plan will provide for the exercise and sale of up to 800,000 stock options held by Mr. Clarke through December 31, 2006, by which time many of the options will expire if not exercised. Proceeds from the sales will be used to pay withholding taxes and the option exercise price and to assist in the diversification of personal assets. Mr. Clarke has options to purchase an additional 650,000 shares that are not subject to this plan.

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