SEC Subpoenas Herb Greenberg & Carol Remond

Omigod, the SEC subpoenaed two journalists! Herb Greenberg and someone else. This is government repression. Oh, wait. The Feds have backed off. The NYT:

The abrupt about-face was an unaccustomed victory for a news organization, as journalists have found themselves under increasing pressure in recent months from law enforcement authorities for information and testimony. In several notable instances over the last two years, including one involving The New York Times, the journalists have gone to jail rather than cooperate with law enforcement officials.

Um, the SEC is looking into stock manipulation. I’m sorry, but isn’t in the same league as leaking classified national security information. Actually, since it involves Salesforce.com (who else), one could argue that this is in the interests of national security, but that’s for another time.
The problem with this article is that journalists see the issue as being themselves. That ain’t it. The real issue is campaigns launched in order to drive down a stock’s price. It’s illegal to manipulate a market, but it’s certainly legal (and ethical) to air criticisms of a company. As long as they’re accurate.
Sure, investors go to Greenberg and others with an agenda. As long as they have valuable and accurate information, that shouldn’t be a problem. The sticky point is when others know that a resulting article will move a stock.
I honestly don’t know what the answer is.
Update: Here’s Greenberg’s response:

For those following the saga: a Dow Jones representative said Friday that the SEC has decided not to seek production of any documents “at this time” related to a subpoena I had received. “The SEC may come back in the future,” the representative said.
But bottom line is that I’m no longer being asked to provide the SEC all of my “unpublished” communications, including emails and phone records, between me and people and organizations I’ve quoted — and at least one I’ve never quoted.
To repeat what I wrote earlier Friday: The subpoena was part of the SEC’s investigation into Gradient Analytics — a research outfit that has served and continues to serve as a valued source for this column. It appears the investigation stems from the recent publicity surrounding Overstock.com Inc. and its controversial CEO, Patrick Byrne.

Gary Weiss takes aim at the SEC:

So today we have the SEC, in full flower of stupidity, chasing down the private vendettas of Overstock Inc.’s CEO, Patrick Byrne, whose principal problem is that his company just isn’t a very good investment. Who is to blame? Well, I don’t have to tell you, it certainly isn’t him! Why, he is just the CEO of the company. Not his fault. It’s them! The conspiracy! Joe Nocera’s column today in the New York Times is the definite article on this one-ring corporate circus. It’s impossible to mock or parody Byrne, because he does such a great job himself.
Enter the SEC. Instead of consigning his rants and conspiracy theories and private vendettas against shorts and the press into the round file, it launches an investigation. In other words, the pinnacle of our self-regulatory system did precisely what it did with the naked shorting conspiracy nuts.
Don’t get me wrong — this is serious business. Herb Greenberg of Marketwatch, one of the subpoena recipients, is correct in saying that the SEC’s action will have a chilling effect on financial journalism. He and Carol Remond of Dow Jones News Service, the other subpoenaed reporter, are two of the toughest financial reporters around. They and others have paid the price for good work by being regularly smeared by Byrne and his lowlife sidekick, an Internet nutjob who goes by the phony name “Bob O’Brien.” The latter is the naked shorting cult’s Cowardly Lion, roaring against real and imagined enemies while carefully guarding his identity to avoid being held accountable for his constant barrage of lies and smears.

If you’re not familier with Patrick Byrne, he’s truly the Lyndon Larouche of Wall Street. Here’s more from Joe Nocera:

For some time now, Mr. Byrne has been saying that his company is the victim of a Wall Street conspiracy intended to drive down its stock, which has fallen to the mid-20’s from the mid-70’s since the fall of 2004. Last August, Overstock sued Rocker Partners, a short-selling hedge fund that has been openly negative on the company, and Gradient Analytics, an independent research firm that has written consistently bearish reports on Overstock’s mounting business problems.
The lawsuit asserted that the two firms were acting in concert to hurt the company and manipulate its stock price. Both Donn W. Vickrey, who runs Gradient Analytics, and David A. Rocker, the managing partner of Rocker Partners, have been sources for Mr. Greenberg over the years. And Mr. Greenberg has written about Overstock and Mr. Byrne from time to time, in his typically tough-minded fashion.Which of course makes Mr. Greenberg a charter member of the Overstock conspiracy. To hear Mr. Byrne tell it, Mr. Greenberg’s role is to do the bidding of Rocker Partners and Gradient Analytics; when asked last year by Ron Insana of CNBC whether he was accusing Mr. Greenberg of “helping others front-run or trade illegally in the shares of your company’s stock,” Mr. Byrne replied, “That’s correct, that’s what I am doing.” He described Mr. Greenberg to me as a “lapdog.”
Although Mr. Byrne says he did not know about the subpoena, he clearly knew something was afoot. (He later told me that he had “just come from an interview with certain law enforcement people” who had been asking about Mr. Greenberg.) “As I take a sip,” he taunted in his e-mail, “I find myself curious: do you guys know? Are you sitting somewhere, blithely oblivious, still chuckling about Whacky Patty, and all that? Or do you understand now that this is going to end badly for you?”
If you know anything about Patrick Byrne, it’s probably his famous “Sith Lord” conference call. Held last summer, it was an hourlong monologue during which Mr. Byrne laid out a vast, overarching conspiracy, made up of dozens of Wall Street players — including the New York attorney general, Eliot Spitzer! — all under the thumb of an mysterious puppet master, whom Mr. Byrne labeled the Sith Lord. He titled the conspiracy “The Miscreants’ Ball,” an obvious reference to Michael Milken’s old Predators’ Ball.
Although Mr. Byrne told me that his Sith Lord speech ranked among “the 10 proudest moments of my life,” most people, including me, thought it was loony beyond belief. Roddy Boyd of The New York Post recalled hearing about it from someone on Wall Street. “When he described it, I thought he was embellishing,” Mr. Boyd said. But when he listened to the replay, “my jaw dropped — you cannot make up what occurred on that phone call.”In addition to his conspiracy-mongering, Mr. Byrne talked about Stinger missiles, Wayne and Garth, a mysterious Spanish phone message, stuttering and cocaine. (“I’m not a coke head,” he said, unprompted.)

Posted by on February 25th, 2006 at 4:03 pm


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