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Tag Archives: Herb Greenberg

In Other Election News… it looks like Overstock won’t be relocating to South Dakota after all.  I’m not sure if that’s good news or bad for Utahans.

A big part, probably the biggest, of what turned the 2008 election in the US was basically the same thing that gave the US its previous Democrat president in 1992; in the words of that campaign, “It’s the Economy, Stupid”.

And two of the biggest factor in that were the ballooning of oil and fuel prices (which seems to have passed almost as inexplicably as it occurred; I had the pleasure of filling up for $1.99 a gallon on Election Day), and what they call the “mortgage meltdown”, and the turmoil that’s wrought in the financial sector.

And that brings us to an obscure player in the mortgage boom and bust of the 2000’s, a little Kansas City company called NovaStar Financial.  It first came into the spotlight, as Mitchell states, in April 2004, though Mitchell seems totally baffled as to exactly why.  In fact, the trigger seems to have been issues involving NovaStar obtaining proper licensing in several states, which led to an informal SEC inquiry.  Despite what you may have heard about the mortgage industry being an unregulated free-for-all back then, in fact these regulatory issues had significant consequences for NovaStar, in that their insurer, PMI, was refusing to pay claims on defaulted mortgages that didn’t have all the regulatory hoops jumped through cleanly.

This led to a lawsuit against PMI later in 2004 which was settled in 2005, but apparently NovaStar was by no means unique when it came to mortgage lenders that cut corner, but merely in the one that came out and publicly blamed their problems on outside forces.

In a way, it was the first sign of trouble ahead for the subprime mortgage industry, an augur of things that would prove world-shaping before they were done.

Or, you can ignore all that as Mitchell does and lay it out this way: Rocker was shorting NovaStar in 2003 and their lapdog Herb Greenberg got his lapdogs in the SEC to stir up trouble for NovaStar and take down their stock.

Mitchell has a strong tendency to avoid making concrete statements of fact throughout Deep Capture, but apparently it wasn’t completely out of excessive carefulness, because now he lays down the whopper that “NovaStar continued to report strong profits well into 2007”.  Unless you take that to mean “for nearly two months into 2007, NovaStar was considered by most to be strongly profitable”, that’s quite simply not true, as many on Wall Street were shocked by an unexpected loss in NovaStar’s 4th quarter results for 2006.  This in fact was the beginning of what would prove a very swift end for NovaStar, as in short order the giant dividend which had attracted investors was no more, and in August 2007 they abruptly stopped accepting new business and divested existing business elsewhere.

Of course, Mitchell once again ignores all that, deciding shares of stock not being delivered was far more important than mortgage payments not being delivered.  He does concede, in one of his rare moments of understatement, that subprime mortgages had become “risky business” at the time Deep Capture was published, and does offhandedly refer to NovaStar’s final demise by way of whining about Herb Greenberg gloating over it.

And in all of this we haven’t even touched on the “nfi-info” website (which no longer exists; the link is to the Wayback Machine archive of it) that was run by none other than the Easter Bunny himself, and had been dedicated to the greatness that was NovaStar and the travesty that it was finding itself under attack.  And of course all those stock delivery failures, which, despite what Mitchell might want you to believe, had absolutely nothing to do the collapse of the company.

Next week, another victim steps forward.  At least this one isn’t totally dead yet, though it’s made some very adverse headlines of late.


Irony defined: As the markets burned last week, short-selling hedge funds, which you would think would be prospering, if not outright driving the push down, are in some cases actually suffering badly themselves. I’m sure that comes as a delight to some, though it begs the question… if even they aren’t benefiting from this, then who is?

It was, to put it mildly, not a proud moment for Anthony Elgindy. Ordered to remain in New York for legal proceedings, he opted nonetheless to leave the area under an assumed identity. His side of the story is that he was desperate to see his family, who live in San Diego. Prosecutors, echoed by Mitchell in this week’s section, claim it was an attempt to flee the country.

Elgindy (whose birthname, Imr Abrahim Elgindy, seems to be cited for no other purpose than to provoke an anti-Muslim reaction) is, again putting it mildly, a very colorful character. For several years he held court on a stock message board called Silicon Investor, making bold market calls — most of them on the bearish side — and exhibiting a very keen sense of how the stock market, and in particular how stock promotions, particularly those of the “pump and dump” variety, work.

Unfortunately, one thing Elgindy lacks a keen sense of is how to stay out of legal trouble. From an incident involving a company called Saf-T-Lock, wherein he “got religion” in mid-course only to wind up as the fall guy, to an insurance dispute that led to a conviction for fraud, to his most recent convictions for which he remains incarcerated pending appeal, Elgindy most definitely has the proverbial “feet of clay” that make him a very difficult person to defend, even when the accusations become demonstrably unfair, as they do in Mitchell’s piece this week.

Most egregious among these are Mitchell’s attempts to tie Elgindy in to the attacks of 9/11. It is true that Elgindy did a partial liquidation of an account on the day before, but it was never shown that this was anything more than a coincidence of timing; that is to say nothing of why he would only do a partial liquidation if he had knowledge of what was coming the next day.

The quote Mitchell prints about Elgindy claiming to have expected a 3000-point one-day drop in the Dow does not appear anywhere else in a Google search and as such has the air of being completely manufactured. And finally, Mitchell’s portrayal of why Elgindy was never charged with anything 9/11-related very much downplays the facts: in reality, the prosecutor attempted to invoke 9/11 during the actual trial, and received a severe rebuke from the judge when he had to admit he had nothing to back up the insinuation.

At any rate, not satisfied with having managed to slander a convicted felon (ponder that for a moment), Mitchell resumes his stylistic foibles by veering off course and into the story of a Chicago boxer named Gary “Pugs” Dobry. Dobry is something of a footnote in the whole short-selling story these days, as the message board he frequented, Raging Bull, has gone through several changes in ownership and had its message board database wiped, but those who had the opportunity to see him in action would most likely agree that he made the subject of the post two weeks ago appear competent and restrained in comparison.

Dobry is portrayed by Mitchell as being “obsessed with Elgindy” but in fact his obsessions ran far, far deeper. Having been a heavy backer of a company called Amazon Natural Treasures, which in the end proved to be a total fraud, Dobry lashed out at anyone and everyone who had tried to warn him, and even in one case an unfortunate woman who merely had the same name as one of his targets. This culminated in 2002 when Dobry convinced a lawyer and a judge to subpoena not just the identities but also the credit card information(!!) of 41 aliases on the Silicon Investor message board. It was the successful quashing of this subpoena, and the sanctions that followed, that ended Dobry’s crusade, not some apocryphal garden-shears-through-the-window “message” that Mitchell cites, which sounds more like a bad pun on “hedge” funds. Whatever became of the old “horse’s head in the bed” routine anyway?

Next Mitchell moves into intrigue mode, as he relates the tale of an anonymous “business owner” who says his business was destroyed by short sellers and has ever since devoted himself to attacking them. (That description notwithstanding, this person is highly unlikely to be Dick Fuld of Lehman Brothers.) That person, says Mitchell, has supposedly turned over screenshots of all sorts of activity on a private chat room run by Elgindy, “stored somewhere safe” according to Mitchell, who apparently has no qualms with extortionate suggestion when he perceives it to be to his benefit.

By way of some sort of preview of coming attractions, Mitchell says the transcripts contain numerous mentions of Jim Cramer, Herb Greenberg, and other writers for Because, apparently, it’s very suspicious in a stock-oriented chat room to mention journalists who, at the time, each wrote about half a dozen brief articles about stocks every day.

Mitchell cites one quote appreciative of Herb Greenberg’s writings, by way of, I guess, proving Herb must be dirty or something. Ironically, while lives on, Herb himself has recently moved into the financial equivalent of private practice, meaning that it’s conceivable that the speaker of the quote could have, in fact, gone through with his plans to “hire Herb for himself”.

Another pulled quote cheered a journalist named Dave Evans giving a “free” heads-up about a stock symboled SPBR. Again, lacking context there’s no way to know if this was private communication or a publicly available article. SPBR, incidentally, was the symbol for a company called Spectrum Brands Corp., one of an all-too-large number of tiny firms that tried to make a quick buck with a slapped-together counter-terrorism “solution” in the wake of the 9/11 attacks. (Said company should not be — although may well have been named into order to be — confused with Spectrum Brands Inc., marketer of Rayovac batteries and Remington shavers.)

Finally, Mitchell mentions Dan Loeb, who is believed to have gone by the alias “Mr. Pink” on Silicon Investor, and whose primary crime appears to be having an affinity for Quentin Tarantino films.

At this point even Mitchell seems to realize how far he has gotten off the track, and puts the section to an abrupt halt, with next week’s section beginning anew on the story of Anthony Elgindy.

So much for that new “proudest moment”.  Easy come, easy go.  Ironically, Jim Cramer is bemoaning this reversal, having bought into the notion that the financials in question are helpless in the face of shorting.  Did he not get a memo or something?

I did promise last week to get to what the whole hubbub involving Jim Cramer and Herb Greenberg was all about, but as this section decides rather capriciously to wander into a side issue let’s start there.  Once Mitchell gets through reiterating his embellished descriptions of Cramer and Greenberg that fateful day, he moves on to the story of a high-level Overstock executive (to this day) named Stormy Simon, who despite her name is not and never was in the adult entertainment industry and shame on you for even thinking it.  Or so Mitchell effectively says anyway.

Mitchell attributes the story behind Simon to Jeff Matthews, another blogger who has done a lot of dissecting of Overstock’s performance as a company, particularly in 2005 and 2006 (even as his interest in that story has appeared to wane in more recent months), but strangely, no entry related to Overstock appears in his blog for the specified month, November 2005.  It’s possible the entry may have been deleted, or perhaps the discussion was restricted to the comments page (Simon is mentioned in the comments to a December entry that was Overstock-related, but I’ve neither the time nor the inclination to scan every comment section on that blog.)

Then again, it’s not as if Patrick Byrne himself hasn’t encouraged such a suggestion himself.  According to a story in Forbes from that month, Byrne claimed to have sent Simon to Rocker Partners, under the pretense of having damaging information about Overstock, a practice which Byrne described by saying, “she showed them some thigh”.  No, really.  Mitchell claims that Byrne has thoroughly debunked the notion of any lascivious past on Simon’s part, but once again, a source might have been nice.

There’s a lot more to the story (such as the panned Super Bowl ad referred to in one of the links above, which was put together by Simon herself), but by now Mitchell has moved on so I guess I need to do so as well and get back to what was eating Herb.

That, specifically, was a subpoena.  The SEC, in a rather unprecedented move, issued subpoenas to numerous journalists that wrote critically about, including Greenberg, and Cramer as well, it turns out.  Mitchell acts as if the whole thing is routine from the SEC’s perspective but it is far from that.  The subpoena asks for information about sources that Herb, Jim and others granted confidentiality to as part of their occupation as journalists.

It’s really rather appalling, and a little insulting too, that Mitchell, a man with so much experience in the field of journalism, shows so little regard for the sanctity of confidential sources to journalism here.  Especially given how, earlier in the piece, he made a big show of being protective of the “secret” identity of the “Easter Bunny”, even long after everybody else was satisfied that the secret was out.

But what it really goes back to is the central theme of this overall movement and that is the silencing of negative information about publicly traded companies.  Had Greenberg and Cramer complied with the SEC subpoena, their respective careers as journalists would have been seriously damaged.  It’s a complex and even rather controversial subject, so let me just refer you to a seminal 1994 article from the American Journalist Review on the topic.  Essentially, sources with negative information would no longer want to speak with them, for fear of reprisal should their identities be divulged.  A state of affairs that, again, would fall right in line with the true goals being sought here.

But the bottom line is, whether you agree or disagree with the principle involved here, it is something journalists — as Mitchell himself surely knows — take extremely seriously.  Thus, Mitchell’s pretense of incomprehension that this would become the story of the day on CNBC, Cramer’s on-again, off-again (but as of late very much on-again) employer is really quite grossly disingenuous.

Mitchell goes on to rather mockingly describe Cramer and Greenberg’s assertions that the subpeonas were effectively Byrne’s doing, although you’d think the way Byrne celebrated this action at the time would have been rather strong supporting evidence.

Regardless, not long after, the SEC responded to the outrage expressed by Cramer, Greenberg and others with, basically, a “never mind”.  Mitchell, for his part, attributes the SEC’s reversal to “cowardice and strange events”.  Although What “strange events” he means, as usual, he doesn’t say.  Indeed, Mitchell’s piece has by this point established rather a theme of making odd allusions to nothing specific.

Next week: Section Eight, and it has nothing to do with any military service on Patrick Byrne’s part.  What a rip!

We now move to February 2006. Jim Cramer and Herb Greenberg, former co-workers at TheStreet.Com and friendly rivals up until Herb’s retirement earlier this year, are together on Cramer’s Mad Money program on CNBC. Many times it seems they agree on almost nothing. But today both of them — in a way comically embellished by Mitchell — are livid.

What are they so upset about? Mitchell does not seem to think you need to know that quite yet. In fact he prefers you to believe that Patrick Byrne’s Miscreants’ Ball speech — given five months ago mind you — is somehow causing some kind of time-lapse rage in two prominent journalists.

Even though it’s Greenberg who is — rather ironically, if you’ve ever seen them in action — portrayed as the one who has completely lost his cool in the initial paragraph, the piece then veers over to Cramer and begins attacking the bejeezus out of him, portraying him, effectively, as the nexus of all “negative” (meaning, bearish) financial journalism.

Again, this is quite ironic when you’re considering that this is Jim Cramer, who closes every edition of Mad Money with the catchphrase, “there’s always a bull market out there somewhere”, and is frequently criticized for being too much of a pollyanna when it comes to the markets.  When he and Greenberg would disagree on a stock, you could make book that it was Cramer taking the bullish side and Greenberg the bearish.

But to be fair, Mitchell does not cite Cramer himself as the author of the negative stories, but rather a nebulous group he terms as “friends of Cramer”, which could (and does) include anyone that ever worked at Cramer’s signature website,, or been a regular guest on Mad Money, or Kudlow & Cramer, or Cramer’s short-lived show on Fox Business, or who worked with Cramer or was one of his many, many contacts during his days running the Cramer Berkowitz hedge fund.  Indeed, if you’re anybody on Wall Street these days, trader, journalist, or whatever, you’re probably no more than three degrees removed from the Reverend Jim-Bob, just by the simple fact that he’s probably the single most prominent personality in financial journalism today.  All in all, it’s a neat way for Mitchell to recast the very interconnected nature of the Wall Street community as a conspiracy.

Mitchell may vividly portray Greenberg’s anger, but it’s not long before he betrays his own, throwing any pretense of objectivity to the wind by referring to Cramer’s associates as “reporter-thugs” who routinely print stories for the express purpose of benefiting the short sellers that are their sources.  And, not content with leaving it at that, Mitchell posits that many of the targets are victims of a double-whammy, so to speak, simultaneously victimized by the selling of “phantom shares”.  The pointing out of which, per Mitchell, leads to a “vicious media smear”.  Apparently this section was intended as a demonstration.

That’s a lot of accusation being thrown around here, and Mitchell does claim to have analyzed thousands of stories to establish the pattern, but if you’re looking for any actual examples you’re reading the wrong section, and, I suspect at this point, the wrong paper.

In fact, the only specific example cited was the coverage of Patrick Byrne’s Miscreants’ Ball presentation, specifically a New York Post piece by Roddy Boyd and Dan Colarusso (both alumni… GET IT? HUH???) and apparently containing an unflattering picture of Byrne based vaguely on “The X-Files”.  Mitchell also cites one line from the piece without comment:

Patrick Byrne “is not currently under any psychiatric care,” reported the Post, “and [a company spokesman confirmed] he was sober when he gave the presentation.”

One supposes Mitchell was going for a “how dare they!” reaction to his citation.  And I suppose if one has yet to actually attempt to follow the presentation, but is rather trusting Mitchell’s word about its profound and groundbreaking content, I suppose that might be a natural reaction.  But for those who have seen it, I suspect a more common reaction would be something like: “Really.”

So what was rankling Greenberg so much, to the point where Cramer said Greenberg was potentially in a position where he “can’t do his job anymore”?  Mitchell puts that off until the next section, and so I shall do likewise, until next week.