The Story of Deep Capture by Mark Mitchell, Part 16

Dan Colarusso

Joe Nocera

Herb Greenberg

There are a few journalists whom we have not yet mentioned.

One is Chris Byron, a columnist for The New York Post. Byron has insisted that phantom stock is not a problem. He has accused Patrick of being a conspiracy theorist. And he has written a column, "Gagging the Market," in which he argues that Amr Elgindy's prosecution for bribing FBI officials and manipulating stocks is a threat to the free speech of short-sellers and their media allies.

In April 2006, while the Media Mob is at the height of its anti-Patrick Byrne hysterics, Byron publishes a story alleging that a "CIA front operation continues to funnel agency money into penny stock and micro-cap companies in Wall Street's murkiest back alleys."

The only source Byron names in his story is the "tireless complainant," Tony Ryals.

Tony Ryals lives in a hut in Guatemala. On most mornings, he walks to a nearby internet café and begins writing - sometimes for stretches of more than 24 hours. He has, indeed, become one of the most widely published human beings on the planet. It seems almost impossible to achieve such prolificacy - thousands of long-winded screeds, most of them posted on Indymedia, a collection of websites that publish anything by anybody.

The vast majority of Ryal's rants concern Patrick Byrne. Depending on his mood, he writes that Patrick is linked to stock frauds, boiler room operations, the death of Vince Foster, Skull & Bones, Osama bin Laden, or the Israeli government.

"To see my latest," Ryals says in a recent message board post, "You can google 'israeli prime minister ehud olmert stock fraud orthodox jews gay prostitutes.'"

* * * * * * * *

At the end of April 2006, the Media Mob gathers for the annual conference of the Society of American Business Editors and Writers (SABEW). In response to the accusations leveled by the Easter Bunny and Patrick Byrne, the journalists hold a panel titled "High-Tech McCarthyism?: Dealing with Today's New Business Journalist Bashers." The panel is chaired by Herb, Herb's friend Joe Nocera, and Dan Colarusso, who worked with Herb at TheStreet.com before he became Roddy Boyd's boss at The New York Post.

A Deep Capture team member infiltrates this meeting, and gets it all on tape. The journalists are furious that we have this tape, and it is easy to understand their concern. It couldn't do a much better job of exposing the arrogance and willful obstinacy of the nation's most "prominent" financial journalists.

Colarusso sets the tone. Referring to Patrick and the Easter Bunny, he says, "The more they attack us, you know, we have barrels of ink and stacks of money, and all the resources in the world at our disposal, legal, and via our media, to crush them…"

Sounds like an objective journalist to me.

Then Herb says, "When it comes to naked shorting, it's not my issue…It doesn't relate to what I do, what Joe does, what Carol Remond does, even what Cramer does."

And Joe Nocera says "naked short selling…makes my eyes glaze over…So I asked Patrick Byrne exactly this question…I said, 'Well why do you…why are you in this naked shorting fight since it's not really what you are litigating?' And he said, 'Well, it's like supporting education; it's a good thing to do."

At this, there is uproarious laughter from the journalists in the room. It should be said that most of the journalists in the room are Herb's friends. Dave Kansas, formerly of TheStreet.com, is there. So is Dave Evans, the Bloomberg reporter who, along with Herb and Kansas, worked closely with the online short-seller group led by Amr Elgindy, who is now in prison. So these journalists - these creeps who think it is hilarious that Patrick has embraced what he believes to be a good cause - are by no means typical journalists.

They just happen to be the journalists who control the financial media.

"So," continues Nocera, The New York Times' top business columnist, "it's hard to take [Patrick] seriously on that issue when you hear him say something like that. Having said that, you know, I think it probably would be worth somebody's time to say, Is there something to naked shorting or not? What is naked shorting? What does it mean? What is the problem here? But, you know, life's too short. I don't want to do it."

At this, the journalists in the room laugh even harder.

* * * * * * * *

A few weeks later, SABEW elects Dave Kansas as its president and Joe Nocera writes a column describing Patrick as a "conspiracy-mongering trash-taking lawsuit-filing chief executive." He writes, "What is naked short selling? So glad you asked…except for a few fellow-traveling websites, where Mr. Byrne is viewed as a heroic figure, most people who understand the issue or have looked into it think it's pretty bogus."

Perhaps life really was too short, and Nocera couldn't be bothered to look into the issue. That would be the kind assessment - certainly better that the possibility that he is a prostrated scrivener for hedge fund managers who would like the world to think that phantom stock is a non-issue .

Fortunately, there is one journalist who is doing some real reporting. His name is Gary Matsumoto, and he's one of America's best investigative reporters, famous for breaking the news that thousands of young American soldiers have been used as unknowing guinea pigs in government medical experiments.

Previously, Matsumoto was with NBC and Fox News, and now, in June 2006, he is working for the Bloomberg business news television network. He meets me at a Thai restaurant on New York's Upper West Side. By this time, Matsumoto is convinced that Patrick is right - phantom stock is an epic scandal. He thinks for a moment about the difficulties he's faced in reporting this story. He reckons with the prospect of going up against conventional wisdom and the mainstream financial media's most powerful journalists.

Then he leans back in his chair, resigned, and says: "@!$%#."

"@!$%#," he says, "I just want to do the right thing."

* * * * * * * *

During this week — the week in which Nocera calls Patrick a "conspiracy-mongering, trash-talking lawsuit-filing chief executive" — the law firm Milberg Weiss is indicted for bribing witnesses in phony class action lawsuits against public companies. Remember, according to the DOJ's indictment, Milberg told its bribed witnesses to buy stocks, knowing that their prices would decline. Many of those stocks were Rocker shorts. Most of them were sold, and never delivered, in massive quantities. And nearly all of them were the subjects of negative media stories, released at around the same time as the phony lawsuits. Nocera's friend, Herb, has written negatively about almost every Rocker short-his stories always coming out around the same time as the Milberg Weiss lawsuits, the massive phantom stock selling, the release of false information by questionable research shops like Gradient, and the execution of an array of other dirty tricks.

None of Herb's friends mention the indictment of Milberg Weiss. Instead, they continue to serve the interests of Rocker and associated hedge funds. All of Herb's stories still come from these people. Cramer is still bashing stocks shorted by them. TheStreet.com is still publishing stories for them, as is The Wall Street Journal "Money & Investing" section, and MSN Money.

And also this week, Carol Remond is busy circulating another rumor about Patrick. She has called former SEC lawyers and several others with information - given to her by people working for her hedge fund friends - that Patrick is using off-shore accounts to secretly sell shares in Overstock. This, like every other rumor Carol has pursued with rabid enthusiasm, is entirely, 100% false.

Roddy-Boyd-the-Post, meanwhile, is working with the criminal Spyro Contogouris, along with a group of hedge fund managers, including Rocker, to take down Fairfax Financial. He leaves a voicemail message with Fairfax, telling its CFO, "You've got some explaining to do, pal." Then he writes a false story accusing the company of accounting shenanigans. A source at the Post tells Deep Capture that the paper decided not to put Roddy's Fairfax stories on the internet because they would not stand up against foreign libel laws (which are stricter than those in the U.S.).

Soon after Roddy's stories appear, Contogouris sends more threatening emails to Fairfax employees, and arranges a secret meeting with a former Fairfax CFO, saying he can arrange immunity from government prosecution. (Helpfully, Roddy-Boyd-The-Post later publishes a story claiming that "forensic accountant" Contogouris "was actually working for the Federal Bureau of Investigation"- and that an FBI spokesperson has confirmed this. The FBI announces that this is completely false, which makes sense considering that the FBI will later put Contogouris in jail).

And also this week in June 2006, Gary Weiss has just been exposed as the specially protected, anonymous editor of the Wikipedia entries on "Naked short selling," "Patrick M. Byrne," "Overstock.com," "Depository Trust & Clearing Corporation," and "Gary Weiss." But Gary denies having ever touched Wikipedia.

So Judd Bagley publishes additional information proving that multiple Wikipedia accounts are attached to Gary's IP address. Gary's online alias responds that if somebody edited Wikipedia using his IP address, it might have been his visiting uncle.

Then Judd releases information proving that Gary, hoping to cover up his activities, has begun editing Wikipedia using yet another phony identity (or "sockpuppet," in Wikipedia parlance). Gary's sockpuppet responds to this by saying that the other sockpuppet belongs to his nephew.

Gary adds that he had no idea that his nephew shared his interest in naked short selling. Yes, he was really surprised to learn that his nephew edited the Wikipedia entries on naked short selling.

But it wasn't Gary. Gary never edits Wikipedia.

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