Naked Short Selling

Discussion in 'Wall St. News' started by flytiger, Mar 29, 2007.

  1. From The Sunday Times
    April 8, 2007

    Hedge funds in the dock
    Canada’s Fairfax claims rogue investors used dirty tricks, writes Sean O’Driscoll
    IN November 2005, a parcel arrived at St Paul’s Anglican church in Toronto addressed to the pastor, Rev Barry Park, claiming to be from a “P Fate” at New York’s St Patrick’s cathedral.

    Inside the parcel, Park found a 30-page letter questioning why St Paul’s had allowed Prem Watsa, chief executive of Canada’s Fairfax insurance group, to remain on the church’s investment committee.

    Watsa, the letter said, had a striking physical similarity to a convicted fraudster who had stolen huge amounts of money from the Vatican and was involved in sado-masochistic orgies.

    The letter spared no detail, according to court documents filed by Fairfax. It was, it is alleged, part of a systematic campaign by some of the biggest Wall Street hedge funds to undermine Toronto-based Fairfax Financial Holdings, one of the world’s largest insurance firms.

    Days after the letter was received at St Paul’s, a courier arrived at Fairfax’s Toronto offices with a package containing the same 30-page letter — this time addressed to Watsa. As he was delivering it, the courier took out a camera and began photographing the inside of the building.

    Seven months later, as Fairfax was reeling from rumours of financial ill-health, the company said there was another strange incident — this time in London.

    Someone purporting to be a journalist arrived at the London offices of Fairfax’s European subsidiary, Riverstone. He told the security guards he was doing a survey of large financial companies and needed some figures.

    Once inside, however, he allegedly handed out cards that identified him as a “special situations research consultant” with “MI4 Reconnaissance”, based in New York. Allegedly, the phone number on the card was that of the Exis hedge fund and the address was that of Spyro Contogouris, a former analyst turned business consultant.

    The so-called journalist began telling the staff at the London office that Fairfax had sold Riverstone, and he tried to get information from them. When staff challenged him, he told them he was calling an analyst in New York to check his facts, but was told to leave the building before he could finish his story.

    Fairfax is now launching a $5 billion (£2.5 billion) lawsuit against some of the biggest hedge-fund managers on Wall Street, claiming they hired Contogouris and a Manhattan-based associate, Max Bernstein, to harass and intimidate executives.

    The harassment is alleged to have included stalking and threats of imprisonment right down to adolescent pranks, such as jamming the answering machines of Watsa and the company’s financial officer with audio clips from Harry Potter movies and President Bush’s speeches.

    It was allegedly part of a conspiracy by a group of hedge-fund mangers, known as “The Enterprise”, to drag down Fairfax’s share price and buy up the undervalued shares on the options market. Fairfax claims they set up misleading websites, wrote fictitious blogs, leaked false information to the media and encouraged analysts to write false financial reports.

    Apart from Contogouris and Bernstein, the defendants include SAC founder Steven Cohen; Rocker Partners founder David Rocker; Exis Capital Management and its chief executive, Andrew Heller. They deny any wrongdoing. They say Fairfax, which posted $227.5m after-tax profits in 2006, is masking its own financial problems. They also deny that minutes of meetings obtained by Fairfax show a pattern of discussions designed to bring down the company.

    Whoever is to blame, something strange was happening in London last year, according to Fairfax. The day after the journalist’s visit, a courier delivered a letter to former Fairfax finance chief Trevor Ambridge at Advent, another Fairfax subsidiary.

    The envelope contained a letter with a “MI4 Reconnaissance” heading. Its tone was both formal and alarmist. “No doubt you are aware that these are very critical times for your former employer, Fairfax Financial Holdings,” it read. “I am available to meet with you in London at your earliest convenience. I would like to lay out a series of maps, flowcharts and related exhibits which I have put together that I feel are missing some critical pieces.”

    Urging Ambridge to “look to the lessons of Enron”, the sender offered to introduce him to a “former high-ranking investigator for the US government” who could act as a confidential liaison with American and British regulators. The letter, it is claimed, was signed “Spyro”, with a contact e-mail of Spyromi4@aim.com, an account allegedly controlled by Spyro Contogouris.

    After seeking advice from Fairfax’s lawyers and security officers, Ambridge agreed to meet this mysterious source. It is alleged that Contogouris was the mysterious contact, and that he offered to put Ambridge in touch with a “former special agent of the secret service and FBI”.

    Despite claiming to be working with the US government, Contogouris allegedly switched to the name “Martin Gardener” in subsequent correspondence.

    “I do not stay in hotels under any Christian name when meeting insiders at companies,” he is said to have written in one e-mail. “Clearly it leaves my options open in telling my story in the event I am ever subpoenaed. Capisce [understand]?”

    Fairfax claims Contogouris warned Ambridge to “just think what I could do with all your e-mails” and said he would regret it if Contogouris went public.

    When he didn’t reply, Contogouris allegedly sent an e-mail to Ambridge’s work account saying: “RUN, RABBIT, RUN” and telling him to get in contact.

    In the same month that the bizarre letter arrived at Watsa’s church in Toronto, an interview with Catherine Regan, Riverstone’s Brighton-based lawyer, appeared on the legal website, Lawyer.com. The article, by journalist Helen Morris, included a photograph of Regan leaning against the nose of a giant statue.

    Months later, in 2006, according to the court documents, Regan received an e-mail from Spyromi4@aim.com. “I am reading about you in Lawyer News and am stunned by the fact that you are posing next to the largest nose I have ever seen,” read the e-mail. “Being so close to such a nose, one would think the sense of smell would rub off on you. In particular, can you smell the very serious negative issues that are facing runoff for Fairfax? Issues which you seem to have glossed over when meeting with Miss Helen Morris for your article.”

    Fairfax said the e-mail ended with the “ominous” line: “I will be seeing you soon.”

    To Fairfax’s delight, Contogouris was charged with wire fraud last month in an unrelated case in Manhattan. Fairfax said its lawsuit was not designed asa distraction while its share price was slipping but was to stop the forces that were causing it to drop. It said the case was just the latest in a series that showed how hedge-fund managers conspired to bring down perfectly legitimate companies.

    “They have vilified [our] company for no other reason than to make a profit,” said Fairfax. “After all this negative talk, the truth is finally coming out.”
     
    #31     Apr 8, 2007
  2. gaj

    gaj

    #32     Apr 9, 2007
  3. Don't put much faith in the Post business coverage.

    And that's all I'm going to say about that.
     
    #33     Apr 9, 2007
  4. gaj

    gaj

    well, actually, chris byron tends to be very good on things. one of the top biz writers around.

    however, i found references (independent of the post's coverage) to the same thing, about him being hired by the fbi.

    which doesn't excuse his negative conduct.
     
    #34     Apr 9, 2007
  5. I've been thinking about the argument of overstock against naked shorts...
    Something doesn't fit in the whole catastrophe scenario...


    In a regular short, A shorts to B and borrows the stock from C.

    A owes C some stock, he's got to pay short interest over it and if the company pays dividents he's got to cover them. Since A never covered his position, he "created" some stock out of thin air.


    In a naked short, A shorts to B and never borrows the stock.

    A owes B some stock [but B doesn't know it]. So A is not paying short interest on that loan, but, if the company pays dividends, he's got to pay them to B. Since A still has a short position [he never covered it] he created stock out of thin air.

    He's simply borrowing the stock from B. but since B doesn't know it, he's losing the interests on his loan. [that problem can be fixed by regulation, if you buy stock from a short seller -naked one- you should be entitled to recieving an interest for the additional risk you are getting, from receiving an IOU not actual stock]


    In either scenario stock is being created out of thin air, so the whole argument that stock is being forged is not true, it is simply a multiplier effect that happens all the time in currencies. In currencies, the multiplier is limited by the mandatory deposits imposed by the bank that initially emited the currency.

    The question is, what limits the multiplier on stock?


    The first answer that comes to mind is dividends. A stock that pays dividends is much more risky to naked short because as long as they are paying dividents the naked shorter will have to match that dividend x the multiplier.

    If the float of a company is 1 million shares, but it's being multiplied to 100 million shares; when they pay $1 dividents it cost them 1 million, it costs all the naked shorters 100 million.
     
    #35     Apr 9, 2007
  6. The "dividend" tatic doesn't work. Actually, the first call to arms of a naked short conspiracy is "let's pay a dividend". It is a red herring.
     
    #36     Apr 9, 2007
  7. Before you go bat shit, I'll tell you up front. He is correct about this. More should follow tonight or tomorrow. BTW, he's got a several hundred million dollar judgement in his favor. He is all over what this is about. Again, google "Duess, Woltz, Curacao Bank", etc, to see money laundering aspect of this. But, it is what is happening.

    Return to Release

    Universal Express Exposes Trillion Dollar Tax Scam

    NEW YORK, NY -- (MARKET WIRE) -- 04/10/2007 -- Universal Express Inc. (OTCBB: USXP) CEO, Richard A. Altomare, today presents estimated tax losses to the United States Treasury of over $1 Trillion Dollars due to naked short selling.

    "The facts are simple. Sell a stock you do not own. Push the share price down. Force the Company to fail. The failed stock never has to be purchased, and since there is no mandated buy-in after a company fails, almost everyone loses, the employees, the shareholders and now the Federal Government. It's a tax free way of making money," said Richard A. Altomare, Chairman and CEO of Universal Express, Inc.

    "To be more specific, this loophole benefits market makers, hedge funds and maybe even the funding of terrorist cells. Our national debt and the Iraqi war could have been paid for with the elimination of naked short selling or a mandated stock buy-in after shorting.

    "Once again I call upon our elected officials to address the problem prior to the SEC's efforts to pretend they're fixing a broken system. As they attempt to silence those of us who speak the truth, I ask you to examine the profits, the bonuses and the salaries of those stealing not only from individual companies, but from every hard working American taxpayer," continued Mr. Altomare.

    "With all those in Congress looking for an issue worth supporting, how about documented tax fraud in the trillions?

    "Courage is required and our Country and American investors have been stolen from far too long. Where are those real leaders worth following?

    "I'm tired of hearing how much money a candidate raises. Let's rally behind one who shines a light on a practice that is raising our National Debt, raising our taxes, and raising our cost of living," concluded Mr. Altomare.

    About Universal Express

    Universal Express, Inc. is a 23 year old logistics and transportation conglomerate with multiple developing subsidiaries and services. For additional information please visit www.usxp.com.

    Safe Harbor Statement under the Private securities Litigation Reform Act of 1995: The statements contained herein, which are not historical, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements including, but not limited to, certain delays beyond the Company's control with respect to market acceptance of new technologies, products and services, delays in testing and evaluation of products and services, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.


    --------------------------------------------------------------------------------


    Contact Info:

    Mark Falk
    Universal Express, Inc.
    561-367-6177
    Email Contact



    --------------------------------------------------------------------------------

    Return to Release
     
    #37     Apr 10, 2007
  8. "funding of terrorist cells"...


    LMAO...


    would you like some freedom fries with that?
     
    #38     Apr 10, 2007
  9. When you see the suitcase of cash in US Dollars in Palestien w/a bunch of Hamas standing over it, where do you think it comes from.

    He's right. Call 'em up. Tell them they're full of shit. But they aren't.

    I don't know anything about the company, and I do not own the stock. But he's correct.

    Just send your taxes in on time. They've got a shortfall:p
     
    #39     Apr 10, 2007
  10. I would say it went like this... you paid at your gas station, they paid saudi arabia/Iraq/Iran/Venezuela, and they gave Hammas the money... same applies with AlQaeda and others...

    I seriously doubt that investment banks, brokers and dealers are terrorist organizations...
     
    #40     Apr 10, 2007