Monday, June 07, 2010

Politicians and Public Companies Who Instigate SEC Investigations in an Attempt to Silence Critics

Congressman Anthony Weiner
I personally dislike politics and most of the politicians in elected office today from both sides of the aisle - whether they are Democrats or Republicans. At least we have securities laws, though, in too many cases unenforced securities laws, governing deceitful corporate conduct towards investors. However, our elected officials are not subject to those same laws protecting investors from lies by dishonest and corrupt management teams, when they lie to their voters. Way too many elected officials, their political appointees, and their staffs seem to believe that they can lie with impunity to a gullible American public without any potential legal consequences and chalk it off to the game of politics.

Why Fraud Discovery Institute Issued a Report to Rebut New York Congressman Anthony Weiner's Erroneous Report Alleging Fraud by Goldline Inc.

On June 1, 2010, Fraud Discovery Institute, co-founded by my close personal friend, convicted felon, now a short seller and successful fraud buster, Barry Minkow released a detailed 118 page report pointing out major inaccuracies, false, and misleading information in a report prepared by Congressman Anthony Weiner alleging fraud by Goldline Inc. Congressman Weiner's materially inaccurate report recommended what Minkow and I believe to be a politically motivated investigation by both the Securities and Exchange Commission and Federal Trade Commission of Goldline.

In a video released on Youtube that same day, Fraud Discovery Institute disclosed that:
Neither Goldline International, Fox News, or Glenn Beck paid to have FDI investigate these allegations by Congressman Weiner.
No one paid or solicited Fraud Discovery Institute to investigate Congressman's Weiner's allegations against Goldline. I assisted Minkow in researching his report and unlike other research work I sometimes do for Fraud Discovery on InterOil (NYSE: IOC), I did my work for no compensation, too.

Barry Minkow and I are not defending Goldline as a company per se. We are concerned about the blatant inaccuracies in Congressman Weiner's report that led us to believe that Weiner's report is a politically motivated ploy to punish a major sponsor to conservative political programs like the Glenn Beck show on Fox News.

If Goldline committed any alleged crime, we would be the among the first to condemn them. However, Barry Minkow and I will not be part of any scheme, like that hatched by Congressman Weiner, to intentionally publish false information about Goldline or any other company.

The ends do not justify the means in exposing fraud. Unlike Congressman Weiner, Minkow and I face potential libel risk and possible SEC sanctions, if we intentionally publish materially false information about a company and are unprotected by political power.

As I detailed in my last blog post, I am no fan of Glenn Beck and I am a registered Democrat, like Congressman Weiner. If anyone wants to think I am a some kind of a right wing political hack targeting only Democrats for corrupt behavior, just read my blog posts detailing corrupt behavior by Republican Utah Attorney General Michael Shurtleff on behalf of (NASDAQ: OSTK) and its CEO Patrick Byrne, a major campaign contributor. is currently under investigation by the SEC, after I exposed major GAAP violations that forced the company to restate its financial reports for the third time in three years.

In addition, my views on white-collar crime have been sought by all sides of the political spectrum, having appeared on diverse media outlets such as CNBC, Fox News, National Progressive Radio, Russia Today, National Public Radio, and many others.

In Fraud Discovery's June 1, 2010 press release, Minkow made his intentions clear for investigating Congressman Weiner's allegations against Goldline:
“We don’t have a political agenda at the Fraud Discovery Institute,” said co-founder Barry Minkow. “But we can’t stand by while a public servant—a U.S. congressman, no less—unfairly bashes a company that happens to be the biggest advertisers of a political foe, Glenn Beck. It’s a transparent attempt to silence a major critic, and it’s an abuse of his office and an assault on the First Amendment.”

Despite Goldline’s 50-year history (and some truly shadowy businesses in the gold-coin industry, the Weiner Report singled it out for using “conservative rhetoric, high pressure sales tactics and tall tales about the future of gold to sell over priced coins that can be bought somewhere else for cheaper.”

In its investigation, FDI refuted point by point, each allegation against Goldline made in the Weiner Report. This defense is not because of any special affinity to Goldline, Glenn Beck or other conservative commentators. It’s simply because FDI has also been a victim of similar tactics—in its case, unfounded allegations have been lodged with the SEC by public companies that want to silence FDI’s well-documented criticisms of their business.

“This is a disturbing new trends—to use the SEC to silence critics,” Minkow said. “At a time where government officials should be investigating fraudulent companies, they are having to spend their time investigating critics. It’s all backward.”
Note: Bold print and italics added by me.
Likewise, Fraud Discovery and Barry Minkow have been subject to similar retaliatory tactics by certain public companies seeking to silence its investigations of their corporate malfeasance by complaining to the SEC.

Companies that Instigate SEC Investigations against Their Critics

In a June 4, 2010 press release, Fraud Discovery explained its point further:
Later in FDI's report, it disclosed that six companies - Lennar Corporation (NYSE: LEN); InterOil Corporation (NYSE: IOC); Medifast Inc. (NYSE: MED); Usana Health Sciences Inc. (Nasdaq: USNA); Pre-Paid Legal Services Inc. (NYSE: PPD), and Herbalife Ltd. (NYSE: HLF), which FDI had issued critical reports about, had filed complaints with the SEC about FDI, and in the post-Madoff world, says Minkow, "The SEC really has no choice but to investigate."
It's unfortunate that certain malicious public companies such as the six companies listed above try to get the SEC to investigate their critics such as what happened when Allied Capital instigated them to investigate short seller David Einhorn and likewise instigated the SEC to investigate independent research firm Gradient Analytics and short selling hedge fund Copper River Management, formerly known as Rocker Partners. In both cases, extensive investigations by the SEC found no wrongdoing by Einhorn, Gradient, and Copper River and resulted in a waste of time, resources, and embarrassment for the agency.

Note: For additional information, please read "Selling America Short: The SEC and Market Contrarians in the Age of Absurdity" by Richard Sauer (Wiley 2010).

My Advice

My advice to Lennar, InterOil, Medifast, Usana Health Sciences, Pre-Paid Legal, and Herbalife is that company inspired SEC investigations against critics, like Barry Minkow, usually turn out to be unguided missiles that will come back to bite you in the rear-end.

For example, the SEC recently subpoenaed Gradient and Copper River's discovery obtained from's retaliatory litigation against them, in an effort to assist the regulator in its investigation of GAAP and other reporting violations by Those documents were under court seal, until the SEC subpoenaed them from Gradient and Copper River.

Likewise, any damning information against Usana and Herbalife obtained by Fraud Discovery and also under possible court seal due to their litigation settlements with Fraud Discovery and Minkow will probably end up in the SEC's hands, too. Those companies are cautioned to get ready.

In 2008, Fraud Discovery and Minkow won an Anti-Slapp motion filed against Usana and they were awarded legal fees to reimburse them for defending against that company's frivolous lawsuit. Similar Anti-Slapp motions are pending against Medifast (Details here and here).

As to the rest of the cast of characters, InterOil, Lennar, Medifast, and Pre-Paid Legal, your complaints to the SEC about Barry Minkow have not stopped him from continuing to investigate you and issuing new reports detailing your alleged malfeasance. Pre-Paid Legal is already under SEC investigation and I have met with persons at FINRA and provided them with certain non-public but legally obtained documents from outside sources detailing a scheme involving InterOil and John Thomas Financial.

The SEC is respectfully cautioned that company inspired investigations by them into critics can cause great embarrassment for the agency, as in the cases involving David Einhorn, Gradient Analytics, and Copper River Management. However, I will reserve comment on that issue for now and will only say that I have turned over certain information to Dow Jones Newswires.

Why is the Issue of Fraud Discovery's SEC Subpoena News Now?

Likewise, Fraud Discovery and Barry Minkow immediately notified the Wall Street Journal and turned over information to them about receiving an SEC "non-public" subpoena way back in January 2010, but the Journal decided not to publish the story because it was not "newsworthy" at the time.

According to Fraud Discovery's June 4, 2010 press release:
Now, reporters covering the Weiner Report controversy and FDI's investigative work have been tipped off to the "news" that FDI is under investigation by the SEC. "Again, another diversion begins," adds Minkow.
When FDI first received its "non-public" subpoena from the SEC in January 2010, Minkow immediately forwarded a copy to Mark Maremont, the Pulitzer Prize-winning journalist at the Wall Street Journal who has covered many of FDI's proactive fraud investigations including 12 Daily Pro and Pinnacle Development, and the recent hedge fund debacle involving Danny Pang.

Minkow also sent Maremont FDI's 300-plus-page response to the SEC inquiry. FDI wanted to be fully transparent and not be accused of hiding information if this investigation were ever to be truly newsworthy. For six months, the Wall St. Journal decided that it wasn't news.

Now that FDI has written a stinging and factual rebuttal to the politically motivated Weiner Report, the SEC inquiry into FDI is being pushed to reporters as news six months post facto.

The irony of this is that the way it became "news" was from a report FDI wrote that was done for no fee in which the goal was to show just how far people and certain public companies will go to silence their most vocal critics. It now seems the old and previously disclosed news of the SEC inquiry into FDI obscures the facts that FDI had laid out that show how flimsy and politically motivated the Weiner Report is.
Minkow went on to say that:
"Backers of the Weiner Report can try to muddy the waters, but that doesn't change the truth," added Minkow. "Read the Weiner Report and then read FDI's investigation at That's where the real story lies."
It's unfortunate that a gullible public continually elects opportunistic morons like Congressman Anthony Weiner who abuse their power by unfairly attacking sponsors to certain political programs hosted by people who do not share his political views. Trying to discredit critics like Barry Minkow will only energize him to investigate further and publish his findings, like in cases involving InterOil, Lennar, Medifast, and Pre-Paid Legal.

A long time ago, I learned that the consequences of lies and deceit are far worse than the consequences of truth, even an unpopular truth. Apparently, Congressman Weiner has not learned that lesson, yet.

Written by:

Sam E. Antar


I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.

If it weren't for the efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals.

Recently, I exposed financial reporting violations by (NASDAQ: OSTK) as an independent whistleblower. The Securities and Exchange Commission is investigating and its CEO Patrick Byrne for securities law violations (Details here, here, and here).

I do not own securities long or short. My exposure of financial reporting violations by was a freebie to securities regulators to get me into heaven, though I doubt that I will ever get there.

I did research work for Fraud Discovery on InterOil and Medifast's former auditors. However, I do not own any InterOil or Medifast securities long or short. In addition, I currently do not own any securities in any of the following companies, long or short: Lennar, Usana Health Sciences, Pre-Paid Legal, and Herbalife.

I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time. If Congressman Anthony Weiner keeps up his assault on the First Amendment, he may end up joining me in hell, too.

1 comment:

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