Skip to main content

A Warning to Wall Street Analysts from a Convicted Felon

To Wall Street Analysts:

During my years at Crazy Eddie, I found that securities analysts often did not know how to ask intelligent questions. When they asked intelligent questions, they did not know how to formulate the proper follow up questions to our deceptive answers. Most Wall Street analysts were too trusting of the answers that they received from us.

Good questioning will often result in irritable behavior from company management. However, you are not doing your job to be in management's good graces. Your job is to obtain not readily apparent facts, analyze them properly, and communicate them accurately and effectively to your readers. Top notch financial journalist Herb Greenberg advises that you consider "what many companies don't say as they spin the story their way."

For example, be careful of corporate managements that:

  • accentuate positive information and spin and deflect negative information
  • blame others for their company's problems
  • attempt to intimidate you.

Beware of companies that exclude critics and provide “selective” access to management. Too often, Wall Street analysts in their quest to gain access to management end up corrupting their required professional skepticism and cynicism. I played this game very well with Wall Street analysts, as the CFO of Crazy Eddie.

It’s not about gaining access at the cost of your professional integrity. It’s about understanding what is really happening and communicating it accurately and effectively to your readers.

I played you analysts very well by rewarding you with selective access as the CFO of Crazy Eddie. I had you eating out of my hand with “selective” disclosures and “favored” access. While you craved for access and wrote your glowing reports in gratitude for your coveted access, you unwittingly helped make the frauds that we perpetrated at Crazy Eddie easier.

If you had any backbone, you would all boycott any presentation that excludes the more skeptical professionals among you. Frankly, after reading many transcripts lately, you guys look like amateurs with your lack of questioning skills, your inability to ask proper follow through questions, and obtain straight, clear, unambiguous, and honest answers.

You seem like hand picked patsies as I read your unchallenging questions and the lame answers that management gives you without any challenge or follow up. You never seem to learn as you compete with one another for the affections of management and let access to them rule your work at almost any cost.

Eventually you will run into a guy like I was. You will wish you asked the proper questions and follow up questions too. You will wish that your other peers attended the meetings and asked questions you would not ask or could not ask. The questions that will never be asked by you and others will cause you to miss detecting the lies and deceit being spun upon you.

When the “earnings surprises” eventually come out, your previous work will be considered negligent and amateurish. Your future work will always be under a cloud of suspicion. You will be remembered for the glowing reports you made as management ran circles around you. Do you want people to think you are fools?

The managements that spread deceit and lies to the selective few who gain coveted access are not your friends. They are using your humanity against you as a weakness to be exploited in furtherance of their crimes. They know about how your efforts at coveted access end up corrupting your professionalism. They don’t care about what happens to you as a result of their actions. As a criminal, I never cared about you, too.

You have been warned.

Respectfully,

Sam E. Antar (former Crazy Eddie CFO & convicted felon)

PS: I see that nothing much has changed since my time. Keep it up. When a company that you wrote a glowing report on ends up a train wreck will these same managements rescue you?

For additional information, please read the following posts in this blog:

06/02/07: Advice about Trust from a Convicted Felon

12/25/06: The Art of Spinning: How to Identify White Collar Criminals or at Least Unethical and Deceitful People Who You Should Avoid

12/19/06: Managing Earnings: Playing the Numbers Game

12/10/06: Hiding Your Dirty Laundry in the Footnotes: Anatomy of the Crazy Eddie Accounts Payable Fraud

Comments

Popular Posts

Did a Clever SEC Bait Goldman Sachs into Compounding Its Legal Problems With the "Kiss of Death" Message?

Updated: At 3:48 AM ET 04/20/2010 on bottom

The Kiss of Death

In filing its lawsuit against Goldman Sachs (NYSE: GS) on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had …

Overstock.com CEO Patrick Byrne Sleeps With a Gun

In numerous blog posts in the past, and in widespread media coverage, evidence has accumulated for years that Overstock.com CEO (NASDAQ: OSTK) Patrick Byrne has shown signs of being mentally unbalanced and paranoid.

Byrne has blamed his company's financial woes on an unnamed "Sith Lord." He hired paid goons to stalk his real and imagined adversaries and to write lengthy conspiracy theories on the Internet. Byrne has close ties with Bo Gritz. The Anti-Defamation League lists Bo Gritz as a far-right extremist with “extensive connections to both white supremacists and anti-government groups and leaders.”

Patrick Byrne's infamous temper tantrums when he doesn’t get want he wants are well documented too. He made obscene and misogynistic comments to a female reporter. He suggested that she gave “blowjobs” to Goldman Sachs traders. He suggested that a male reporter “Sucks It Likes He’s Paying the Rent.” An independent research analyst was told that “You deserve to be whippe…

Nature's Sunshine Products, Willbros Group, Cal Dive International, and BSQUARE Violate S.E.C. Rules on Calculating EBITDA

Nature’s Sunshine Products (NASDAQ: NATR), Willbros Group (NYSE: WG), Cal Dive International (NYSE: DVR), and BSQUARE (NASDAQ: BSQR) have recently issued earnings reports which include a calculation of EBITDA (earnings before interest, taxes, depreciation, and amortization) that apparently does not comply with Securities and Exchange Commission interpretations for Regulation G governing such non-GAAP financial measures. In each case, their erroneous EBITDA calculations have enabled them to significantly distort their financial performance by erroneously reporting a positive EBITDA, when they should have reported a negative EBITDA in the latest quarter.

How EBITDA is supposed to be calculated under Regulation G

According to the S.E.C. Compliance & Disclosure Interpretations, EBITDA is defined under Regulation G as net income (not operating income) before net interest, taxes, depreciation, and amortization. See below:

Question 103.01Question: Exchange Act Release No. 47226 describes E…

InterOil, John Thomas Financial, and Clarion Finanz: Anatomy of a Stock Market Manipulation Scheme

In this blog post, I will provide evidence of what I believe is a stock market manipulation scheme involving InterOil (NYSE: IOC), John Thomas Financial, and Clarion Finanz AG. I believe that InterOil with the assistance of Clarion Finanz concealed John Thomas Financial’s involvement in helping it raise $95 million through a private placement of convertible debt securities.

Clarion Finanz acted as a buffer between InterOil and John Thomas Financial to help InterOil hide John Thomas Financial's role in raising funds. Afterwards, InterOil filed false and misleading reports with the Securities and Exchange Commission in an effort to conceal John Thomas Financial’s role in helping the company raise $95 million in convertible debt.

Carl Caserta, who in 1991 was barred by the Securities and Exchange Commission from “association with any broker, dealer, or investment advisor” played a role in helping InterOil use John Thomas Financial to obtain funds from investors. InterOil, John Thoma…

Class Action Complaint against Amedisys uses Sarbanes-Oxley Act Corporate Governance Provisions to Battle Alleged Corporate Malfeasance

Updated at bottom of article

Last week, Pomerantz Haudek Grossman & Gross LLP filed a class action lawsuit against Amedisys (NASDAQ: AMED) charging the company, its CEO William F. Borne and its CFO Dale E. Redman with securities fraud.  In the next few days, Bernstein Liebhard LLP and Finkelstein Thompson LLP filed similar class action lawsuits against the company. The lawsuits allege that Amedisys abused Medicare's reimbursement system for at-home therapy care based on a compelling analysis of company revenues in an April 27 Wall Street Journal article.

In addition, the lawsuits innovatively utilize a provision under Section 406 of the Sarbanes-Oxley Act 2002 which provides a back-door way for investors to force ethical corporate governance and sue public companies for malfeasance. That provision requires Senior Financial Officers, such as the CEO and CFO of public companies, to abide by a strict code of ethics which broadly defines corporate malfeasance and effectively makes…