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Months later, my desk was buried under evidence of short seller miscreancy, I had done nothing but investigate this story since the day I first called Patrick, and I had just gone to a topless club to meet a self-professed mobster who told me all about a stockbroker who had peddled phantom shares for the Russian Mafia and the Genovese organized crime family.Heh, it gets better. But, again, way too long to address here. So back to the media angle. Here's Mitchell later on:
I have analyzed well over a thousand stories written by this clique of journalists. The vast majority of them were sourced from a small group of short-sellers who are also friends of Cramer. Other popular sources for this group of journalists include convicted felons, mobsters, dubious private investigators, crooked lawyers, hired stock bashers, and gun-toting goons - most of whom are tied to the Cramer constellation of short-sellers.To fully appreciate the Jim Cramer angle a little journey to his past is in order. This is from Cramer himself:
Some of the stories written by these reporters are accurate enough. But many are not. The journalists misconstrue data with seemingly purposeful intent. They exaggerate and obfuscate. They publish innuendo or merely repeat, Deus Optimus Maximus, the words of their hedge fund and criminal friends. A single negative story by one of these reporter-thugs can send a company's stock tumbling by more than 50% - pure profit for their hedge fund sources, who of course sell the company short (often right before the articles are published). Meanwhile, an overwhelming majority of the companies targeted by these journalists will also be the victims of phantom stock selling and other shenanigans. The journalists do not mention this in their stories, and in fact go out of their way to deny that phantom stock exists.
Anyone who says otherwise is subjected to a vicious media smear.
"We had it down to a science in 1992: my wife would pick stocks that technically looked ready to go up, or she would keep track of merchandise to see what was down to tag ends. She would then generate a list of stocks that could move quickly on good news. Jeff would then go to work calling the companies to try to find anything good we could say about them. I would call the analysts to see I they were hearing anything. When we found a stock that looked ready technically to break out, or where the supply had been mopped up, and Jeff found something positive at the company, and I knew the analyst community didn't know anything positive, we would load up with call options and common stock and then give the good news to our favorite analysts who liked the stock so they could go do their promotion. That would get the buzz going and we would then be able to liquidate the position into the buzz for a handsome profit." (Confessions of a Street Addict, page 61).This is Cramer's big secret. He figured out early that the way to make money betting on stocks was to rig the game - control the news and you control a stock's value. Now he has his own TV show.
Nicholas Maier worked for Cramer until 1998. He quit and wrote a book about it called, Trading with the Enemy: Seduction and Betrayal on Jim Cramer's Wall Street (New York: HarperCollins, 2002). Here's an excerpt showing that Cramer was into naked short selling early on:
Jim turns toward his head trader. "Mark, sell ten thousand Bristol Myers."The story of Jim Cramer cannot be fully presented here. But here's an excerpt from Mitchell's book length exposé that will get you into the ballpark:
"We never bought any Bristol Myers," Mark replies.
"We own the calls," Jim corrects Mark impatiently, aggravated by the delay.
"So sell it short?" Mark asks for clarification. Mark knows that according to the SEC rule book, selling stock you don't already own (even if you do own the call options) must be marked and executed as a short sale.
"You are confusing me with someone who gives a sh*t. Just sell it! I said hit the f*cking bid!" adds Jim, not interested in wasting time over petty semantics. Skirting the "plus tick" rule in this case won't necessarily make us a lot of extra money, but in Jim's eyes, the rule is still an unenforceable annoyance. "And don't ever ask me that again!" (Trading With the Enemy, pages 70-71).
Cramer, who is a sociopath, owns TheStreet.com with Marty Peretz, who is an aristocrat. Peretz is also the former editor of the New Republic magazine. He dabbles in high finance and Harvard professing, which has resulted in his entrusting a large portion of his family fortune to a close-knit group of hedge fund managers, several of whom were his students. For example, Cramer was his student. Then Cramer was destitute. He lived in a car with a loaded gun hidden under the seat. Eventually, though, Peretz gave Cramer some money to start a hedge fund, which Cramer managed with celebrated ruthlessness until he resolved to seek spiritual enlightenment as a TV news host.
Cramer had originally planned to run his hedge fund out of the offices of Ivan Boesky. Shortly before he was to move in, however, the feds busted Boesky for insider trading, making him one of the most famous criminals of the 1980s. (This is not necessarily to suggest that Boesky is the "Sith Lord" mentioned in Patrick's "Miscreants Ball" presentation. Some people have wagered that Patrick was referring to Michael Milken, a business colleague of Boesky known as the "junk bond king," who also went to prison in the 1980s. Patrick has since modified the analogy, saying that the crime has multiple masterminds - "like Al Qaeda").
When Boesky went to prison, Cramer worked instead with hedge fund manager Michael Steinhardt. The media portrays Steinhardt as a financial wizard, a deep thinker and an all-around swell guy. The truth is, he's a thug who perfected the concept of trading on privileged information, and pounded it into the heads of his employees. "What's your edge!?" he'd shout, pacing his trading room floor. "What's your f*cking edge!?" After one of Steinhardt's tirades, a top employee (and the godfather to Steinhardt's children) had a heart attack. It is said that Steinhardt showed no remorse.
Indeed, Steinhardt has one of the most fearsome reputations on Wall Street. Which is perhaps unsurprising given that Steinhardt's father, Sol "Red" Steinhardt, was a mobster once described by a Manhattan district attorney as the biggest Mafia fence in America. Steinhardt Sr. worked for the Genovese organized crime family, with goons like Meyer Lansky and Vinnie "Blue Eyes" Alo, before he was sentenced to a number of years in Sing-Sing prison.
By Steinhardt Jr.'s own account, the principal partners in his first hedge fund were the Genovese Mafia, Ivan Boesky, Marty Peretz (the aristocrat who funded Cramer), and a man named Marc Rich. Rich is closely connected to Ronald Greenwald, described in the authoritative book Red Mafiya as the man who, along with the Genovese family, brought the Russian Mob to America.