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InterOil Daily Distortions 28

April 25th, 2009 · 6 Comments

Since perception can often trump the truth, it’s quite important to keep one’s eye on the truth. Remember, it’s way easier to scare people into selling than it is to ‘scare’ them into buying..

Here some background on the people involved in an effort to smear InterOil. The heart of the story is based on a deposition under oath, which is pretty uncomfortable and quite difficult to disprove.. Therefore, these people  have smeared the source of the story below beyond anything, called all sorts of things, no surprise there.

And they now think they can smear InterOil by arguing that Carlo Civelli has been “involved” in stock scams. These scams were investigated and Civelli  has never gone to trial, let alone been convicted (unlike Sam Antar and Barry Minkow). A newspaper even had to make an embarrassing retraction.

And, most importantly, none of this alters nothing of what InterOil has found in the ground,  no matter how hard they try

When you’re right, you’re right.

What seems to bother critics of more than anything else is their inability to disprove the things written here.

That’s because deals in facts. Period.

Often, having made my case, I’ll take the additional step of drawing conclusions based on the facts. It’s never easy leaving the comfort of what I know to be true for what I suspect is true — particularly when reputations are involved. Yet, with a single (quickly rectified) exception, every conclusion extrapolated here has proven accurate.

And, in at least one case, my conclusions have proven much more accurate than even I could have anticipated.
To learn more about that case, let us return to June of 2007.

At that time, I concluded that convicted stock manipulator Sam Antar and securities class action litigator Howard Sirota were working in concert with convicted stock manipulator Barry Minkow’s Fraud Discovery Institute (FDI) to manipulate the share price of USANA, a public company.

You can review my reasoning (which, I urge you to keep in mind, Sam Antar characterized as being “filled with deception, innuendo, deflection, insensitivity, and arrogance”) here.

Many things have happened since the post was published, most notably the deposition of Minkow, whom USANA is suing for reasons that I expect will soon appear obvious. You may access the deposition transcript, in two parts, here and here.

In his deposition, Minkow confirms that to say he and Sam Antar were “doing business together” was the understatement of the fiscal year.

Minkow states, under oath, the following:
At some point in the past two or three years, Sam Antar came to be a “spiritual advisor” to Minkow. But unlike a traditional spiritual advisor, Antar didn’t ask for money…he was handing it out.

According to Minkow, in mid-2006, Antar sent him, unsolicited and with no strings attached: $100,000. This was Antar’s way of saying: “Thank you…you’ve been an example for me that you can come back from failure.”

Shortly thereafter, and by pure coincidence, Minkow decided to use Antar’s money to finance FDI’s attack on USANA, which was published and delivered to the SEC on February 20, 2007 (precisely the same day as Minkow’s second book was published), but not before Minkow established a short position in USANA stock, as well as investing in put options (both of which gain value as a stock loses value).

Minkow says that in total, Antar’s support for FDI has exceeded $250,000.

Additionally, Minkow disclosed two payments totaling $40,000 by hedge fund manager (and frequent Herb Greenberg advisor) Whitney Tilson, and $10,000 by Anthony Bruan, owner of Cactus Capital.

Remember Howard Sirota? Bruan is a long-time Sirota law client, dating back to some high-profile scrapes with the securities laws in 2001.

Sam Antar is also a long-time client of Howard Sirota’s law practice.

For those of you keeping score at home, that means at least $260,000 – nearly 90% – of the disclosed $300,000 used to finance FDI’s attack on USANA, came from associates of Howard Sirota, who makes a living leading shareholder lawsuits against public companies, à la Milberg Weiss.

Here’s where things get strange…
Consulting public records, I discovered that on February 27, 2007 (seven days after FDI’s USANA report was released), the New York State Department of Taxation and Finance issued a warrant for unpaid taxes against Sam E. Antar, in the amount of $473.15.

A bankruptcy attorney I consulted with on this issue cautioned that from time to time these warrants are filed erroneously. Hoping to rule out that possibility, I conducted a deeper search and discovered that unpaid taxes are nothing new to Sam Antar. Indeed, between 1987 and 2007, Antar amassed over $333,000 in tax liens, warrants and judgments on the city, state and federal levels, in addition to just under $60,000 in judgments and liens by private creditors in 1992 and 1993.

None of these debts was discharged by Antar’s Chapter 7 bankruptcy filing in 1998.

My point being, Sam’s history suggests this most recent – and nearly one year later, unsatisfied – tax warrant was not the result of an error.

And yet, from Minkow’s deposition, we’re supposed to believe that someone who can’t pay a $500 tax bill is in a position to give Minkow gifts totaling at least $250,000 – motivated by nothing more than the spirit of fraud fighting?

As noted in my earlier post on this topic, Howard Sirota was caught bashing (though in an unusually civil manner, to his credit) USANA stock on Yahoo Finance under the screen name StanleySargoy. In his first such post, dated April 14, 2007, Sirota declares (and Minkow’s deposition later confirms) that Sirota was shorting USANA stock, in addition to being long USANA put options.

Interestingly, five trading days later, USANA appeared on the Reg SHO Threshold Securities list for the first time.

Whether or not Sirota’s short position was a legitimate one, this post to Yahoo Finance by StanleySargoy in 2003 shows Sirota’s clear understanding of the relationship between public perception of a company and its share price, and of the value of using the media and other venues to spread negative information specifically for the purpose of lowering share price.

Based on these facts, I am led to conclude:

  1. Sam Antar’s $250,000 “gift” wasn’t a gift, but the cost of a commissioned, negative report on USANA, intended to adversely impact USANA’s share price.
  2. The money Antar gave Minkow wasn’t Antar’s at all. I suspect it belonged to someone else using Antar as an intermediary.
  3. In addition to shorting USANA, Sirota likely intended to lead one of the (several) class action suits brought against the company in the months following release of Minkow’s report. That he did not do so just might be a consequence of his having been identified as StanleySargoy in this blog.
  4. Finally, but likely most importantly, is my belief that this is a clear case of illegal stock manipulation.

If this sounds implausible, please remember that it is precisely the sort of activity Sirota’s counterparts at the law firm of Milberg Weiss are accused of engaging in. To learn more, you may either read this 105 page indictment of Milberg Weiss, or (as I would recommend) invest a few minutes watching an excellent presentation explaining how this sort of thing is happening on a broader scale than you could possibly imagine.

Tags: Daily Distortions · IOC

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