We featured two posts analyzing stuff written by a certain Eric Sussman, a UCLA lecturer (here and here). So far, he hasn’t been able to disprove anything we’ve written.

And it’s not that he doesn’t care, as he came up with something new, and a couple of personal insults. The something new turns out to more distortions, and the insults, we’ll leave it at that. We like to use arguments, and would expect a UCLA professor to do the same..

You might think that if you call a university professor “corrupt”, based on meticulous reading of what this professor states and suggests, he would respond trying to refute our arguments. Not this professor. Surely if our analysis had a weak point or two, a university professor would be able to point them out? Not this one..

And it’s not that he doesn’t care, because he has responded, with personal insults, and with two new PR’s that are supposed to show that management is misleading. It does seem that he is slightly more careful this time, no grand statements:

• Here is your final exam. Referenced below are two press releases released by IOC in the past two years. You have 30 minutes to read the releases and answer the following questions:
• 1) What information is contained in the press releases that turned out to be materially incorrect?
• 2) What information is excluded from the press releases that should have been mentioned?
• 3) How do your answers to to 1) and 2) above impact your views on IOC as a potential investment, and whether information contained in subsequent press releases prepared by IOC management should be blindly trusted? [Eric Sussman]

The two IOC PR’s he’s using are the following:

• http://www2.interoil.com/presentation/20…
• http://mail.interoil.com/presentation/In…

Yes, a university professor wants us to do his dirty work. He doesn’t dare to write any answers himself, because just as with the previous PR’s, there is not really a lot wrong with them. Here is the last PR, since Eric goes on about it we provide it in full:

• InterOil Corporation today announced that it has signed option agreements with a strategic industry partner and a financial investor covering a combined 7.5% participation interest in the Elk gas discovery (“Elk”) and 5% participation interest in a proposed liquefied natural gas (“LNG”) project, all located in Papua New Guinea.  Entry into final agreements is contingent upon confirmation of the Elk gas reservoir through successful drilling and testing of the Elk-2 well that is currently being drilled.
• Under the option agreements, the companies have agreed to deposit funds totaling $57.5 million into escrow accounts as a sign of good faith to secure the right to negotiate definitive agreements for the interest in Elk, the LNG project and LNG supply.
• “We have a preliminary understanding with both parties, including terms, and the next step is to negotiate definitive agreements,” InterOil Chairman and CEO Phil Mulacek said.  “We expect to conclude the negotiations and have final agreements documenting the terms and conditions over the next several months.”
• The industry partner, who has extensive LNG experience, has agreed to deposit $42.5 million, in escrow, for the option to purchase a 5% interest in Elk, a 5% interest in the LNG project and rights to a portion of the LNG supply.  Clarion Finanz A.G., a Swiss  investment firm, has agreed to advance $15.0 million for the option to acquire a 2.5% interest in Elk. In the event that final agreements are not signed, the deposited and escrowed funds will be refunded.

So, it is an option’s agreement, the right to negotiate. It didn’t materialize. Negotiations do not always succeed, it could be for a whole host of reasons. Perhaps they asked too much. But to Eric, failed negotiations are a sign that there must be something terribly wrong:

• Me too. I really want to read Stp’s answers to the questions. Frankly, I’d like a real analysis of the second one, that mystery strategic partner, and perhaps a reference to a third press release or disclosure explaining what happened to all of this? I am on pins and needles. Maybe we should ask Anesti about this? [Eric Sussman]
• So…not a single long has risen to the challenge to even attempt to answer the questions on the final exam. Oh, well. I suppose I can’t be too surprised there. Boston and Prometheus, I suppose it’s just the two of us, who can actually read and critically evalute those two press releases. Dang, I was hoping someone could identify that mystery “strategic partner” from Elk-2, who obviously bailed, especially now since they are desperate to find someone else. And what happened to all that supposed money “in escrow.” I guess that got returned when escrow was canceled. How come there was no press release to announce that? [Eric Sussman]

Hmm, it’s funny this:

1. A university professor, instead of writing serious stuff for scientific journals, posts unargued and unsubstantiated distortions on some stock on a message board.
2. He cannot deal with even a single one of our challenges, but comes up with silly games instead, asking questions and when he is ignored, he thinks he’s won the argument
3. His two buddies are full time posters, one with a list of lies and distortions as long as a phone book (see the first 10 episodes of our Daily Distortions series), the other had has his posts removed by Yahoo multiple times, and our professor argues that they are the only ones who “can actually read and critically evaluate those two press releases”
4. He argues that IOC is desperate to find someone else, but on what is that based? Not on reality, because IOC seems hardly desperate, as (contary to Eric’s predictions) they have been able to get significant finance to continue drilling for a long time
5. There isn’t actually any sign that he (nor Boston, nor ‘Prometheus’) did do any critical evaluation himself, but there is more:

Boston actually tried to argue that this options agreement implied a valuation for Elk:

• 7.5% of Elk was sold for $55M in 2007. [Bostonkenmore]
• I find it funny that you fail to mention that despite these factors Interoil sold 7.5% of Elk for $55M in 2007 and included a free look on Elk2. Perhaps because it doesn’t support your argument. [Bostonkenmore]

We argued that it was an options agreement giving them the right to negotiate and the $57.5M was a sign of good faith, not a valuation (implied or otherwise) just as the PR said (literally, just check above). Not surprisingly, he just denies this:

• Oh please….who puts down $57.5M as a show of good faith? Who negotiates a deal without knowing what you are paying for the percentages? Do you buy things without knowing what you are getting and for how much? No one else does. [Bostonkenmore]
• You actually think that an investor group put down this type of money to be nice to Interoil. They didn’t set a price at which they would buy their 7.5%. They just put down money and Interoil could then decide what to charge them. Who in their right mind would do business this way? Incredible. [Bostonkenmore]
• Yet someone funded money here, which means they must have received something of value in return. Do you really want us to believe that someone gave up $55M and received nothing even though percentages were listed in the PR. [Bostonkenmore]

A few observations:

1. InterOil wouldn’t be able to charge them whatever, they would negotiate over the final deal (once again, it’s what the PR literally says). It would be funny if they would be able to fix the deal at that time, since the Elk2 results weren’t yet known (May 2007), so they wouldn’t know what they were buying (and InterOil wouldn’t know what it was selling).
2. In fact, they didn’t “buy”. Nobody gave InterOil $55M, the money was in escrow. It was not at InterOil’s disposal.

So once again an attempt to grossly distort what was going on. And guess who came to defend Boston:

• Boston: why do you try to argue with these guys? You can’t win. You just can’t. Listen, IOC is a spin-master. All of their press releases — all of them — are written in such a way as to contain lots of positive spin, but then always have enough ambiguity (read: wiggle room) that allows them to deny culpability later. I don’t care if it was that ridiculously bullish announcement from 2002 that you, stp, and brun were arguing about the other day, this one about the escrow deposits and the percentages, or even the most recent drilling announcement. Re: the latter, I am not even referring to the blanket caveat about their not having provable reserves, which is always mentioned. For example, in the last press release, they mention issues with the skin and the testing equipment. It’s all subtle wordsmithing. My advice is that you do what I’m doing. I read regularly, laugh a little or a lot, and just wait. Stock goes up…then falls. There will be more positive press releases and more of the same. You will go nuts arguing with these guys in the meantime. [Eric Sussman]

This was last June (12th). Now he comes back with the same PR, and thinks we have forgotten about this? And he argues that the only ones who “can actually read and critically evaluate those two press releases” are him, Boston, and Prometheus? Really?? Come on Eric…

And what’s ambiguous about a 63MMcf/d flow rate (the latest blockbuster DST test results from InterOil)?? Who was trying to show it was (see Daily Distortions no.12)?  Indeed. Eric Sussman.

And note that sentence where he argues that “issues with the skin and testing equipment” is wordsmithing? The only wordsmithing here is, once again, Eric’s:

1. Elk4 DST#4 improved more than sixfold upon previous already good DST’s because they used a somewhat bigger (but still fairly small) pipe, just as we predicted on this website, we kept stressing the small pipes they were using in the first two DST’s
2. Skin damage because of the mud thrown into the well is a common limiting factor, the mud enters in the pores of the limestone, limiting gas flows. Hopefully, we will see the results of a cleaned up skin in the next DST result…

This once again is already a large report it is because these people really distort almost everything when they write. We haven’t even dealt with that other PR yet, but we’re sure you got the point.

Oh yeah, we forgot, instead of answering our allegations, he came up with this about us as well:

• I know. It’s called obsessive-compulsive disorder, I think. I mean, if he really has zero affiliation with the company (or management, etc.), it is really sort of sad to see someone so obsessed with us and our views on this overpriced and overhyped AMEX company. Oh, well. I suppose I can take solace in that he has some friends here in ken and getdirt… [Eric Sussman]

Suggesting (not for the first time) we are affiliated with InterOil and name calling. We’re not obsessed with his views, but the distortions. And since we’re not accusing light heartedly, it takes a good deal of forensic-like work. As a parting shot, we’ll use an argument from Boston:

• Interoil bulls LOVE to attack the author of the report. I guess that this means that they can’t respond to what it actually says. [Bostonkenmore]

Yep, if you can’t deal with the report, attack the author (and come up with new nonsense), Sussman got that one right…

We will have more on Sussman, he’s left a rich trail of deceit.