Howard B. Sirota

Sunday, November 21, 2010 Litigation Analysis Fourth-Quarter 2010 has been sued on November 17, 2010 in California state court by seven District Attorneys in Northern California for systematically misleading consumers by intentionally overstating list prices and its own purported discounts on such items. According to the Complaint, “Overstock’s untrue and misleading representations accompanied virtually every product listing on its site beginning no later than January 1, 2006.” The action seeks $15 million in restitution and fines, a sum which might be manageable even for a troubled company like, which declined to settle the claims since April 2008 for a far lesser sum. However, this $15 million claim for purchasers in Alameda County, extrapolated to include all purchasers throughout America, would clearly vastly exceed the financial resources of if new governmental or private litigants commence individual and class actions against the company, as would seem likely.

In my opinion, the true significance of the case is life-threatening for, which has been struggling, reporting losses, under SEC investigation regarding financial reporting issues, and now, a week before Black Friday and the crucial fourth-quarter sales blitz, charged with systematically misleading consumers about the most important competitive advantage claimed by its supposedly low prices. The lawsuit has received extensive media coverage throughout the United States, and been commented upon by innumerable consumer advocates, including the wry comment from Chris Morran of The Consumerist: “Apparently the “O” in stands for “Overstating…”

The most telling comment came from itself, demonstrating that management clearly understands that its immediate prospects have been cast in doubt by the filing and consequent negative publicity on the eve of Black Friday and the essential fourth-quarter sales effort. Jonathan Johnson, President of, stated that “…the officials have chosen to file this lawsuit at what appears to us to be a strategically-timed moment.” Johnson also said “We have been singled out” and the odd boast that “As always, we look forward to our day in court”, perhaps referring to the extensive and growing portfolio of litigation against described in Note 6 to the financial statements in the Form 10-Q for the quarter ended September 30, 2010.

In short, this is a classic instance of the old adage “It couldn’t have happened at a worse time.”, having made the now-obvious blunder of not settling with the seven District Attorneys, now faces a Hobson’s Choice of epic proportions which may be a life-or-death corporate decision: settle now, confirming to everyone that’s claimed discounts are suspect and hope the company survives past this fourth-quarter long enough to rebuild its tarnished brand name, or not settle, look forward to its day in court “as always” and have a sword of Damocles over the principal claimed reason to shop at…its supposedly low prices.

The moral of the story for corporate managers, in-house and outside counsel is that “A bad settlement is better than a good verdict.” could have jointly announced a settlement with the California District Attorneys after 4PM on a sleepy summer Friday during the summers of 2008, 2009 or 2010, with agreed-upon language blurring the lines. Instead, now faces a crisis of its own making which, as itself admitted, came at “…a strategically-timed moment” the week before Black Friday and the fourth-quarter crucial to any retailer.

Disclosure: I represent Sam E. Antar, who has exposed accounting shenanigans at, and been the target of issuer retaliation comparable to General Motors’ retaliation against Ralph Nader. I have spoken out against the anti-Semitic comments of’s CEO Patrick Byrne.

Saturday, August 7, 2010

Fink & Grow Rich

The Dodd-Frank Act enacted July 21, 2010 included provisions to incentivize SEC whistleblowers to provide the SEC with original information about securities fraud. The Act provides whistleblowers with a financial incentive of ten(10) to thirty(30) percent of an SEC recovery over $1 million. The SEC will have 270 days to promulgate regulations under the Act, and is already seeking public comments.

The Act also contains specific whistleblower protection provisions prohibiting retaliation against SEC whistleblowers, including the employer even if the whistleblower has blown the whistle on his own employer. This means that anyone at a major Wall Street firm or a public company with knowledge of serious securities law violations involving serious money can "Fink & Grow Rich" by blowing the whistle. The SEC whistleblower's downside is not being welcome at the office, and the end of his or her business career on Wall Street or Corporate America.

Thus, if you have a high-ranking position at a major Wall Street firm or public company, you had better be very sure of your claim of securities fraud before you register your SEC whistleblower filing. However, if you are sure, especially if you obtain a review of your narrative and documents from experienced securities lawyers to organize your presentation to the SEC in factual and legal issues presented, to represent you at meetings with the SEC staff and in connection with any attempted retaliation against you, you may ultimately be very well rewarded, less legal fees of course, which are generally contingent fee arrangements with law firms independent of the major Wall Street firms and Corporate America. Don't expect major law firms to rush into this space.

To take a best-case scenario, suppose someone at Goldman Sachs had blown the whistle on "The Fabulous Fab" et al, spilled the beans to the SEC, and received 10% of the $550 million settlement, all within a year. Push the needle to 30%% and we're talking serious exit money even for a senior Managing Director at Goldman Sachs.

Granted, your colleagues will frown upon you and treat you like a "rat" as if they were the Mob and you had sworn an oath of silence. You may have to sue to enforce your rights against retaliation against you. It's risky unless you're sure you have the goods.

The new law provides for the SEC to establish a separate Office to screen and evaluate filings by SEC whistleblowers in coordination with the SEC Division of Enforcement.

There is thus a new path to riches on Wall Street and in Corporate America. It's the reverse of "Don't Ask; Don't Tell." Now it's "Find Out & Tell." Tell the SEC.

Enron. Worldcom. Cendant. In every securities fraud there are numerous participants in the process, including mid-level people who do not expect to receive anywhere near the potential financial reward of a piece of a large SEC recovery, plus people who are ambivalent about their participation in the fraud, concerned about their own legal exposure, feel betrayed or unrewarded by the kingpins of the fraud, have been fired or resigned, or have a personal grudge. These in-the-know persons now have a serious financial incentive to "Fink & Grow Rich."

Disclosure: I am representing an SEC whistleblower claiming entitlement to an award in the event of an SEC recovery arising out of the original information provided to the SEC.

Sunday, April 18, 2010

S.E.C. v. Goldman Sachs

The United States Securities & Exchange Commission has filed a civil action charging Goldman Sachs with securities fraud in connection with the sale to Goldman clients of a fund created by hedge fund manager John Paulson as a “basket” of the derivative securities which Paulson believed were most likely to fail. According to the SEC, Goldman did not disclose to its clients which purchased these securities that Goldman had secretly “stacked the deck” against its own clients.

The SEC Complaint seeks $1billion, a sum less than Goldman’s annual budget for travel and entertainment. However, this case deserves the world-wide attention it is receiving because it re-establishes, for the first time in America since Stanley Sporkin was the head of the SEC Enforcement Division that there are no longer any “Sacred Cows” on Wall Street. In addition, this case, which is only the tip of the iceberg, will lead to far larger civil claims against Goldman and marks the end of financial deregulation. Expect the demise of flash trading, dark pools, unregulated derivative securities, analysts and investment bankers within a firm “coordinating” their efforts.

The SEC has long been underfunded and understaffed. Adjusted for inflation, the SEC has no greater enforcement budget than the 1970s, while the financial world has grown exponentially both in scale and complexity. For too long, the SEC has focused upon the low-lying fruit of micro-cap stock fraud involving obvious, and small, frauds of all varieties by a kaleidoscopic motley crew of affinity fraud Ponzi schemes, penny stocks, cures for cancer, resources discoveries of gold, silver, oil, natural gas, ostrich farms, worm farms, and old-fashioned “take the money and run” scams.

The Goldman case sends the message that there’s a new Sheriff in town, and he’s gunning for the big bad guys. The message was reinforced by the selection of Richard L. Simpson, Esq. to lead the case against Goldman. Like giving the ball to your best player to take the key shot, the SEC is represented by its most-experienced top-level enforcement lawyer, together with a top-tier group of SEC enforcement lawyers and staff.

The stock market got the message and punished Goldman shares, as well as the general market. The media coverage was world-wide and nobody but small children and simple adults gave any credence to Goldman’s indignant denials of any wrongdoing. To be blunt, the major Wall Street firms have lost their remaining credibility following scandal after scandal, decade after decade, ultimately leading to the worst financial crisis since The Great Depression. The “Savings & Loans” debacle was different than the “Sub-Prime Crisis” principally in that the damage done was so far less to the United States of America. Greed, arrogance and power, combined with unlimited leverage and very limited oversight, magnified the financial crisis beyond any recent bubbles because prior financial deregulation had made the SEC a toothless tiger content to eat mice while the raptors roamed Wall Street and ate everyone else alive.

Goldman Sachs will survive. Salomon survived rigging the market for United States Treasury Bonds in 1991, and lived to rig the markets for hot IPOs in the Internet bubble period at the end of that decade. A Salomon alumnus of playing “Liar’s Poker” is the Mayor of New York City, Michael Bloomberg. The other major Wall Street firms all participated in the manipulation of hot IPOs in the late 1990s, including Goldman Sachs. The major Wall Street firms all participated in “pay to play” with public officials to obtain municipal bond business, to be a financial advisor to the funds and knowingly sell public employee pension funds high-risk derivative securities which became worthless.

Goldman Sachs used to regularly supply America with the Secretary of the Treasury, as well as Mayors and Governors and Senators galore. Goldman Sachs had access everywhere in the world, because money talks, big money talks louder, and really big money whispers.

No one should have any illusions that Goldman will lose any access or make any less money over the long run because the likely outcome of a protracted battle in SEC v. Goldman Sachs is a consent decree in which Goldman neither admits nor denies the allegations and pays a fine equivalent to a speeding ticket to a person of ordinary means.

Nor should anyone have any illusions that, in the not-too-distant future, America and the rest of the world will forget what happened and end up cheering for a recidivist enemy of the American people rich enough, and connected enough, to blur the truth and remain invulnerable. H.L. Hunt called for the assassination of the President of the United States of America, John F. Kennedy, and celebrated upon learning the “good news.” His sons, Lamar Hunt and Nelson Bunker Hunt, manipulated the silver futures market in America and got away with a slap on the wrist. Lamar’s son, Clark Hunt, is heralded as a “sportsman” and less well-known as the long-time business partner of convicted felon Barrett Wissman.

Money may not buy happiness, but money definitely can buy power, and power can make enormous sums of money, feeding an endless cycle. Plus, money can buy goodwill, rebuild a brand name, and focus the average American’s attention upon other, more important matters, whether NASCAR or “The Stupor Bowl.” If the Kansas City Chiefs are in the game, the camera will pan to the owner’s box to show Clark Hunt with his hand over his heart and tears in his eyes during the pre-game singing of “The Star-Spangled Banner” and few in the audience will remember or note the bitter irony.

Former President Clinton pardoned the only fugitives ever to receive Presidential Pardons. Coincidentally, the pair was billionaire Marc Rich and his partner-in-crime “Pinky” Green. Goldman does metals trading and other financial transactions with Marc Rich every business day, nor is Goldman alone. President Clinton became the US Envoy to Haiti. Coincidentally, Barrick Gold had previously announced the first major gold discovery in that impoverished nation.

If one looks to the other side of the aisle in America, it’s even worse. Republican-protected Halliburton actually was complicit in the murder of over two hundred villagers in Africa whose only crime was their refusal to leave their shack homes to get out of the way of the pipeline being built by Halliburton. Blackwater “wet work” teams of private mercenaries murdered at least 17 Iraqi civilians.

Goldman Sachs will survive and prosper in the long run, as long as money buys power, and that’s a very long time.

Disclosure: I was a lead counsel in the IPO Securities Litigation against the major investment banks, and other litigation against the large brokerage firms. I represent a client in a pending action against Barrett Wissman and Clark Hunt. I worked with Rick Simpson in the Crazy Eddie case. I hate hypocrisy.

Wednesday, March 3, 2010

Circle of Greed: Bill Lerach Does A Limited Hang-Out

Circle of Greed: Bill Lerach Does A Limited Hang-Out

It seems that you just can’t keep a bad man down. Fresh out of prison, Bill Lerach is the subject of a new book “Circle of Greed” by Patrick Dillon and Carl M. Cannon which claims to have had the “full cooperation” of Bill Lerach. The result, while well-written and still fascinating, is a quasi-authorized biography which stops just where the story becomes really interesting. It’s as if Ted Bundy was expected to tell the whole truth to his biographers.

The fundamental flaw is that “Circle of Greed” focuses upon Bill Lerach out of the context of the systemic fraud at Milberg Weiss which predated Lerach becoming a protégé of Mel Weiss. The systemic fraud and criminal conspiracy at Milberg Weiss went all the way back to Lawrence Milberg, so that no name partner was untouched. Similarly, the book fails to follow the trail of Lerach’s protégé Gene Cauley, who recently began serving a seven year sentence for stealing $9.3 million from an attorney escrow account, or the inter-relations and musical-chairs movement of partners of Gene Cauley and Lerach’s successor firm, Stoia Coughlin and Milberg LLP.

In short, Bill Lerach did not invent the criminal conspiracy; he joined it in progress. His “full cooperation” fails to name names and take numbers. Lerach refuses to identify a single non-prosecuted partner of Milberg Weiss as a participant in the criminal conspiracy. As a result, “Circle of Greed” falls short of explaining the reality that there was a culture of criminality at Milberg Weiss and its various spin-offs which extended throughout the firm, from the named partners down to the “case-starters” to the new associates. Similarly, there is little effort to pin down the ugly truth that, after the passage of the PSLRA, Lerach and Milberg Weiss systematically engaged in “pay to play” with the elected officials who control public employee pension plans across America. Lerach doesn’t reveal a single quid pro quo with any elected official to whom he liberally contributed.

Lerach knows, but he isn’t telling, because the statute of limitations has not yet run for all of his crimes, and any crimes committed after 2005 by Lerach , the already-prosecuted and non-prosecuted partners of Milberg Weiss, the paid plaintiffs, the crooked expert witnesses like the since-convicted John Torkelson and the crooked politicians who replaced the since-convicted Howard Vogel professional plaintiffs.

“Circle of Greed” fails to answer three fundamental questions:

1. Who else at the firm knew of the criminal conspiracy besides those already prosecuted?

2. Did the criminal conspiracy extend into 2006-2007 beyond the end date of the prior convictions?

3. Which elected public officials to whom large contributions were made was literally “on-the-take”?

In my opinion, based upon over thirty years’ experience in securities class actions and direct dealings with Bill Lerach and Mel Weiss, the answers are:

1. EVERY PARTNER at the firm knew of, participated in, and profited from, the decades-old criminal conspiracy.

2. The criminal conspiracy extended not only into 2006-2007 but continues to the present day.

3. The recipients of bribes disguised as campaign contributions are numerous, from New York’s since-convicted Comptroller Alan Hevesi to California CALPERS’ Angelides, and the “pay-to-play” practices are an ongoing corruption conspiracy.

The bottom line is that Bill Lerach isn’t “ratting out” anyone. The result is that “Circle of Greed” fails to deliver the real goods and falls short of a real explanation of how an astoundingly large group of sociopaths with licenses to practice law got away with their crimes for decades, nor how most of them are still practicing law, and bribing elected officials who control public employee pension plans.

Nevertheless, “Circle of Greed” is a must-read for lawyers and judges because even a “limited hang-out” by Bill Lerach reveals far more than he intended, and the authors’ skillful writing does indeed paint a stark, disturbing individual portrait of Bill Lerach.

Monday, February 8, 2010 Litigation Update 2010’s litigation portfolio has changed significantly in the past few months, with the $5 million settlement of the Rocker litigation and the expanded scope of the pending SEC investigation of In addition, it appears that the Great Naked Short Selling Conspiracy lawsuit against the major prime brokers is petering out, and will soon settle for nuisance value or be discontinued by

The Rocker case $5 million settlement was proclaimed a victory by for itself, its shareholders, and the investing public. After expenses, there isn’t much left for the shareholders. Thus ended a “crusade” that was supposed to be worth a fortune to

Unfortunately for, that didn’t end the matter. internal emails by ex-CFO David Chidester , produced in discovery in the Rocker case, were obtained and utilized in an article by Roddy Boyd to contradict’s contemporaneous SEC filings that it had adequate internal controls. Chidester resigned effective immediately. CEO Patrick Byrne wrote a blog saying Boyd had “…less dignity than a wino giving $2 hand-jobs at the bus station” and subsequently said there were a number of financial journalists whom he’d like to “kick in the throat.” Byrne has since been unavailable for comment. has filed a motion that the disclosed documents were under a protective order, but that horse already left the barn.

Worse yet, the SEC has subpoenaed the Rocker litigants for the documents produced in discovery in’s lawsuit against Rocker et al. No confidentiality order in the prior civil case can immunize these documents from production to the SEC; by definition they were produced in discovery to the adverse party and so are not privileged. This expanded SEC inquiry coincided with’s firing of Grant Thornton in an acrimonious dispute, the engagement of KPMG, and the third restatement in three years as was forced to restate 2008-2009.
The expanded SEC inquiry is highly likely to bear fruit since the very first leaked documents immediately led to the ex-CFO resigning and filing that its prior financials cannot be relied upon. The SEC is highly likely to bring an enforcement proceeding against and certain officers regarding false financial statements and false Sarbanes-Oxley certifications.

The Great Naked Short Selling Case appears to be petering out, despite’s pledge to pursue the case to trial solely represented by Stein & Lubin now that John O’Quinn has passed and Wes Christian is no longer involved. The cost to actually conduct e-discovery of epic proportions to prosecute the case is in excess of $25 million in 2010-2012, and the court Docket reflects a decided slowdown in’s “vigorous” prosecution of the action. The most likely scenario is a settlement in the range of below-Rocker to about $5 million, with the defendants simply being pragmatic, or an actual discontinuance by is now in defensive mode and cannot fund or waste management resources on another “crusade.” has filed a Form 8-K stating that it expects to be profitable for 2009 after restating to correct “errors.” NASDAQ listing requirements and SEC reporting rules mandate audited financials within required time periods. There is a high probability that KPMG, which was engaged December 23, 2009, will conduct additional procedures in light of the recent withdrawal of the prior financials, the expose of internal emails contradicting the SEC filings, the immediate departure of the ex-CFO who was the author of the emails contradicting the SEC filings, and the SEC expanded inquiry subpoena for the balance of the documents. In my opinion, KPMG will resign the engagement if there is reason to doubt management integrity, and will not be rushed into issuing an audit opinion by NASDAQ-listing deadlines needed to avoid becoming a Pink Sheet or Bulletin Board stock.

If the internal emails by the ex-CFO are, as I expect, only the tip of the iceberg, then KPMG’s additional procedures, with the SEC inquiry pending, will ascertain if these internal control and reporting issues are only “errors” or whether the conduct rose to the level of “irregularities.” In the latter case, may end 2010 with no significant recovery in its crusade against naked short-selling “Sith Lords” and their minions of imagined miscreants, exposure of years of internal controls and reporting issues, and a wary or already-departed KPMG.

Don’t hold your breath waiting for to report restated financials audited by KPMG.

Disclosure: I have represented Sam E. Antar, who exposed’s accounting shenanigans despite vicious and unlawful Issuer Retaliation against him and other critics of, including me. I believe that the above analysis is correct but I do have an axe to grind here.

Monday, January 4, 2010

Vanished Without A Trace: The Disappearance of Section 11 Rights

The principal advantage of a Section 11 claim under the Securities Act of 1933 over a Section 10(b) claim under the Securities Exchange Act of 1934 is that, unlike Section 10(b), a Section 11 claim does not require scienter, nor even negligence. Section 11 is strict liability for any misstatement or omission of a material fact in the prospectus.

The federal courts have always required a Section 11 plaintiff to trace the shares purchased back to the shares issued in the offering being sued upon. The original purchaser in the public offering could always and can still today produce a confirmation from the broker-dealer handling the purchase stating “Prospectus Enclosed” with the purchase price at the initial offering price on the cover of the prospectus. In the old days, subsequent open-market purchasers could trace their shares back to the offering through the chain of physical stock certificates showing the names of the record and beneficial owners backward to the date of the prospectus. However, following the 1960s “paper crash” automation became necessary and today, the Depository Trust Company, known as DTC, operates a paper-less net book entry system that does not assign a separate CUSIP number to prospectus shares as opposed to non-prospectus shares. Whether intended or not, this use of the same CUSIP number eliminates the ability to trace shares back to a secondary or initial public offering once the first non-prospectus shares enter the pool of shares, typically a Rule 144 sale 90 days after the offering.

For example, if a company issues 1 million common shares in an initial public offering on January 29, 2010, all shares traded in the open market after the opening trade can only come from one source: the initial public offering. Assume that, on April 30, 2010 there is a Rule 144 sale of 1,000 shares. At that point it becomes impossible to trace any shares back to the offering through the DTC “Bermuda Triangle” net book-entry system. Courts have rejected efforts to statistically calculate the percentage of prospectus shares assuming equal turnover ratios of all shares. Thus, although the statute confers one year of protection for investors in public offerings, in the real world strict liability attaches only until the first entrance into the market of non-prospectus shares, typically 90 days until the first Rule 144 sale.

The situation is worse for purchasers of secondary public offerings. Except for the initial purchasers in the underwriting themselves, the pre-existence of non-prospectus shares means that there is immediately a complete inability to trace shares purchased after the secondary offering back to that offering. Thus, for secondary offerings, there is, in the real world, no ability by any open-market purchaser to trace even a purchase made seconds after the secondary offering went effective.

Thus, as a practical matter, the Securities Industry Association and DTC have eliminated the statutory rights of Americans to complete protection, for one year, against misstatements or omissions of material fact in a prospectus. The federal courts have enforced the law on the books, while the industry has engaged in self-help and rewritten the book used in the real world.
There is a real world solution, if there is a will to protect public investors. The Securities & Exchange Commission has the power to promulgate rules requiring DTC and its participant member firms to assign a separate CUSIP number to prospectus shares for one year from the date of the offering in which the shares were sold to the public. These shares would be fungible for all other purposes with shares of the same class of stock. However, these shares would be identified as the shares entitled to Section 11 protection during the one-year period the Congress intended the public to be entitled to rescission or damages without proof of fault, much less fraud.

The cost to create and, for one year from the offering(s), maintain additional CUSIP numbers is negligible whereas the benefit to public investors is immense. Proving fraud is far more difficult than proving that any important fact was not correct or left out of the prospectus. There is no good reason to continue to permit the industry to gut the strongest federal securities claim of public investors in public offerings. The SEC should act to enforce the statutory rights of public investors.

Wednesday, November 4, 2009 Litigation Analysis 2009-2010 Litigation Analysis 2009-2010’s pending litigation portfolio may have a material financial effect upon the Company’s financial statements for 2009-2010 with a scheduled February 9, 2010 jury trial of the claims by against Rocker et al. and the claims against by the defendants.

In addition, has pending the Great Naked Short Selling Conspiracy Case against the major broker-dealers in America, a sinkhole of e-discovery of enormous proportions to even attempt to prove the case, much less settle it, much less try the case. Throw in the usual cluster of business litigation of class actions to patent suits. Add a pending SEC investigation of the already thrice-restated financials for good measure. is incurring ramping-up legal expenses that will peak in the Rocker case over the next two quarters, concluding discovery, motions, and perhaps a trial. In 2009 has not been expensing all of its legal expenses, netting an unrelated settlement against the actual pending cases’ costs, thereby understating expenses and overstating reported net income. In the fourth quarter of 2009 and in 2010 legal expenses should not have such offsets and are likely to be at a run-rate of as much as $5 million in the fourth quarter 2009 and $10 million in the first quarter of 2010 if the Rocker case actually goes to trial.

Regardless of the outcome, on a cash basis, the Rocker case will require substantial legal and expert fees and expenses through 2010 and beyond. In my opinion, has overstated its claimed damages recovery if liability is proven, and there is no pot of gold awaiting in Marin County Superior Court in California. To the contrary, with David Boies representing Rocker, may be rendered insolvent by a verdict in favor of Rocker and Copper River.

The history of sketchy public companies suing short-sellers is ugly. To my knowledge, no issuer has ever recovered any substantial sum in such a case. In my opinion, it is very unlikely that will recover anything from Rocker and very likely that any settlement recovery will be nuisance value. If there is a trial, I would expect Copper River to prevail on its claims against I’m thinking Nemeroff v. Abelson and the Mazzeo fiasco reprised.

The Great Naked Short Selling Case involves enormous e-discovery of the major prime brokers in America who are the defendants, who include defunct Bear Stearns and Lehman, whose records will be extraordinarily expensive to obtain and analyze, and the show-stopper DTCC. Whether intended or not, the automated book-entry system of DTCC destroyed the ability to trace particular shares through the successive buyers and sellers of “those” shares. For example, public investors’ Section 11 rights in stock offerings is one year on paper and in the real world only 90 days until the first Rule 144 sale, at which point the fungible treatment of shares and book-entry netting of the DTCC systems makes it impossible to trace any after-market trade to any particular source. The courts have continued to follow the pre-DTCC requirement of tracing purchase back to the shares in the offering, even though that is today impossible.
The e-trail ends at DTCC, the “Bermuda Triangle” of particular shares, and with major hedge-fund prime brokers Bear and Lehman gone, you cannot ever have an even-incomplete record of short-selling that traces the trail of who sold which shares to whom over time. does not have any “magic grits” to trace particular shares through market participants at DTCC. The cost to attempt to do so would require a large staff of lawyers, paralegals, experts and computer vendors that would be in excess of $25 million over a period of years to come. In short, this case has been and continues to be a “crusade” rather than a rational economic decision by a fiduciary. is represented by a “consortium” of law firms that presumably are on a modified contingency arrangement re fees but unlikely to be advancing costs and expenses. Lead lawyer John O’Quinn recently passed away. Co-Lead Counsel Wes Christian was recently sanctioned in an unrelated short-selling conspiracy case in federal court in New York that sank like a rock. Ironically in light of Patrick Byrne’s kooky bigotry, Local Counsel for is Stein & Lubin, reminiscent that Archie Bunker’s lawyers were “Rabinowitz, Rabinowitz & Rabinowitz.”
In conclusion, faces rising cash outlays and large chunks of management time expended in futile litigation in which it is the plaintiff, significant expense and exposure in the cluster of business litigation in which it is the defendant, and a significant probability that it will incur extraordinary legal and audit fees regarding the pending SEC investigation of its financial statements. In my opinion, the new auditor, Grant Thornton, is likely to conduct additional procedures in light of the circumstances.

Disclosure: I became aware of Patrick Byrne and in 2007 through Sam E. Antar, and have spoken out about Patrick Byrne’s anti-Semitism since that time. While I believe that my analysis is accurate, I do have an axe to grind here. Time will tell.