SEC Accuses 3 ex-New Century Employees With Fraud

[Parsad]

Finally after 2 years, the SEC has charged 3 former executives at New Century with fraud.  

 

http://finance.yahoo.com/news/SEC-accuses-3-exNew-Century-apf-2981651593.html?x=0&sec=topStories&pos=8&asset=&ccode=

 

In the past, I've had numerous exchanges with Herb Greenberg about why he was ignoring New Century, while writting crap on Fairfax & Overstock.com.  The past exchange below was written back in 2007 before NEW even filed bankruptcy.  David Einhorn was a director of the company and on the audit committee I believe at the time.  Cheers!

 

 

6:10 pm March 2, 2007

 

Sanjeev Parsad wrote:

 

Herb, you keep covering Novastar, yet you’ve virtually ignored New Century.

 

The company has been cut further into junk territory by S&P today…they’ve laid off 4.4% of their employees…they have 23 class-action lawsuits against them…and their stock is down 47% in the first two months of 2007!

 

David Einhorn, who is a director at the company, and demands accountability from the companies he invests in, was apparently complacent here. Why isn’t Mr. Einhorn held up to the same level of accountability that he inures upon others? Are you planning on writing anything about this? If not, why are you not asking such an important question that is directly related to the subprime industry, and thousands of shareholders in NEW?

 

Sincerely,

 

Sanjeev Parsad

 

10:36 am March 5, 2007

Sanjeev Parsad wrote:

Herb,

 

For three weeks now, I’ve asked you why you haven’t done a story on New Century?

 

During that period the stock has fallen 75%, the company is under criminal investigation and it has defaulted on a number of its debt covenants.

 

I have not received a single response on why you have not had the time, nor inclination to examine the subject.

 

Would you care to comment if your relationship with David Einhorn, who is a director at NEW, is hindering your investigation of the company? The same David Einhorn that has requested the dismissal of a number of corporate boards in which he was an investor for transgressions not even remotely close to what has occurred at NEW.

 

Sincerely,

 

Sanjeev Parsad

 

10:43 am March 5, 2007

herb greenberg wrote:

Sanjeev, I didn’t write about New Century for the same reason I didn’t write about IndyMac, Fremont, Impac and every other subprimer out there: Can only do so much and NovaStar represented among the worst risks in subprime land. As for Einhorn: No relationship whatsoever, other than I’ve quoted him in the past and his phone records were stolen — as were mine! If you’re looking for conspiracies, I suggest you check with the folks over at Overstock. They claim to have it all figured out!

 

Cheers.

 

Herb

 

 

12:11 pm March 5, 2007

Sanjeev Parsad wrote:

Hi Herb,

 

Thank you for your response. I understand that you have time restrictions.

 

Looking at some of the subprime lenders you’ve mentioned…Fremont is down 70% from its 52-week highs…Indymac is down 42%…Impac is down 59%…Novastar is down 86.5%. New Century is down 88.2%!

 

While Novastar deserved your scorn, I still don’t see how you presumed that it was the most fertile ground. Especially if you examine market losses for just the last three weeks, where no subprime lender has lost anything near New Century. I’m also not sure what Overstock has to do with the subject.

 

I spoke to you at the first VIC in New York in November 2005. Both you and Jim Chanos had spent virtually your entire presentations on why “Fairfax was a zero.”

 

I approached you after your presentation and asked you exactly how you went about your research on Fairfax Financial. Your response was that you had two very good sources. I then asked you if you had read the annual reports and investigated the financials of the company. You said that you didn’t, but that your two sources were very reliable. I was flabbergasted with that answer!

 

While I don’t believe you are corrupt in any manner, I certainly question how you go about your research and reporting. I think you’ve spent more time marketing yourself, rather than spending that time on your actual investigations. Especially the trust you’ve endowed some of your sources.

 

The reason I asked you the question on New Century, is that I’m asking you if your relationship with sources is compromising the integrity of your investigations and reporting? That perhaps more due diligence in investigating financials is a better route than relying on sources for information.

 

I would have no problem with you asking questions about any company…as long as they are corroborated with significant due diligence on your part. David Einhorn had presented at that VIC conference with you. You presented right after Mr. Einhorn. You’ve done stories on other companies that Mr. Einhorn was engaging as an activist investor. Yet, you seem to indicate that you don’t know Mr. Eihnorn. I find these answers very questionable!

 

Sincerely,

 

Sanjeev Parsad

 

12:23 pm March 5, 2007

herb greenberg wrote:

1. You’re confusing the stock price with the underlying issues. (Overstock has to do with conspiracies.)

 

2. Fairfax was and is a complicated, tangled ball of string. I spent at least a month trying to figure it out and focused largely on the Luxembourg entity, which the company had declined to comment about after more than a week of having my questions. (When I’m surrounded by a dozen people asking me questions I’m not going to go into a great discourse about how I do my job.)

 

3. I never said I didn’t know David Einhorn. Is there a problem knowing David Einhorn. I know a lot of people! What’s your point? (Which gets us back to Overstock: In the case of Overstock, conspiracy theorists tried to paint a picture of corruption because reporters talked to short-sellers; note they never do when reporters write positive stories! I’m a reporter. I talk to people. I don’t make stock calls; I raise the red flags. Ignore them or use them for further research to give you comfort in your opinions.)

 

Cheers.

 

 

12:55 pm March 5, 2007

Sanjeev Parsad wrote:

Hi Herb,

 

1) Overstock was irrelevant to the discussion. My question was on the subprime industry, and your decision to exclude New Century from your coverage.

 

2) I agree that Fairfax was very complicated, yet some of the individuals involved with providing source material to a number of journalists, including yourself, had a vested interest in their opinion.

 

That should have raised a red flag with you and forced you to provide a more balanced view of the company, like many other journalists chose to do, who had equally valid questions for the company.

 

Part of accurate reporting is picking and choosing the information you base the article on. Noise and distraction is not a suitable answer.

 

A company refusing to comment, especially when that was a historical precedent for the company’s management, clearly is not indicative of anything nefarious. Leucadia National chooses to not discuss issues with the media, yet no one has ever questioned their integrity. Nor does anyone have reason to.

 

3) The point with knowing David Einhorn, is that did your friendship with him prevent you from investigating the company for your readers?

 

I don’t think Mr. Einhorn is anything but a legitimate and honest investment manager. But I do think it is highly hypocritical, that the same standards he sets as an investor in other companies, is not the same standard he holds himself up to in this situation. It is questionable, and i’m wondering why you haven’t asked this question?

 

Sincerely,

 

Sanjeev Parsad

 

 

2:48 pm March 5, 2007

herb greenberg wrote:

Sanjeev,

 

1. My mention of Overstock was tied to the implication from your questions that there is something nafarious going on becuase I didn’t write about New Century.

 

2. As was the case with Overstock, there were those who tried to create an issue of reporters talking to people who have vested interests. That’s what we do. Would you be raising the same question if I were talking to big holders of the stock? My guess is you wouldn’t. Beyond that, while tips may come from shorts/longs and others, my own research determines whether I decide a story is worthy of being written. That’s my decision and mine (and, in some cases, my editors’) only. Key is the quality of the information, which is often contained in public filings. Smart people slice-and-dice the same set of numbers of public disclosures different ways.

 

3. As to whether I will or won’t write about a company, positively or negatively, based on whether my sources are long or short: As most will tell you, they only wish that were the case!

 

Cheers.

 

Herb

 

 

 

3:49 pm March 5, 2007

Sanjeev Parsad wrote:

Hi Herb,

 

1) Most of what happened at Overstock is Overstock’s own making. At the same time, there is no doubt that there is some collusion in the activity around Overstock. Simply the fail to delivers and scope of shorting that occurred earlier last year was indicative of that.

 

I’m not saying you had anything to do with it. I’m saying that some of your sources may have had something to do with it, and utilized your media exposure.

 

2) Which leads me to the point regarding Fairfax. Again, I think you were the patsy in a game played by a number of organized shorts.

 

One of your former cohorts from the Street.com wrote some 48 articles on Fairfax in a six month period, often quoting the same sources, irregardless of what was occurring in the underlying financials of the business.

 

For a journalist, this is very irregular behaviour. You write often, but i’ve never seen you write anything close to that many articles on one company.

 

On your comment regarding my reaction if you had spoken to some big shareholders, I would have actually preferred if you had done that while writing your articles. That way you would have provided a balanced view…good or bad from either stakeholder…short or long.

 

In Fairfax’s case, you could have spoken to a litany of highly-regarded investment managers who were large stakeholders from Peter Cundill, Mason Hawkins, Mohnish Pabrai, Markel, Sir John Templeton and the investment managers at Letko Brosseau. This was never done…not by you or anyone else! Why?

 

3) It doesn’t really matter to me if you write on NEW or not. The whole point of my argument was that scrutiny by journalists should be unbiased and balanced. That the flame should be held to everyone’s butts equally! I know you have great regard for David Einhorn…that doesn’t mean the same questions should not have been asked.

 

Sincerely,

 

Sanjeev Parsad