Kingsford Capital And The Captured Media

Mark Mitchell at Deep Capture has some interesting details about the extensive influence of hedge-funds, specifically Kingsford Capital, on the reporting of stories in the financial press:

“Another focus of my investigation at CJR was the appalling bear raid on a collectibles company called Escala. Not only was Escala the victim of massive amounts of illegal naked short selling, but a hedge fund convinced the Spanish government that Escala’s parent company, based in Madrid, was fleecing investors in philatelic collectibles. The Spanish government closed the parent company, Afinsa, but not a single executive of the company has since been prosecuted for any crime. Former clients of Afinsa are now petitioning the Spanish government, claiming that the closure was a gross miscarriage of justice. For the full story, I encourage you to visit a website www.gregmanning.me) put together by Escala’s former CEO. This website provides evidence that the hedge fund at the center of the bear raid on Escala – the hedge fund behind the Spanish government’s decision to close Afinsa — was none other than Kingsford Capital, which donated a bundle of money to the Columbia Journalism Review while I was busy trying to figure out which hedge fund was at the center of the bear raid on Escala.

While I was working on my story for the Columbia Journalism Review, a reporter named Justin Hibbard was working on a similar story for BusinessWeek magazine. I have reviewed emails between Hibbard and one of his sources. These emails clearly show that Hibbard had received evidence that various companies had been clobbered by illegal naked short selling. The emails suggest that Hibbard was investigating ties between journalists and naked short sellers, and that he had interviewed the above-mentioned Herb Greenberg. But for some reason, Hibbard’s story was killed. It never appeared in BusinessWeek. Shortly after Hibbard’s story was killed, Hibbard had a new job – working as consultant to Kingsford Capital.

After I wrote my first story raising questions about Kingsford’s “donation” to the Columbia Journalism Review, Hibbard erased all mention of Kingsford from his profiles on LinkedIn.com and other social networking sites. In a phone interview, Hibbard told me that he “preferred not to discuss” his relationship with Kingsford. When I asked what happened to his BusinessWeek story about naked short selling and corrupt journalists, he said that he had never worked on any such story. When I told him I had evidence to the contrary, he said he might have done some initial research on naked short selling, but he never finished the story. Currently, Hibbard works as a private investigator catering to the needs of short sellers and other “activist” investors. In an interview with an online publication, he said he serves hedge funds by “covertly” observing executives of public companies, taking photos of the executives with a spy camera, staking out offices, using multiple cars to trail the executives, etc. I assume Kingsford Capital is one of his clients.”

My Comment:

I’ll make three points here.

One:  Mitchell’s story that Escala was done in by abusive short-selling is contested.

(Further note – two of the journalists who have written about it (Rich Behar and Gary Weiss) also figure in the Deep Capture narrative of a captured media).

On the opposite side, here is a collection of documents relating to the case that purports to rebut the allegations made by the media (Barron’s, most prominently) against Escala. The collection was assembled  by Escala founder, Greg Manning.

Read this account, especially.

Second point: The attack on the privacy of executives of public companies that is casually referenced in the last line is appalling.

Spy cameras? Surveillance?

People should be incensed over TSA demanding private information, including passwords to accounts, from air travelers, like this journalist. But they should also be incensed when the media crosses the line to snoop in the private lives of public figures. We’re not talking about researching public records or asking tough questions, or doing background work. We’re talking about following people around in cars and trying to get medical records from doctors without their consent, behavior that is normally considered criminal.

Point three.  Whether you take the position that Escala was involved in a massive Ponzi scheme that deserved to be unmasked or you believe that it was unfairly targeted by hedge-funds, what happened to it is one of the inevitable results of  debt-financing. And debt-financing dominates the capital markets.

Economist Michael Hudson:

“The consequence has been that debts on the economy-wide level have grown more rapidly than the ability to pay. Instead of reducing this debt overhead by earning their way out of debt, economies have sought to inflate their way out of debt. However, the mode of inflation is not the familiar rise in consumer prices, much less wage inflation. Rather, it is asset-price inflation, emanating largely from the United States. Since the gold-exchange standard gave way to the paper dollar standard in 1971, the U.S. economy has become unique in being able to create credit – and foreign debt – without constraint. The result has been an unparalleled growth in debt relative to income, production and wages. This “debt pollution” has been likened to environmental pollution. It is the financial equivalent of global warming.

[Lila: Note: recent revelations suggest that the panic over anthropogenic global warming, at least, is substantially a  creation of activists and their media allies.]

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