Hearing to Examine HF/Analyst Connection

Date: Tuesday, June 27, 2006
Author: Institutional Investor Daily-Hedge Funds

The brouhaha brought about by online retailer Overstock.com and Canadian pharmaceutical Biovail has made the connection between hedge funds and independent analysts the focus of a U.S. Senate Judiciary Committee hearing set for today. The Financial Times reports that committee Chairman Arlen Specter (R-Pa.) is to focus on potential collusion and fraud based on the recent lawsuits filed by Overstock against HF Rocker Partners and Biovail against SAC Capital Advisors over what both claim were negative reports issued by Gradient Analytics, a Denver-based independent-research firm. Overstock CEO Patrick Byrne has embarked on a mission to squash short sellers, such as hedge funds, and has persuaded Utah Gov. Jon Huntsman to sign a bill that would slap brokers in a the state with a daily fine of $10,000 for accumulating too many unsettled trades, a tell-tale sign of short selling. Rocker, SAC and Gradient have all denied the allegations. Meanwhile, Gary Aguirre, the former Securities and Exchange Commission attorney who claims he was fired after pressing a probe of hedge fund Pequot Capital, is set to be a witness at the hearing, along Demetrios Anifantis, a former employee of the firm that became known as Gradient. (The SEC’s inspector general has rejected claims by Aguirre that the commission stopped him from taking testimony form a top Wall Street bank executive, saying the evidence presented “failed to substantiate the allegations.”)