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Very few things are predictable in the markets, except that a company whose CEO cries about short selling --- especially the mythical menace of naked short selling --- is either a crook, a dummy, or both. So it is with a company that began its journey to that great bucket shop in the sky this week: a surgical supply outfit called Arthrocare (NASDAQ:ARTC).

Arthrocare has wept bitter tears about short sellers who claim that its accounting is FUBAR. Poor thing, to be so ill treated! Isn't it awful how companies are attacked by short sellers? Except that yesterday it announced that it is under both SEC and criminal investigation into... the company's accounting, which Arthrocare concedes has been totally screwed up from head to tail:

The Audit Committee was informed that certain sales and marketing personnel within the Spine Business Unit provided physicians and their billing staff with merchandise and administrative services at no charge potentially in exchange for their utilization of the Company’s products. The Audit Committee has determined that Company personnel at all levels lacked adequate healthcare compliance training and that Company billing personnel lacked adequate training and supervision in insurance reimbursement requirements. In addition to considering and implementing remediation efforts, the Audit Committee is undertaking a review of such practices in other business units.

The Company is unable to estimate the possible effect of the review on the ongoing restatement of its financial statements for the years 2000 through 2007 and the quarter ended March 31, 2008.

Translation: if you have any 10-Ks or 10-Qs going back to the Clinton administration you can throw them in the trash can. Its crybaby-in-chief, CEO, is stepping down.

Another short seller crybaby that has been ground into dust by its own crappiness is an outfit called Medis Techologies (OTC:MDTL) which has been screaming about naked shorting for years. Just a few months ago CEO Robert K. Lifton devoted a large portion of his quarterly earnings release to loud weeping over naked short selling, boasting about a meeting with George Bush's comatose SEC chairman Chris Cox:

During this period, much has been written and discussed about improper practices connected to short selling and the SEC has promulgated rules regarding naked shorting and other improper actions by short sellers as they relate to certain large financial institutions. Last month, I had the opportunity to meet with Counsel to SEC Chairman Cox and present our view that these new rules should apply to all companies, large and small. Our Company, for example, has the dubious distinction of being number one on the Regulation SHO list showing failures to deliver shares for 758 days. To be sure the harm to these large financial institutions can have serious broad based consequences, but as I pointed out in our SEC meeting, it is those smaller companies that predatory short selling- what Chairman Cox terms “distort and short” - can more easily destroy. These companies are the ones which help create new technologies that our country needs in order to compete successfully on today’s highly competitive playing field. Our recommendations to the Commission call for stopping illegitimate naked short selling in a number of ways. First, to amend Regulation SHO effectively to require...

The reference to "Regulation SHO" refers to a rule, passed by the SEC as a sop to blame-shifting CEOs like Lifton, requiring brokers to settle trades and thus wipe out any possiblity of naked shorting (despite the total absence of evidence that there is actually a problem called "naked short selling"). Reg SHO was a godsend to the Liftons of this world, because it meant that if they appeared on the list they had a ready-made excuse for their own incompetence and/or crookedness.

Since those words were written, Medis's stock has declined from $3 to under 50 cents because of poor financial performance, and yesterday, the company announced that its crybaby CEO was "retiring."

Source: Arthrocare, Medis: Troubles for Some Corporate Crybabies