NovaStar Supporters Pin Company's Woes On Naked Short Sellers

| About: NovaStar Financial, (NFI)

I've been writing about NovaStar (NFI) for the better part of five-plus years. During that time my reporting became the focus of "deconstruction" and routine criticism by the likes of Howard H. Hill, a former message board poster who now works at Babson, which recently took a large stake in NovaStar JUST before the stock collapsed; and the fictitious Bob O'Brien a.k.a. Phil Saunders.

Through their website, they sought to attack any criticism of NovaStar as misguided and corrupt. Yes, criticism of NovaStar's gain-on-sale accounting, the conservative assumptions it used in selling loans to other investors -- even questions about the quality of NovaStar's earnings: All of it was ridiculed and routinely dismissed as irrelevant by promoters of a company whose stock one analyst now believes is headed toward zero.

As the NovaStar story evolved, and the critics didn't disappear, charges of "naked short-selling" began to emerge, which is where the delicious irony of this story appears: Bob O'Brien a.k.a. Phil Saunders and his merry band of followers then hooked up with our dear friend Patrick Byrne. Together they formed another website dedicated to the destruction of naked short-sellers The line, in the process, was blurred between illegal "naked short-selling" and legal short-selling. It was assumed that all critics were doing something illegal.

So, here comes Patrick, trying to claim he was trying to warn people of the financial system's imminent collapse because of (without coming right out and saying) naked short-selling. Not even close, pal. It all started with subprime lending and, yes, NovaStar was on the very leading edge. That's the real story nobody wanted to hear.

The beat goes on.

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