A new web site investigating publicly-held companies launched last week. It’s got an interesting backstory and a very, very interesting business model.
iBusiness Reporting is run by William Lobdell, a former Los Angeles Times reporter, and Barry Minkow, a guy who did seven years in prison for orchestrating a Ponzi scheme in the 1980s. Yep. (His Ponzi scheme also may have involved the mafia, money laundering, and a Ferrari Testarossa.) Yeah, you read that right.
iBusiness Reporting plans to report on companies that may be engaging in fraudulent practices (kinda like the ones Minkow engaged in way back when) and fund its reporting through shortselling the stocks of those companies. If the stock price drops after the outlet reports negative information about the company, IBR makes money.
Let’s say that again. There are no ads on the site. No endowments. Nothing of the sort. When one of IBR’s staff, who has taken the position that such-and-such stock will go down, reports information that makes the stock go down, IBR makes money.
This is apparently not a joke! Minkow’s been running the Fraud Discovery Institute, a for-profit corporation he founded in 2003, doing much the same work; Lobdell says the FDI has helped law enforcement shut down 24 Ponzi schemes and uncovered $1.8 billion in fraud. Now, the new web site iBusiness Reporting will do the same, except publicly.
At most major news outlets, reporters can’t own stock in the companies they cover; iBusiness Reporting is obviously quite different. They plan to be completely transparent about it; here’s an excerpt of the web site’s first story, with the disclosure:
Critics [of the stock] include two ex-cons-turned-fraud investigators Sam Antar of White Collar Fraud and Barry Minkow of the Fraud Discovery Institute (which funds iBusiness Reporting), and the ValueHuntr who recently recommended shorting the stock on the Motley Fool investment website.
Minkow, who also holds a short position with InterOil, accused the company in a December press release of being “nothing more than hype.”
We’re not sure what more to add to this. After we scoop our jaw off the floor maybe we’ll have something more to say.
(h/t LAT’s On The Media)