Jerome Armstrong: Hype for Hire
By Dan McLaughlin Posted in Democrats — Comments (53) / Email this page » / Leave a comment »
“A gross failure on Warner's part to vet his staff to keep out a known miscreant”
Deep behind the Times Select firewall this weekend was an article by Chris Suellentrop that calls into question both the judgment of Mark Warner and the motivations behind some of the prominent picks of the lefty "netroots" leaders. (More here from The New Republic).
Back on January 14, 2005, Suellentrop wrote about the longstanding relationship between Markos Moulitsas Zuniga (a/k/a "Kos") and Jerome Armstrong. Suellentrop and others noticed a suspicious pattern developing. When Armstrong would start working for a candidate, Kos would start pimping the candidate.
In the long series of candidates pimped, we now find ourselves at 2008 presidential contender Mark Warner, who hired Jerome Armstrong to work for his campaign. Quid. Shortly thereafter Kos, in an interview, mentioned that Warner was a candidate who needed to be watched - even though Warner has kept a decidedly low profile on the Iraq War, which has otherwise been the signature issue of Kos-backed candidates. Quo? It seems that Warner's payments to Armstrong worked out well - except that the judgment that had Warner hire Armstrong could be what does him in. At a minimum, it suggests a gross failure on Warner's part to handle an essential requirement for a prospective president - vetting your staff to keep out known miscreants.
You see, in 2003 the Securities and Exchange Commission charged Armstrong with a violation of the federal securities laws* for touting a newly-traded stock called BluePoint on the "Raging Bull" internet message board in 2000 (at the height of the tech stock craze) without disclosing that he was paid at least $20,000 by the promoters of BluePoint. And Suellentrop reports that the SEC got Armstrong to agree to a bar from the business**:
Without admitting or denying anything, Armstrong has agreed to a permanent injunction that forbids him from touting stocks in the future. The S.E.C. remains in litigation with him over the subject of potential monetary penalties.
A perusal of the complaint suggests that Armstrong was, at a minimum, involved in abetting a serious fraud. Read on.
Now, it's true that SEC settlements, like any settlement, are not necessarily proof that the SEC could establish all the elements of its claims. But the SEC generally doesn't go after small outfits like the BluePoint operation unless it has the goods, and unless Armstrong has a real good explanation, it is reasonable for observers to assume that the general outline of the SEC's allegations against him - which are quite straightforward and unambiguous - are true. At the very least, the Warner campaign should be asked about the SEC's charges.
Here are the basics of the BluePoint complaint:
1. MAS Acquisition XI, a a shell corporation (i.e., no real business of its own) acquired a Chinese company that supposedly had developed and marketed a Chinese version of Linux. That company was renamed BluePoint.
2. For essentially all of its time as a public company, beginning March 6, 2000 (the very top of the NASDAQ bull market), trading in BluePoint was dominated, controlled and manipulated by a cabal of fraudsters who fleeced the public investors, controlling trading in the stock through nominees under their control and arranging bogus trades amongst themselves to inflate reported prices (in one month, the stock dropped from an opening-day high of $21 to under $7, and kept dropping). The stock was not registered with the SEC.
3. Beginning March 6, 2000 - the first day of public trading on the OTC Bulletin Board - and thereafter, Jerome Armstrong touted BluePoint on the Raging Bull discussion boards:
Armstrong posted over eighty times on the BluePoint message board located on the Raging Bull website in the first three weeks. He praised BluePoint's investment value and encouraged traders who were having trouble getting their orders filled to keep trying. Armstrong never stated in his posts on the Internet that he was being compensated for making the postings. However, [two individuals involved in the scheme] compensated Armstrong by transferring stock in three separate companies to Armstrong at below market prices during the relevant time period.
(Emphasis added). Note that the reason they were having trouble filling orders was apparently because - unlike in a real, free market - supply of the stock was being artificially restricted by the manipulators. One of the individuals who recruited Armstrong for this venture had been subject to a cease-and-desist order from the State of California in 1998 for running an unlicensed broker-dealer and selling securities that were not "qualified" to be marketed under California law. Little is said about the other guy who paid Armstrong except that he resided in the Cayman Islands.
Legally, the problem was that Armstrong received substantial compensation (valued here at $20,000) for touting the stock without disclosing that compensation - that's what the charge is, and that would appear to be the basis of his settlement with the SEC. But the more serious question is whether he knew that the people controlling the stock were running a scam. What plausible basis did he have for thinking - if he now claims good faith - that BluePoint was, at that point in time, a legitimate investment?
It's hard to say that Armstrong's conduct in the BluePoint case can be separated from his employment by the Warner campaign - if anything, what he did in 2000 bears a striking resemblance to what numerous people have noted in the netroots with candidates: money goes to Armstrong, and hype emerges around his favored candidates, and - if the Howard Dean campaign is any indication - what's left at the end is a bunch of promoters and consultants who made a bunch of money and an audience of true believers who got left with nothing. In other words, it appears that Warner may be using Armstrong for essentially the same function that ran Armstrong afoul of the law in the first place.
All of this raises several questions:
(1) Did Mark Warner know about Jerome Armstrong's rap sheet with the SEC - and if not, now that he does know, will Warner distance himself from Armstrong?
(2) Did "candidate pimping" have anything to do with Mark Warner hiring Jerome Armstrong?
(3) Will Warner continue to pay money for candidate pimping among the netroots?
(4) What private arrangements are there, if any, in Kos's promotion of Armstrong-linked candidates such as of Sherrod Brown in Ohio and Mark Warner for President?
(5) DailyKos was inspired by MyDD, Armstrong's blog. Kos and Armstrong have maintained a variety of business partnerships, including publishing a book. Was there more behind starting Kos than just the inspiration of MyDD?
(6) Are the lefty netroots so dumb as to not see what is going on?
* - Section 17(b) of the Securities Act of 1933, under which Armstrong was charged, provides as follows:
(b) Use of interstate commerce for purpose of offering for sale
It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.
15 USC 77q(b) (Emphasis added).
**- A portion of the docket sheet is online here.
UPDATE: Tom Maguire has links to more primary documents, plus a New York Post promise of more shoes dropping: "The Post has uncovered hundreds of Armstrong posts from 1999 to 2003, many supporting now virtually or entirely worthless stocks."
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Jerome Armstrong: Hype for Hire 53 Comments (0 topical, 53 editorial, 0 hidden) Post a comment »
Has anyone actually found any undisclosed interests in clients he wrote about?
Certainly nobody at RS would argue that representing Wal-Mart is wrong. But by the standards of his own movement, it's unforgiveable.
Excellent post. This story is significant for the following reasons:
1) Armstrong is the authorial and business partner of Markos Moulitsas, founder of DailyKos.com.
2) Armstrong's recent book, co-authored with Moulitsas, is a major publishing phenomenon on the left.
3) Armstrong's site, MyDD.com, is the direct progenitor of DailyKos.com.
4) Armstrong's past raises legitimate questions about the transparency and propriety of his paid political work. That work includes:
a) Past paid association with the 2004 Dean campaign.
b) Work undertaken in his commercial partnership with Moulitsas under the aegis of Armstrong-Zúniga, LLC.
c) Work undertaken in his political-advocacy partnership with Moulitsas under the aegis of BlogPAC.
d) Work presently underway in the service of the 2008 candidacy of Mark Warner.
Given the resolute refusal of Armstrong-connected entities, including both MyDD and DailyKos, to publicly disclose or discuss their financing as they pertain to relationships with political entities, this is a story worth pursuing.
I want to note one more thing for the RS community. Back in the day, Jerome Armstrong was among the primary agitators in the attack on Erick Erickson -- and Erickson's family -- for Erickson's refusal to bow at the altar of Cindy Sheehan. For this, Armstrong wrote: "Erick Erickson deserves a very public and personal humiliation."
One hopes he shortly has ample cause to regret those words now.
Do we have to do them what they did to Ben? Eye for an eye is that it?
If he commited a crime he will be prosecuted. It means nothing beyond that.
We reserve our ire for substantive wrongdoing.
In this case, if you don't think this is the tip of the iceberg, you're not paying attention.
Armstrong's SEC issues bear a remarkable resemblance to activities SINCE then, which appear to be ongoing. And since he is currently a pretty big player on the left, and there seems to be alot of smoke here, it seems at least worthy of a closer look.
And maybe I just missed it, but did Crank actually drag out sordid, personal details of Armstrong's family? Hmmm, just an oversight I'm sure. Yep, I guess we're just like Kos. Only.....not.
but on occasion, grind exceedingly fine. Almost makes one believe in karma. I really don't feel too sorry for a guy who took personal shots at EE (and family) like that.
Like you are trying to capitalize on the character flaws of an ideological opponent in order to discredit his movement, when his actions are his alone.
It's like Rush and his addiction. They used his character flaws to try and discredit him and the ideas he stood for. Or Bennet with his gambling.
they want to destroy him because it hurts the Republican movement
Not settling for refuting the arguments, we set out to ruin our political opponents' reputations and livelihoods. Success is measured by how many are destroyed.
is a hypocrite.
Getting fat off of a system he railed against.
Representing the legal interests of the single largest symobol of all the Kos Koolaid Kids hold in contempt.
He thought he could ride two horses and was immune to crticism because is a liberal and his politics are pure.
He left to avoid the throat slashing he owuld have experienced at Kos.
to point out crass hypocrisy.
The "reality-based community" is screaming out "culture of corruption" at the time of their lungs; meanwhile, one of their founders appears to be a scam artist. They have prosecuted and convicted Republicans in the leftist blogosphere with a lot less real evidence (Frogmarch Rove, Impeach Bush, Convict Delay). Perhaps they should spend more time cleaning out their own tent before they start crticizing others.
They also have been working on becoming big time polticial movers. Why should they not get the same criticism as lobbyists such as Abramoff.
Maybe by a lefty's weirdo standards he's a hypocrite, but I don't see that.
There's more to hypocrisy than a mere case of apparent contradiction.
And even if he were a hypocrite, as far as criticisms go, it's a really, really, really minor one to get worked up about.
If he's getting 'fat' off of American prosperity, then good for him, I say. And if he's doing it by being a good lawyer for successful business, then good for all of us.
I see where you are coming from. But there are character flaws and/or mild vices that turn into bigger addictions (Bennett -- gambling), or relatively benign youthful indiscretions (our beloved Ben D). I don't think Rush belongs in this discussion -- unsuccessful back surgery, the aftermath of which turned into painkiller addiction, is to be in no way compared to binge drinking (spin the wheel and pick any Kennedy) and such nonsense.
But the thing with Armstrong is rife with corruption, deceit, the buying and selling of reputations, underhanded, dishonest, shady dealings in money and influence. And the cherry on top is that he's also made a living on personal attacks and muck-raking, hateful and spiteful things. I invite you to find me ANYTHING in the history of Rush, Bennett, or Karl Rove that suggests such lowness. Whole different ballgame.
And I think it's fine for political opponents (that's us at RS) to point out when there's a skunk in the camp. As I suggested above, nobody's dragging Armstrong's family or personal life (other than his personal financial life...) into this.
the argument, but also to know where the argument is coming from. For instance, the AP loves to go to experts who just happen to be members of a Soros-funded group. You have to know where the statement is coming from to give weight to an argument. If you have a crook lecturing about ethics, obviously his status as a crook is not irrelevant to the argument.
A bigger question: Should the same people who take apart conservative jurists, journalists, and activists for any minor transgression be immune from similar inspections themselves?
If these people want to be the prime movers in the Democratic Party, should they themselves not be put under the microscope, regarding their words and deeds? Personally, I wish people would focus more on their caustic words (Screw'em et. al.) and then note their cushy relationship with top Democrats. Their deeds however are also relevant.
I don't recall him ever being anti-capitalist. I think he's wrong on most policy issues, but I don't think him a hypocrite.
I am speaking of the Kos pov in this.
I have no probelm witha person making their living in any legit way they choose.
the point is this:
If he had been here he would not have had the problems he walked into at Kos.
Violating SEC regulations / "Character flaw"
Is not the same as a "character flaw" I should say.
We're not just making something up and screaming about it here. Someone ELSE took him to court, for being fundamentally dishonest in his Internet chatter.
Nobody's saying to humiliate him at his home, to go after his family, or to personally destroy the man.
This is all about his credibility on the Internet. My guess is anyone who gets personal in the way that people got personal against Erick Erickson or Ben Domenech will get warned and possibly blammed.
But please don't make me defend Armando again, heh.
I just prefer to beat them with ideas and at the ballot box.
we levy the charge of schadenfreude, this is news. In the small corner of the world that bloggers inhabit it is pretty substantial news, and Armstrong's ties to what looks like a promising campaign suggest that this story could have implications for 2008. While we should be careful to avoid cheerleading I certainly don't fault anyone for trying to explore this in depth.
There is a side of me that likes throwing a high fastball just under their chin though..... ;o)
It is unfortunate but true that when one side (when the press wholly backs them) shouts loud and long about a 'culture of corruption' on the other side, that side has an obligation to address that -- for the unopposed lie becomes the public 'truth' after many repeatings -- for example, no WMD's, Blood-for-Oil, Delay simply MUST be a crook, Rove/Libby/etc 'outed' Val Plame, and so on.
you can use != or <> as shorties for 'not equal to'. Most of the math/computer folk will get it. Not sure if the lawyers and other dregs will get it. [hey, just kidding guys]
Let's take a page out of the conspiracy theorists' play book and say, "Follow the money!" If this Armstrong guy made money on fraudulent market deals, then we have to ask how many Dems has this guy supported used these funds in campaigns? What about this Kos kid? Has he benefitted monetarily from the dirty money? That's what makes this so important. The fact that politicians and Liberal pundits may have benefitted from tainted funds makes this a legal case, not a political one. One more thought on this though: What if Kos didn't know and he was being duped by this guy? At some level you have to pitty the poor kid, if this is the case.
First of all, if the Kossacks had only hit Ben on the thing that took him down - the plagiarism charge - their conduct would not have been blameworthy. But they only hit on that after a mountain of utterly bogus and scurrilous attacks.
Second, this isn't penny-ante stuff, it's not a 'victimless' crime like drug addiction or gambling, and it's more than just speculation - this is a federal agency charging that Armstrong was effectively the front man for a multimillion dollar fraud.
Third, it's bigger than Armstrong. It's about the judgment of Warner, who wants to be the Leader of the Free World.
Penalties under Securities Act 17(b) are tiered and related prosecutions often made a public spectacle by the SEC with a state AG in tow. Under Sarbanes-Oxley 308, they could really go for the mother lode (if they think it applies to the defendants). By my count, there are a couple of million dollars involved.
My summary, if the public profile gets higher, negotiations get tougher and investigations deeper.
I postulate that Mr. Warner is probably conferring with his lawyer at this hour. By the way, he will claim ignorance of Armstrong's background/activities as a defense. Furthermore, if he wants any political shelf life, he will also extricate himself from Armstrong.
Sarbanes-Oxley penalties wouldn't apply because the relevant conduct occurred before July 30, 2002. And they've already settled the case - the only thing up in the air is a disgorgement order, i.e., getting him to cough up the $20K. Although if he was able to plead poverty to the SEC in 2003, he clearly has the funds to pay that now.
Excellent, Crank. Let's slow-fry the little fraud.
It seems to me the important thing here is not to point out hypocrisy-- you could dedicate 1,000 blogs to leftist hypocrisy and not even scratch the surface-- but to question the very purpose behind DKos. The financial aspect is hard to ignore, when you consider Armstrong is basically a criminal. But more generally I think Kos is trying to build his political power, and his idea of "networking" is to trade favors for support on his site.
I highly doubt, however, that his long-term objective is to remain king of a web-based community. I would be shocked if his interest did not lie in holding office himself. For that, he'll need the establishment.
Armando's already been excoriated by the netroots as a corporate tool, and Armstrong's just been caught in something uglier. What's the reaction of the netroots "betrayed" by their leaders?
It seems to me that Kos is not into policy, but into personality and influence; I believe he has said as much. Kos is certainly taking in a lot of money, and disbursing some of it to losing leftist candidates.
So, is DKos a business? How is this business regulated, given the political action/speech law, business law, and Internet freedom arguments we have seen?
Did this guy hype any of Warner's companies when he was running his stock scam.
I'm Cajun. Everyone knows we can't spell French correctly. And don't even get me into Toi es v. Tu es...
How is this business regulated, given the political action/speech law, business law, and Internet freedom arguments we have seen?
Very little, but the upside to that is that the stupids make Markos rich, and waste their money on non-productive uses.
What kinds of things are people like DeLay accused of? It's one of two things, right?
- Corporate contributions are limited in what they can be used for. Did he cross the line? For that matter, where is the line?
- Where personal contributions to a candidate are limited, they can help funnel money around. I want to donate $10K to candidate X here in TX but am limited to $5K for example. Someone finds a similar example in NY and we both donate $5K to each candidate. Voila!
Cunnigham was a crook, but all these charges against DeLay are marginal at best, and what he's been accused of is not stealing no matter how you look at it. Compare the impression the MSM paints of him vs how they deal with Mollohan (much bigger crook than Cunningham) and Jefferson (though seemingly a small-time crook by comparison. And how often does the MSM remind us that George Soros is a huge crook, so big that even the French are against him?
Crickets.
from the complaint. However, SOX does not wholly prohibit, among other things ex post facto prosecution if the alleged act spans the date. Frankly, I think they were too limiting in their complaint and focused on specific violations in order to provide prosecutorial assuredness. Smart; just not groundbreaking or bold.
One could make the argument this is a pattern of behavior with respect to certain defendants (what else will they find on Armstrong?). Somewhat separate, but in addition to this, continuing public viability of a company can be viewed as continuation of a fraud by providing material contribution to an illusory scheme. Granted, focusing on specific manipulative acts are the safe bet, but again not legally precedent setting.
By the way, one investment note. When a company comes from a registration change such as Bluepoint did from MAS Acquisition XI, beware. These types of seed companies (MAS) are generally used as registration vehicles (with no business plans, revenue, etc.) and are generally very risky.
fine print: This does not constitute investment advice and represents personal opinion. Investors should always read the prospectus carefully.
- I highly doubt, however, that his long-term objective is to remain king of a web-based community. I would be shocked if his interest did not lie in holding office himself
Don't underestimate the attractions of being "King of a Community." Washington is full of these critters — on both sides of the aisle — and it's not a bad life.
To pick two on our side, Grover Norquist and David Keene get to run around being celebrities, giving speeches, pontificating, hobnobbing with the rich and famous, and so on. Plus, on the side, they make a real nice living playing "consultant." They can do this because they are Kings of Americans for Tax Reform and the American Conservative Union, respectively.
It's almost as much fun as being a member of the House leadership (though perhaps not as much fun as being a Senator) in terms of getting your phone calls returned, getting the best tables in the restaurants without a reservation, etc. And there's much more freedom to make Serious Money on the side, because in theory you don't really have any power.
In some ways it's even better, because once acquired, these positions are difficult to lose. You don't have to run for re-election. Unless you get caught with your hand in the till or there's video of you in bed with a chicken, these are lifetime appointments.
it is clear that this goes beyond personal issues, in that these character issues may have influenced the content of their ideas and writings.
It would be like learning that Rush was paid by the RNC to promote certain ideas.
that unlike the hypocrisy of doc-shopping for pain killers while denouncing other drug use, and the shame of minor-league youthful plagiarism, the charge is that Armstrong, and by extension Zuniga, are backing candidates not on ideological grounds but because they're getting paid for it. It's an hypocrisy of their function in the process, at an entirely different level than the personal foibles of a talk-show host or blogger.
The cases of Ben and Rush show that personal behavior spills over into public; Armstrong's troubles are professional in nature to begin with.
that is the best analogy.
I don't get upset over hypocrisy. I have three young children, I encounter hypocrisy constantly. Likewise I don't mind if people back candidates because they are getting paid to do so. Pitch men are an American icon. When I hear Larry King pitch a product do I really think he's doing it out of altruism? Of course not. He's getting paid.
To me the sliminess of this whole affair is that one or more prominent bloggers had a financial interest in touting a candidate AND did not disclose that interest. Do I think this Armstrong putz would have raised less money for his hapless clients if he had announced 1) that he was getting paid or even that 2) he was getting a kickback from all donations made through his website? Not in the least. I would contend that most, if not all, of the people who contributed via his site would have sent the same, if not more, money.
When viewed in the context of his past history of hucksterism and his desire to separate "the poor, undereducated, and easily led" from their cash one can only come to the conclusion that we are dealing with an Elmer Gantry-like character who quite possibly believes nothing other than that he should be the center of attention.
The "hypocrisy" is as perceived by the MyDD/DKos fanbase; for them, that's a hot button, whereas you and I understand that people are people, famous or not. I was responding in the thread, though perhaps I missed the mark.
And I too don't care a bit if someone is on the payroll of a candidate, or a PAC, or a party. I suppose there are paid operatives here at RS. It isn't honorable to hide that fact, however, and the information or lack thereof colors my perception of the message the stealth spammer spouts.
There is a candidate for governor in GA who is paying a young person to blog for him/her. The blogger has not disclosed who she works for, and since I called her out on her attacks on Mark Taylor (calling him a "idiot," "chicken," and "daddy's boy" her blog has dissappeared. WestCobber.BlogSpot.com was the address. She has attacked Cathy Cox and Mark Taylor, so she probably is either working for Bill Bolton or Mac McCarley. Her profile on her blog was this:
hey, i'm kimberly smith. my friend jennyb and me work for this guy who is running for governor and he pays us to blog all day and pretend we're grassroots supporters. i used to run errands and stuff but after the other guy went away i got this job. is that cooooool or what??????? i love this job!!!! i'm not real smart with web stuff but this is soooooo fun. xxxxoooo p.s. i'm inflatable.
This is sort of off topic, but I wanted to point it out.
I know I'm not in the business of ripping people off.
and now this.
Kos is a very good liberal, indeed.