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SEC OIG Investigating SEC Complicity in Naked Short Selling of Dendreon Corporation

By Mark Mitchell, Published: December 1st, 2009 6:35 PM CST

The Office of the Inspector General of the Securities and Exchange Commission not long ago submitted a semi-annual report to Congress. There are two items in the report of interest to those of us who have argued that the SEC has turned a blind eye towards, or even assisted, unscrupulous hedge funds that make their fortunes destroying public companies for profit.

The first item reads as follow:

“The OIG has opened an investigation into complaints from an investor alleging that the SEC failed to investigate instances of market manipulation and other misconduct in connection with the review, and eventual non-approval, of a developmental drug. The investor also has alleged that the SEC failed to investigate a recent bear raid on the stock of the company that developed the drug, causing a severe plunge in the stock price. The OIG has reviewed several hundred pages of documents, including numerous emails and attachments provided by the complainant. The OIG expects to complete its investigation and issue a report of investigation in the next reporting period.”

I have confirmed that this is a reference to the bear raid on Dendreon (NASDAQ:DNDN), described in considerable detail by Deep Capture.  There is plenty of evidence — including, perhaps, those documents and emails referred to by the OIG — pointing to miscreancy in this case. Indeed, it is one of the more despicable cases of market manipulation on record – and many cancer patients were deprived of potentially life-extending treatment as a result. We look forward to reading the OIG’s report – it should be a doozy.

The second item of interest in the OIG report is this:

“The OIG continued its investigation of an allegation that SEC staff engaged in retaliation against a company after it publicly complained about naked short selling in the company’s stock. During this reporting period, the OIG took the sworn testimony of the staff attorney who worked on the matter and reviewed numerous relevant documents. The OIG has completed its investigative work and plans to issue its report of investigation prior to the end of the next semiannual reporting period.”

It has long been a contention of Deep Capture that the SEC has not just ignored allegations of naked short selling, but has gone after companies that complain about it, often at the behest of the short sellers themselves. This report, too, should be interesting, to say the least.

It wasn’t so long ago that people who did battle against abusive short selling and captured government officials were labeled as conspiracy theorists. Now, thanks to SEC Inspector General David Kotz and a few other honest people in government – people like Senator Ted Kaufman – we might finally see some light shed on some of the shenanigans that have made America look an awful lot like a third world basket case.

Yes, there are hedge funds that do bad things.

Yes, there are government officials who help them.

It’s an ugly reality, and the OIG is to be commended for treating serious allegations as they should be treated – i.e. seriously.


Mark Mitchell is a reporter for He previously worked as an editorial page writer for The Wall Street Journal in Europe, a business correspondent for Time magazine in Asia, and as an assistant managing editor responsible for the Columbia Journalism Review’s online critique of business journalism. He holds an MBA from the Kellogg Graduate School of Management at Northwestern University. Email:

Related: JPM, MS, BAC, AIG, DNDN

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