Investment adviser Porter Stansberry wasn't happy. Worse. He was mad. "I understand my story might be hard to believe," he raged in the Agora group newsletter, The Daily Reckoning, which promotes every kind of business and financial opportunity, from the greenback to gumshoes. "I maintain my writing was honest, materially correct, and is certainly protected by the First Amendment of the U.S. Constitution."
Stansberry was writing shortly after the Supreme Court refused to hear a complaint from him against findings first reached in the Maryland federal district court that he had defrauded many thousands of investors. Those findings were later upheld on the fourth circuit court of appeals. And, as I say, Porter Stansberry - charged as "Frank Porter Stansberry" - wasn't a happy man.
"Unfortunately, so far, almost none of the critical issues at stake in my fight have been accurately reported. Worse, people who have no idea what they’re talking about continue to assume my case is another example of a financial publisher acting scurrilously."
So what's it all about, the so-called "Stansberry scam"? Is life too short to care? Certainly, some say so, such as rival tipster Timothy Sykes ("Learn How To Make $30,000 in 7 Days!") who goes after the same customers as Porter, and delights in accusing him of wrongdoing. "Porter Stansberry scam," is how he sums up the situation, accusing his competitor of nothing short of "blatant lies".
Another commentator, called "the independent individualist", similarly wades in, declaring "Porter Stansberry is a convicted crook."
But what's the truth behind the allegations and rumours? Is the abuse just sour grapes, or opportunism, among rivals? Or is there something more substantial of concern? These issues are important. Stansberry has become a force among investors in recent years, becoming the subject of a New York Times editorial (an honour we share) and sometimes leading big and small punters to gamble their bucks on his advice. As hundreds of thousands of subscribers are bombarded each day, week and month, with tips and invitations about where to put their money, how are folk to make sense of what happened with Stansberry? As I say elsewhere: friend or fraud?
So who is Porter Stansberry?
You only need Google to get a sense of the man's reach. He has a cluster of websites to play with. Top of the list is stansberryresearch.com, site of Stansberry & Associates Investment Research. This is where one finds the Stansberry Investment Advisory, which introduces itself in the following terms:
"Every month in his Investment Advisory newsletter, Stansberry & Associates Investment Research founder Porter Stansberry alerts his subscribers to several types of investments: 1) “No Risk” stocks that represent ultra-safe, long-term investments 2) “Next Boom” recommendations that feature undervalued stocks poised for growth, and 3) “Forever” stocks that are cheap blue-chips which will provide excellent returns… forever."
Alongside the "advisory" are something like twenty further products, segmented by target audience. There's True Wealth, Advanced Income, Retirement Trader, Growth Stock Wire, The Daily Crux... The list goes on, and sometimes changes.
As for the man himself, there's less to be sure of. A New York Times report in August 2003 noted that Stansberry at the time was 30 years old, and that he was an employee of the Baltimore-based Agora group, which specialises in financial newsletters. The paper quoted him as saying that he had delivered pizza and worked as a lifeguard while at college, and had stared at Agora as a lowly file clerk in 1996.
The fraud allegation
As for what Porter Stansberry did, the first clear description was set out in April 2003. That was when Karen L Martinez, Thomas M Melto and Brent R Baker of the Securities and Exchange Commission's Salt Lake City office filed a complaint with the federal district court in Baltimore, Maryland, where Stansberry's investment newsletter business was located. They alleged:
"1. Defendants engaged in an ongoing scheme to defraud public investors by disseminating false information in several Internet newsletters published by Agora or its wholly owned subsidiaries such as Pirate. Through various publications, defendants claimed to have inside information about certain public companies. Defendants suggested that its readers could cash in on the inside information and make quick profits. The defendants offered to sell the inside information to newsletter subscribers for a fee of $1,000.