In fact, an agreement was reached between USEC and Tennex, but not until 19 June 2002, nearly a month after the email and thousand-dollar report had promised. As the SEC would charge: "Stansberry had no basis whatsoever for the claim in the USEC Report that the approval of the USEC-Tenex contract would occur on May 22, 2002."
"Defendants, by engaging in the conduct described above," the complaint alleged, "directly or indirectly, in connection with the purchase or sale of securities, by the use of means or instrumentalities of interstate commerce, or of the mails, or of a facility of a national securities exchange, with scienter:
"employed devices, schemes or artifices to defraud;
"made untrue statements of material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
"engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon other persons;"
Porter Stansberry replies
Stansberry, unsurprisingly, took a different view of his conduct. He said he regarded himself as a journalist. And, while he admitted the obvious, that USEC had made no announcement on 22 May, he denied any impropriety on his part. "My lawsuit with the SEC started as a fight over the First Amendment rights of a publisher – me," he was to argue.
"I claim a former unit of the Department of Energy – a unit that was sold to investors in 1996 and is now known as USEC – was withholding material information from the public. I believe it did so in order to reward certain investors, including its bankers, its corporate insiders, and members of the Department of Energy.
"By revealing information about a major and long-pending agreement with USEC’s Russian supplier of uranium, I disrupted the opportunity insiders had to accumulate shares at lower prices. In short, I ruined the party by telling investors the agreement had been reached and would be announced in a few days.
"Because USEC was trading at a very distressed price (half of book value) and was paying such a high dividend (yielding more than 8%), I believed the stock would soar once this long-pending agreement was made public. In my report, I explained why the agreement would turn USEC into a profitable company by lowering the company’s raw material costs dramatically. I predicted the stock would double on the news.
"And that’s almost exactly what happened."
In other words, Stansberry wasn't as portrayed, a sleazy fraudster, selling information to investors he didn't have. He wasn't only an investment advisor and newsletter editor. He was a campaigning reporter, writing wrongs, albeit at $1,000 a report. He would then move the goalposts (or perhaps he erased them), by removing from consideration the critical issue: the May date.
"The insider explained the details of the summit to me in advance, long before they appeared in the newspaper and told me to “watch the stock on May 22.” And in fact, the long-awaited announcement came about a month later, on June 19, 2002. Keep in mind, this agreement had been pending for more than two years. And yet, somehow, I was able to pinpoint almost to the day when it would be announced to the public.
"Did the stock soar? No, not exactly. It moved from around $8 to around $11. That’s roughly a 40% move in a few days. That’s not bad. More importantly though, following the new agreement with the Russian uranium supplier, the stock traded all the way up to nearly $20 over the following three years. In fact, by the time my case reached its first federal judge, investors who followed my advice would have made more than 150% on the investment, thanks to capital gains and big dividends. (The stock eventually went to $25 during the uranium bubble of 2007.)
"Yes… that’s right. The SEC is suing me for a matter that involves a stock that went from under $8 to nearly $25. That’s more than a 200% gain. You’ve got to be kidding, right?"
Bear in mind, also, Stansberry urged his critics, " I didn’t use this information for my own personal gain." He said: "I didn’t buy the stock. Or even just tell my friends to buy the stock. No, instead I did my job. I published a report about what I’d learned and offered to sell my report to any (and all) interested investors."
Netting more than a million dollars for Pirate.