Porter Stansberry defends credibility as VaxGen crash follows stock hype efforts

A midnight announcement on February 24 2003 that the candidate HIV vaccine AidsVax showed no effect in a phase III clinical trial was long predicted by independent scientists. Inquiries by Brian Deer during his 1999 Sunday Times investigation of VaxGen Inc, unearthed a worrying picture, and led to the prosecution of Dr William Heyward, who as HIV vaccine chief at the Centers for Disease Control and Prevention cheer-led for VaxGen's technology and arranged federal grants whilst secretly engaged to join the company

As the AidsVax trial progressed, VaxGen forged another relationship - with stock hypester Frank Porter Stansberry. Annotated extracts from Porter Stansberry material claiming to prove that AidsVax works and predicting that the stock would soar are available at this site. On the day of the announcement, however, VaxGen opened at $3.31 - shedding a staggering twenty bucks from its 52-week high and more than $30 from its post-IPO peak. Nevertheless, in the email exchange below, Porter Stansberry, who at the time of publication is in litigation with the US Securities and Exchange Commission, argues that Deer has treated him unfairly

Porter Stansberry is complaining about this and this. The Securities and Exchange Commission is complaining about this

Porter Stansberry v Brian Deer: you decide!

From: Porter Stansberry
To Brian Deer
Date: Mon, 24 Feb 2003 11:14:11 -0500
Cc: Matt Turner <MTurner@agora-inc.com>
Subject: copyright request

Brian -

Please remove from your website the material from my BLAST email of February 24, 2003. It is copyright protected and intended for my paying subscribers only.

Also, I have not profited from the shares of VaxGen, nor has my company. Your allegations to the contrary should be corrected immediately.

Thanks,

Porter Stanberry

From: Brian Deer
To: Porter Stansberry
Monday, February 24, 2003 11:46 AM
Subject: copyright

Dear Porter:

Thanks for your email. I have updated the relevant page, which I hope meets with your approval, or at least hours of fun.

Brian

From: Porter Stansberry
To: Brian Deer
Date: Mon, 24 Feb 2003 21:39:04
Subject: copyright

Brian -

Sound famaliar?

[Extract from copyright notice at briandeer.com] In the battle to preserve an economic base for original journalism, including the necessary expense, skill and labor invested in what are sometimes long inquiries, it's vital that copyright is protected. That protection must deny others any right to reproduce the material published on this website, other than, say, as a single copy of a single item for personal reference.

Porter

From: Brian Deer
To: Porter Stansberry
Date: Tue, 25 Feb 2003 08:39:58 +0000 (GMT)
Subject: Re: copyright (fair use)

Porter,

You are not making a point that is square with your complaint. If somebody lifted one of my stories and republished it, I would warn them and, if they took no notice, be willing to sue them in federal court. To protect my earning capacity, I've been down that path to some extent and know how the land lies.

If, however, they published annotated extracts from my work for the purpose of demonstrating that I'd written something of consequence that was intentionally false, or with reckless disregard to its truth or falsity, or that evidenced my utter incompetence or unreliability to practise journalism, I would have little choice but to reply, grin and bear it. If the material about me was presented responsibly in a proper context, for a public purpose and without malice, they would be entitled to go ahead. No copyright infringement or libel would arise. That is the law. That is democracy.

It's also the moral case. Any embarrassment caused to you by the material at my site you complain about is the consequence of your own actions. If VaxGen was the best investment opportunity you have ever seen and you spent $250,000 researching it, as you claim, I'd be too terrified to look at what you might come up with on a hunch. I note that you made your most extravagant claims when the stock was at nearly $20. Hours after your pump email hailing the results of the AidsVax trial, it opened for trading at $3.31.

If you're telling me that you made an honest mistake and that you are really that stupid, I'd suggest you might consider an alternative occupation.

With regard to the pages, I've quoted extensively but not unreasonably in the circumstances. Although there's a lot I have left out, I don't comment or edit more heavily in case readers might feel that I'm spinning or misrepresenting you. Only at some length are your techniques made clear.

I could give a detailed critique of what you've published, but I've no primary interest at present in what you get up to. I'm more concerned with Aids and the search for a vaccine. In that context, I am interested in VaxGen. I should tell you, however, that I've already received unsolicited emails from people who say they are thinking of taking action against you. I'm also intrigued to see you referred to on a bulletin board not as Porter Stansberry but as Porker Scamsberrie.

I'm more than happy to publish any reply you may have to the broad implications of the pages in question. If there's anything more you want to say, please let me know. Should you wish to pursue the matter further, as you implied in an earlier mail, please name your jurisdiction and I'll be more than willing to come and defend my pages on grounds of fair use and qualified privilege. I think the dispute might receive some attention.

I don't accept that you were simply misled by VaxGen which, in my view, has been aware for a surprisingly long time that AidsVax was likely to fail.

I can only trust that your techniques serve you better financially than mine serve me.

Brian

From: Porter Stansberry
To: Brian Deer
Date: Tue, 25 Feb 2003 13:17:37
Cc: MTurner@agora-inc.com
Subject: copyright (fair use)

Brian -

I don't object to your criticism of my work. Anyone who can't stand a critic shouldn't walk alone outside, nevermind publishing opinions. But what you're doing is not journalism, nor is it protected by any government that is a democracy.

You state - as fact - that I have committed serious crimes, not merely that I was wrong about the outcome of the first clinical trial for a HIV vaccine. You do so without ever questioning me or without any supporting evidence, except the claims of anynomous sources found, of all places, on a Yahoo! message board.

In fact, your information about me is so bad, you don't even know in places how to spell my name correctly or that I don't live, work or publish my newsletter in New York. This hasn't stopped you from making serious claims about character and from continuing to do so even after I've asked you repeatedly to amend your published reports.

Finally, in quite a contradiction from your own copyright policy, you advertised that my materials - without any comments from you - were available on your site. Only after I complained did you add your commentary. And, still, you have not removed any of the text of my complete February 24th BLAST email.

You've maliciously libeled me, you've stolen my work and now, below, I see you've begun to call me names.

This is what you call journalism?

Porter

From: Brian Deer
To: Porter Stansberry
Date: Tue, 25 Feb 2003 15:50:22 +0000 (GMT)
Subject: copyright (fair use)

Porter,

Nowhere have I stated that you have committed any crimes, serious or otherwise. I have not stated that you were wrong about the outcome of the trial. You stand accused of making the most extravagant and unsupportable claims about future stock prices, based on junk information on AidsVax. Your claims about the Wall Street Journal and your prediction that VaxGen's stock would "soar" after the trial failed speak for themselves and require no commentary from me. The only material from a bulletin board is posted by me as a joke: it's funny, given the the events of yesterday with VaxGen. I'm grateful for you pointing out that I've spelt your name wrong and that you are not in New York. I will make the necessary corrections ASAP. If you have similar points, please let me know. I have not published the complete text of your Blast, which I obtained from a public source, but in the circumstances I believe that I would be entitled to do so, for reasons given already. No materials of yours are available at my site, free or otherwise. You must be reading any reference incorrectly. There are only the two pages of edited extracts, with my commentary, from your pump publications. I have not maliciously libeled you (ask your attorney friend the meaning of "malicious", if he knows). Nor have I stolen anything.

In a previous email you made similar errors - claiming I had spoken of "allegiance" (you misread "alliance"), that I had accused you of "fraud" (I did not) and that I had called you a "pump and dumper" (the expression appears nowhere on my site).

I think you are getting a little overheated - possibly as a distraction from the very large amounts of money you have cost small investors in VaxGen who, for reasons best known to themselves, trusted you.

Brian

From: Porter Stansberry
To: Brian Deer
Date: Tue, 25 Feb 2003 16:37:41
Subject: copyright (fair use)

Brian -

You're doing it again.

Below you state as fact that I have cost small investors money in VaxGen. I have done no such thing. At no time did I ever sell anyone a single share of VaxGen. Instead, I presented the investment case of the stock and I recommended it to my subscribers at $5.50 per share [and at more than $26 and many points between], advising them that this was the riskiest stock I would ever consider recommending and advising them to only put 1% of their portfolios at risk. Had anyone followed my complete advice, there is no way they could have lost money - a key point you leave out of your webpage. Furthermore, the material you cite is not even from my newsletter, it is from a promotional piece meant to sell access to my newsletter. It is not my advice: it is advertising about my advice. (Ironically, the letter you state is meant to "pump" the shares of VaxGen do not even give the company's name).

You have probably never even read an actual newsletter I've written because you have never even bothered to call me for comment. You are not a reporter, you are merely harassing me out of some misguided notion that you are ntitled to do so because we disagree about the character of VaxGen's executives and the worthiness of their clinical approach. These are not the actions of a legitimate reporter.

You have committed libel: you state as fact that I have violated the ecurities laws of the United States and you've done so even after I contacted you to correct your malicious "reporting":

1. You call me a "pumper" which in the context of investment securities has a clear and well understood meaning - that I was promoting the shares of VaxGen in an attempt to make money from its inflated share price at the expense of other investors. You state as fact that email solicitations for the sale of my newsletter are "pump" emails. Pirate Investor is not a stock promotion business and no such investing in the shares of VaxGen took place
on our behalf. Were such investing to take place, I would be guilty of securities fraud. There is a well known and commonly understood linkage between "pumping" a stock and securities fraud.

2. You state as fact that I have a business relationship with VaxGen and that the company and I have a common agenda. No such relationship exists. VaxGen does not review, approve or pay for my work. If I had an undisclosed relationship with a company I was recommending in my newsletter, I would be breaking the securities laws of the United States.

Brian - I invite you to call me, to visit our publishing company and to learn more about my newsletter. Last year the average stock in my recommended portfolio went up by 20% during a year in which the market fell. And, though you call me a "pumper," most of our gains came from recommending short sells on stocks.

My bullishness on VaxGen was based on the company's science, which I found sound, and, even more so, on the unique risk to reward ratio the investment provided us. As you would see, if you bothered to contact me or read my actual newsletters, our advice in regard to the company was conservative and not at all in the style you claim. Obviously we are disappointed that the market has reacted to the company's results the way it has, but we believe in time VaxGen's approach will lead to an approvable vaccine. We continue to recommend a limited risk investment in the company because of this longer term promise.

I'd be happy to speak to you about all of these matters as long as you'll agree to remove your offending comments prior to our discussion. Just email me a good time to call.

Porter

From: Matt Turner <MTurner@agora-inc.com>
To: Brian Deer
Date: Tue, 25 Feb 2003 17:02:38
Subject: copyright (fair use)

See***below comments***
>
[From Brian Deer's email] If the material about me was presented responsibly in a proper context, for a public purpose and without malice, they would be entitled to go ahead. No copyright infringement or libel would arise. That is the law. That is democracy.

***Mr. Deer, please have your attorney review this. Malice is met here since you have no facts at all for your "pump" statement and have been informed by Mr. Stansberry and his attorney that Mr. Stansberry did not own the stock
prior to writing about it, nor has Mr. Stansberry sold the little stock he purchased several week after the publication. Therefore, he cannot have "pumped" the stock as you continue to maintain. Malice is met under case law when when a false statement of fact is published with "wreckless disregard for the truth". "Malice" (i.e. "wreckless disregard for the truth") is satisfied if the publisher of the statements is informed of the true facts but continues to republish the false statement without any basis, and is now on notice that his facts are dead wrong. Case law finds that the web is a continuing republication especially in this context since you continue posting even though you have been put on notice that Mr. Stansberry has made no $ via a "pump". Again, I ask you to please forward this to your libel attorney. Mr. Stansberry has never purchased a stock and then written about it and then sold the stock afterwards, i.e, Mr. Stansberry has never "pumped" a stock. Don't confuse strong recommendations and opinions with a "pump."

Hours after your pump email hailing the results of the AidsVax trial, it opened for trading at $3.31.

**Again, you falsely state "pump" without any evidence. A strong opinion on a stock does not make for a "pump" as that term, in this industry, is connected to profiting by use of writing on a stock after a purchase and then selling on the stock's rise. There are no such facts in this matter. Malice does not mean, legally, that you say whatever you want without a factual basis. Again, I urge you to have counsel review this matter.

I'm more than happy to publish any reply you may have to the broad implications of the pages in question. If there's anything more you want to say, please let me know. Should you wish to pursue the matter further, as you implied in an earlier mail, please name your jurisdiction and I'll be more than willing to come and defend my pages on grounds of fair use and qualified privilege. I think the dispute might receive some attention.

***And I suggest you have counsel review such paragraphs above prior to writing such statements.

Matt Turner
General Counsel,
Agora Publishing

From: Brian Deer
To: Matt Turner
Date: Wed, 26 Feb 2003 08:53:04 +0000 (GMT)
Subject: copyright (fair use)

Dear Matt,

My first reaction to your email was to be intrigued that Agora Investments Inc appears to employ a general counsel who can't spell "reckless". To my knowledge, the word you have repeatedly used, "wreckless", means to be without a wreck - perhaps a badly-damaged automobile, or a sunken ship.

Possibly, Porter's colleague, David Lashmet, who is described in Porter's material as finishing up his Ph.D in "Medical Studies", can help. I understand that David Lashmet is an English major whose dissertation is on "Aids and American Culture". According to David Lashmet in another forum, his medical research opens with the premise that "the screenwriters of 12 Monkeys framed their viral dystopia around the suspicions of Curtis in Rolling Stone".

Be that as it may, you deployed the erroneous adjective in order to criticize what you call "disregard for the truth". In this context, I would draw to your attention the very first words of Porter Stansberry's promotion for VaxGen. You will find much more in a similarly unqualified vein, but this is sufficient:

"Any day now, a Wall Street Journal story will make a handful of investors rich. Dear Investor, I've uncovered a business currently worth $250m that will soon be worth several billion."

I might suggest that you study Porter Stansberry's literature on VaxGen and consider whether either of you stand on firm ground for making allegations of a disregard for the truth - whether wreckless or otherwise.

Brian

From: Porter Stansberry
To: Brian Deer
Date: Thu, 27 Feb 2003 00:52:02
Cc: MTurner@agora-inc.com
subject: copyright (fair use)

Brian,

Thank you for editing your website and removing your false statements that I "pumped" the shares of VaxGen.

I also appreciate that you no longer falsely label me a "pumper" in your headline. Although I don't understand why you would have written such serious, false statements of fact in the first place I do appreciate your decision to remove these statements. I would also encourage you to contact me for comments before you write about me or my business. Your articles about me have always contained obvious errors that I think embarrass you as a journalist.

More importantly, there is at least one other material misstatement of fact still on your webpage. Your website still claims that VaxGen "forged...an extraordinary alliance in at least nine meetings and 'weekly' phone sessions with stock hypester Porter Stansberry." There was no extraordinary alliance. Or even a banal alliance. In fact, there was no alliance of any kind. Thus, you cannot have any evidence of such an alliance...because there was no such relationship.

I have contacted you repeatedly to correct your "reporting" of this material misstatement. I have explained why such statements are damaging to my reputation and my business. Nevertheless you have continued to ignore my corrections and further, you have continued to promote your published misstatements on at least one website you know to be used by my customers, business associates and potential future customers.

Your actions are deliberate, malicious libel.

Brian, I hope you understand that I don't have any personal animosity towards you in regard to our different opinions about the validity and value of VaxGen's AIDSVAX. I don't like the kind of reporting you did on Dan Francis, but this is a professional difference of opinion, not a personal matter.

Again, I invite you to visit our publishing company in Baltimore. I invite you to sit down with me and discuss our differences of opinion in regards to VaxGen. I invite you to examine my business and to report on it however you see fit...as long as you will refrain from making any more intentional, malicious and false statements regarding the nature of my business.

Sincerely,
Porter Stansberry

From: Brian Deer
To: Porter Stansberry
Date: Thu, 27 Feb 2003 09:56:26 +0000 (GMT)
Subject: copyright (fair use)

Porter,

I had mixed feelings about removing the word "pump" and inserting the word "hype" on my pages about your VaxGen promotions. Although I'm unable to inhabit your mind and thus prove your intentions, I'm in no doubt that your propaganda for VaxGen was laced with a strong desire to see your publications inflate (or latterly put a brake on the fall in) VaxGen's stock price. And, believe me, NOBODY would think you didn't hope to make money from that.

However, I took advice on the question of whether, on the plain meaning of the word to a person in the street, and on the information I had to hand, I could talk of "pumping" (albeit without the allegation of "dumping", which I never made). The answer from two sources was that I probably could, but that I was dancing on the line. As you say, there may be an understanding among some that "pumping" is associated with illegal activities. Since you are running a business, you may have felt forced to see this question tested, which, on that narrow point, would be a monumental waste of my time. Contrary to your claims, I have no malicious intent, don't think I'm reckless in what I do, and prefer to fight battles on more interesting landscapes.

In the days since the VaxGen meltdown, I've received a lot of information about Pirate Investments. People want me to look into you. But I'm still only really concerned with what happened over VaxGen. Very soon, I would expect to see even the statistical claims the company made about blacks and Asians benefiting from AidsVax to dissolve under independent analysis. AidsVax is a bust. But, I wonder, why didn't you see that coming (assuming you didn't)? To me, it looked all but inevitable.

In 1999 I must have spent about four months researching AidsVax. During that time, I never found a single independent scientist anywhere in the world, whether government or academic, whether lab or clinical, who spoke up for VaxGen's rgp120 technology. I never found one who admitted to knowing somebody who might. Instead, I found senior people falling over themselves to devote valuable time to explaining to me why it wouldn't - many said "couldn't" - deal with the Aids crisis. Some of these people are cited in my Sunday Times report The VaxGen Experiment. Many are not. I visited with Don Francis, Phil Berman and others at Brisbane twice in the space of a few days. My total budget was probably about $40,000 - and that included a trip to Thailand. In California, I stayed at the Petaluma Motel 6.

Yet, you and David Lashmet claim to have visited VaxGen nine times, spoken with them "weekly", done all kinds of other work and to have spent $250,000 investigating AidsVax. The result? The chimps. On and on you go about the chimps - co-incidentally the selfsame thing that Don Francis goes on and on about. That seems to be the totality of what you picked up (or more probably David Lashmet supplied) on this subject - for a quarter million dollars (you say). And yet the chimp stuff is bunk. It was work carried out by Genentech shortly before that company abandoned this technology as useless. The strains used in the chimps were tamed, pre-prepared for neutralization during about fifteen years of breeding in government laboratories.

So why didn't you know that (assuming you didn't)? Did you fall under the sway of Don Francis, just as Randy Shilts did twenty years before you? Don is undoubtedly charismatic, plausible, and led a full life during his time at CDC. But at the end of the day he was one of many who worked on Aids in the mid-1980s; the ebola stuff you cite isn't nearly as glamorous when you know how poorly infectious is that virus; and his preeminence in the book (and TV movie) And the Band Played On was driven by Randy's need to create characters - good guys and bad guys. He plucked Don Francis out of a small crowd.

I think to some extent you must have fallen into the same trap as Randy. (I can see how it happens: with me, Don played all those games you see in people who believe their own publicity.) In one of your publications somebody emailed me, you describe him as "a veritable saint, the only person you'll ever meet who is a candidate for both the Nobel Peace Prize and the Nobel Prize for medicine."

Yuck.

And again, it's just not true. He's a nice enough guy, probably smarter than me, but hyping up the man, as you hyped up the chimps, and hyped up the stock, is not a substitute for professional research. Possibly, scientists who wouldn't speak to an investment analyst WOULD speak to me. Possibly, either you or David Lashmet couldn't be assed to do the research, much of which is boring and mentally taxing (glycosylation, man!). Possibly, you don't feel you needed to do all the homework because your strategy is to latch onto glamorous "gold-digger" stocks that are bound to be volatile down the road. And possibly you know that, as with horoscope readings, people may remember the picks you seem to get right and forget those you so evidently get wrong.

Right now, I don't know, or particularly bother myself with the name of your game. What I do know is that, naive to the consequences, I placed on the worldwide web, free of charge, a story from The Sunday Times that, by all accounts, helped give some people the confidence to make huge amounts of money shorting VaxGen. It may also have encouraged some longs to get out while they could. Meanwhile, you were hyping (note I haven't said "pumping") the prospects for AidsVax, costing another bunch of people wads of cash (One guy mailed me to say you wiped him out of $20,000 - and he wasn't a rich man).

Were you duped yourself? I don't know. Should you be investigated by the SEC? I don't know. But what I do know is that it's perfectly feasible to research complex biotechnology stocks and, at the end, give a balanced, reasoned and honest assessment of their potential. Actually, I think I would be quite good at that myself.

I'd love to take you up on your offer to visit you in Baltimore. Sneakily, I could check out what it takes to run an operation like yours and maybe go into competition. But inquiring journalism doesn't sell newspapers and, therefore, my end of the business doesn't pay enough for unfocussed foreign trips. Last time I came near your part of the world, I stayed at the Motel 6 in Laurel, MD. But, as the man says in the commercials, when you turn the lights out it's just like those big expensive hotels.

Brian

From: Porter Stansberry
To: Brian Deer
Date: Thu, 27 Feb 2003 13:44:55
Cc: MTurner@agora-inc.com
Subject: copyright (fair use)

Brian,

I would encourage you to strike out on your own as an independent biotech research analyst. Although I disagree with your conclusions about the VaxGen trial and some of your editorial decisions, I do think you're an incredibly skilled writer. I would be happy to talk with you about the independent investment newsletter business. In fact, my company owns several such publications in Britain and I would be happy to introduce you to some people who could help you make a start, if you were so inclined.

Again, I have nothing against you personally. We disagree about VaxGen and you're poorly informed about how I conduct my business. Both of these issues could, I think, be cleared up in a relatively short conversation.

As you can imagine, in my business trust is very important. If my readers believed I was attempting to defraud them in order to make money in the shares of the stocks I cover, I would be ruined. You seem to believe it's impossible that I wouldn't take advantage of people in this way. But you don't know me, so I don't take it personally. You also don't know about the audits I've been through or how profitable my business is without resorting to fraud. (All of these things could have been established, with sources given, if you'd only asked me).

You also assume that I couldn't possibly help investors with the work I do. Just because I was wrong about the market's reaction to VaxGen doesn't mean that I'm a bad analyst or that I have a bad track record. In fact, my track record is good and I know from direct contact with my readers at conferences that I have made several people millionaires. I would be happy to show you some of the hundreds of positive testimonials I have received. I also know
that my loss prevention strategies are extremely helpful to new investors and well appreciated by even the most experienced traders.

Meanwhile, you got emails from anonymous sources who weren't following my advice. Here's what I wrote in my newsletter about how to invest in VaxGen:

"No stock pick I've ever made before has generated as much publicity and as much interest as VaxGen (NASDAQ: VXGN). If you own shares or are contemplating buying some now, please read my August issue (it's available for free on the website: www.pirateinvestor.com). Make sure you understand what you're buying. If you find the science too complex or you're not sure about taking such a big risk, don't buy the stock. I think the shares are worth buying up to $30 based on the research David Lashmet and I have conducted. Of course, the stock is probably worth a $1 or less if the final phase III trial that's recently concluded shows little or no efficacy. Iexpect for results to be announced in late January or early February, but I have no specific insight into when. It could be sooner, or later. My advice is for you to establish a position that's no larger than you can easily afford to lose and then wait out the trial results. I'll offer more advice on our recommended strategy after the results are in."

If you think telling people to invest no more than they can easily afford to lose and reminding them that without AIDSVAX VaxGen is probably worth less than $1 a share is hype, I would like to show you some of the real stock promotion letters that are out there.

In closing Brian, I want to say thanks again for removing the pump statements you were making. And I want to encourage you to arrange to speak to me by phone, or in person. I think you're operating under a few serious false assumptions about my intentions and my character. You're too good of a writer to conduct journalism the way you do with that tawdry website and its libelous commentary.

Finally, if I may, I have one brief critical comment for you, which I offer only because I think it would benefit your work and your career a great deal. Brian, you seem to think that the people who disagree with you have no standing and no rational basis for their opinions. In your journalism and in your conversations with me you display an arrogance that many people, I think, would find tiresome. Instead of assuming everyone who thinks differently than you is wrong, stupid, or evil (or all three) if you would try to figure out the rational basis for people's different opinions, you would be a much better journalist.

You've traveled enough to know that the world isn't really filled with evil, stupid people. Everyone I go in the world - and like you I've been around - what I see are mostly good people, each trying to do what's best for his himself and his family. Almost always the evil intentions I suspect at first turn out to be a misunderstanding, or simply ignorance.

Sincerely,

Porter Stansberry

P.S. I note that you are still publishing material misstatements of fact: I have no alliance with VaxGen. You should remove these statements immediately. We take these matters seriously.