15 | November | 2011 | New Economic Perspectives

By WilliamK. Black

Someone has created a fabulous, richly detailedparody of Austrian economics. They callit The Daily Bell and claim that itsperspective reflects Austrian economics. In reality, it satirizes faux Austrian economics’ sycophancy towardelite white-collar criminals.

I was delighted to learn that they used my recentcolumn: The Virgin Crisis: Systematically Ignoring Fraud as a Systemic Risk as the vehicle for their send-up.

The send-up captures precisely faux Austrianeconomists’ disdainful response to adverse data – they ignore it.

The article hits its peak in capturing the servileapologies that Austrian economists offer in defense of the elite white-collarcriminals who make a mockery of Austrian claims of “free markets.” The satirist emphasizes the Austrians’hypocrisy (they love police enforcing a “rule of law” and “property rights”against blue-collar folks), by calling the FBI the “Stasi” (the East German’ssecret police) when they enforce the rule of law and property rights againstelite white-collar criminals. Thesatirist then mocks the Austrians by picturing them as eager to prevent theimprisonment of elite white-collar felons. Faux Austrian economists’ heroes have always been elite felons. The author of the satire ridicules theJustice Department’s (DOJ) abject failure to investigate, much less prosecute,the elite felons of finance that drove our ongoing crisis. He skewers DOJ for going AWOL during thiscrisis by employing over-the-top mockery. The author states that DOJ is so effective in prosecuting the elite white-collarcriminals that drove this crisis and sanctions them so viciously that they havecreated an “ever-expandinggulag of slave-laborers.” One man’s“Club Fed” is a faux Austrian’s “gulag.” The reality, of course, is that no Wall Street bankster inhabits thisnon-existent white-collar gulag. Thatgap between reality and the hysterical claims of tortured banksters is whatmakes the passage hilarious.

The authorof the satire of Austrian economics uses the nom de plume of Anthony Wile, which is a fabulous insiderjoke. The real Anthony Wile was theinfamous subject of an SEC action for securities fraud. What a brilliant conceit – assuming the nameof a man identified by the SEC as one of the perpetrators of a crudewhite-collar fraud to advance the proposition that only fascists wouldprosecute elite white-collar frauds. Here are the lowlights of what the SEC investigation of the real AnthonyWile and his colleagues found:

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21696 / October 15, 2010

Securities and Exchange Commission v. Brian N. Lines, Scott G.S. Lines, LOM (Holdings) Ltd., Lines Overseas Management Ltd., LOM Capital Ltd., LOM Securities (Bermuda) Ltd., LOM Securities (Cayman) Ltd., LOM Securities (Bahamas) Ltd., Anthony W. Wile, Wayne E. Wile, Robert J. Chapman, William Todd Peever, Phillip James Curtis, and Ryan G. Leeds, 1:07-CV-11387 (DLC) (S.D.N.Y., filed Dec. 19, 2007)

Court Enters Final Judgments against Brian N. Lines, Scott G.S. Lines, Anthony W. Wile, Wayne E. Wew (formerly Wayne E. Wile), Lines Overseas Management Ltd., LOM Securities (Bermuda) Ltd., LOM Securities (Bahamas) Ltd., LOM Securities (Cayman) Ltd., and LOM Capital Ltd. in Market Manipulation Case

The Securities and Exchange Commission today announced that the Honorable Denise Cote of the United States District Court for the Southern District of New York entered judgments of permanent injunction and other relief against Brian N. Lines, Scott G.S. Lines, Anthony W. Wile, Wayne E. Wew, Lines Overseas Management Ltd., LOM Securities (Bermuda) Ltd., LOM Securities (Bahamas) Ltd., LOM Securities (Cayman) Ltd., and LOM Capital Ltd. on October 15, 2010. (The LOM companies collectively are referred to hereinafter as the “LOM Entities”). All of the foregoing defendants, with the exception of LOM Securities (Bahamas) Ltd. and LOM Securities (Cayman) Ltd., were enjoined by the Court from violating certain of the antifraud provisions of the federal securities laws, as described below. The Court also ordered broad ancillary relief against the defendants, including as to certain defendants, disgorgement, civil money penalties, and compliance with undertakings to not trade in penny stocks quoted on certain U.S.-based electronic quotation services and, for the LOM Entities, to not maintain accounts for U.S.-resident customers. Brian and Scott Lines and the LOM Entities were ordered to disgorge over $1.9 million in profits and prejudgment interest and pay civil penalties totalling $600,000.

Without admitting or denying the Commission’s allegations, the defendants consented to the entry of the judgments against them. These judgments resolve the Commission’s claims against these defendants in a civil action that was filed on December 19, 2007, in which the Commission alleged that that these defendants had participated in a fraudulent scheme to manipulate the stock price of Sedona Software Solutions, Inc. (“SSSI”), and, except for Wile and Wew, also had participated in a second stock manipulation scheme involving SHEP Technologies, Inc. (“SHEP”) f/k/a Inside Holdings Inc. (“IHI”).

In addition to entering permanent injunctions, the Court ordered Brian and Scott Lines, who are brothers and during the relevant time were the controlling persons of the LOM Entities, to pay, jointly and severally with the LOM Entities, disgorgement of $1,277,403, prejudgment interest of $654,918. The Court also imposed civil penalties in the following amounts: $450,000 for the LOM Entities, $100,000 for Brian Lines; and $50,000 for Scott Lines. In addition to entering permanent injunctions against Anthony Wile and Wayne Wew, the Court ordered Wile to pay a civil penalty in the amount of $35,000, and Wew to disgorge approximately $8000 and pay a $10,000 civil penalty.
In its Complaint in the civil action, the Commission alleged that, in early 2002, Brian and Scott Lines assisted two LOM customers, defendants William Todd Peever and Phillip James Curtis, to secretly acquire a publicly-traded OTCBB shell company named Inside Holdings, Inc. (“IHI”). Peever and Curtis then arranged for a reverse merger of IHI with SHEP Ltd., a private company that purportedly owned certain intellectual property. Peever and Curtis paid three touters to publish a series of highly positive reports recommending investments in the newly-merged entity, SHEP Technologies, Inc. The Commission’s complaint alleged, in pertinent part, that during the first half of 2003, Peever, Curtis, and the Lines brothers sold over three million SHEP shares into this artificially-stimulated demand in an unregistered distribution of SHEP stock. As part of the alleged scheme, the Lines brothers, Peever, and Curtis failed to file required reports regarding their beneficial ownership of IHI and SHEP stock, and Brian Lines caused several false reports to be filed with the Commission in order to conceal that Peever and Curtis, among others, owned substantial positions in, and had been selling, SHEP stock.

As further alleged in the Commission’s Complaint, in late 2002, Anthony Wile and another individual formed Renaissance Mining Corporation (“Renaissance”) and thereafter engaged in substantial promotional activities that created the misleading impression that Renaissance had acquired three Central American gold mines and was the “Leading Gold Producer in Latin America.” In fact, Renaissance had only executed a non-binding Letter of Intent to acquire those mines and lacked the funding necessary to consummate the acquisition. The Complaint further alleges that Wile acted in concert with the Lines brothers, who acquired a publicly-traded shell, Sedona Software Solutions, Inc., using LOM accounts in the names of nominees to disguise their ownership of the Sedona shell, as part of a plan to merge Sedona with Renaissance.

The Complaint alleges that, in early 2003, Wile and his associate primed the market for Renaissance/Sedona by disseminating materially false and misleading information that misrepresented the ownership of the gold mines and created the impression that the Renaissance/Sedona merger had been completed. Wile and his associate also arranged for the Renaissance/Sedona offering to be touted to prospective investors by Robert Chapman, the publisher of an on-line investment newsletter, and three other newsletter writers, all of whom purchased Renaissance shares for nominal sums. Through this deceptive promotional campaign, Wile and his associate informed the market that there would be an opportunity to invest in Renaissance by acquiring Sedona stock at approximately $10 per share beginning on January 21, 2003.

According to the Complaint’s allegations, on that date, Wile orchestrated a pre-arranged manipulative trade between his uncle, defendant Wayne E. Wile (who subsequently changed his name to Wayne Wew), and Brian Lines to artificially drive up the price of Sedona stock from $.03 per share to over $9.00 per share and stimulate trading in the stock. The Complaint alleged that Scott Lines solicited investors, including at least one LOM customer in the United States, to purchase Renaissance stock in anticipation of the merger between Renaissance and Sedona, without disclosing that he and Brian Lines owned the Sedona shell corporation. The Complaint further alleged that, after Renaissance and Sedona had announced their pending merger, the Lines brothers sold 143,000 shares of Sedona stock in an unregistered distribution to numerous public investors at between $8.95 and $9.45 per share, reaping over $1 million in illegal profits. On January 29, 2003, the Commission suspended trading in Sedona’s stock.

Final judgments were entered by the Court against each defendant and provide the following relief, respectively:

(i) Brian Lines is permanently enjoined from violating the antifraud, securities offering registration, and securities ownership disclosure provisions of the federal securities laws, Sections 5 and 17(a) of the Securities Act of 1933 (“Securities Act”) and Sections 13(d) and 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 13d-1, 13d-2, and 16a-3 thereunder; (2) ordered to pay disgorgement, jointly and severally with Scott Lines and the LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $100,000; and (4) ordered to comply with an undertaking to not trade for a period of three years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File;

(ii) Scott Lines is permanently enjoined from violating the antifraud, broker-dealer registration, securities offering registration, and securities ownership disclosure provisions, Sections 5 and 17(a)(2) and (3) of the Securities Act and Sections 13(d), 15(a), and 16(a) of the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder; (2) ordered to pay disgorgement, jointly and severally with Brian Lines and the LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $50,000; and (4) ordered to comply with an undertaking not to trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File;

(iii) Lines Overseas Management Ltd. is permanently enjoined from violating the antifraud, securities offering registration, and securities ownership disclosure provisions, Sections 5 and 17(a)(2) and (3) of the Securities Act, and Section 13(d) of the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder; (2) ordered to pay disgorgement, jointly and severally with Brian Lines, Scott Lines and the other settling LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $450,000, jointly and severally with the other settling LOM Entities; and (4) ordered to comply with an undertaking to: (a) not trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File; (b) not accept or maintain any account for or on behalf of any United States customer for a period of two years; and (c) hire an independent consultant for two years to monitor compliance with these undertakings;

(iv) LOM Capital Ltd. and LOM Securities (Bermuda) Ltd. are permanently enjoined from violating the antifraud and securities offering registration provisions, Sections 5 and 17(a)(2) and (3) of the Securities Act and, in addition, LOM Securities (Bermuda) is permanently enjoined from violating the broker-dealer registration provision, Section 15(a) of the Exchange Act; (2) ordered to pay disgorgement, jointly and severally with Brian Lines, Scott Lines and the other settling LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $450,000, jointly and severally with the other settling LOM Entities; and (4) ordered to comply with an undertaking to: (a) not trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File; (b) not accept or maintain any account for or on behalf of any United States customer for a period of two years; and (c) hire an independent consultant for two years to monitor compliance with these undertakings;

(v) LOM Securities (Bahamas) Ltd. and LOM Securities (Cayman) Ltd. are permanently enjoined from violating the securities offering registration provision, Section 5 of the Securities Act; (2) ordered to pay disgorgement, jointly and severally with Brian Lines, Scott Lines and the other settling LOM Entities, in the amount of $1,277,403, plus prejudgment interest thereon in the amount of $654,918; (3) ordered to pay a civil penalty in the amount of $450,000, jointly and severally among the settling LOM Entities; and (4) ordered to comply with an undertaking to: (a) not trade for a period of two years in penny stocks that are quoted or displayed on the OTC Bulletin Board Montage, Pink Sheets, or the ArcaEdge Electronic Limit Order File; (b) not accept or maintain any account for or on behalf of any United States customer for a period of two years; and (c) hire an independent consultant for two years to monitor compliance with these undertakings;

(vi) Anthony Wile is permanently enjoined from violating the antifraud and securities offering registration provisions, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 5 and 17(a) of the Securities Act; (2) ordered to pay a civil penalty in the amount of $35,000; (3) barred from serving as an officer or director of a public company for a period of five years; and (4) barred from participating in an offering of penny stock for a period of three years;

(vii) Wayne Wew (formerly Wayne E. Wile) is permanently enjoined from violating the antifraud provisions, Sections 17(a)(2) and (3) of the Securities Act; (2) ordered to pay disgorgement in the amount of $5,422, plus prejudgment interest thereon in the amount of $2,608; and (3) ordered to pay a civil penalty in the amount of $10,000.

As part of a global settlement with the LOM Entities, Brian Lines, and Scott Lines, the Commission agreed to dismiss with prejudice the pending civil enforcement action against LOM Holdings Ltd., which is the parent holding company for the LOM Entities.
The Court previously had entered permanent injunctive relief against defendants Peever, Curtis, and Chapman. The Commission’s claims for monetary relief against those defendants remain pending before the Court.

For additional information, please see Litigation Releases Nos. 20407 (Dec. 17, 2007); 20733 (Sept. 22, 2008); and 21577 (June 28, 2010).”

http://www.sec.gov/litigation/litreleases/2010/lr21696.htm

The faux Austrian satirical web site uses thispathetic episode as another opportunity for humor when it presents a faux bioof the not-as-wily-as-he-thought Wile:

“He has put thisknowledge to good use, working with top mining executives and ventureentrepreneurs to generate some of the most successful business efforts of the2000s.”

There is a similar gem prominently featured on theweb site: the admonition that the key to a successful society is “personalaccountability.” What a perfectaccompaniment to an article demanding that the elites who grew wealthy throughfraud not be prosecuted. The satiristhas a great gift for irony.

Prior variants of Wile’s website contained thisdefense of Wile.

http://thedailybell.com/2012/Anthony-Wile

(accessed 11/13/2011)

“In 2000, Wile experienced a brief role as the CEO of astart-up junior mining company that became the subject of a civil attack by theSEC. Wile and others fought for more than seven years at greatpersonal and financial expense before eventually settling the case withoutadmitting any wrongdoing. The assets of the company in question weresubsequently purchased by a New York Stock Exchange listed company and theproperties have now produced more gold than was initially suggested. Hundredsof investors lost literally tens of millions in deserved future profits becausethe SEC accused the company of over-promising a merger that was actually takingplace. Perhaps this experience adds to Wile’s fervor to expose the power eliteand their societal manipulations.”

[Perhaps? This is supposed to be Wile’s web site. Why is Wile guessing at the source of Wile’s “fervor?” For that matter, why is Wile referring tohimself as “Wile” rather than “I?” Whyaren’t Wile’s actions (as found by the SEC staff’s investigation) nasty“societal manipulations?” Why isn’t Wilepart of the “power elite?” Note that theSEC’s characteristic failure to actually litigate its cases or get admissionsof the facts means that Wile gets to pose as the victim of some kind of evilconspiracy. The Department of Justice,equally characteristically, failed to prosecute despite SEC staff investigationfindings that should have led to felony charges. Some gulag!]

It is time for a word about real Austrianeconomists. They hate elite frauds andwant them prosecuted vigorously. Ludwigvon Mises and Friederich Hayek are the two most famous Austrian economists.

Hayek, F.A. The Road to Serfdom

“To create conditionsin which competition will be as effective as possible, to prevent fraud anddeception, to break up monopolies— these tasks provide a wide and unquestionedfield for state activity.”

The Constitution of Liberty

“There remains,however, one other kind of harmful action that is generally thought desirableto prevent and which at first might seem distinct. This is fraud and deception. Yet, though it would be straining the meaningof words to call them ‘coercion,’ on examination it appears that the reasonswhy we want to prevent them are the same as those applying to coercion. Deception, like coercion, is a form ofmanipulating the data on which a person counts, in order to make him do whatdeceiver wants him to do. Where it issuccessful, the deceived becomes in the same manner the unwilling tool, servinganother man’s ends without advancing his own. Though we have no single word to cover both, all we have said ofcoercion applies equally to fraud and deception.

With this correction,it seems that freedom demands no more than that coercion and violence, fraudand deception, be prevented, except for the use of coercion by government forthe sole purpose of enforcing known rules intended to ensure the bestconditions under which the individual may give his activities a coherent, rationalpattern.”

“Liberty not only means that the individual has boththe opportunity and the burden of choice; it also means that he must bear theconsequences of his actions…. Libertyand responsibility are inseparable.”

Mises, L.

“Governmentought to protect the individuals within the country against the violent andfraudulent attacks of gangsters, and it should defend the country againstforeign enemies.”

The faux Austrian website and the faux (or real, whocan tell) Wile piles layer upon layer of satire. The website contains articles that make theterm “bizarre” deeply inadequate. One ofthe site’s favorite motifs is that an international conspiracy of the topbankers that caused the ongoing global crisis is using the Occupy Wall Street(OWS) movement to demand that the fraudulent bop bankers that caused the crisisbe prosecuted. The dastardly OWS personcarrying the water for this conspiracy of international bank elites is DavidDeGraw.

“[T]hereis an Anglo-American power elite trying to establish a world government. Wecannot necessarily explain WHY anyone would want to do such a thing. Butapparently someone does. Actually more than a “someone” – a handfulof impossibly wealth banking families, located mainly in the one-square-mileCity of London.

These families – and one family in particular – apparentlyhave control of a worldwide central banking apparatus. With the ability toprint money-from-nothing around the world, the Rothschilds have amassed afortune that may be in excess of US$300 trillion. (Nobody really knows.)”

This too is a wonderful satiric technique. I particularly like the “Nobody really knows”parenthetical as a modifier for a (gigantic) number that has already been madea non-number by the use of the word “may” (with a lead-in sentence renderedimpotent by the use of “apparently”). Atrue Austrian-school economist, however, would never admit that central bankscould create over $300 trillion in money (over 15 times the GDP of the U.S.)without producing even material inflation over the last 30 years. So, where do the Rothschilds invest ordeposit their over $300 trillion? Giventhe fact that the Austrian school considers even massive income disparities irrelevant,it must be a very good thing for the world (from an Austrian perspective) thatthe Rothschilds have created such a massive increase in societal wealth withoutproducing anything that even approached hyper-inflation.

David DeGraw must be the most skilled operative inthe world if the Rothschilds have chosen him to run their “false flag”operation that recruited the OWS as their secret ally. Indeed, the Rothschilds are so clever thatthey doubtless picked DeGraw as their operative because he has been apersistent critic of central banks (the devils incarnate in this satire), thenpicked me because I am a persistent critic of central banks and want us toprosecute the elite banksters that drove the crisis. Why? Wecan’t explain WHY.

I learned that the Rothschilds hate and wish todestroy the largest banks. The largestbanks, however, are the central banks leading supporters. Why? We can’t explain WHY. All of thiswould be confusing if the blog had any pretense to rationality or reality.

The web site and interviews on the web with whoeverplays Mr. Wile are so loopy, with such vibrant excursions into multipleTwilight Zones that it is hard to pick a favorite satirical delusion. In an hour of bemused perusing I learned thatOsama bin Laden had been dead for years (the raid on his compound in Pakistanwas a fake), it is likely that we used military force in Libya because theywere about to mint a gold coin that would become their national currency, theWorld Trade Center towers were blown up by the U.S., and hyper-inflation isabout to go global any minute.

I grew up largely in Dearborn, Michigan (home ofFord Motor Company). Henry Ford wasinfamous for distributing The Protocolsof the Learned Elders of Zion (the Czarist forgery exposing the Jewishconspiracy to rule the world), so I found that reading the Rothschild rant waslike noshing on comfort food.

Sorry, have to cut this short, but I just received acall from the City of London. Mr.Rothschild may be calling (nobody really knows). And if nobody really knows, it could be true. Why? We don’t know WHY.

Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.

Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.Follow him on Twitter: @WilliamKBlack