Media TKO's Kos to Protect Dean and Warner

Over the course of the past few weeks – and much to the delight of many conservative new media journalists – no less than seven major news outlets have published rather derogatory articles about Markos Moulitsas Zuniga, the highly-successful proprietor of the überleft-leaning blog Daily Kos.

Conspicuously at the same time, most media avoided or downplayed the recently revealed stock fraud allegations surrounding Zuniga’s colleague and co-author Jerome Armstrong – the man that helped Howard Dean’s presidential campaign back in 2004, and is now working for 2008 Democrat presidential candidate Mark Warner.

As this negative media focus came soon after Zuniga’s much-heralded liberal bloggers’ convention, The Yearly Kos, in Las Vegas – where the usual media suspects were writing great praise for the event as well as for Kos himself – some awkward and so far unspoken questions arise:

• What did these press representatives and political officials in attendance either see or conclude from the proceedings that so quickly made Markos persona non grata?

• And, maybe more importantly, why did this wave of bad publicity only go so far?

Despite all the punches thrown at Zuniga the past two weeks, it is apparent that the press have held back a deadly uppercut, and, instead, settled for a technical knockout…at least for now.

Is this all about shielding Dean and Warner from embarrassing revelations about their connection to Armstrong? After all, the public loves to hear about the scandals of pols, but mysteriously, in this instance, virtually nobody in the media followed up.

When sharks smell blood in the water and swim away, you can rest assured something is up. Or, is it possible that there is another factor motivating the press to be happy with the referee calling the fight in their favor at this time rather than moving in for the kill?

To be sure, the media have demonstrated a merciless penchant for assisting the Democrats in getting candidates elected by aggressively swaying public opinion against left-wing candidates that are determined to be unelectable. Two recent examples come to mind when one revisits such campaigns against Howard Dean in January 2004 and Hillary Clinton just last month.

In the case of Kos, it seems that a similar coordinated attack was directed at him in the past two weeks, but obviously for different reasons. However, the timing is unmistakable, as the earth began to move under his feet just as the convention in Vegas was winding down.

On June 12, Salon’s Michael Scherer wrote an article entitled, “How Much is That Blogger in the Window?” with a subheading, “In Las Vegas, Democrats court the netroots as if it were the AFL-CIO.” Scherer’s not so subtle implication was that the affair in the desert was a live auction for Democrats to buy the services of the blogosphere’s preeminent leftist, with top bid going to the seemingly moderate Mark Warner of Virginia.

This peculiar contradiction was by no means lost upon others in the political arena:

“The controversy over Warner’s generosity has continued online, where bloggers debated both the merits of the candidate and the questions raised by Warner’s relationship with some prominent bloggers. For more than a year, Warner has employed Jerome Armstrong, a close friend, co-author and mentor of Marcos Moulitsas Zúniga, the proprietor of Daily Kos.”

Four days later, a much more serious blow came from the New York Times “Opinionator” column available exclusively to TimesSelect subscribers, which inadvertently precipitated a battle between The New Republic and the Daily Kos. According to Jason Zengerle’s June 16 report at TNR’s “The Plank,” “Opinionator” writer Chris Suellentrop addressed Armstrong’s allegedly shady past:

“Which, interestingly, is precisely what the Securities and Exchange Commission, in court documents filed last August, alleges that Jerome Armstrong did in 2000. (The original S.E.C. complaint is here.) In a subsequent filing, the S.E.C. alleges that ‘there is sufficient evidence to infer that the defendants secretly agreed to pay Armstrong for his touting efforts’ on the financial Web site Raging Bull.

”Without admitting or denying anything, Armstrong has agreed to a permanent injunction that forbids him from touting stocks in the future. The S.E.C. remains in litigation with him over the subject of potential monetary penalties.”

For those unfamiliar, Raging Bull is a day traders’ website that was extremely popular during the bubble phase of the stock market’s run in the late ’90s. The behavior Suellentrop was referring to was called a “pump and dump” scheme that was unfortunately quite common during this period. According to the SEC complaint:

“On March 6, 2000 and after, Jerome Armstrong (“Armstrong”) promoted BluePoint on the Raging Bull internet site, which carried hundreds of posts about BluePoint. Armstrong received undisclosed compensation from Markow and Goelo in return for his posts.

“Armstrong, directly and indirectly, has engaged and, unless enjoined, will continue to engage in acts, practices and courses of business which constitute violations of the touting provisions of the federal securities laws, specifically, Section 17(b) of the Securities Act [15 U.S.C. §77q(b)].”

Obviously, BluePoint was the name of the company Armstrong was alleged to have been “pumping.” In such a scheme – and according to the SEC in this case – an individual or a group of investors acquire a decent amount of a certain stock, and then go on message boards like those available at Raging Bull to post extremely positive – and not necessarily truthful – pieces of information about the company so that others will buy it. Such purchases aid in driving the price of the stock up, allowing this individual or group to sell at a huge profit – aka “dump”:

“Armstrong posted over eighty times on the BluePoint message board located on the Raging Bull website in the first three weeks. He praised BluePoint’s investment value and encouraged traders who were having trouble getting their orders filled to keep trying. Armstrong never stated in his posts on the Internet that he was being compensated for making the postings. However, Goelo and Markow compensated Armstrong by transferring stock in three separate companies to Armstrong at below market prices during the relevant time period.”

Having traded as high as $21 on March 6, 2000 – with the alleged conspirators having purchased their shares for just pennies – BluePoint stock quickly plummeted once this group was done with its illegal activities, and is now trading for seventeen cents.

Without question, thousands of investors around the country were bilked out of billions of dollars from such schemes. In addition, this practice undoubtedly added to the hype in the NASDAQ driving it to absurd prices before it began crashing in the middle of March 2000 starting one of the biggest and certainly most costly bear markets in U.S. history.

As such, what Armstrong is alleged to have participated in was quite disgraceful to say the least. Yet, with really only one exception, the few media outlets that have raised this subject have been uncharacteristically blasé about this revelation.

Bucking this trend was The New York Post, which on June 18 published an extremely detailed accounting of Armstrong’s alleged behavior in an article entitled “Shill to Hack” which began:

“Jerome Armstrong, the political strategist who followed a famous Internet fundraising effort for Howard Dean in 2004 with a book on ‘people-powered politics,’ has a sordid past as a shill for a worthless dot-com stock.”

From there, author Roddy Boyd described – using the text of the SEC complaint – how the scheme worked, what Armstrong’s role is alleged to have been, and concluded with a quote from a former Raging Bull member that claimed to have dealings with Armstrong:

“Floyd Schneider, a New Jersey mortgage broker and investigator of penny-stock scams, said he was a repeated target of Armstrong’s attacks because he criticized the finances and business models of firms Armstrong supported.

“‘[Armstrong] was among the nastiest and ugliest stock touts from that era,’ said Schneider. ‘The stocks he touted were dogs and rigged, so it makes sense that he had a deal with promoters.’”

By contrast, the other mainstream media reports about this issue were much less specific concerning Armstrong’s alleged behavior. For instance, The New York Times’ David Brooks on June 25 wrote a rather derogatory piece about Zuniga entitled “Respect Must Be Paid.” In it, Brooks briefly referred to Armstrong’s alleged stock activities:

“Chris Suellentrop, who writes the Opinionator column on TimesSelect, posted an item on June 16 noting the strange correlation between Armstrong contracts and Kos endorsements. He further reported that the S.E.C. has filed court documents alleging that in 2000 Armstrong touted a dubious software stock on a Web site in exchange for secret payments. Armstrong was accused of building Internet buzz to make money for himself.”

So, in the course of nine days, although it appears that the Times’ own blogger was the first to report these revelations – albeit exclusively online to subscribers of its TimesSelect service – all the space the print edition gave to this subject was two lines in an op-ed column buried on page twelve. Conspicuously, the Times chose not to follow-up with a more detailed report on the subject that would have made a significantly greater percentage of its readers and the country aware of this story.

The same day that Brooks’ piece was published, Newsweek ran a rather long and mostly unfavorable article about Zuniga at MSNBC’s website scheduled for its July 3 – 10 print issue. Though the 1,668-word piece did address the squabble between Kos and The New Republic, Armstrong’s problems with the SEC were completely ignored.

A few days earlier, Slate’s Torie Bosch addressed the Kos-TNR battle during her blog roundup on June 22. Much like Newsweek, there was no mention of Armstrong and the SEC.

The following day, Howard Kurtz of The Washington Post included this blog war in his June 23 article Unlike Newsweek and Slate, Kurtz did bring up Armstrong’s stock debacle, but rather tangentially to say the least:

“Kos says he disclosed that he worked for Howard Dean for a time, and Armstrong has reached a settlement with the SEC on a related question.”

A related question? Quite an exposé there, Howard. Nice job.

Of course, even these twelve virtually meaningless words on the subject were downplayed by Kurtz who then printed Zuniga’s comments regarding the matter from an e-mail message allegedly sent to Kos’s most loyal followers as reported at “The Plank”:

“The YearlyKos media people have already forced corrections at Slate and NY Times (Suellentrop’s blog). There has been some serious overreach by the few outlets that picked up this story (which as I mentioned before has been shopped around). It was interesting how this one piddly-ass story was used to try and smear Jerome, me, AND YearlyKos. So the only paper to run this as a news story is the disgraceful NY Post. Others who picked up on it have had to backtrack from their original sensationalistic claims.”

The alleged e-mail message continued with a somewhat non-specific defense of Armstrong:

“And Jerome’s case, if it could be aired out, is a non-story (he was a poor grad student at the time so he settled because he had no money). Jerome can’t talk about it now since the case is not fully closed. But once it is, he’ll go on the offensive. That should be a couple of months off.”

And concluded by imploring readers to not post about this information:

“So far, this story isn’t making the jump to the traditional media, and we shouldn’t do anything to help make that happen. My request to you guys is that you ignore this for now . . . If any of us blog on this right now, we fuel the story. Let’s starve it of oxygen. And without the ‘he said, she said’ element to the story, you know political journalists are paralyzed into inaction. Thanks, markos.”

Kurtz concluded by suggesting a reason why there hasn’t been a lot of liberal media coverage of this incident:

“Or maybe they just don’t think there’s much worth writing about.”

Possibly, Howard, but that does seem rather facile. After all, according to a June 29 article  published in The New York Post, Armstrong was hired to assist Dean’s presidential campaign in June 2003. Yet, the SEC complaint against Armstrong et al was filed in April of the same year.

It certainly doesn’t make Dean look like a very competent politician to be paying someone who had just been implicated by the SEC in a serious stock fraud to be involved so prominently in his campaign, especially in a position of raising money over the Internet. Now that Dean is the chairman of the Democratic National Committee, is this something that the mainstream media want to make public in a loud fashion just months before the midterm elections?

Hardly. It would certainly make it even more difficult to pound the table over a Republican “culture of corruption” if it became common knowledge that the chairman of the DNC was closely involved with a person charged with stock fraud.

In addition, what about Mark Warner utilizing Armstrong’s services, now that these revelations about his troubles with the SEC have come to the surface? Is this something that the mainstream media want to broadcast about one of the Democrats’ strong contenders for the 2008 presidential nomination?

Quite the contrary. Yet, this puts Warner in a bit of a bind. According to the New York Post:

“Some Dems suspect Warner fears ditching Armstrong would spark rage from his ex-business partner, Markos Moulitsas-Zuniga of the Daily Kos Web site, who’s had nice things to say about Warner so far.”

It appears that Warner wants the positive attention given to him by Kos, but needs desperately for Armstrong’s legal troubles to not reflect negatively upon him. As a result, it is not at all surprising the few mainstream media outlets that have addressed this issue have done so rather gingerly, with most totally ignoring it.

It’s not just the print media boycotting the issue. CNN, which has done seven stories dealing with Kos since June 7, hasn’t mentioned the Armstrong allegations at all. In fact, the Washington Post’s Howard Kurtz interviewed Zuniga on the June 18 installment of Reliable Sources, and even though it was two days after the SEC complaint was reported at both the Times and TNR blogs, Kurtz chose not to bring it up.

Maybe even more disgraceful, on June 27, fully nine days after Armstrong’s legal troubles were revealed, and the battle on the blogosphere was in full dudgeon, CNN’s Internet reporter Abbi Tatton discussed Armstrong’s connections with Warner on the 4PM installment of The Situation Room without addressing the SEC issue at all. CNN has done two other reports about Warner’s presidential ambitions since the Armstrong revelations first appeared, and both also completely ignored the alleged securities fraud.

Would that have been the case if such allegations surfaced regarding someone involved with any of the current presumptive Republican 2008 presidential candidates such as John McCain, Rudy Giuliani, or George Allen? Almost certainly not.

However, the Brooks column in the Times running on the same day as the Newsweek article is likely no coincidence. And, the timing of all this negative attention towards Kos indicates that the media are indeed afraid this issue could blow up at any minute, and are therefore trying to distance themselves from him and his associates while doing their best to protect Dean and Warner.

Of course, it is possible that Zuniga could be right, and this issue is indeed a non-starter. If so, the media’s current tactic might be designed to spank Markos a little to let him know that they’re the boss. After all, he is conceivably making more money right now than he ever has, and is likely scared that all this recent negative attention might force him to give back that big screen TV set that Newsweek reported was being installed while they were interviewing him at his home in Berkeley, California.

As a result, by just going for the TKO today rather than the knockout, the media could easily revive a more compliant Kos down the road if his usefulness becomes apparent, and their involvement with him less muddied by the possibility of SEC-related improprieties that reduce the credibility of all involved.

Noel Sheppard
Noel Sheppard
Noel Sheppard, Associate Editor of NewsBusters, passed away in March of 2014.