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Best Satire of Faux Austrian Economics Ever

November 22nd, 2011
in Op Ed

by William K. Black

(This article originally appeared at New Economic Perspectives)

Someone has created a fabulous, richly detailed parody of Austrian economics. They call it The Daily Bell and claim that its perspective reflects Austrian economics. In reality, it satirizes faux Austrian economics’ sycophancy toward elite white-collar criminals.

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

Follow up:

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

The article hits its peak in capturing the servile apologies that Austrian economists offer in defense of the elite white-collar criminals 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’s secret police) when they enforce the rule of law and property rights against elite white-collar criminals. The satirist then mocks the Austrians by picturing them as eager to prevent the imprisonment of elite white-collar felons. Faux Austrian economists’ heroes have always been elite felons. The author of the satire ridicules the Justice 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 this crisis by employing over-the-top mockery. The author states that DOJ is so effective in prosecuting the elite white-collar criminals that drove this crisis and sanctions them so viciously that they have created an “ever-expanding gulag of slave-laborers.” One man’s “Club Fed” is a faux Austrian’s “gulag.” The reality, of course, is that no Wall Street banker inhabits this non-existent white-collar gulag. That gap between reality and the hysterical claims of tortured bankers is what makes the passage hilarious.

The author of the satire of Austrian economics uses the nom de plumeof Anthony Wile, which is a fabulous insider joke. The real Anthony Wile was the infamous subject of an SEC action for securities fraud. What a brilliant conceit – assuming the name of a man identified by the SEC as one of the perpetrators of a crude white-collar fraud to advance the proposition that only fascists would prosecute elite white-collar frauds. Here are the lowlights of what the SEC investigation of the real Anthony Wile 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 inpidual 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).” p>

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

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

“He has put this knowledge to good use, working with top mining executives and venture entrepreneurs to generate some of the most successful business efforts of the 2000s.”

There is a similar gem prominently featured on the web site: the admonition that the key to a successful society is “personal accountability.” What a perfect accompaniment to an article demanding that the elites who grew wealthy through fraud not be prosecuted. The satirist has a great gift for irony.

Prior variants of Wile’s website contained this defense of Wile.

http://thedailybell.com/2012/Anthony-Wile (accessed 11/13/2011)

“In 2000, Wile experienced a brief role as the CEO of a start-up junior mining company that became the subject of a civil attack by the SEC. Wile and others fought for more than seven years at great personal and financial expense before eventually settling the case without admitting any wrongdoing. The assets of the company in question were subsequently purchased by a New York Stock Exchange listed company and the properties have now produced more gold than was initially suggested. Hundreds of investors lost literally tens of millions in deserved future profits because the SEC accused the company of over-promising a merger that was actually taking place. Perhaps this experience adds to Wile's fervor to expose the power elite and 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 to himself as “Wile” rather than “I?” Why aren’t Wile’s actions (as found by the SEC staff’s investigation) nasty “societal manipulations?” Why isn’t Wile part of the “power elite?” Note that the SEC’s characteristic failure to actually litigate its cases or get admissions of the facts means that Wile gets to pose as the victim of some kind of evil conspiracy. The Department of Justice, equally characteristically, failed to prosecute despite SEC staff investigation findings that should have led to felony charges. Some gulag!]

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

Hayek, F.A. The Road to Serfdom

“To create conditions in which competition will be as effective as possible, to prevent fraud and deception, to break up monopolies— these tasks provide a wide and unquestioned field for state activity.”

The Constitution of Liberty

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

With this correction, it seems that freedom demands no more than that coercion and violence, fraud and deception, be prevented, except for the use of coercion by government for the sole purpose of enforcing known rules intended to ensure the best conditions under which the inpidual may give his activities a coherent, rational pattern.”

"Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions.... Liberty and responsibility are inseparable."

Mises, L.

“Government ought to protect the individuals within the country against the violent and fraudulent attacks of gangsters, and it should defend the country against foreign enemies.”

The faux Austrian website and the faux (or real, who can tell) Wile piles layer upon layer of satire. The website contains articles that make the term “bizarre” deeply inadequate. One of the site’s favorite motifs is that an international conspiracy of the top bankers that caused the ongoing global crisis is using the Occupy Wall Street (OWS) movement to demand that the fraudulent bop bankers that caused the crisis be prosecuted. The dastardly OWS person carrying the water for this conspiracy of international bank elites is David DeGraw.

“[T]here is an Anglo-American power elite trying to establish a world government. We cannot necessarily explain WHY anyone would want to do such a thing. But apparently someone does. Actually more than a "someone" – a handful of impossibly wealthy banking families, located mainly in the one-square-mile City of London.

These families – and one family in particular – apparently have control of a worldwide central banking apparatus. With the ability to print money-from-nothing around the world, the Rothschilds have amassed a fortune 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 made a non-number by the use of the word “may” (with a lead-in sentence rendered impotent by the use of “apparently”). A true Austrian-school economist, however, would never admit that central banks could 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 or deposit their over $300 trillion? Given the 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) that the Rothschilds have created such a massive increase in societal wealth without producing anything that even approached hyper-inflation.

David DeGraw must be the most skilled operative in the 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 that they doubtless picked DeGraw as their operative because he has been a persistent critic of central banks (the devils incarnate in this satire), then picked me because I am a persistent critic of central banks and want us to prosecute the elite bankers that drove the crisis. Why? We can’t explain WHY.

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

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

I grew up largely in Dearborn, Michigan (home of Ford Motor Company). Henry Ford was infamous for distributing The Protocols of the Learned Elders of Zion(the Czarist forgery exposing the Jewish conspiracy to rule the world), so I found that reading the Rothschild rant was like noshing on comfort food.

Sorry, have to cut this short, but I just received a call 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.

More by the author:

Analysis blog articles by William K. Black

Opinion blog articles by William K. Black

Related Articles

William Black: Building the Bigger Regulatory State by The Daily Bell

The Virgin Crisis: Systematically Ignoring Fraud as a Systemic Risk by William K. Black


About the Author

William K. Black is Associate Professor of Economics at University of Missouri, Kansas City. From 1990-1994 Prof. Black was Senior Deputy Chief Counsel, Office of Thrift Supervision, which was formed in 1989 to supervise the thrift industry following the Saving & Loan crisis. He is the author of the widely acclaimed book “The Best Way to Rob a Bank is to Own One.” Full bio here









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