Sorry if I seemed to be legally liable in any way

Ivan Oransky of Retraction Watch pointed this out to us. Retraction Watch focuses on scientific journals, with sample subject matter including spectroscopy, peptides, climate change, surgical techniques, quantum physics, and yes, surface temperatures of naked-neck chickens.  An article in the International Journal of Biometeorology on the chickens contained material stolen from a masters’ thesis. “Proof that people will plagiarize anything they think they can get away with,” notes Retraction Watch.

How true that is. Yet the retraction we’re looking at today has nothing to do with plagiarism, nothing to do with exotic chickens. Too bad, because fancy chickens can cheer up so many situations.

The whole sad poultry-free mess is laid out by TheStreet. In September, the Washington Post ran a column by Steven Pearlstein, titled “Northwest Biotherapeutics Stock Woes Highlight the Harm of Short Sales.” (A title that could use a chicken or two.)

That column is about short selling, small biotech companies, and Adam Feuerstein, a reporter for the TheStreet who has also written about Northwest Biotherapeutics (NWBO).

TheStreet said the Pearlstein column insinuates that Feuerstein, “is conspiring with ‘Wall Street wise guys to use sleazy tactics to manipulate share prices for short-term profit.’ Mr. Pearlstein thus plainly and falsely implies that our reporter is guilty of securities fraud. Yet he intentionally fails to mention any of the information we provided him or otherwise available to him before the story was published that would have caused a reasonable reader to doubt his damning article.”

According to TheStreet, Pearlstein called their PR department 5 days before the column ran, and asked some questions. He ended up talking to editor-in-chief Janet Guyon – who later wrote the demand for a retraction.

Guyon goes down a list of things she told Pearlstein, which he didn’t put into his story, and which would have interfered with his “hatchet job” attack on Feuerstein. “…Mr. Pearlstein plainly implies… that Mr. Feuerstein is not just biased, but a criminal.” Guyon used the word “defamatory.” She demanded a retraction.

What’s all this about? This is not an area of SorryWatch’s special expertise. (There are many such areas, but short selling in biotech is something we haven’t gotten to yet.)

Northwest Biotherapeutics, based in Bethesda, is a small company trying to develop vaccines for solid tumor cancers. Brain cancer. Prostate cancer. I know nothing about their research, but I wish them tremendous success.

Short selling is an odd, well-established financial practice. It gets around the difficulty of making a profit on pessimistic predictions. It’s easy to see how to make money if your optimistic predictions that a price will go up are correct: you buy low and sell high. Ding ding ding!

But if you predict that the price of a stock will go down, the last thing you want is to be stuck owning some. What you do, apparently, is “borrow” some of the stock, and make a deal with someone else to sell them at today’s high price. When the price goes down as you pessimistically predicted, then you buy some at the low price and return them to the entity you borrowed them from. So you sold high, and bought low. Ding ding ding!

What a cinch! (Except that you had to put up collateral to do this in the first place, and if you guess wrong, you can lose a lot of money.)

Pearlstein apparently dislikes short selling. “In theory, short-selling enhances the efficiency of markets by bringing in fresh information and capital. In reality, it has contributed to turning financial markets into a giant casino which is easily rigged for the benefit of insiders.”

You can see how that would work: You borrow stock in FancyFowl Industries, and sell it for $20 a share. Then you run around telling everyone that FancyFowl is on the rocks, that consumers are turning away from elaborate poultry, that the FDA is about to crack down on FancyFowl for introducing salmonella into the food chain, etc. If you can get the price to go down to, say, $10 a share, you can buy some stock at the low price and return that the entity you borrowed the original stock from.

Problem: that’s illegal.

S&D, or “short and distort” market manipulation is against SEC rules.

Does Pearlstein accuse Feuerstein of doing that? In the column, Pearlstein said the level of shorting of NWBO stock was “suspicious.” He cites a nonprofit organization called CREW (Citizens for Responsibility and Ethics in Washington), which asked the SEC to investigate whether nefarious forces were working to manipulate NWBO share prices. In CREW’s letter to the SEC, Pearlstein says, they “called particular attention to Adam Feuerstein, a biotech reporter whose relentlessly negative blog posts for thestreet.com this year have not only been filled with exaggeration, mischaracterization and half-truths, but curiously have also coincided with the spikes in short trading.”

Oh, curiously, huh?

I won’t go down Pearlstein’s list of things Feuerstein has written about NWBO that strike him as suspicious/curious. If you’re interested, they’re in his column. I won’t go down Janet Guyon’s list of Pearlstein’s omissions and misstatements about Feuerstein and TheStreet. If you’re interested, they’re in her letter on TheStreet.

But here’s what Pearlstein wrote after Guyon demanded the retraction.

Dear Janet and Adam,

I understand from your letter, which was posted on your website, that you read my Sept. 27 column (“Northwest Biotherapeutics Stock Woes Highlight the Harm of Short Sales”) differently than I had intended. So let me be clear: I did not assert, or mean to imply, that Adam committed securities fraud by engaging in a conspiracy with short sellers to drive down Northwest Bio’s stock price. I did not write, or mean to imply, that Adam had any financial interest in the trading of Northwest Bio’s shares or otherwise derived financial benefit from market participants.

Adam and I obviously disagree about Northwest Bio. Although I believe Adam’s coverage of the company has been unduly negative – just as I am sure he believes my column was unduly positive about the company – I never meant to imply that either he or TheStreet lacks journalistic integrity.

Please feel free to publish this letter in its entirety.

Uh huh. Retraction Watch summed up:

…@adamfeuerstein got a deserved apology, albeit lawyered, from @StevePearlstein…

It’s lawyered all right. It’s a terrible specimen of an apology. Pearlstein does not say he’s sorry. He never says he did anything wrong, or that he will do anything differently in future. Perched on a high horse, he resorts to an unsatisfactory old standby: YOU MISUNDERSTOOD ME.

LEARN TO READ.

Tiny fools, let Pearlstein explain clear ly and slow ly: he did not say that anybody committed securities fraud. He did not imply it. Why, that could be libelous. It did not happen.

Curious.