Source: TSE (Brazil)
Topic: Election Advertising
An interesting case study in the arcane regulation of campaign advertising in Brazil.
The ruling party, the PT, objected to the use of an AdSense campaign speculating about the effects of election results and sponsored by a leading (?) research firm.
I ran across the ads many, many times during the election — above — and did not think much of its “and who will win?” message. “Laugh about it, shout about it, til you have to choose …”
Among the interesting features of an otherwise routine bit of election lawyering, however, is the history of a defendant, Empiricus, a consultancy that earns its living selling market forecasts.
The minister of the federal elections tribunal (TSE) Admar Gonzaga granted an inempiricusjunction ordering the withdrawal of Internet propaganda with content negative to Rousseff and positive for Neves, the two candidates for the presidency.
The decision was the result of suit filed by the Rousseff campaign against the company Empiricus Consultoria e Negócios, Aécio Neves and his political organization, and against Google.
The complaint was that the company was publishing propaganda with the following [AdSense] ads, “How to protect yourself and your assets if Dilma is reelected” and “If Aécio wins? Stocks should rise. Which shares should rise if Neves wins? Find out clicking here.empiricus
Under the Elections Law (Law No. 9,504/97, Article 57-C), the publication of any type of paid advertising on the Internet is forbidden. In addition to retiring the offending contentment, the Dilma group asked that those involved be fined.
Previously, a lower court judge had allowed the advertisement to circulate.
Empiricus, The Joker
Sued by the SEC, American partner inspired the anti-Dilma marketing campaigns of Empiricus.
Jornal GGN – The ad campaign “Protect yourself if Dilma wins” was a master stroke by the American consultancy Empiricus. In fact, the market anticipates investment strategies depending on situation foreseen. And the newspapers have also emphasized … the idea that the reelection of Dilma would represent a risk to economic stability. Though terrorist in nature, the campaign has influenced investors.
The visibility of the campaign, however, brought to the surface certain controversial methods used by the consultancy, resulting in ethics probes and punishment of managers in association with equally controversial U.S. groups — and has attracted the attention of the U.S. SEC.
Empiricus is known for its informal reports, full of jokes and personal matters, more fitting for a Facebook page than for the sobriety expected of financial reports.
empiricusResponsible for the analyses of Empiricus in 2011, Marcos Eduardo Elias, Rodolfo Cirne Amstalden and Roberto Altenhofen Pires Pereira decided to scan the news as part of a campaign against the meatpacker Marfrig Alimentos S/A.empiricus
In their reports, they executed a contract job with an almost personal tone, attacking the image of the company and its controllers, Marcos Molina and Ricardo Florence. They accused Marfrig of accounting fraud and published negative analyses and commentaries, at the same time trading in the company’s shares.
In January 2012, the Superintendency of Apimec, a self-regulatory ordered the installation of an administration proceeding.
The supposed attacks on Marfrig, said Empiricus, caused it to be ridiculed in public during an event with various analysts and KPMG auditors. “As a matter of survival in the market or “to save our reputation,” Empiricus began the campaign to demonstrate supposed inconsistencies in the company’s books.
Trial documents reproduce excerpts that confirm that the content of Empiricus’ negative statements about the company “was worse than a bar fight.” Marcos Eduardo Elias – author of such statements as “fire Ricardo Florence, he’s a stutterer” – wound up punished with a 12 month suspension of his credentials. He left Empiricus in November 2012. The other two were sentenced to pay R$ 2,000 and waive the right to appeal.empiricus
For its part, Marfrig filed a confidential suit (nº 0106655-70.2012.8.26.0100) in the sempiricustate high court of São Paulo, requesting R$ 1 million from analysts in damages.
The Coinstruction of Wealth
The Marfrig incident was not the only controversy involving Empiricus.
In recent times it has radicalized its working methods after entering into an association with the U.S. company Agora, Inc. and its promoter. Both of them — Agora and Ford — have already been targeted by the SEC for misdeeds in the capital markets.empiricus
The modus operandi of Empiricus is to fabricate a market guru, to inundate the market with informal newsletters, based on which it constructs highly unorthodox investment strategies guaranteeing high returns with zero risk.
On its Web site (www.empiricus.com.br), the brokerage house promotes a “Wealth Creation Club — WBC Brasil”. It presents itself saying that “a more rapid way to construct a fortune is in Brazil”. It recommends: “Forget pyramids or gambling. This is a legitimate and consistent method for earning your first million, and more.”
The secret consists of applying formulae inspired by the American Mark Ford, an entrepreneur most recently working in the real estate industry, who press releases say “made friends in Brazil thanks to jiu-jitsu.”
The target of this plan is the small investor, the “thousands who have not yet achieve a life of financial independence.” Mark Ford’s method is propagated by fans of Empiricus as “The 11 Secrets.” The presentation of the system is full of crude commonplaces and presents some basic calculations of compound interest and promises that results will be revealed using the keypad of financial calculators.
Mark Ford, meanwhile, is the subject of articles in gringo newspapers for having taken part, on more than one occasion, in deals that ended up being investigated by U.S. authorities.
In 1991, for example, the U.S. postal inspector seized US$ 6.6 million in accounts belonging to Ford and his partners, Joel Nadel. The agency charged both with participation in a scheme involving post fraud and money laundering.
Ford and Nadel supossedly conducted e-mail lotteries through a media company they own, that brought in US$ 8 million per month. The legal dispute between the postal service inspectors and the accused have delayed payments to victims of the supposed fraud. According to an item in The News in 1993, Nadel and Ford never admitted to the fraud.
According to the Web site Friends in Business, the operation consisted in sending out e-mails to thousands of persons, informing them they had won a “valueable prize” in a supposed lottery. All the winner had to do was pay a small surtax to the lottery company. The “valuable prizes” never arrived, and if they had, they would have been much less valuable than the tax they had paid.
Profiting from the 2014 Cup
Empiricus met Mark Ford through an association with Agora Inc. which invested R$ 2 million in the consultancy for sales promotion.
In Brasil, a group of self-styled fans of Mark Ford explain on the Web portal Cartas da Iguatemi how to make money. One of the followers calls himself “privileged for being the zero member in the WBC Brasil wealth construction club,” and narrates how he profited from the World Cup.
The brilliant idea was to rent a Rio apartment belonging to a friend to foreign visitors. Four Argentinians agreed to pay R$ 760 a day for 25 days. The “number zero” will receive R$ 7,000 of the total of R$ 19,000 brought in by the scheme.
Mark Ford is one of those who made a success of Agora Inc., a publishing house producing newspapers, books and bulletins. It has a subsidiary, Stansberry & Associates Investment Research (S&A). This company, in turn, is another private publishing house with subscribeStansberry & Associatesrs in more than 100 countries. On the Web portal of S&A, Ford is identified as a guest editor.
S&A has as one of its founders Frank Porter Stansberry, a financial markets professional known for writing and publishing news and content associated with “the interest of U.S. conservatives and the political right wing.”In 2010, he created a a 77 minute [film] titled “The End of America”.
In the video, Porter Stansberry says that years ago he warned investors to avoid companies like Lehman Brothers, General Motors, Fannie and Freddie and dozens of other companies that collapsed during the 2008 crisis — an event he also claims to have foreseen.
Stansberry says in the video, that in relation to 2008, the coming crash will be “infinitely more dangerous” because it will directly affect the checking and savings accounts, retirements, and the very way of life of the U.S. investor.
The phenomenon would supposedly affect “the U.S. Treasury,” and Stansberry took it on himshttp://youtu.be/elf to teach Americans to invest their money without fearing the government. He promises to send a report, free of cost, explaining the method step by step.
The Fake US$ 1,000 Reports
Like Mark Ford, Porter Stansberry, an editor at Agora, was involved in legal tangles of his own on more than one occasion.
In 2003, the SEC (Securities and Exchange Commission) discovered a scheme by S&A to sell “false privileged information about USEC Inc., a Maryland company that fuels nucler reactors with enriched uranium.”
Under the pseudonym Jay McDaniel, Stansberry had published a report with investigation guidance for 1,217 pessoas, in 2002. Each report was sold for US$ 1,000. USEC told the SEC it had never passed privileged information to Stansberry.
In 2007, S&A was ordered by the U.S. District Court to pay US$ 1.5 million in restitution and civil penalties for defrauding subscribers to this “report.” Ágora Inc. was also named in the suit, but the court found that only the subsidiary should be penalized. A little over 2,000 persons sued for the reimbursement of their money.
As the judge told Marvin Garbis, “The seriousness of this case is not limited to the amount of money each subscriber paid for the Special Report.” All of them, believing the information to be true, lost 20% to 25% of the money used to buy the shares recommended by S&A. Some lost as much as US$ 28,000, while Stansberry profited by at least US$ 1 million on the deal.
Agora invoked the First Amendment in its defense. The case gave rise to a rich debate over the limits of the freedom of expression. …
The Political Persecution of Empiricus
Rodrigo Constantino of Veja magazine and the Instituto Milennium angrily cries censorship.
When the economy is in bad shape and the government has nothing to show for it during an election year, what to do? Initiate a witch hunt, of course! The case of Banco Santander, as I commented before, is the most serious example.
The principal asset of a bank is its credibility. I ask you: how do you trust a bank that in cowardly fashion fails to resist government pressure and fires the analyst who was simply repeating common knowledge, namely that the markets suffer when Dilma’s poll numbers are up.
Next it was the turn of the government to persecute a small market research company, Empiricus Research, whose reports, full of pessimism for the future, circulate through the social networks. The company issued the following statement todenounces day:
We learned on Friday that President Dilma filed a complaint with the election authority against the campaign of Aécio Neves, Empiricus and Google, complaining of our Internet campaigns. The argument is that we are supposedly crehttp://youtu.be/ating improper campaign advertising.
Given the argument to disqualify Empiricus from engaging in election ads, … In suing Neves, Empiricus and Google, it is to be supposed that the President’s campaign believes that these parties are related.
With that, I invite the Dilma camp — or anyone else — to provide the existence of a relationship between Empiricus and Aécio Neves.
Estimativa de crescimento do PIB para 2014. Fonte: Focus/BC/BloombergWhat the PT wants is to avoid at all costs the circulation of something that market participants already know, from the lowliest intern to the richest of investors: that shares of state-owned companies rebound as soon as rumors that a fresh electoral survey shows Dilma losing points. The PT would like to hide this fact at any cost from unsophisticated voters.
And that is an undeniable fact. But the PT has an authoritarian bent, and wantshttpEstimativa de crescimento do PIB para 2014. Fonte: Focus/BC/Bloomberg://youtu.be/ persons natural and legal to issue their opinions or arrive at certain facts. Instead of Dilma explaining, or even understanding, the reason for this, she prefers to break the thermometer or prevent the public from knoEstimativa de crescimento do PIB para 2014. Fonte: Focus/BC/Bloombergwing there is fever. Leading market analysts consulted by the Central Bank comment comment on estimated GDP growth this year:
[Estimated GDP growth for 2014. Source: Focus/BC/Bloomberg
Note: estimated growth is in free fall. With every survey of analysts, estimated growth declines, and now stands at a miserable 0.9%. Why Estimativa de crescimento do PIB para 2014. Fonte: Focus/BC/Bloombergdo the stock markets trend upward whenever the numbers for Dilma reflect a downturn. This is the real question. And the answer is obvious: Because Brazilian and international investors know that four more years of Dilma in power represents a potential catastrophe for Brazil and the value of our assets. Simple as that!
The witch hunt has only just begun. The PT plays hardball and will do anything it can to remain in power and pass it along to the next generation. … We hope that Brazil will respond in kind, proving that there still exists independent analysis and freedom of expression. They shall not pass!
This rather florid defense does not address insider trading convictions and pump and dump practices, however — ennobled by the celebration of the “independent analyst” as a post-capitalist hero, as in this case from Banco Santander, on the “firing of an analyst who made Dilma angry.”
I would not be surprised if the CVM — the Brazilian SEC — does not take a more aggressive stance toward research analysts, in memoriam Henry Blodget.
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