Biovail (NYSE: BVF), a poster child for accounting fraud and the "blame it on short sellers!" diversion strategy, has hired yet another chief financial officer, announcing that Peggy Mulligan will take over for interim finance chief Adrian A. De Saldanha, who had held the position since March.

In March, Biovail paid $10 million to the SEC to settle charges related to improper accounting and false and misleading statements. Former CFOs Brian Crombie and Kenneth G. Howling were implicated in that mess. So Ms. Mulligan has a tough act to follow: she'll have to produce results legally!

Shares of Biovail are trading near their lowest price of this millennium, understandable given that phony accounting and vast conspiracy theories are no longer there to prop up the stock price.

Biovail plans to spend more than $600 million on research and development over the next five years, in an effort to create real shareholder value.

SEC Chairman Chris Cox, who has been off battling the imaginary dragon of naked short selling as actual securities fraud continues to be as easy as ever to get away with, has a message for you about the recently-expired naked-short selling rule.

He said that failures to deliver in the 19 financial stocks affected "were reduced substantially" and added that "It was a very effective order from that standpoint." Fair enough. But then he dropped this bomb shell: "We expected and intended to have no impact whatsoever on the direction of prices. That's not the purpose of regulations."

Uh-oh. That takes quite a bit of the wind out of the sails of the naked shore-selling conspiracy theorists -- if naked short selling was an evil scheme driving down share prices, then wouldn't regulation designed to curb it be expected to impact the direction of share prices? That statement from Mr. Cox would seem to be an admission that failures to deliver are a procedural issue, not some conspiracy to drive down stocks involving crooked journalists and a "sith lord" as Overstock (NASDAQ: OSTK) CEO Patrick Byrne infamously suggested.

For a summary of the commentary on this mess, check out this post from Gary Weiss.

One of the most common rebuttals to the naked short selling conspiracy theories is this: Name one company that has been hurt by naked short selling.

In a July 22nd interview with Fox Business, Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne gave an example: Force Protection (NASDAQ: FRPT). "Makes vehicles for soldiers in Iraq. . . stock was at $25, got naked shorted down to $4, canceled the secondary. . . Some soldiers are going to die in Iraq this week because some hedge fund guys need a new Ferrari."

Oops. On August 14th, Force Protection dropped some bad news on its shareholders. In addition to having missed the deadline for filing its 10-K, the NASDAQ is now threatening to de-list Force Protection's stock for failing to file its 10-Q for the quarter ended June 30, 2008. This comes after the company changed auditors and, back in March, disclosed "certain material weaknesses in internal control over financial reporting."

And that is, according to a message Patrick Byrne left on a message board (View the post for a video of the interview) the "easiest way to explain this problem to Congressmen, Senators, and most Americans."

Note to Byrne: I, and I suspect many others, will be more convinced when a company without serious accounting/internal controls problems and/or a failed business model complains about naked short selling. So far we haven't heard anything like that.

When SEC chairman Chris Cox announced an "emergency" rule to make short-selling in certain financial stocks more difficult, the reactions basically fell into two categories: 1.) How stupid: that will create an artificial price increase not justified by fundamentals. 2.) How stupid: if that's a legitimate rule, why not apply it to all companies?

Continuing on the theme of hypocrisy and scapegoating, The Wall Street Journal reports (subscription required) that Cox is set to extend the emergency rule to include "insurance, housing-industry and a broader range of financial stocks."

In other words, let's protect all the stocks that deserve to go down from going down.

I've spent the past few hours trying to figure out who exactly these "emergency" rules are protecting. Why do we need to make a special effort to curb short-selling in companies that are fine, as their defenders insist? Are they protecting the longs? But if these companies are in such great shape and the shares are heinously undervalued because of short-selling, wouldn't that present a great opportunity for investors to go long and profit from the long-term tendency of stocks to move to reflect their intrinsic value? Heck, where are the buyout firms that could be scooping up these undervalued victims of market manipulators?

What's so pathetic about these SEC rules is that they're a giant waste of time, essentially trying to micromanage day to day price swings in companies with futures that are very much up in the air -- time that should be used to improve the poor, and possibly misleading disclosures at many of these firms that led to so much pain for investors.

Life as a short seller isn't much fun these days, except for the whole getting rich part.

Rather than slapping them on the back for their prediction of trouble at many of the leading financial firms, regulators and pundits are lashing out at short-sellers, implying that their place on the moral spectrum lies somewhere between child molester and Al Qaeda operative.

And, sadly, the "naked short selling" conspiracy theories that have generally been spread only by the tinfoil hat crowd that Gary Weiss dubbed the baloney brigade are going mainstream.

Forbes writer Liz Moyer writes that "Many hedge fund managers deny naked shorting occurs, but a growing number of company executives, from bigger and bigger companies no less, have complained that short-sellers have used manipulation to drive their shares down."

Well that is kind of interesting. Why are bigger and bigger companies tossing the same allegations that used to be tossed by small, crappy, cash-bleeding corporate crybabies? Because bigger and bigger companies are operating more and more like small, crappy, cash-bleeding corporate crybabies every day! And when the cash is flowing out instead of in, scapegoats must be found.

Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne -- sometimes referred to as the clown prince of online retailing -- has never managed to report a profitable year for his company, in spite of years of optimistic projections.

You might think that a CEO would take responsibility for his company's failures after years of over-promising and under-delivering. Heck, he might even lose his job!

But not Byrne, who is also chairman of the board and owns 28.7% of the company. I would speculate that if he did not have such a large stake, he'd have been pushed out years ago. Instead, he uses his place at the helm of a money-losing company to propagate his theory that there is a vast plot against his company, involving naked short selling (brokerages executing sell orders on behalf of short sellers even though they haven't located any actual shares for sale, potentially (theoretically at least) driving the stock down when shareholders aren't selling -- here's more from the SEC on this stuff), crooked journalists, stock bashers, and a sith lord, although he recently conceded the sith lord doesn't exist.

With the former CEO of naked short selling conspiracy theory poster child Richard Altomare locked up, the group Gary Weiss calls the baloney brigade is badly in need of a new commander in crap.

Well it looks like they can forget about Biovail Corporation (NASDAQ: BVF). Fortune's Roddy Boyd reports that, a couple months after the company settled an SEC complaint for $10 million, "The big Canadian drug company agreed Friday to plead guilty to U.S. kickback and conspiracy charges ... Biovail and a New Jersey-based subsidiary will pay a $24.6 million fine to avoid a court case that could have cost them future business with federal agencies."

Gradient Analytics -- which had published negative research about Biovail and head cry baby Overstock.com, Inc. (NASDAQ: OSTK) and was subsequently sued by both companies -- appears to have been right on the money in its criticisms of Biovail.

Moral of story: when a company starts suing people and lashing out at its critics, sell the stock. That philosophy would have saved people a ton of money on Biovail.

Naked short selling whiner Biovail (NYSE: BVF) has settled accounting fraud charged with the SEC, agreeing to pay a fine of $10 million. According to the SEC's complaint:

The SEC's complaint alleges that present and former senior Biovail executives, obsessed with meeting quarterly and annual earnings guidance, repeatedly overstated earnings and hid losses in order to deceive investors and create the appearance of achieving earnings goals. When it ultimately became impossible to continue concealing the company's inability to meet its own earnings guidance, Biovail actively misled investors and analysts about the reasons for the company's poor performance.

The SEC adds that former chairman and chief executive officer Eugene Melnyk, former chief financial officer Brian Crombie, current controller John Miszuk; and current chief financial officer Kenneth G. Howling still face charges.

Biovail's allegations of a naked short selling conspiracy and menacing antics intimidated analysts, convincing Banc of America Securities, which had been negative about the company, to drop coverage of the stock. On his blog, financial journalist Gary Weiss writes that "Despite all the post-Enron rhetoric about the sanctity of independent analysts, the SEC has done woefully little against companies like Biovail and Overstock that want analysts to be obedient little puppies."

It seems like every few weeks, another naked short selling poster child is exposed as a securities fraud. Back in 2006, then-CEO Eugene Melnyk told 60 Minutes that "When you've got these companies, these people out there trying to bring you down, we're lucky we survived."

Moral of story: when a company starts complaining about naked short sellers conspiring to drive down the share price, sell the stock and ask questions after.

In another piece that has me questioning the quality control over at SeekingAlpha, a post titled BIDZ Shareholders Fight Against Alleged Illegal Shorting has appeared on the site.

The post quotes a letter posted on Yahoo! message board by someone claiming to be a former executive at the company, Matthew Mills: "As most you know, I am the former Chief Operation Officer of Bidz. I have maintained a very close relationship with a great number of the original shareholders of Bidz and still hold a sizeable stock position in the company."

In the post, this Mr. Mills fellow discussed plans he was making with "investors are very well known in the investment community, connected to big name law firms coast to coast and have political ties in Washington DC" to sue "naked short sellers" who were driving down the company's share price.

With shares of Movie Gallery (OTC: MOVIQ) having closed 2007 at just over 2 cents per share in the wake of the company's bankruptcy, I thought it would be fun to take a look at what the company was saying back in 2006, when its shares were trading more than 100 times higher.

You might think the company's CFO, Thomas Johnson, would have been busy looking for ways to stop the cash bleeding and return Movie Gallery's operations to something other than miserable failure.

But you'd be wrong. No, Johnson was actually conducting an interview with Bloomberg, saying that he had asked the SEC to investigate allegations of naked short selling in the company's stock:

"I'm throwing out the towel, saying 'Help me.' There are rules designed to deal with this, and people are still managing to do these naked short sales. It's extremely frustrating. It's like being on the front line and people are shooting you from every direction.''

"On the frontline... people shooting at you from every direction." I wonder if that's how Movie Gallery shareholders felt when the company recently filed a reorganization plan that canceled the stock of the company's common shareholders.

The moral of the story is this: When the bad management of a lousy company starts complaining about naked short selling ... go find a company where the management spends its time running the business.

As Gary Weiss discussed on his blog, Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne issued a press release last night to complain that his company was back on the REG SHO list, a list of stocks experiencing failures to deliver often indicative of naked short selling. Overstock had disappeared from the list for 6 days after 669 consecutive days on the list.

Byrne added that "Here we are on the eve of the third anniversary of Regulation SHO (January 3) and hundreds of companies continue to be manipulated -- right under the SEC's watchful eye."

Here's where it gets interesting. According to a countersuit against Overstock filed by Copper River:

When asked about the December 2003 short squeeze, Byrne replied, "when opportunities come along where we can knee the shorts in the groin, that's always good for fun and amusement."

What did Byrne mean by that? If Patrick Byrne engaged in perpetrating an artificial short squeeze to "knee the shorts in the groin", that would be manipulation!

Rocky Mountain News finance editor David Milstead recently blogged about Maximum Dynamics, a Colorado Springs company that has come under the scrutiny of regulators. The SEC has filed a lawsuit against two former officers charging that they operated a scheme.

But not so long ago, Maximum Dynamics had some penny-stock players convinced that the company was a victim of naked short sellers and other miscreants intent on bringing the company down. In an 8-K released in July of 2005, the company wrote that:

Until the anonymous internet attackers are brought to justice, management is providing a warning to investors to rely on the company itself as the sole source of information regarding the company. (emphasis added)

The idea of relying on a company as the sole source of information is probably the worst investment methodology I have ever heard -- it's actually slightly worse than examining goat feces to try to predict the future.

As ex-con turned white-collar crime fighter Sam Antar writes, " Do not trust, just verify. Verify, verify, and verify." Relying on the company as the sole source of information was exactly what cost investors billions in losses at companies like Enron and Worldcom. Since the analysts were just parroting the companies' claims, listening to them would have done no good either. Only strong independent research by journalists like Bethany McLean and short sellers like Jim Chanos was able to penetrate the elaborate fiction concocted by scheming executives.

Moral of the story: When a company says "Believe us, not your lying eyes," don't buy the stock. If you own it, sell it. If you don't own it, it may be worth shorting.

Universal Express certainly wasn't the biggest promotional pump and dump of all time, but it's definitely one of the most brazen. Much of former CEO Richard Altomare's looting of shareholders through the sale of unregistered securities took place after the SEC had told him to stop and ordered him to resign as CEO. Then there was the company's crusade against the evil naked short sellers, its acquisition of the Jackson family memorabilia collection, and the seemingly endless press releases.

A federal judge called Altomare a "repeated and remorseless" violator of the securities laws.

The New York Times' Floyd Norris has been covering this travesty, as has Gary Weiss.

Norris offers some interesting tidbits from the latest receiver's report:

From April 2006 to May 2007 - the latter date after the judge had ordered him to stop running the company - Mr. Altomare had the company spend $558,900 at a retail jewelry store in Boca Raton, Fla. In October, he pawned the jewelry for $500,000 ...

In July - after my column, and after the Securities and Exchange Commission asked a judge to hold him in contempt for failing to obey the earlier order - Universal Express paid $30,000 "to cover Altomare's marker at the Wynn Las Vegas," a casino.

Oh, and Mr. Altomare may have absconded with unreleased Jackson family master tapes.

But amazingly, the naked short selling conspiracy theory Kool-Aid drinkers will not be dissuaded from their belief that Universal Express was the victim of a concerted campaign involving the SEC to destroy the company for blowing the whistle on naked short selling. Check out this comical post from InvestorsHub.

If you follow the message boards for POS stocks like SLJB and USXP, you're familiar with a big "event" that was supposed to happen yesterday, but didn't. You see, yesterday was supposed to be the mother of all short squeezes as those evil market makers were forced to buy back billions of dollars worth of counterfeit shares. As Gary Weiss blogged yesterday, October 15th was the day that "grandfathered fails to deliver" were supposed to be closed out under REG SHO.

Anti-naked short selling zealots claim that billions of shares of stock are being sold short illegally, without being borrowed first. They liken this to "counterfeiting shares" and claim that these shares are severely depressing the prices of small-cap stocks. They even go so far as to say that NSS threatens the integrity of our financial system and the future of our country... or something.

But in the end, nothing happened. It was a non-event right up there with Y2K. The market was actually down big yesterday and continues its decline today. It looks like the naked short-selling scandal has been exposed as a myth spread by corporate losers like Universal Express' Richard Altomare, serving as nothing more than an excuse to divert attention from poor, and in many cases criminal, management.

But not to worry! Weiss writes, "As usual, the baloney peddlers have been proven wrong with their predictions of a MOASS ("mother of all short squeezes"). But don't worry. The excuse machine is churning away, and a new fairy tale will soon replace the old one... D-Day having been a dud, the latest word from delicatessen-land is that the date of the big MOASS has been rescheduled for 35 days from now. Stay tuned."

I'll look forward to that.