The lawsuit, filed yesterday in New Jersey Superior Court in Newark, lays out a scheme by several hedge funds to send “ghost written” research reports — all negative — to Camelback, an independent investment research firm based in Arizona now known as Gradient Analytics. Camelback would wait for the hedge funds to accumulate a short position on the stock — a technique that allows traders to make money if the stock price falls — and then Camelback would release the report, the suit says. As a result of the reports of Camelback, as well as subsequent reports by David W. Maris, an analyst with Banc of America Securities, shares of Biovail stock fell more than 50 percent between 2003 and the spring of 2004, resulting in its business reputation being “devastated” and curtailing its ability to access capital, the lawsuit says. They must have some proof or they would have never filed a claim. Notice Overstock never filed suit. This reminds me of the Cramer/Herbstreet scam that plays out every week.

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