In This Episode

Porter gets immediately to the heart of Netflix’s recent woes in this 60th episode of Stansberry Investor Hour. It may have 100 million subscribers (including Porter) but the $163 billion company could be doomed thanks to one simple corporate calculation. “I have yet to call for the end of Netflix… but I can see the ending on the horizon.”

Buck asks about Elon Musk’s head-scratching decision to call a British rescue diver he didn’t know a “pedo” and Porter explains the method to his madness. When your whole career is a “Wizard of Oz” style act, you want people talking about anything, even outrageous behavior, before they look at your balance sheets.

Buck introduces Roddy Boyd, an independent journalist who not only eschews advertisers but also paid subscribers, choosing to distribute his findings for free. His Southern Investigative Reporting Foundation has exposed some of the biggest abuses on Wall Street since 2012, and he’s been credited by New York Magazine for exposing “perhaps the worst Ponzi scheme ever.”

Now he has a new warning about a company masquerading as a promising pharmaceutical company – and he’s ready to explain how he knows it could be the next Valeant Pharmaceuticals, which he was working to expose in 2014, when the high-flying stock was still fooling thousands of investors.
What’s truly amazing – and what makes Porter “slightly suspicious” – is that this incredible research, which could have made hedge funds fortunes from shorting the paper tigers Boyd uncovers, is being offered to readers for free.

We think, after the epic fraud Boyd has uncovered that was often hiding in plain sight, you won’t want to miss his latest warning

Featured Guests

Roddy Boyd
Roddy Boyd
The Huffington Post named Roddy Boyd one of the 25 most feared financial reporters in America. His book about the near collapse of AIG, Fatal Risk, was long listed for 2011’s Financial Times and Goldman Sachs Business Book of the Year.


Announcer: Broadcasting from Baltimore, Maryland, and New York City, you're listening to the Stansberry Investor Hour.

[Music plays]

Tune in each Thursday on iTunes for the latest episode of the Stansberry Investor Hour. Sign up for the free show archive at Here are the hosts of your show, Buck Sexton and Porter Stansberry.

Buck Sexton: Hey, everybody. Welcome to this week's edition of the Stansberry Investor Hour. I am nationally syndicated radio host and overworked TV cohost Buck Sexton, of With me, of course, the man himself. He is back. He is bad. He is ready for action. Mr. Porter Stansberry. Good sir, good to have you on.

Porter Stansberry: I love all of Buck's radio showmanship.

Country Club Guy: Game show host.

Buck Sexton: You gotta lean into it a little bit.

Porter Stansberry: Yeah. Lean in.

Buck Sexton: Sometimes I actually do a radio host pretending to be a radio host, so it's like [in exaggerated radio host voice]: "Hey, welcome back everybody. Oh, who's going down to Bob's Water Warehouse later? I'm the wolfman of finance. Coming at you live from Baltimore." See? [laughing] You know, you start to do the radio personality stuff.


Country Club Guy: That's a good one.

Buck Sexton: It all just comes outta you. So, by the way, today we're going to be talking to Roddy Boyd, editor and founder of Southern Investigative Reporting Foundation. If any in our audience followed the Valeant Pharmaceuticals fraud, you'll recognize his name. Roddy has a new report out on another pharmaceutical company that he says isn't a pharmaceutical company. So stay tuned for that one. By the way, don't forget: for all the stuff you need here from the show.

Mr. Porter, what is on your mind, sir? I know there's a lot.

Porter Stansberry: Yeah. I got a couple things right off the top here. First of all, I want you guys to pay attention to the big Netflix mess. I think the stock is down about 15% today. And I've got just a general question. I want to ask Buck to help investors think through this. Netflix, over the last seven years, let's say, has spent untold billions of dollars – I don't have the number handy but, I don't know, it's got to be $10 to $15 billion at least – building out content and building out this network of subscribers. And it has a ton of subscribers, over 100 million subscribers.

Buck Sexton: I'm one.

Porter Stansberry: Yeah. And it's very popular. And people have paid to join. I have two Netflix accounts, believe it or not. My wife has one and I have one. I don't know why. But we just do. But it's very popular. So what's been interesting to me is that the content providers have been willing to license the content to Netflix, Disney being the prime example. So you've got to ask yourself this question: Why would Disney let Netflix license its content and create an enormous content distribution competitor to Disney itself? Why would Disney do that? And the answer is, my dear friends: Disney would only do it if Netflix was paying way too much for the privilege.

And how do we know that Netflix is paying way too much for the privilege? Because, Buck, every year they spend more and more money and every year they lose more and more money. So last year, they lost close to $2 billion. And so Netflix – my favorite expression here is they're losing money on every new subscriber but they're going to make it up with volume, Buck. And what's happened to Netflix is that subscriber growth is now slowing and the company's still losing money hand over fist. And that's because its content contracts are unsustainable.

And so, here's the million-dollar question: When everybody else pulls their content from Netflix, what will Netflix be? And there's no way that Disney's going to renew their content distribution agreement. I don't know about all the other content providers. But the issue that Disney faces is the same issue that the other content distribution providers will face. Five years ago, when they made the deal, Netflix was just a distributor of Disney's content. Great. And Disney was making a lot of money for it. But now Netflix is a competitor to Disney's content. "Well, screw you. We're not going to let you license our content when you're building Emmy – or, whatever, Oscar-winning shows," right? You follow me?

Buck Sexton: Yeah. Of course. Well, what I was wondering is: How are they doing – they're spending a ton of money. These shows like The Crown. I mean, they are spending –

Porter Stansberry: A fortune.

Buck Sexton: – bigger dollars – Netflix is outbidding networks. I mean, I know this because I know some people on the content side.

Porter Stansberry: Of course. Yes. And movie studios. Combined. Yes. Spending more – it's transformed Hollywood, all their spending. It's the greatest time ever to be an actor. So I think that we have – listen, please, be cautious here. People calling the end of Tesla, people calling the end of Netflix have been wrong for a very long time. I have yet to call the end of Netflix. But I can see the end of Netflix on the horizon, and I think the market is beginning to realize it, too.

With Tesla, as I explained last week: The worst thing that can happen to Tesla shareholders is that they're successful with the Model 3. Because if they're successful with the Model 3, now they're just a car company. You know? Now they're just like GM: They make a ton of cars and they don't make money on any of them. So how's that special? And people will realize it's not. And that stock is going to –

Buck Sexton: Were you a little surprised, by the way, Porter –

Porter Stansberry: That stock's going to go from 300 to 30. Mark my words.

Buck Sexton: Were you surprised to see what Elon had to say, by the way? He got all weird with this diver, referred to him as "Pedo Guy?" You know what I'm talking about?

Porter Stansberry: Yeah. But that guy's going to crack under the pressure. I mean, his whole specialty is the Wizard of Oz: "Don't look at our balance sheet. Look over here. Look over here!" He's a walking distraction. Eventually that game is going to fail. People are going to go, "Well, that's nice that you called the guy a pedophile but how come you guys are burning a billion dollars a quarter in cash?"

Buck Sexton: Can I just ask you, Porter: If you were taking the other side of this, how does Elon make the magic happen here? Meaning: Let's assume that there was the possibility he could pull a rabbit out of a hat here and turn this around. What would he have to do? What's the other side of this? Like, how could he make it work?

Porter Stansberry: Wow. That's a great question. I honestly don't know the answer to that. Because I don't think you can scale the battery production fast enough in order to get your cost down as you produce more and more cars. The battery production process just doesn't scale. So I don't know the answer to that question. The obvious answer is: He could start making a real profit for automobiles. So he'd have to, without subsidies, start making money every time he sells a car. And that's never occurred. He's never actually made money from selling cars. He's made money from government subsidies and he's made money by selling stocks and bonds.

There's no question, particularly if you look at the build-out in China: There're going to be millions and millions of electric cars on the road in 10 years. I'm not arguing the utility or the value of the electric car. But, Buck, electric cars have been around since the early 1900s. There's nothing radical about sticking a battery on an automobile. There's nothing really innovative about it at all. And every carmaker can do it.

Buck Sexton: People talk, though, about it now, Porter – they say, "Well, all you have to do is have a wall outlet and the infrastructure has evolved and we're ready for it now." But if we're ready for it, wouldn't the market – wouldn't that be reflected in: This is what people would want to drive? It feels like a lot of this is showmanship, right? People want to drive these Teslas for the same reason people used to want to drive a Prius, right? The Prius was an ugly car that outsold – what was – the Ford Leaf? What was the original electric car? Because people wanted to drive a Prius to show they were driving a Prius. I feel like people want to drive –

Porter Stansberry: Well, the Prius was a hybrid, right?

Buck Sexton: Yeah.

Porter Stansberry: So it's a different kind of car. It's not purely electric.

Buck Sexton: No, no, I know. But –

Porter Stansberry: The Nissan Leaf was a pure battery car.

Buck Sexton: Okay. Right. I mean the original hybrids.

Porter Stansberry: And the reason why it outsold the Leaf was because most people realized: "Man, I don't want a car that I can only drive for 200 miles. Because what about the twice a year where I've got to drive to grandmother's house that's 300 miles away? I can't take my car."

Buck Sexton: But what I'm saying is that people chose the Prius specifically, even though it was an ugly car, I think, by anyone's estimation of aerodynamics and what a car should look like, because it was driving around saying, "I'm environmentally conscious. Look at me. Look at me."

Porter Stansberry: Well, the fun thing to me about the hybrids is: It's all a big deal because they get 50 miles to the gallon of gasoline or something like that. Right?

Buck Sexton: Yeah.

Porter Stansberry: But go back. Go back 40 or 40-plus years ago, when Honda first came to the U.S. market during the '70s, when the oil crunch was on. They had the CVCC, which I believe was a two-cylinder-engine car that got 60 miles to the gallon. And there's other examples of high-quality diesel engines that get that same kind of mileage. People don't make those cars because no one wants to buy them. So what I think is so interesting about this is not that the technology is really innovative or radical at all. It's just that it's now cool. It's a fad. And so being green is a big fad, and Tesla has played into that very well. And that's fine. That's great marketing and I applaud Elon for that ability.

But the question is: How does Elon create something that's actually worth $50 billion, given what he has now? And I don't believe that it's possible that he can do so. Because as his business grows into that valuation, the reality of his margins are going to become evident. And he hasn't done anything to radically lower the cost of building a battery or a car. So I don't think you can justify his market cap, even if he was to sell 1,000% more cars. And as he grows – let's say production this year – I don't know. They're building thousands of cars a week now.

Let's say production grows 20 times this year. I don't know how much it will. But as that occurs, it's going to become very clear that all of the problems that bedevil other carmakers, like bad brakes and cars that have recalls and manufacturing problems, are all going to happen to Tesla, too. Building cars is a really lousy business because there's tremendous overcapacity in automobile manufacturing. Tesla's not addressing any of those problems, which means, sooner or later, that stock's going to hit a wall.

Now, let me just tell you one thing: I'm not bashing electric cars. In China, there's a very good reason to go to electric cars. Because in China, smog and pollution is a very real health issue. So rather than go through all of the innovations in automobile engines that we have to make automobile emissions less damaging to the environment, China can just leapfrog. Go to Beijing. You will see a million trucks on the road that are 20 years old. They are belching sort of unrefined blue diesel smoke everywhere and causing a big problem. So rather than go out and build a whole bunch of environmentally-friendly freightliners, it makes a lot of sense for China to just go ahead and have the electric car that has no emissions. That makes tremendous sense in that market.

It's kind of like why they never built a telephone network across most of Africa. By the time they had the capital to do so, wireless phones were readily available. So you go that way. There's lots of good reasons for China to adopt electric cars. But there's lots of reasons why it doesn't make any sense in America. Let's start with the fact that if we wanted to have a power grid that was capable of charging everyone's automobile every night, we'd have to build like 150 more coal plants. Because there isn't any other conceivable economic way to provide that much electricity on the grid. So there's lots of reasons why that's unlikely to happen in America, and there's lots of reasons why it is likely to happen in China. But I don't think that any of those things are particularly good for Tesla.

Buck Sexton: Can I ask you about the – not to get off this. I find this fascinating, actually. But the front-page Wall Street Journal story today about GE Capital? Looks like GE's got some problems, Porter.

Porter Stansberry: Buck knows how to wind me up, toss me up.


Buck Sexton:Yeah.

Porter Stansberry: "Dance, monkey. Dance, monkey."


Buck Sexton:Throwing snakes in the lion's den [laughs].

Porter Stansberry: I sent you guys an e-mail, I think, with a quote from that article. Jammer, I know it's hard for you to read, but dare I ask you to read that quote for us? It's just one of the most hysterical things I've ever seen printed about American business anywhere, ever.

Country Club Guy: "Despite years of shrinking, GE Capital still has about $150 billion" – billion with a b – "in assets, including a large airplane-leasing business, a defunct subprime mortgage operation, and more than $3 billion in a collection of variable rate-rate" – wait for it – "Polish residential mortgages."

Porter Stansberry: Yeah. So when I wrote about GE back in 2010, 2011, 2012, the point that I made was that they would be able to sell a lot of assets from GE Capital and reduce a lot of debt. But eventually they'd get down to sort of the bottom of the soup can, you know? Imagine a big hot pot of soup, and you know there's all that burned stuff on the bottom? [Laughs]. Well, once they got down to that part, the soup was going to get awfully bitter and no one was going to want to buy it anymore. And they would get left with – I didn't know what the number would be. I thought it would probably be about 10 or 15% of those assets, so let's call it $60 to $100 billion that they would just have to eat because no one would take it from them, and it was all going to be trading at a big discount because it wasn't worth much.

They've already written down something on the order of $21 billion from one insurance product. There's no question in my mind they've got big losses hidden in the airplane leasing. They've got big losses hidden in the Polish variable-rate mortgage business. So I've already talked about this ad nauseam. I don't think that GE is a buy yet. I think you have to wait until they have dealt with the GE Capital issue. Now, if they start spinning stuff out – so, for example, if they were to sell their oil and gas business, if they were to sell their health care business, if they were to sell their power company, those assets, spun away from GE Capital, might be very, very interesting and good investments. I'll wait to see when or if that occurs. But I don't think you can buy GE stock today plain. I don't think that it's safe.

Now, let me ask you one last question about this. And we're going to bring Roddy Boyd in, who's a fantastic investigative journalist. And one of the things I want to talk to him about is the Enron debacle. So, this is a little preview of where we're going to go later in the conversation. But let me ask you this question, Buck. Enron was a $60-billion bankruptcy. And the guys who led the collapse of the equity value were Ken Lay, Jeff Skilling, and Andrew Fastow. Ken Lay was guilty of insider trading. There's no question about that. He knew the numbers, and as he was telling his employees to buy the stock, he was selling it. He had a heart attack and he died. So he paid with his life. Okay, fine.

Jeff Skilling – most people don't know this: Jeff Skilling was exonerated from insider trading. He never, ever insider traded. He didn't sell a share of stock. He was personally financially wiped out. His reputation was ruined. His family was destroyed. And he ended up being sentenced to jail, I think for 24 years, which was the largest white-collar sentence anyone had ever seen before. And the main charge against him was honest services fraud. In other words, the government convicted him of being dishonest in his fiduciary duty to the bondholders and shareholders of Enron. Later, that conviction was overturned. Because, as it turned out, he was never compensated for doing the wrong thing. And that is a key part of honest services fraud.

So, if I happen to lead Stansberry Research into the ground and I do so because I'm getting kickbacks from all the vendors and I'm overcharging the company for all the printing and the technical services, I should go to jail. But if I lead Stansberry Research into the ground and I don't sell any stock and I get no reward and there's no evidence of kickbacks or fraud, how do you send me to jail? I just ruined myself because I was a dumb businessperson. But that's not a crime.

Anyway, even though the honest services conviction was thrown out, the federal government, in all its wisdom, decided not to resentence him. They just made a deal. They said, "If you stop suing us, we'll only give you 10 years instead of 25. And if you try to sue us and you lose, then we'll never let you out on probation and you'll die in jail." That was his choice. So he got ten years off his sentence. He gets out, by the way, in February of 2019. And, Jammer, that's a guy we have got to get for the podcast.

Country Club Guy: Vegas, 2019.

Porter Stansberry: Fastow. No, we already got Fastow. Skilling.

Country Club Guy: Skilling.

Porter Stansberry: Now, one last thing about this. I know I'm going on too long but I am going to reach an important point. The guy who actually committed the honest services fraud at Enron – anyone know who that was? It was Fastow. He got kickbacks from every one of these illicit financings that he did for the company. So he was told to go out and borrow money for the company and he did. He did what they said, but meanwhile he got paid a whole bunch of money in cash every time he did it because he was doing it in a way that put the company's equity in jeopardy.

There was this thing called the Galactic clause that said: "If Enron stock falls below this amount, then we will start giving you shares, as many as required as to make you whole, so that you're never at risk in these financings." That was Fastow's innovation. That's what got Enron all the money. And that is what destroyed the company. Critical question for the jury: Did Skilling know about the Galactic clause? The answer is: No, he didn't. And Fastow lied about it to the jury. And there's clear documents that show that Skilling did not know and that Fastow knew he was lying.

Fastow got five years in jail. Why? Because he was willing to testify against Jeffrey Skilling. So, in other words, the prosecutors were going to get Skilling whether they could prove it or not, and they were willing to rely on a felon who they knew was lying.

Now, here's where we tie into our friend, Roddy Boyd. The prosecutor of Skilling is a guy named Berkowitz. And Sean Berkowitz went from being the head of the federal task force on Enron to, the day after the trial, joining the big law firm – it's not Lenny Watkins. What is it? The big – Google it. You'll find the name of it.

Buck Sexton:Or Waptell?

Porter Stansberry: No. Remember the lawyer who just got thrown out of this firm, something and Watkins, for sexting?

Buck Sexton:Oh, yeah. That just happened.

Porter Stansberry: Yeah. What's the name of that law firm? It's one of the largest corporate law firms in America. It's the biggest. Anyways, partners there make $1.6 million to start. So he walked out of the job of being a district attorney for the federal government, and AUSA, and he started working as a partner for this major corporate law firm. And he knowingly convicted a guy and sent him to prison for 24 years who didn't do the crime that was alleged.

And he's married to Bethany McLean. And Bethany McLean, during the Enron trial, was writing for Fortune Magazine. And her pieces mirrored the government's line. And her source for these stories was Sean Berkowitz, who she married directly after the trial. But Bethany McLean never disclosed to any of her readers at Fortune that she had an intimate personal relationship with the lead prosecutor of the Enron task force. Now, I ask you: Is that ethical?

Buck Sexton:Swampy.

Porter Stansberry: Is that ethical?

Buck Sexton:Mm-mmm.

Porter Stansberry: No. But Bethany McLean –

Buck Sexton:Not for the journalist or for the prosecution, by the way.

Porter Stansberry: But Bethany McLean is featured as an investigative journalist today on Roddy Boyd's website, a guy who claims to only do good for investors.

Buck Sexton:I don't know, P, you've got to ask him about it.


Porter Stansberry: What really happened is that Enron was a very aggressive, very troublesome company for all of the major U.S. utilities. It gave them fits. And when a senior employee at Enron, Fastow, sent the company down the river, every single major U.S. corporation that had dealt with Enron wanted to see the people at Enron destroyed. For personal reasons. And they wanted Skilling's head. And that was Sean Berkowitz's job: to get Skilling's head. And he did. And he got rewarded by going to work for the largest corporate law firm in America.

Country Club Guy: Was it Latham & Watkins?

Porter Stansberry: Yeah. Latham & Watkins. Guess who Latham & Watkins' clients are? Buck, you'll never guess. All of the major utilities in the United States. That's what really happens when the powers in America decide that someone's gotta go. And we're going to hear from Roddy Boyd about what's happened in the pharmaceutical business. But I want you guys, in the back of your minds, to remember that what the government tells you happened may or may not have happened. And what people describe as someone who's evil may or may not have been evil. They may have just caused problems for a lot of very powerful people.

Now, let me bring this all back to GE and then we can move on to Roddy Boyd. Here's what I want to tell you about GE as it relates to Enron: Enron was a $60-billion fraud. The person who's most responsible wasn't hardly punished. His name is Fastow, not Skilling, okay? At GE, there was probably something on the order of $100 billion, maybe more, maybe less, in fraudulent nonsense going on. And GE would've collapsed just as surely as Enron did. And the total losses would've been way larger. At its peak, GE's balance sheet was $600 billion.

GE was not revealed as a fraud and did not collapse for one reason and one reason only, and that is because, in the fall of 2008, the federal government guaranteed every single one of GE's liabilities. They said, "GE's liabilities is the same thing as a U.S. Treasury bond. Suck it, market." And they guaranteed it until 2012, which gave GE, for free, three years of room to maneuver and reduce their balance sheet. The executive who engineered the massive fraud at GE? Jack Welch. Jack Welch did everything that – Jack Welch designed the playbook that Jeffrey Skilling followed. And he is revered as a cultural and American icon. Why? Because GE was the largest company in America with over 300,000 employees, and it owned Washington. In fact, GE was often referred to as the for-profit wing of the Obama administration.

So I just want everybody to realize that when you're dealing with who the government says is responsible or who is a crook, it may or it may not be true. But if you're dealing with corporations that threaten the interests of the largest established powers in the country, it really does pay to take a closer look and to see what really went on. And when we bring Roddy in, we're going to talk more about that.

[Music plays]

Buck Sexton:Today's guest is Roddy Boyd, founder and editor of SIRF – that's S-I-R-F – or Southern Investigative Reporting Foundation, a free report where they help uncover corporate and financial fraud on Wall Street. Roddy was one of the first to uncover a concealed relationship between Valeant Pharmaceuticals and Philidor Rx Services, a special pharma company accused of using questionable tactics to push higher-priced drugs. This story, and Roddy, were featured on the Netflix docuseries called Dirty Money. The Huffington Post named Roddy Boyd one of the 25 most feared financial reporters in America. His website can be found at – that's – and is free. I encourage you to take a look at his work.

Roddy will also be speaking at our annual Stansberry Alliance meeting this fall at the Bellagio resort with speakers like Robert Kiyosaki, Jim Grant, Steve Forbes, Trish Regan, plus many, many more. Two-day tickets still available, but our Alliance-only day is sold out. Call the Stansberry sales team for information or visit Please welcome Roddy Boyd.

Porter Stansberry: Roddy, thanks so much for being on the line with us. You are a man of tremendous reputation and you have done some fantastic work for investors, for which you have been rightfully lauded. Can you just tell us a little bit – I'm spellbound and mesmerized that someone doing the kind of work that you do that has enormous market value is working for a not-for-profit. And I have to tell you the truth: It doesn't make any sense to me, so it makes me very suspicious. Why on Earth are you not running an investment fund or working for a hedge fund?

Roddy Boyd:Sure. Well, thank you very much for having me on. And thanks for the kind words. Look, you're not alone. A lot of people ask me that. And sometimes some of those people are my wife.

Porter Stansberry: [Laughs].

Roddy Boyd:Especially now that we have two teenagers in the house. And she outranks you. But that's neither here nor there. In all seriousness, you know, look, unless you've been asleep for the last 20 years, you've seen the horror show that's been mainstream media, which is where I came out of. And, you know, layoffs and closings and entire investigative units shut down. And that's really dangerous when you're talking about Wall Street and you're talking about large corporations seeking public capital. And then you add to that – that's one shoal. And the other shoal is the issue of something I'm sure you're aware: regulatory complacency and inertia. And the SEC, the DOJ –

Porter Stansberry: Roddy, that's certainly not new.

Roddy Boyd:Yeah [laughs]. No, it is not new. But it's not good, either. And you put the two of those things together, and I just said, "Look, someone's got to stand in the gap." So I put together this 501(c)(3) and I thought, "Well, hey, people will appreciate it and people will donate to it and I'll make a living." And it took me about six years to make a living. But I think the model – it matters. I think the work I'm doing matters. And I'm willing to fight if people will have me.

Porter Stansberry: Well, Roddy, I'm going to do my very best to convince you that you've got it all wrong and that you should be in my business, which is independent journalism. We don't take any advertising dollars. We don't have any corporate sponsors. And we have subscribers who pay us a fair rate. I mean, our base subscription is $100 a year. We're not ripping anybody off. You know? You don't have to be rich to enjoy our work. And, in fact, much of our work is free. We have four or five free daily e-zines. The podcast is free. You can get a great investment education from our website and from our free work. So I feel like we're doing good, as well as doing well.

But, boy, I mean – like I said, I'm completely aghast that you do such valuable work and you don't have any, as far as I can tell, sort of guaranteed sources of income. So if you ever change your mind, please let me know. Because I would love to help you set up a business that could probably make you $10 to $20 million a year and you'd do exactly what you do right now. But that's only if you're interested.

Roddy Boyd:Okay [laughs].

Porter Stansberry: Let's move along. Some people don't like money, and I'm grateful [laughs]. So, here's what I want to talk with you about. I really want to start with the pharmaceutical issue. And I want to start with Valeant in particular. Because I have a very contrarian view that'll make you giggle. And that is: I think that Valeant got a raw deal, especially from the short sellers. Many of the things, for exam, that Citron claimed in its report – and, by the way, I'm friendly with Citron's founder, Andrew Left. He appears at our conferences. I think he does as good as he can. But there are some material things he got wrong in that report. Valeant wasn't stuffing the channel. And it really wasn't until you found Philidor that the fraud at Valeant was uncovered. A lot of the short sellers had it wrong. And there may have been more financial value in their roll-up model than they get credit for today.

And I understand: You can probably tear this argument apart. But that's what I want to ask you: Do you think that the founder – or not the founder, but the CEO who implemented Valeant's acquisition model – Michael Pearson? Do I have his name right?

Roddy Boyd:Yes. Mike Pearson, yeah.

Porter Stansberry: Do you think that he's a bad actor?

Roddy Boyd:I think – gee, that's a great question. Look, I don't think he's a bad actor the way we usually – the way we could consign certain people at Enron or WorldCom or any of the other kind of classic frauds of recent vintage. So, I don't think it's that. I never for a second personally alleged or ever personally believed that Valeant was a pharmaceutical Enron, as had been alleged by several short sellers, including, I believe, Andrew Left, who I believe _____ –


Porter Stansberry: Yeah. That was the title of his report.

Roddy Boyd:Yeah. I never think that way. I never write that way. I never thought Enron was that bad. I mean, it was bad. But there was still value to the enterprise there. Ironically, it was the sleepy oil pipeline business. But as to Valeant, look, there is a rational pool of value there in terms of drugs – dermatology drugs, and they have Xifaxan. The problem for them is they took on a massive amount of debt, perhaps sharply too much debt, because the service for that debt – the problem with debt is paying it back. And they need – to generate the cash flow necessary to service the debt, they would have to continue to raise prices in the fashion that they did.

Look, they did some very abusive things. And I think Pearson and his executive team deserve some sanction for that. I'm a reporter. I'm not a lawyer. Thank God. I'm not a judge. So obviously there's a process going on. They haven't been indicted. I know they've been subpoenaed. And they'll be given a fair shake. I don't think it rises to jail. But I think they deserve some sanction. I don't think they did precisely what – and there were aspects of fraud to the Valeant story. I don't think it rises to necessitating widespread arrests or things of that nature. But Pearson had a good idea and a good model at a point.

The thing about growth is, it only works when you stop and digest and build out. And a lot of those things that are pretty unglamorous require doing. Look, Stansberry Research is an important large organization, but it only works because there are people in and around the entity that seek to manage operations effectively, that ensure the fair delivery of the goods. You know, there's a lot of boring stuff to running a business. And if you decide that you don't need to do it like Valeant didn't need to do it, boy oh boy, there are consequences.

Porter Stansberry: Yeah. Absolutely.

Roddy Boyd:You can't always just take price, put it that way.


Porter Stansberry: Roddy, let me just jump in there and just talk about that for a second. So this guy, Michael Pearson: He was victimized by two of his executives who were engaged in a criminal fraud, right? So the former CEO of Valeant set up a pharmacy company and was paying $10 million in kickbacks to one of Pearson's top executives unbeknownst to Pearson. And that's where the whole problem came from, in terms of what the fraud was. It wasn't that Michael Pearson was buying drug companies and raising the prices. That was perfectly legal.

Roddy Boyd:Oh, sure.

Porter Stansberry: In fact, the senator from Missouri who was featured in Dirty Money said at an open hearing that Michael Pearson hadn't broken any laws. What I think is interesting is that a guy like Martin Shkreli and a guy like Michael Pearson both become completely vilified, in part by the Netflix documentary, but by media in general, and certainly in part by some of the work that you have done. They've been vilified as criminals because they legally bought drugs and they legally raised their prices.

And the question I want to ask you about this is: Why is it that capitalists acting rationally for their own best self-interest in the health space is any different than capitalists acting rationally in the market for power or the market for fresh food or the market for movies? Why is it that there is this moral supposition that Michael Pearson or the shareholders at Valeant have any obligation whatsoever to serve the public? They don't.

Roddy Boyd:No. I should have perhaps been more clear. In terms of their price-raising, I certainly have never thought that it violated any statute or regulation. So I'll be very clear about that.


Porter Stansberry: But, Roddy, come on, you can't ignore the fact that that's where all the public animosity comes from, right? That's what caused Hillary Clinton to say, "We're going to go after them," right?

Roddy Boyd:Yeah.

Porter Stansberry: Do we have socialized medicine in this country, or do we have capitalism in this country? Which one is it?

Roddy Boyd:Yeah. Well, with medicine, we have absolutely the worst of both worlds.

Porter Stansberry: Right. Exactly. And that's what I was hoping we would get to. The real problem in these stories is not that Valeant raised the price. The real problem in these stories is that Valeant was gauging very politically powerful insurance companies and they weren't going to have it anymore. But rather than those people going in the marketplace and building a competing drug, which they could've easily done, they didn't. They went to the government and complained.

And that's what irritates me. I don't want the most powerful pharmaceutical companies in America to control competitors through their lobbyists in Washington. And no one gave a peep about Valeant until they tried to buy Allergan. And when they tried to buy a very big, very successful company and they almost pulled it off, that's when all the regulators came down on them. You can't tell me that was a coincidence.

Roddy Boyd:Boy, that's a lot to unpack.

Porter Stansberry: Or how about the fact that they also said, "We're not going to pay taxes in America anymore – we're going to Canada?" You don't think giving the finger to Congress like that drew some attention?

Roddy Boyd:I think it drew plenty of attention.

Porter Stansberry: Yeah. Exactly. But is that what we want our legislators to do in Congress, to enforce the world's highest corporate tax rates by vindictively going after medicine makers in America? It seems like a crazy thing to do to me.

Roddy Boyd:Yeah. I mean, look, I have long personally, and to an extent, professionally, argued that the American corporate tax code is the – it's truly destructive. It's irrational. And it's a series of loopholes wrapped around some loose –

Porter Stansberry: All right. Roddy, I agree with you. But I'm trying to hurry because I'm trying to get to a bigger point.

Roddy Boyd:Sure.

Porter Stansberry: I want to make one more point about this, which is: the point I'm trying to make is: in America, our politicians don't go after the real criminals. In America, our politicians go after the people they can crush. And that annoys the hell out of me. So Martin Shkreli, for example, was completely vilified in America. He ended up going to jail for seven years because he ripped off four wealthy investors from New York who already had known that he had ripped them off and didn't even bother to sue him. The real reason why Martin Shkreli went to jail, of course, is because he bought a drug and he jacked the price up 56 times. You and I can argue about whether or not that's reprehensible. I don't really know. I do know that when a competitor brought out a new product, they were charging just as much as Martin Shkreli was. But nobody even mentioned that.

And here's what also really bothers me: all the drugs that Valeant bought, everybody knew they were going to raise the prices on. Everybody in the industry knows this, right? But that doesn't stop the incumbents from selling those drugs at a hugely inflated price. And nobody in Congress goes around and says, "Hey, why did you guys sell that drug to Valeant for $60 million when you knew the only way they could recoup that money was by ripping off your clients?" So if there is an ethical obligation to protect patients who need these drugs, how come the people who sold the drugs to Valeant were never hauled into court?

Roddy Boyd:I hadn't looked at – I had not considered that.

Porter Stansberry: And I want to bring all this back around to one question, which I suspect that you won't want to answer, and that's okay. It's not your fault. But I bring this all around to the Enron thing because I believe that Skilling got a really raw deal. I don't think there's any evidence at all that Skilling committed a crime. There's plenty of evidence that he made terrible decisions. But as a result, he was personally wiped out, just like Michael Pearson was, just like Ackman was. Ackman lost $4 billion. A lot of that money was his. When you mess up in civil society, assuming you're playing by the rules, you pay the consequences, which these guys all did.

The guy who committed the crimes, in my opinion, at Valeant, as you know, were the two guys who were doing the kickbacks, and at Enron it was Fastow who was getting the kickbacks. There was never any evidence that Skilling committed honest services fraud. In fact, the convictions were later thrown out. But, meanwhile, Roddy, I'm begging you: you gotta take a closer look at who is getting railroaded by the government and who is not. Because I think that's the bigger story.

In the Enron case, the lead prosecutor of the Enron task force spent five years investigating Jeffrey Skilling. And immediately after he won his conviction, he was awarded a $1.5-million law firm partnership at – what's it called again?

Country Club Guy: Latham?

Porter Stansberry: Latham & Watkins, the largest corporate law firm in America. And do you have any idea who all of Latham & Watkins' clients are? They're the largest utilities that Enron had been [beep]-ing over for a decade. So getting Skilling was a corporate witch hunt. And that story was never told. And I think that's at least as interesting as the idea that Skilling was a criminal. What kind of a criminal goes out and destroys his entire fortune, his family, his reputation, and the livelihoods of everyone he knows? It doesn't make any sense.

Roddy Boyd:I have talked to Fastow. Fastow has argued to me that Skilling was well aware of the lack of disclosure and what that meant regarding those offshore entities. My personal view – and I should say I had that conversation, face-to-face, in-depth with him, under three months ago. I would also note that I very much agree that – I think he was sentenced to 17 years. His sentence was excessive. And I don't think it matched the crime. I don't think it should've been passed down. I don't know if the judge had any latitude to depart from it. I could not begin to speculate on that.

Porter Stansberry: Well, listen, I don't want to get into a fight over Fastow and Skilling. I've met with Fastow several times. We've had long conversations. The key document is that Fastow lied under oath about the Galactic clause, which is why Enron's stock just got destroyed, among other reasons. But the point that I'm asking you to consider, Roddy, is that when you go to write a report about Acadia, for example, or when you go to write a report about Valeant, think for a second about – what's the Latin phrase for "Who benefits"? Cui bono? If Valeant Pharmaceutical gets destroyed, who wins? And what are those lobbyists in Washington doing? And who is feeding you information and why?

And maybe your answer is: "Nobody feeds me information. I go and find it all myself." And I wouldn't be surprised if that's the case. I'm not accusing you of any kind of wrongdoing. We're having you speak at our conference. I'm just asking you to think carefully before you destroy a business or someone's reputation, especially if there may be an incentive for the people who are feeding you a story.

Roddy Boyd:Okay. Absolutely. I personally – that's why, not to be self-promoting – you have a much broader, and heartfelt, point. I would simply say that, in terms of SIRF, we only use documents. I found Philidor based on documents.

Porter Stansberry: Yeah. And, by the way, that was an incredible discovery. I mean, that was amazing. It really was. I was blown away by your skill in figuring that out.

Roddy Boyd:Yeah. I mean, it only took me 11-hundred-thousand man-hours, obviously.

Porter Stansberry: [Laughs].

Roddy Boyd:I probably gained 15 pounds and lost – half my hair is gray or something. But to the extent possible, I try to narrowly cast my reporting to just say: "Look, here's an interesting thing." I mean, I wrote extensively about a company called Insys Therapeutics, publicly traded, that made one drug, a fentanyl spray, a fentanyl formulation that was like an inhaler.

Porter Stansberry: That sounds really dangerous.

Roddy Boyd:Yeah. They pushed it – they bribed doctors. And you know, they were the fastest-growing Nasdaq stock in 2012 and '13 I believe. They certainly were promoted extensively by CNBC. And I simply just followed the money trail of payments to doctors for speaking fees for conferences they never attended.

Porter Stansberry: Oh boy.

Roddy Boyd:And I also tracked the dead bodies through Freedom of Information Act –


Porter Stansberry: Lots of people died, I'm sure.

Roddy Boyd:– various county – hundreds. Hundreds.

Porter Stansberry: Let's talk about your latest story, Acadia Pharmaceutical. Because I think that, beyond my philosophical concerns about people writing destructive things about businesses – and sometimes overstating the facts. Not you, but you know that does happen occasionally –

Roddy Boyd:Of course.

Porter Stansberry: – in short-selling reports. But, of course, there is a public purpose to be served here. I'm sure you can help protect patients from a firm like Acadia that's selling a drug that has probably very little utility and seems to be very dangerous. What are the facts?

Roddy Boyd:Well, the facts are that this is a California-based pharmaceutical company that makes one drug. It's marketed as Nuplazid. And you can go to YouTube and check out their commercials. It addresses Parkinson's disease psychosis. In other words, about halfway through the Parkinson's cycle, 40, maybe upwards of 50% of patients experience mild, episodic delusions. They think: "What is a horse doing in the laundry room? Why is a dog in the bathroom? We don't own a dog" type thing. And in that sense, it's different than, let's say, Alzheimer's delusions or psychoses, which can be very malevolent: past traumatic episodes emerging. And this is a drug that they had sought to get FDA approval on.

The hook here is that every clinical trial they ran that was sort of classically constructed – you know, randomized, double-blind, all that kind of inside-baseball type stuff – they failed horrifically at. So they were able to use a loophole in the 2012 FDA – it was a piece of legislation that enabled them to get breakthrough drug designation on the view that this might really change the game, as it were. But even then, they had to conduct one trial, not two, on a nine-point scale, as opposed to 20. And they got a bunch of other concessions. So they really got the FDA to give them – they basically got a C before they sat down on the test.

Now, why that matters is: There are no drugs that address this stuff. You know, in the last – I just turned 50, and in my lifetime I've seen remarkable progress made across all of these horrific diseases and afflictions that really just laid people low for centuries. The one area that that's not true is neurodegenerative diseases like Parkinson's.

Porter Stansberry: Yeah. There's been no progress.

Roddy Boyd:There's absolutely no progress. They are using medicines from the early '60s. I mean, that just tells you all you need to know. Acadia got approved despite – you know, the guy who led the FDA effort said, "This drug doesn't work." His personal recommendation was: "I refuse to recommend it to the panel, but you'll make your own decision." And they went ahead and approved it because they took the view: A, something might be better than nothing, and B, the large – what they call "mortality signal," which is the large amount of people dying from the stupid thing – "Look, those people are sick. They've only got a few years left. If it helps a few of them, it's worth the risk."

What they didn't see was – I tracked – that was in March of '16, and the drug hit the market in June of '16. What I did is I tracked, though the FDA's adverse events database – that's publicly available, and I'll talk about that in Las Vegas. Anybody can hit it up – The death toll is out of all proportion. I mean, whether you're looking at –

Porter Stansberry: Roddy, but why is that? I think there's two things in your story that don't make sense to me. And one is: I think you're ascribing a lot more power to the adverse events reporting than you should. Because these people are all in professional care. So their adverse event reporting is solicited. And the other drugs are all voluntary. When someone dies in a nursing home, it's a noted event. But no one yet understands if there's any causal relationship.

Roddy Boyd:Well, in the initial FDA review, what they call the briefing document, there was a clear, what they call "signal" – again, I am not a doctor, so I'm using these words in the best capacity I can – there was a signal that suggested that it did something to the rhythm of – your heart's rhythm. It affected the QT, which is the opening and closing rhythm of your aortic valves. Again, that's not proved. That's not proved. And you are certainly correct in noting that: look, this patient base is sick. Whether you think they have four years or six years or, at the outer band, eight years, you're still going to see a cohort – a death number. Again, I'm being pretty clinical about your grandmother and my uncle type of thing. But it's still going to be much more than the average pool of, let's say, 75-year-olds, even. So I am not saying that this is like giving fentanyl to a couple of dopey 19-year-olds who think it's a quick high.

Porter Stansberry: That's right.

Roddy Boyd:I'm not trying to draw that analogy.


Porter Stansberry: And the other thing about your reporting that I thought was overstated – it's just an opinion. I'm not saying it's not factually true. I'm just saying it's – I think you're ascribing more significance to it than perhaps you should. But, of course, it's an opinion, and I don't know. But you've been very critical of their spending on doctors. And what I thought was interesting was: In your report – I mean, you do a very thorough and honest job – you actually cite a doctor who has not accepted any compensation from Acadia, who has been prescribing a lot of this drug to her patients –

Roddy Boyd:Oh yeah.

Porter Stansberry: – and she says, "I'm not doing it because they've paid me, because I don't take money from them, and I'm doing it because I have seen a positive effect in some of my patients." And I think it's very interesting.

Roddy Boyd:Absolutely.

Porter Stansberry: I think that's one way that you're very different than most plain short sellers: you present a more balanced view. But I guess what I'm saying is: How can you – do you have a good reason to ascribe the fact that Acadia is heavily marketing a new drug – because, to me, that just seems like a normal business practice. When I have a new product, I spend heavily on the marketing initially. Is there something malevolent about what they're doing, in your opinion?

Roddy Boyd:No. Well, the marketing – that's only smart. They'd be fools not to have spent their first couple of bucks putting together prime-time NFL commercials and all the medical journal ads and these sponsor stuff at conferences. If their executives weren't doing that, I would have to imagine their executives – if I was an investor, I would argue for their dismissal immediately, posthaste. So that's just Business 101. We don't even need to dwell on that. Going out and getting a certain amount of doctors to act as informal consultants and then paying them for their observations – look, I don't know anything about your doctors, but if your doctors are like my doctors, they are well put-upon. I mean, I'm not saying they're poor, and they don't deserve to be. But they are busy characters, okay?

Porter Stansberry: For sure. Yeah.

Roddy Boyd:And I think they should be paid, a certain amount of those doctors, especially doctors with some degree – what they call KOLs, Key Opinion Leaders, men and women who've been around for a while, established practices, that do some academic research. They have credibility. Again, that's idiotic. That's business 101. If you don't do that and you're a pharmaceutical company, you deserve all the bad things that happen to you. What I'm talking –

Porter Stansberry: Okay, yeah, so what's different about what Acadia's doing? because that wasn't clear to me.

Roddy Boyd:Sure. What they're differently doing is they're going right to two areas. They're giving an intense amount of – they've signed up a lot of doctors for these consulting fees that, based on my reporting so far, there's just not a lot of work involved. There's this subtle quid pro quo that: "Look, if we're paying you $3,000, $5,000, or $7,000 a month, we expect, over a four- or five-month period, a certain volume of prescriptions." Now that is not –

Porter Stansberry: That's clearly not right. We all would agree with that.

Roddy Boyd: Yeah. That is not in a contract or anything like that. I've just – I had heard from doctors who, again, liked this drug –


Porter Stansberry: It's just like a wink and a nod.

Roddy Boyd:Yeah. Like, "Hey, Porter, forget about that money you owe me. I might just reach out to you next time because I know you got the seats at the Orioles," or something like that.

Porter Stansberry: I gotcha.

Roddy Boyd: It's, I think, like you're saying, a wink and a nod. What I find pernicious –

Porter Stansberry: And do you have anybody on the record about that? Or is that all off the record?

Roddy Boyd: No doctor would go on the record about that. So I didn't put that so bluntly in the – in fact, I didn't put that in the story at all. Because I don't do that kind of reporting. If people won't go on the record saying it, or there's not a document that alludes to it, I'm not – it's just not right. Even though –

Porter Stansberry: I got it. But that's the backstory on why you've put so much emphasis on their marketing spending.

Roddy Boyd: Yes.

Porter Stansberry: Got it. Okay.

Roddy Boyd: And you're the only person I've told that to so far, so –

Porter Stansberry: Well, not anymore. Unless you want us to remove it from the recording [laughs].

Roddy Boyd: No. Keep it in. The other thing that I think – and this is – I kept it in there: They've focused extensively on what in the pharmaceutical business they call LTC, which is long-term care, which is, of course, a nice name for nursing homes. They're using – they focus extensively on those doctors, even more perniciously on the administration.


Porter Stansberry: I got it. Let me ask you one more follow-up about all this. Because –

Roddy Boyd: Yes, sir.

Porter Stansberry: So, reading what I've read about it, I draw a very quick conclusion. It seems like there's a whole lot of facts that would say you've got a drug of marginal utility. And that is: What it addresses is not a real serious problem for these people who are dying of a serious neurological disease. It's not as though these hallucinations are scary or all that troublesome, right? So, even if it works, it's a drug of somewhat marginal utility. And there's a lot of question about whether or not it works for the overall population. So, it is sort of this very most marginal case. And I think we'd agree that the FDA probably approved it because the patients are terminally ill and: "Okay, fine." There's no direct way of proving it hurts them. Okay?

So that's all, I think, fine. But what's interesting is: This drug – people don't go out and buy this drug, right? This drug has to be administered by a doctor.

Roddy Boyd: Correct.

Porter Stansberry: And so, if the arc of your work is correct, the fraud has to be centered on some kind of a kickback between grossly overprescribing this drug – right? Because if there's a doctor who goes, "My patient really doesn't need this; I'm not going to bill them for it because it's not really going to help them," then Acadia can't succeed. What Acadia has to do is corrupt a large number of physicians who go, "Eh, it's probably not going to hurt my guy so I'm going to bill them." But how is that in the doctor's interest? Is there a financial link? Besides, you've pointed out, there's a couple of doctors they've given the wink and the nod to. But is that really enough to drive their business? How have they corrupted the long-term caregivers and the doctors-at-large in order to drive a lot of prescriptions?

Roddy Boyd: Sure. I think, if I were a regulator, the immediately most productive path into investigating this is the issue of the medical professionals in and around these long-term care facilities, many of whom, while on an absolute basis are decently compensated, certainly earn less than their peers elsewhere. And I would look very closely at any connection – sometimes – I mean, I've done a lot of reporting over the years that suggests sometimes these aren't winks and nods. Sometimes they're pretty damn explicit, which is against the rules.

Porter Stansberry: Mm-hmm.

Roddy Boyd:So I would look at that. And then, the second thing I would look at is intentionally soft-pedalling, during the marketing, either potential mortality risk – because even though these people are ill, there has to be a standard of patient care. You know –

Porter Stansberry: Right. But there's no black-box warning. There's nothing regulatory –

Roddy Boyd: There is on this one. They do have a black box.

Porter Stansberry: Are you sure?

Roddy Boyd:Yeah. I swear. They have a boxed warning on this, yeah. I mean, I talked about it at length. It's the standard antipsychotic-in-elderly issue.

Porter Stansberry: I had that wrong then. I got that wrong. Okay.

Roddy Boyd:I mean, look, this is complicated stuff.

Porter Stansberry: Yeah. Anyways, so we have a lot of listeners and we have a lot of readers. And one way that we'll catch these people, if what you think is going on is going on, is people will tell us. So, if you work in a long-term care facility and you see that Acadia – their product is being pushed in a way that you know is unethical, reach out to us. Let us know about it.

This, for me, was – that was the last hurdle that I couldn't get over. I don't disagree with you that Acadia is aggressively marketing a very marginal drug. I agree with you completely. I just don't know that a weak business plan has gone over into fraud. I'm not saying it hasn't. I just haven't been convinced yet.

Roddy Boyd: Okay. And, look, I think there's some concerning things. I have not used certain language, and I haven't written certain things because I don't think it can be proved and I'm not sure it's happening.

Porter Stansberry: Yeah.

Roddy Boyd:I think there are some things that should give people pause.

Porter Stansberry: Have you looked at Tesla's accounting? [Laughs].

Roddy Boyd:[Laughs]. Boy, about once, twice a year I look briefly at that company, laugh, and then I – I try and avoid situations that are these Stalingrads between short sellers and longs, and that involve religious views.


Porter Stansberry: Like Herbalife. By the way, isn't it fascinating that Herbalife obviously tilted Bill Ackman's moral compass, right? I mean, he was –

Roddy Boyd: Yes.

Porter Stansberry: You couldn't have been – what's the word for someone who's publicly moral? What is that? Geez. My vocabulary has left me.

Roddy Boyd: Yeah. Mine too.

Porter Stansberry: Geez, what is that word? It'll come to me in a minute. Anyway, he was so indignant that Herbalife would use multilevel marketing to encourage poor people to buy their products, right? I mean, that is really a crime against humanity. Meanwhile, of course, he's the largest investor in Valeant, which is destroying the medical industry by jacking up the prices of drugs [laughing].

Roddy Boyd: Yeah. It really is – you know, cognitive dissonance strikes the smartest, most gifted people.

Porter Stansberry: It sure does.

Roddy Boyd:And that would be evidence –

Porter Stansberry: And I'm always so worried I'm guilty of it myself. I've always –

Roddy Boyd: Me too.

Porter Stansberry: I'm very, very careful about ascribing poor intentions to other people because I wouldn't want to be treated the same way.

Roddy Boyd: No, and that's why I do document work as opposed to relying on: "Oh, hey, I heard X said Y about Z." I do document work and then – I gave this company six months to reply to my questions. I got scooped partially twice because I waited so long – I spent so long trying to get in touch with the company because I didn't want to be unfair. Because what I found disturbed me and I wanted them to engage. And it took me –

Porter Stansberry: Roddy, I want to be really clear: I thought that your presentation about this company was extraordinarily even-handed. And I applaud you for not only allowing the company to respond, but sharing their full response. I thought it spoke tremendously to your credibility.

Roddy Boyd: Thank you for noticing. Many people don't read as closely as you. So it means a great deal that you did.

Porter Stansberry: I've got one last question for you, and then I'm sure you have better things to do than to talk to us yahoos. This could be the focus of your new investigation, because nobody has figured this out yet. And I don't think it's a Stalingrad either. It's just a very big story. So, in the Wall Street Journal today on the front page, you'll find a quote that describes how General Electric, which was one of the three or four AAA-rated companies in America at the time, and only shortly before had been the world's largest publicly-traded company, how they came to own large amounts of Polish adjustable-rate mortgages [laughs].

Roddy Boyd: What?

Porter Stansberry: Yes.

Roddy Boyd: Polish ARMs, huh?

Porter Stansberry: Yes. So the question I've got for you is: at what point does somebody at GE think: "This is a good use of our AAA rating, and what we should really do is allocate heavily to Polish adjustable-rate mortgages?"

Roddy Boyd:I mean, words fail. I don't have the vocabulary, Porter. I don't have a way to express it.

Porter Stansberry: This is behind the giant problems that GE has had for a long time that have just now come to light, and their very-low-quality assets that somebody stocked all of GE capital with. And that story has never been told. And I just want to point out that it was the crack gumshoes at the Kansas insurance regulatory body that first caused GE to admit that a lot of the assets in GE Capital are a bunch of bullshit, and they took a $21-billion write-down. Now, just think about that for a second, Roddy. When's the last time the Kansas insurance regulator was the sharpest tool in the drawer in terms of investigative work and American finance?

Roddy Boyd: I think you might have to [laughs] – the jokes are alluding me because the setup is too good, you know? [Laughs]. "Never" might be –

Porter Stansberry: You can't make this stuff up.

Roddy Boyd: Yeah.

Porter Stansberry: I mean, this is at the same scale as strippers in South Florida owning five homes, right? This makes no sense.

Roddy Boyd:Yes.

Porter Stansberry: And yet there's not a peep from the SEC or from the Southern District of New York or from any of the usual sources. And why would that be? Hm. Let me see. Let me see.

Roddy Boyd: I don't share – just to be as blunt as the traffic'll bear, I don't necessarily share your view about a whole lot of things. But on this one, I think I see where you're going. I see your hand, and I'll raise. I think GE probably has a great deal of regulatory capture going on in its favor. Because going – when I was at Fortune Magazine, the investigative unit, back in '08, one of the projects I was working on when they began laying us all off – I can say it now because it's been 10 years and I'm not there obviously anymore – is I was the point man on doing a very large piece on GE Capital's – I had some kind of goofy word, but really abusive accounting. And it was going to go a lot farther than just numbers. It was diving into it. And they were so worried about their AAA rating. It was incredible to see what they were willing to throw at us. Just even questioning a AAA rating for that band of crap.

And so fast-forward 10 years – Polish ARMs – at no point did I see that they had that there. But my God almighty. I mean, it shocks me, but it doesn't shock me, you know? I mean, look, GE – Jack Welch – there's nothing new under the sun, according to the Bible. But Jack Welch didn't invent earnings management. He just perfected it.

Porter Stansberry: [Laughs].

Roddy Boyd: And it was pretty clear to me – I would bet you a lot of money – I don't have a lot of money, but if I did, I'd bet a lot of it saying that the only way that Immelt got to take it over was he said, "Look, everything Jack did, I'm going to do, except it'll have a different spin on it."

Porter Stansberry: Yeah. I'm not going to –

Roddy Boyd: Because I'm pretty sure their board –

Porter Stansberry: Yeah. "I'm not going to tell on you, Jack. Put me in charge."

Roddy Boyd: [Laughs].

Porter Stansberry: Well, Roddy, listen, this was a lot of fun. And I wish we'd gotten to GE earlier. Because I, too, have done a lot of work on GE over the last 10 years. And I actually did know about the Eastern European mortgages. So I would have helped you if I had known you when you were at Fortune.


Roddy Boyd: Damn.

Porter Stansberry: Anyway, it really is a pleasure to talk to you. I'm a great admirer of your work. And I thought it was so much fun to have a frank discussion about all these issues. I really enjoyed it. I'm looking forward to seeing you in Vegas.

Roddy Boyd: Me, too.

Porter Stansberry: And, Roddy, listen, I'm a friend. If I can ever do you a favor, if I can give you any publicity, or if I can help you push anything to the public, let me know.

Roddy Boyd: Thank you.

Porter Stansberry: I'm always happy to help.

Roddy Boyd: Oh, many thanks. I deeply appreciate this. Big honor. Thank you.

Porter Stansberry: Okay, Roddy. Have a great day.

Buck Sexton: Man, we went deep there, Porter. That was some deep-dive stuff.

Porter Stansberry: Sorry, guys.

Buck Sexton: I was riding shotgun, learning a lot.

Porter Stansberry: Sorry, guys.

Country Club Guy: I was trying to figure out the time I was going to get into there and ask a question.

Buck Sexton:That was like 20,000 Leagues Under the Sea deep.

Porter Stansberry: I'm really passionate about all this stuff, because there was a time in my life where I was the little guy that the government was trouncing, you know? And I hadn't done anything that they said that I did. And so it makes me a little more sympathetic when I see people who are getting railroaded by the public for not – it's not that they necessarily did anything wrong, it's just that there's a witch hunt. And I don't like to see that. I don't like to see justice being abused, especially not by large corporations or the big media. No offense, Buck.

Buck Sexton: There is no bigger threat from government to the average American than a politicized prosecutor. That's it. There's nobody else scarier.

Porter Stansberry: They have a nuclear weapon. No one ever beats a federal case. Nobody.

Buck Sexton: That's right. They bankrupt you in the process. By the way, they actually sometimes will even bring that up with people in the negotiations.

Porter Stansberry: Of course they will.

Buck Sexton:"Even though we know that you're going to win, we're going to bankrupt you."

Porter Stansberry: How they were able to get Fastow to testify falsely against Skilling was they threw his wife in jail. They threw Fastow's wife in jail.

Buck Sexton: Porter, explain this to me: how is it that Governor Bob McDonnell, former governor of Virginia, big state, important state – this guy was at one point in the top five candidates to be vice president of the United States. He was on the short list, okay? How is it that that guy's wife is criminally charged with felonies for accepting gifts under a corruption statute when she is not an elected official and took no action?

Porter Stansberry: I have no idea. But I can tell you: If they come after you, you just had better pray. Because you're [beep].

Buck Sexton: Yeah. You're done.

Porter Stansberry: And we can talk about these abuses all we want. And guess what the general public thinks? "Who cares? Fat cats. Screw 'em." And, you know, you might not know the guy, but the Holocaust writer, Primo Levi, one of my favorite authors of all time, right?

Buck Sexton:Oh, Primo Levi.

Porter Stansberry: He had a great line. I'm pretty sure it was Primo. It might have been Elie Wiesel – I think is his name. The other great –

Buck Sexton: Elie Wiesel, yeah.

Porter Stansberry: Sorry. The other great Holocaust writer. But it's true: When they came after the Democrats, I didn't care because I wasn't a Democrat. And then when they came after the janitors, I didn't care because I wasn't a janitor. I'm obviously misquoting it. But the point is: You don't care when the federal prosecutors or the media is abusing somebody – you don't care until it turns out they're coming after you or your family. And then you care a great deal, and you're like, "How does this happen in America?" I mean, no one – if I tell you what they did to Fastow, you won't even believe me because it's so terrible. Fastow was a crook. There's no question about that. And he was willing to admit that he was a crook. But the government said, "Unless you say that Jeffrey Skilling knew about the Galactic clause, we're going to throw your wife in jail," and then they did.

Buck Sexton: Yup.

Porter Stansberry: And the prosecutor who did that, the mobster who did that, gets rewarded with a partnership at the largest law firm in America and has probably made $25 or $30 million since.

Buck Sexton: Hey, man, I'm the one who keeps telling everybody about James Comey, one of my least favorite former government servants, who just happened to go to – you would know. I forget the name of the – the biggest hedge fund – I think it's the biggest hedge fund based out of Connecticut. It was one of the huge ones.

Porter Stansberry: Bridgewater.

Buck Sexton: Yeah. I believe it was Bridgewater.

Porter Stansberry: It's Bridgewater.

Buck Sexton: And that was the only giant hedge fund that I know of where there was no probe from Preet Bharara's grandstanding –

Porter Stansberry: Absolutely not. No, he bought protection.

Buck Sexton: And look at that.

Porter Stansberry: It's just a racket.

Buck Sexton: And what a shock. And, by the way, Preet was Comey's protégé, which also gets left out of all this. These guys all know each other.

Porter Stansberry: And, by the way, I don't think that Preet's prosecutions, in many cases, were ethical or correct, and a lot of them have been thrown out later in the appeals process. So there is an appeals process. And even in Skilling's case, he got 10 years lopped off because he shouldn't have been convicted either.

Buck Sexton: Yeah. But where do you go to get your reputation back, Porter? That's the problem.

Porter Stansberry: You don't. You can't. And, by the way, Skilling doesn't deserve a reputation [laughing]. He was a complete idiot [laughing]. The business model he pioneered was completely crazy and stupid.

Buck Sexton: But idiocy and criminality: not the same thing. If idiots went to prison –

Porter Stansberry: No. And that's the big problem. When you allow the government to convict someone of a criminal charge when there is no criminal intent whatsoever, then you're allowing them to use the biggest weapon they have for political reasons, which is always a bad idea.

[Music plays]

Sir, I'll do the intro. This is the mailbag. This is when you guys write to us and tell us how we screwed up. And most of the time, we don't deserve it. But sometimes we really do. Including last week. And I'd like to go on the record about this.

So this is the mailbag. Send your feedback to –

Buck Sexton: [email protected]

Porter Stansberry: [email protected] Love us or hate us, just don't ignore us. Send us a note. Especially about today's episode, which I thought was really deep and fascinating and I hope you liked it.

So here's the letter from Rich W. Thanks, Rich, for writing in. Buck will send you some swag. "Greetings. Thanks for your effort and time. You wasted my time. Here's how. Five minutes regarding your cool vacations and pending golf afternoon. Same lavishing praise on each other and Mr. Page. Finally, you didn't know Carter Page wouldn't answer questions nor add to the knowledge base, but you had a choice: to air the podcast or not to air the podcast. Trying to be honest, not mean-spirited. Rich."

By the way, Rich, I could not agree with you more. And I told both my cohost and our executive producer, Country Club Guy, that I didn't want to be within 100 miles of that podcast or Mr. Page, who I know nothing about and I'm not interested in. Oh, no, no, but I was not allowed to back out. Oh, no, no, no. Guilted into being present. And then technology fails and the guy who's supposed to interview Carter Page because he does know something about it and he does care about it, my friend Buck – we can't get him on the podcast because our technology fails. And even then, do we cancel the podcast? No, no, no. We make Porter Stansberry look like the world's biggest [beep] interviewing a guy he doesn't know one damn thing about politics, which he doesn't give a [beep] about and we air the podcast. Great job, crew.


Buck Sexton: We were in a little bit of a transition, a little bit of a transition last week. We had some technical things to handle. Going forward, only podcasts that deepen the knowledge base and that Porter is fired up about.

Porter Stansberry: And the next time I tell you I don't want to be on a podcast because I don't know anything or care anything about the cast, why don't you just let me gracefully back out?

Country Club Guy: I know what your summer schedule looks like. And I knew you were going to be away. I wanted to have our audience be able to hear you.

Porter Stansberry: Then get Carter Page when I'm not going to be here.

Country Club Guy: It was a good guest to have. I thought so. Buck, you just need to have your microphone work.

Buck Sexton: You know, I will just say this: you say you're concerned about the government going after you for political reasons. Porter, the government has pulled that guy's e-mails, phone calls, everything.

Porter Stansberry: He's been abused nine ways to Sunday. I mean, the government hasn't [beep] somebody in the [beep] that hard in quite some time. I agree. But I will tell you: I don't care, because he was asking for it. And every question I asked him, he just said: "Well, you know, Trump is the best. Blah blah blah." He didn't give any answers to anything. In my opinion, he's just one of those political guys. All he cares about is what's good for his man. Not what's good for the country. Sure, the FBI's treated him terribly. Absolutely. You know, but phff – lay down with the dogs, wake up with the fleas.

Buck Sexton: See, I just think it's interesting also because you liked talking to Julian Assange, and I feel like the audience was really interested in hearing that, and Assange is tied into this whole collusion, Russia, and e-mails-releasing, all that stuff.

Porter Stansberry: Absolutely. But Assange comes at it saying that every government in the world is corrupt. "Send me the documents that prove it and I'll publish them." He publishes on governments all around the world. I applaud that. That's journalism. This guy is a partisan.

Buck Sexton: Yeah. I missed – I couldn't even hear most of the interview, to be honest with you. So, you know –

Porter Stansberry: [Laughs].

Buck Sexton: – I would have jumped in and been like, "Wait a second, Porter" – anyway, okay. Porter thought last week was a giant turd, everybody. And he's the boss. So this week, obviously, we got into some real stuff. Next week will be dope. What do you think, Porter, by the way, about getting – do you want to get the Theranos author on? Because he's not just an author. He blew the whistle on Theranos when no one else would.

Porter Stansberry: I would love to hear the Theranos story. And I have a long-winded connection to one of the Theranos board members, which I'll disclose later. I mean, it's not a big deal. But the thing I'm most interested in, in the Theranos story, is the fact that the former secretary of defense – his grandson, right?

Buck Sexton: Yeah.

Porter Stansberry: That angle. His grandson blew the whistle and now his grandfather won't talk to him.

Buck Sexton: Schultz. And they went after him.

Porter Stansberry: Yes.

Buck Sexton: They were going after these guys. With, like, private detectives. This story gets crazy. So we're going to reach out to Carreyrou. He's a Wall Street Journal former investigative reporter, try to get him. It might not be next week, but it'll be soon. Other than that, [email protected] Obviously, we will read it on-air. And if we have a goose turd, not only can you tell us, but Porter will agree with you if it was, in fact, stinky.

Porter Stansberry: That's right.

Country Club Guy: I think this guy's going to get some swag from my personal closet. Because it got Porter so fired up.

Porter Stansberry: I think when you call us out and we deserve it, I'm going to applaud you every time. You know, people can say a lot of things about me, but I will call a spade a spade. And when I lay a turd, I fess up.

Buck Sexton: With that, everybody, we hope you'll join us next week and also subscribe. Write to us: [email protected] is where you can find transcripts of the show. Subscribe on iTunes or Stitcher, wherever you listen. Mr. Porter Stansberry, it has been illuminating, sir. I will see you next week. I'll actually see you in person. And we will rock and roll with a fantastic podcast.

Porter Stansberry: All right, Buck. Thanks for the great podcast.

Buck Sexton: Thanks, everybody.

Porter Stansberry: See you next week.

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