Jim Cramer knows how easy CNBC is to fool. He used to play the network himself. Here are five episodes from the stock speculator's past that could use some dusting off.
Cramer avoided any career-ending gaffes on the Daily Show last night — like say, "when a performing monkey pundit does it that means that it is not illegal!" — but the extended drubbing and his squishy apologetic demeanor is a reminder that his 30-year-long career — as a trader, as a dot-com entrepreneur, and now as a screaming cable personality — has been little more than a running series of scandals and contretemps, rife with evidence that the TV personality has long made a habit of using his media profile for personal enrichment. The Stewart dust-up is far from the first time Cramer has run up against allegations of ethical misconduct. Here's the tangled history:
1. Stock-Picking at SmartMoney
In 1995, Cramer mentioned four stocks as good buys in his SmartMoney column, mentioning that he had a stake in one of them. In fact, his firm Cramer & Co. owned shares in all four, including 10 percent stakes in two of them. All four stocks shot up in value after the column ran. The SEC launched an informal investigation, and Dow Jones, which owned SmartMoney, announced a new ethics policy to prevent columnists from writing about securities they own. The magazine eventually took the blame for leaving out the disclosure. Two years later, Cramer told CNN that the episode "turned my life upside down... I now mention to everybody in the press because it could happen again; I don't want it to... It was a horrible incident. I live with it every day." Lesson learned!
2. Shorting WavePhone
In 1998, while co-hosting Squawk Box, Cramer said out loud on television that, prior to interviewing the CEO of a company called WavePhone that morning, he had shorted 25,000 shares of the company because he thought it was overvalued. Later in the same show, he went after the CEO, and WavePhone's stock dropped 38 percent, making Cramer slightly richer. He later claimed that it had been "a terrible choice of words" to say, "I called my stock-loan department and said, 'Listen, I want to short 25,000 WavePhore because I think this thing is a big speculative bubble." In fact, he said, he was just curious if anyone else was shorting the company. CNBC suspended him and the SEC investigated, but found no wrongdoing.
3. Trading With the Enemy
In 2002, Nicholas Maier, who worked as a Cramer & Co. trader for five years, published a tell-all detailing Cramer's manipulation of his pals in the financial media for fast profit: Acquire exclusive intelligence on a stock, take a position on that stock, and then leak the intel to CNBC. "Jim's strategy was to put in an order to buy a stock...and then dial Maria [Bartiromo]," Maier wrote. "As soon as she announced the news on television, the stock would often jump.... We weren't just using the news, but making it. No sooner would Maria be thanking us for the help than we'd be getting a payback—a quick hit thanks to our friends at CNBC."
4. SEC Subpoeanas
In 2006, both Cramer and TheStreet.com were served with subpoenas by the SEC in an investigation into collusion between stock analysts and short-sellers. According to, um, TheStreet.com, the SEC was looking into allegations that "Gradient Analytics, an Arizona stock-research firm, published bearish research reports at the behest of a group of short-sellers, including Rocker Partners, a minority owner of TheStreet.com." The subpoenas were never enforced after the SEC backed down, but such a scheme might involve Rocker Partners ordering up some negative intel on a stock, shorting that stock, and then leaking the negative intel to their friends over at TheStreet.com, profiting nicely when the news breaks.
Oddly enough, Cramer outlined just such a scheme in the 2006 interview with TheStreet.com cited frequently by Stewart last night. If his hedge fund was short on a stock (he used Research in Motion as an example) and needed it to go down, he said, "it's really important to get the Pisani's of the world"—that would be CNBC's Bob Pisani—"talking about it as if there's something wrong with RIM. Then you call the bozo at the Journal who's a reporter on Research in Motion and you would feed that Palm's got a killer that it's going to give away." It works with Apple, too: "Apple, it's very important to spread the rumor that both Verizon and AT&T have decided don't like the phone, and that it's not going to be ready for MacWorld. And this is a very easy one to do because the people who write about Apple want that story, and you can claim that it's credible because you spoke to someone at Apple, because Apple doesn't talk."