The Daily Beast has an excerpt from Randall Lane's new book, The Zeroes, which claims CNBC host Jim Cramer's protégé and former pro-baseball player Lenny Dykstra "was secretly paid to plug stocks on" the Cramer co-founded website "TheStreet.com and give access to Cramer."
In an era of epically wrong financial predictions, boisterous Jim Cramer's declaration that "Bear Stearns is not in trouble!" a week before its March 2008 collapse, rated among the most moronic, or at least the most infamous.
But it turns out that Cramer made one call far worse: He decided to make a stock-picking star out of a mumbling former Major League Baseball All-Star named Lenny Dykstra, giving him a high-profile column and ultimately an expensive "premium" newsletter on Cramer's site TheStreet.com. How did Dykstra return the favor? As I reveal in my book, The Zeroes: My Misadventures in the Decade Wall Street Went Insane, Dykstra took money --$250,000 worth of secretly issued stock -- in exchange for recommending that stock to TheStreet.com subscribers. He also promised access to Cramer in exchange for the stock, which he apparently hid under his brother-in-law's name.
It was Cramer's repeated endorsements -- echoed by de facto validation from everyone from CNBC to me -- that enabled Dykstra to pull off the scheme.
Jim Cramer single-handedly created the concept of Dykstra-as-financial genius. Known mostly for his willingness to crash his body into walls or his cars into trees (nickname: "Nails"), the former New York Met and Philadelphia Phillie became an investment columnist for TheStreet.com in 2005, after sending Cramer an unsolicited email. For the next four years, Dykstra made stock picks, focusing on "deep-in-the-money calls"—a way to buy leveraged options—for tens of thousands of followers on Cramer's website.
The excerpt does note that there is no indication that Cramer had any knowledge of the payments to Dykstra:
Cramer, I am sure, had no knowledge of Dykstra's "pay to plug" scheme—an arrangement that could well lead to a Securities & Exchange Commission investigation. He was just a dupe. But his relentless endorsements and promotion of the ballplayer's stock-picking over the years must now surely rank as his most ill-conceived.
In March, I noted that the SEC was investigating TheStreet.com.