Last week, Ira Stoll took issue with Dennis Berman’s column on SharesPost and SecondMarket, on the grounds that Berman lied about his own identity: he pretended to be his late grandmother. Stoll likened Berman’s behavior to Project Veritas’s entrapment of NPR—something the WSJ itself said failed to “meet the ethical standards of elite journalistic institutions, including of course The Wall Street Journal”.

Now SharesPost CEO Dave Weir has written his own take on the Berman column, and it goes much further than attacking Berman for lying about his identity. He also accused Berman of misrepresenting SharesPost’s policies, “leaving readers largely misinformed and our company unfairly maligned”.

I asked Berman if he had any response to Weir, and he replied by sending me a copy of his response to Stoll:

As you can appreciate, the integrity of these markets is based in part on honest disclosures by both buyers and sellers. My intent was to probe the strengths and weaknesses of a system that relies almost exclusively on buyers’ own disclosures for establishing whether they are “accredited.” That self-reporting standard enabled my grandmother to slip through. So might other people with intent to dodge the rules.

My approach and objectives were discussed in detail with the companies prior to publication. As you can see, the story also praises SharesPost for cutting off my access.

We take ethics and fairness very seriously at the Journal. We are in the business of truth-telling, not deception. In this case, applying a simple test to an entire way of doing business helped shed light on an important topic for investors and markets that ultimately serves the public good.

Weir was well aware of this response when he wrote his email, and aware too that it doesn’t come close to answering his substantive criticisms. In fact, Berman’s response to Stoll only serves to exacerbate the misinformation in his original column, since he says that the SharesPost system “relies almost exclusively on buyers’ own disclosures”. This simply isn’t true, as Weir explains:

-Mr. Berman failed to mention that his fraud only enabled him to view information on our site. Had he attempted to transact, he would have been required to undergo a second level of compliance review and direct dialogue with one of SharesPost’s FINRA registered brokers;

-Had he actually entered into agreements with a seller, those agreements would have required him to make multiple contractual representations to the seller, the company and SharesPost that he had provided accurate information and was in fact an Accredited Investor;

-Had he actually entered into a contract to purchase shares, the transaction would have been processed by U.S. Bank, a third party escrow agent, which first verifies buyers’ and sellers’ identities by collecting all the documents required under the Patriot Act and Anti-Money Laundering regulations.

Berman’s response is barely adequate as a reply to Stoll. There are many legitimate concerns about SharesPost, but the fear that people are lying about their identity to trade shares on the system is not one of them. Berman gives no reason to believe that has ever happened, or that anybody is silly enough to even attempt it: after all, no one wants to end up running the risk of having valuable shares taken away from them on the grounds that they were acquired under false pretenses.

The rest of Berman’s response is even weirder. Whether Berman subsequently talked to the companies under his own name is beside the point—and if the WSJ is “in the business of truth-telling, not deception,” why did Berman lie and deceive? His only defense is that doing so “ultimately serves the public good”. And that defense, as we’ll see, doesn’t stand up.

If Berman’s statement is weak as a response to Stoll, it’s clearly inadequate as a reply to Weir. If Berman’s intent was “to probe the strengths and weaknesses” of the SharesPost system, as he says, then why didn’t he mention any of the strengths of the system, which would clearly have prevented his late grandmother from buying shares?

And more generally, if Berman’s “in the business of truth-telling,” then why did he end up publishing a column which, as Weir says, “ignored and embellished the facts to suit his story line”?

There are lots of errors in Berman’s column, starting with its headline: “Meet My Departed Grandma, Fledgling Facebook Investor.” This is false: Berman’s grandmother failed utterly to invest in Facebook.

Berman goes on to say that his grandmother was “cleared” to buy Facebook shares, and that SharesPost certified her as an accredited investor. But as Berman himself admits later on in the column, in the first instance buyers certify their own credentials; the minute that the process reached the point at which SharesPost had to do any clearing or certifying, the company suspended the account.

Felix Salmon is an Audit contributor. He's also the finance blogger for Reuters; this post can also be found at