The Times Chronicles the Patrick Byrne Meltdown

The meltdown begins, March 2006

The New York Times today has a fascinating column by Joe Nocera on the meltdown of Overstock.com's Patrick Byrne, his anti-analyst-and-media jihad and "naked shorting" demagoguery.

It is a seminal piece that will be cited by market scholars for years to come, long after Overstock and Byrne are just vile memories.

Just by coincidence, Nocera's column comes almost exactly one year after Byrne's meltdown officially began, in a famously bizarre appearance on CNBC. Byrne's downhill slide into the muck had already commenced, but as he held up that sign it was obvious to pretty much everybody that he was losing it.

The latter stages of his deterioration are just as grotesquely entertaining to watch. Nocera provides stunning, new details of Byrne's infamous meeting with Utah legislators over his pet "fails to deliver" legislation:

As it became clear that Mr. Byrne had no support, and the law was going to be repealed, he first offered to finance the state’s defense himself. No, he was told, the state had to bear the cost for its own litigation. Then, he became increasingly agitated, accusing [Utah state senate majority leader Curtis] Bramble of betraying him. As his tone became more belligerent, and he began cursing, most of the others in the room, their jaws agape, simply listened to him rant. Several of them later told me they had never heard anything like it.

Apparently (and I have to admit, I find this hard to believe) even his wads of cash in political donations won't buy his way out of this mess:

Though no one will say so publicly, the word is that Utah officials now feel they were snookered by the Overstock C.E.O. And that his behavior at that meeting further damaged his credibility. And that, even though he is one of the state’s largest political donors, he is going to have a hard time ever getting the Legislature to take him seriously again.

Nocera quotes Bramble as saying "he now believed that Overstock’s motives were 'highly suspect.'" This, mind you, from the sponsor of the original bill. "He added: 'There are those who believe Overstock has been using the Legislature as a distraction against its own problems. It raises serious questions.'"

No s--t, Sherlock.

Now that Byrne has insulted and embarrassed two branches of the Utah state government, you have to wonder whether the state's lapdog Capitol Hill delegation will continue to offer unblinking support for Byrne's fantasies.

Nocera says that Byrne "is becoming harder and harder to take seriously. . . Which is not to say that I don’t still think he’s dangerous."

That he is, and that is why I and many others have been watching him very carefully.

Byrne is clearly terrified by this scrutiny, and he hauled out his shopworn intimindation tactics when Nocera came calling. His surrogate Phil Saunders a/k/a "Bob O'Brien" posted Nocera's emailed questions on his nutty "sanitycheck.com" website, and Byrne pledged to do likewise.

But the brass-knuckle tactics, used effectively against Business Week a year ago, didn't work -- just as they didn't when Susan Antilla of Bloomberg took a star ship to Planet Byrne.

One final note: Nocera wrote another seminal column on the early stages of Byrne's slide into the abyss, "Overstock's Campaign of Menace," in February 2006.

Nocera is a finalist for the Pulitzer Prize in Commentary, and I understand that the oft-quoted "menace" column was one of the prize submissions.

Byrne may be an unmitigated disaster for Overstock shareholders, but for journalists and regulators he is the gift that keeps on giving.

UPDATE: Overstock's resident stalker, "director of social media" Judd Bagley, responded in a message board post accusing Nocera of being corrupt:

Joe Nocera's skewed take on this issue can no longer be attributed to mere differences in human perceptions. He has sold his soul. And I guarantee you he hates himself for it. Certainly, whatever he's getting in return helps to numb the pain, but that stuff never lasts.

Similar sentiments ("Bought, stupid? I'll go with bought.") came from Mary Helburn, director of the National Coalition Against Naked Shortselling. I always wondered why some people in the media would quote this ditz as an "authority" on anything after she said that Enron was a victim of "stock counterfeiting." I'm even more amazed now.

Bagley later went into a meltdown of his own, with a message board post threatening to contact the employers of small-fry investors who criticize Overstock.

As Nocera pointed out in his column, these kinds of ravings are losing much of their "oh my goodness" factor. But the fact that a public company would employ goons like Bagley and tactics like this underscores the need for continued close scrutiny of Overstock.com.

© 2007 Gary Weiss. All rights reserved.

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