Monday, April 16, 2007

Tracking the Deceptions of Overstock.com CEO Patrick Byrne


Overstock.com CEO Patrick Byrne is often viewed as a comical figure -- throwing tantrums, acting like a clown on national television (left), and spinning loony conspiracy theories to excuse his incompetence. But as New York Times columnist Joseph Nocera has eloquently pointed out, it's a mistake to view Byrne as a mere buffoon. He is also a menace, and his company is under investigation by the SEC.

An excellent blog post today by reformed felon Sam Antar points out the extent to which Byrne has put himself in jeopardy, just by opening his big mouth.

I am increasingly convinced that Byrne will be the only CEO in history to get himself in hot water with the Securities and Exchange Commission by posting on message boards.

Sam tracks Byrne's deceptive and contradictory remarks in the Investor Village message board, where he posts under the pseudonym "Hannibal" and only rarely signs his posts. Sam compares Byrne's slippery posts with those of Overstock.com's resident stalker Judd Bagley, who runs Overstock's antisocialmedia.net corporate smear site. He concludes that Byrne and Bagley made deceptive public statements to conceal Byrne's role in creation of the antisocialmedia smear site.

That's problematic for a host of reasons, including the fact that antisocialmeda was run anonymously for some months, until Bagley was outed as its operator by the New York Post. That gives all involved -- including Overstock -- possible exposure under the federal anticyberstalking law, a risk factor nowhere disclosed in the company's SEC filings.

As if to again demonstrate Overstock's contempt for the most elementary corporate ethics, Bagley spun a wild conspiracy theory on the antisocialmedia smear site yesterday, encompassing the Depository Trust and Clearing Corp., myself and a person named Joseph Petrofsky.

As the O-Smear blog points out, such fairy tales seek to mislead investors by accusing Overstock's real and imagined critics of being in league with DTCC, which is at the center of "stock counterfeiting" conspiracy theories.

So how does a potential investor evaluate the true state of Overstock.com? Largely by the representations of management. Is it materially significant if Overstock is being criticized as the result of some covert DTCC operation (implying critics are dishonest) or the criticism is honest?

I think it is "materially significant...and the SEC knows that I think it's materially significant...and they know where to find me.
And me as well.

Ironic, isn't it, the kind of trouble Patrick Byrne is getting himself into, just to placate a small number of "tinfoil hat" conspiracy theorists -- many of whom don't even own the stock?

UPDATE: Not only is Byrne's bloviating exposing himself to legal liability, but it is being used as ammunition by his opponents in his recent absurd junk lawsuit against Wall Street firms.

In legal papers filed recently seeking dismissal of the suit, lawyers for one of the defendants, Merrill Lynch, observed that the suit is part of a "continuing campaign by Overstock and its CEO to blame the poor performance of its stock on anything other than its own inadequacies." The brief prominently sites Overstock's "public relations assault against critics."

Later in the day, Bagley placed a misleading disclaimer on the smear site -- obviously at the behest of Overstock's lawyers -- in a desperate, belated attempt to put some daylight between his corporate smear site and Overstock.

Imagine the derision that would rightly come from Byrne and his supporters, if an employee from Rocker Partners started an anonymous smear site aimed at Byrne. Yet Byrne, in his arrogance, expects people to swallow this pap.

A good analysis of the doubletalk, which contradicts (as usual) previous statements by Byrne, can be found here.

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

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