Did Overstock.com CEO Patrick Byrne Lie to the SEC?

This is fast becoming one of Overstock.com CEO Patrick Byrne's worst days in quite a few red-ink-smeared months. Pardon me if I am not shedding tears.

The fiasco du jour has been Byrne's failure to disclose for one year his subpoena by the SEC, and subsequent meltdown and spin campaign. His loyal subordinate, stalker-in-residence Judd Bagley, has served his boss by smearing Jim Cramer and spying on users of the Investor Village message board. (Hey, he's not called "Sleazey McSleaze" for nothing. Personally I think "the nauseating spectacle of Judd Bagley" has more of a ring to it.)

Now, on top of that, some have questioned whether the real issue du jour is not delay or concealment, but rather that Byrne has been flat-out lying.

It's not surprising that Byrne would lie, for the simple reason that he is a liar. I can say that with some confidence because just about every word out of his mouth about me has been a lie. But lying to the SEC is not a wise move. Under the right circumstances it can be a criminal offense.

A sharp-eyed reader posted the following as a comment and I think it is worth repeating here:

Did [Byrne] not only fail to disclose but also make false disclosures? See the deal docs for OSTKs 12/06 [secondary offering]:

Except as disclosed in the Prospectus, there are no legal, governmental or regulatory actions, suits or proceedings pending, nor, to the Company’s knowledge, any legal, governmental or regulatory investigations, to which the Company or any Subsidiary is a party or to which any property of the Company or any Subsidiary is the subject that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of the Company to perform its obligations under the Agreement; to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated by any governmental or regulatory authority or threatened by others; and there are no current or pending legal, governmental or regulatory investigations, actions, suits or proceedings that are required under the Act to be described in the Prospectus that are not so described.

The key words here are "except as disclosed in this Prospectus." Ain't no disclosure of a subpoena of Byrne, boys and girls. Seems to me that Byrne is saying, "I'm not subpoenaed." But he was.

Gee, is that bad? Is it bad when a CEO misleads people who buy stock issued by his company?

Next comes reformed felon Sam Antar, who has pointed out on message boards that Byrne certified to the accuracy and completeness of the 10-K for 2006, as required by Sarbanes-Oxley.

Here's the relevant wording:

I, Patrick M. Byrne, certify that:

1. I have reviewed this Annual Report on Form 10K of Overstock.com, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;….

Oh my goodness. I think an SEC subpoena of the CEO of a company, in connection with an investigation of the CEO and his company, is a "material fact." He omitted that.

Gosh. Is that bad? Is it bad when a CEO omits a material fact from a 10-K and then certifies that he hasn't omitted any material facts from the 10-k?

And if it is bad, what is the SEC going to do about it?

The SEC may have bigger fish to fry in its investigation of Byrne and Overstock.com, but if you ask me this one stinks to high heaven.

UPDATE: Byrne's continued message board rants continued over the weekend.

© 2007 Gary Weiss. All rights reserved.

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