More Patrick Byrne Subpoena Fallout

Roddy Boyd has an intriguing article in the New York Post today about the one year it took Overstock.com Patrick Byrne to disclose his SEC subpoena.

An SEC attorney told The Post that while such disclosures should be made "promptly," there was little chance that his actions would get him in trouble.

A former enforcement chief echoed this sentiment, adding, "If [the SEC] is looking at you, there [are] bigger fish to fry."

There certainly are, and the size of the "fish" can be judged by the wide-ranging nature of the SEC subpoena. My information is that the biggest "fish" begins with the letter "I" as in "inventories." The one-year delay falls under the category of "icing on the cake." Still, this makes me wonder: if concealing a subpoena from the SEC for a year is not enough to yield SEC action, in and of itself, what is the point of having rules requiring prompt disclosure of significant company news?

Byrne has responded to media interest in his latest malfeasance by, typically, accusing the media of conspiring with one another to get him.

Yesterday, Byrne alleged a media conspiracy because three reporters had simultaneously asked about the one-year subpoena delay. A rational, honest CEO would have realized that the reporters were reacting to a single event -- the filing of the 10-Q, and subsequent pickup by Sam Antar's and my blog. Byrne, who has turned paranoia into something of an art, screamed "conspiracy" -- which he either knows is a lie or actually believes. Not sure which is worse.

Lee Distad observes as follows:

I've only paid tangential attention to the Overstock.com saga because, quite frankly, I cover companies that either sell stuff, produce stuff, or market stuff, and I'm not entirely certain that Overstock.com's business plan focuses on doing anything other than setting large piles of money on fire and generating negative publicity.

However this latest piece of news is so bizarre, and well, sordid, that it must be mentioned.

Overstock's house stalker, Judd Bagley, predictably defended his boss on the Investor Village message board (thumbing his nose at Regulation FD, as Byrne always does, by using a "handle" and not signing his post with his name and affiliation with Overstock).

Bagley pursued the same dishonest theme on Overstock.com's antisocialmedia.net corporate smear site.

In the IV post and the smear site, Bagley sought to draw parallels between Byrne's nondisclosure of his subpoena and Jim Cramer's stock sales after his SEC subpoena. Another user responded as follows:

How many days did it take Cramer to notify the public that he had personally received a subpoena? Compare with Byrne.

How many shares of TSCM have been sold by Cramer or his firm between the time he received his subpoena and he notify the public that he received a subpoena? Compare with Byrne and his firm.

Did the SEC change its mind about the Cramer subpoena and decide not to enforce it? Compare with the Byrne subpoena.

A response on the smear site would have been impossible, of course, as Bagley deletes all critical comments.

Another crucial distinction between Cramer's subpoena and Byrne's is that Cramer was being summoned as a witness, whereas Byrne and his company are clearly the targets of the SEC investigation. Byrne's desperate, and dishonest, efforts to spin the subpoena as "cheerily helping the government uncover wrongdoing" are aimed at deflecting attention from that fact.

The O-Smear blog has a solid take on the latest Byrne looniness, and I am sure there will be more fodder for Byrne-watchers in the days ahead.

Batten down the hatches! Expect more "who do you believe, me or your own two eyes?" spin to come from the Overstock camp on this latest mess.

UPDATE: More spin from Bagley, who is flailing away hard -- and fraudulently, as usual -- at Jim Cramer's stock sales on behalf of his SEC-investigated boss. A "fraud" accusation from the likes of Bagley, who routinely embeds spyware in his posts, is funny.

Meanwhile, the best take on the company recently came from Dan Rubin of the Motley Fool (subscription required):

This man is more delusional and power mad than any executive I have ever seen.

He's under investigation by the SEC. And he acts as if he's going along with the investigation as a service to the nation.

I feel convinced, believe it or not, that this message board as a whole has been way to optimistic about this company. I believe it has a cult culture that will fall apart like a house of cards once the leader falls. And after peeking at blogs by Weiss, Antar, and this forensic accountant lady who has come on the scene - this really looks like a complete and total disaster. I know David has it pegged to go below 10. I think he's right. I'd take out the 1 though. I shudder to think of what will come to light from these investigations. All evidence points to a CEO who is out of touch with reality, who thinks he is smarter and more righteous than the law, who hires shady characters like D. Bagley and who, I believe feels he is morally superior to all. In other words, I would not be the least bit surprised to find he has broken laws in the name of his brand of crimefighting. Disaster looms and can strike hard any day. How anyone could seriously own this stock is beyond me. As Carmela said to Tony, "it's like you have a piano dangling by a rope over your head!" [Italics added]

Note what I have italicized. That is my feeling as well. Call it a gut reaction.

© 2007 Gary Weiss. All rights reserved.

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