Sunday, May 13, 2007

Baghdad Byrne's Weekend Delusion-a-thon

Updated Monday, May 14

More on the continuing adventures of CEO Patrick Byrne, whose paranoid fantasies and lengthy, self-incriminating message board rants are a fascinating spectacle. His increasingly surreal statements brought back fond memories of Baghdad Bob, the famously delusional Iraqi information minister.

In our last installment, I described how Byrne's "forgetting" to report an SEC subpoena for a year might have been more than just an omission, but a misstatement.

Most CEOs would hold their peace in such a situation. But Baghdad Byrne continued to dig into the topsoil with his tongue, as he continued his verbosity to investors asking a simple question: Why did he wait a year before disclosing his subpoena? It was a fascinating example of a slippery CEO refusing to tell the truth.

Byrne began the weekend mouth-fest by bouncing off the walls on the Investor Village message boards Friday night, reacting to questions from Joe Nocera, who wrote an excellent column in the New York Times Saturday morning.

If you comb through the muck you will note that Byrne's central complaint against the Times was bogus. He was given hours of time to respond to Joe's simple query about the SEC investigation of Overstock, but refused to do so -- because, no doubt, he knew his spin would not work with perceptive Nocera. This Internet addict's "didn't check my emails" excuse will go down in the pantheon of unbelievable Overstock excuses, right alongside "cow in the highway."

Completing the surreal scene was Byrne's loyal factotum, resident stalker Judd Bagley, who threatened a critic -- Internet sleuth "ScipioAfricanus" -- with "exposure." So I guess you can expect the Overstock's smear site to be cranking up some fairy tales fairly soon.

Byrne and the nauseating Bagley continued to thumb their noses at Reg. FD and public company disclosure norms by posting under Internet "handles" and not disclosing their identity and corporate affiliation with each post. (Not that it would necessarily make much difference. I think that their posting on a message board raises securities law issues even if they did identify themselves properly.)

Byrne's hysterical and largely incoherent post, "Gotterdammerung of the American mainstream media," predictably tosses Nocera into the ever-widening media conspiracy. But that's not as noteworthy as his desperate effort at damage control over the delayed disclosure of the subpoena.

Byrne's latest spin (repeated the following day) is that the subpoena "was a small fraction as long as the first, covered sub-issues of the first, as well as issues related to a broader investigation that is not about me or Overstock at all."

But that's not what the company's recent 10-Q said. The 10-Q doesn't say Byrne was subpoenaed on an investigation unrelated to Overstock or Byrne. In fact, subpoenas do not disclose, as a rule, the purpose of the investigation -- they just ask for stuff. Still if Overstock knew that the purpose of the two subpoenas was different, why didn't it say so? What possible reason would it have not to say so?

As you can see, the first quarter 10-Q said that both subpoenas requested the same things:

These subpoenas [emphasis added] requested a broad range of documents, including, among other documents, all documents relating to the Company’s accounting policies, the Company’s targets, projections or estimates related to financial performance, the Company’s recent restatement of its financial statements, the filing of its complaint against Gradient Analytics, Inc., the development and implementation of certain new technology systems and disclosures of progress and problems with those systems, communications with and regarding investment analysts, communications regarding shareholders who did not receive the Company’s proxy statement in April 2006, communications with certain shareholders, and communications regarding short selling, naked short selling, purchases and sales of Company stock, obtaining paper certificates, and stock loan or borrow of Company shares.
There can be only two reasons for this discrepancy:

1. The person who signed the 10-Q, Overstock CFO David Chichester, works secretly for the Sith Lord, so he sneaked in this materially misleading language, omitted the exculpatory information to make his boss look bad, and Byrne was too busy posting on message boards and looking for dead bodies in his trunk to notice;


2. Byrne is telling one whopper of a fib, seeking to mislead and distort by claiming that the Overstock subpoena is materially different from the Byrne subpoena.

Once again we have the "Groucho Marx challenge": What are you going to believe, Patrick Byrne or your own two eyes?

My challenge is this: What's the SEC going to do about it?

Ace forensic accounting sleuth Tracy Coenen observes:

Did you catch that? He’s claiming that his subpoena wasn’t related to the SEC investigation. That will be his reason/excuse for not disclosing it in Overstock’s Prospectus and SEC filings.

Patrick Byrne may also claim that since the subpoena was to him personally, and the Prospectus and 10-K both apply to the company, then there’s no violation or lie.

The cool thing is that neither of these excuses really pans out for Byrne. The company has now disclosed the subpoena, so to say that “previously it wasn’t related to the Overstock investigation but now we’re disclosing it… ” Well, you get the idea.

The Patrick Byrne mouth-a-thon continued into Sunday, with Byrne continuing to push the "Groucho Marx challenge" in a series of ever-lengthier, ever-loonier rants. Note this pile of pretentious, dishonest mush, and this post repeating and amplifying the "Groucho Marx challenge" I noted earlier.

He also seems in intent on pushing the line that the SEC is aiming at a broad, widespread conspiracy and Byrne is just a cooperating witness. If he was, of course, they wouldn't be issuing a subpoena, and his famous "celebration" press release (below) had already indicated that the SEC's interest was largely hostile. Note the admission that "Some of the requests suggest the whispering of the blackguards, but I remain unconcerned about their hokum."

"Blackguards" is Byrnespeak for "critics who have made credible, well-documented assertions concerning me and my company." It ain't "hokum," of course, and Byrne certainly seems concerned. Indeed, terrified.

That's one of a number of contradictions and lies that oozed from Byrne's weekend ravings, which I am sure will be giving the SEC and other Overstock-watchers plenty of grist for their investigations.

Hopefully for Coenen, Sam Antar, the media, the SEC and everyone else following this story and toting up his lies and evasions, Byrne will continue to keep his tongue primed and ready for deployment. As hole-digging equipment it is a remarkable instrument.

Felon-turned-crimefighter Sam Antar observes that back on January 30 he asked Byrne on the Investor Village message board if "the Board of Directors considered any additional disclosure relating to the SEC subpoena of" Byrne's response was an evasive, abusive brushoff, and Byrne's minions later had Antar booted off the board.

Meanwhile, forensic accounting whiz Tracy Coenen is dazed and amazed by Byrne's weekend obfuscations:

So now, Byrne is claiming that the May 9 press release about the company’s subpoena really included his personal subpoena, even though he didn’t actually disclose that and the subpoena hadn’t even been issued yet. That might wash with some people, but not with me.

He now disclosed the personal subpoena separately, so he must believe that it has some significance and requires disclosure. Either it needs to be disclosed or it doesn’t, but Patrick seems to be saying that it didn’t need to be disclosed separately a year ago, and this year it does. Nonsense.

But you see, Tracy, you're making the same mistake I've sometimes made. Byrne is not taken seriously, and I think that somewhere deep down he does not expect to be taken seriously. As a child of ancestral wealth, he has never had to work for a living and expects to coast for the remainder of his life on the paternal nest egg, no matter how much wreckage he causes.

Hey, they don't call him the Baghdad Bob of CEOs for nothing!

UPDATE: An alleged Overstock insider posted anonymously on the Investor Village message board Sunday night, claiming that Byrne concealed his subpoena from the board of directors and was eventually forced to act by the SEC. If not a hoax, this could be devastating. Here's Tracy Coenen's post posing two additional questions for Byrne.

The alleged insider says:

All was good in the world as the SEC careful examined the evidence provided, until the SEC pronounced that one of the CEO's targets was without fault, Gradient/Camelback Research. This infuriated the CEO and he made mention of the 2nd subpoena to one to many persons. The word leaked to the Board of Directors via a variety of sources, including Sam Antar. The CEO was called on the carpet but he basically told the board to go F themselves, he wasn't disclosing a 2nd time. One member of the board of directors then resigned.

The SEC then pushed the issue and the board was forced to act, under legal advice, to disclose the 2nd subpoena in the latest 10Q. Patrick as royally pissed off and remains pissed off to this day.

He refuses to admit anything improper was done and it is now a firing offense at to mention the 2nd subpoena.

But if this account is correct, why didn't the board of directors resign en masse? It doesn't seem plausible that even the most pliable corporate board would accept such misconduct from a CEO without quitting -- and the Overstock board is arguably the most pliable in Corporate America.

Another interesting weekend discovery was made by Internet sleuth "ScipioAfricanus." He found that a Utah entity called Provo Labs is monitoring traffic to antisocialmedia. Provo Labs, which describes itself as "an incubator that invests in early stage web companies" (whatever that means) is Bagley's former employer.

Quite a weekend for this train wreck of a company.

LATER: More babble.

© 2007 Gary Weiss. All rights reserved.


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