Will the Last Overstock.com Director Please Turn Out the Lights?
The Overstock.com train wreck appears to be progressing faster than I had expected, and, as usual, CEO Patrick Byrne's nutty behavior is the catalyst.
Last night, the company announced the resignation of Ray Groves, a member of its board of directors audit committee and one of two "financial experts" on the board. The announcement did not mention the reason, which Groves disclosed in an SEC filing -- "My resignation relates to the Company’s prime broker suit."
Here's Sam Antar's and Herb Greenberg's take on the situation, and a good column by Seth Jayson. The stock tanked in reaction to the news. Herb observes: "Interesting to note that in its official press release, Overstock didn't mention the official reason, instead leaving it to an SEC filing on the day before a three-day weekend." Yeah. You'd think he didn't want people to notice, or something.
The "prime broker suit" is, of course, the moronic junk lawsuit that Byrne filed against half of Wall Street just before announcing fourth-quarter earnings, in a crass attempt to divert attention from the Niagara Falls of red ink.
This is now the third board member to quit because of Byrne's nutty antics.
The first was his father, insurance magnate John Byrne, who was chairman of the company. He quit after an embarrassing falling-out over Byrne's anti-naked-shorting "jihad." As I and others observed at the time, the elder Byrne's departure was a mockery of corporate governance, because a responsible board chairman would have forced a bizarre and delusional CEO's departure, and not just slinked away.
The second board member to leave because of Byrne's craziness was John A. Fisher, who like Groves was a member of the audit committee and who also quit because of the prime broker suit.
More recently, another audit committee member, Allison Abraham, dumped 15,000 shares of the stock. A real vote of confidence, that.
Now, this being Overstock.com, the Groves question raises regulatory questions. Among them: Is that the only reason Groves (and, for that matter, Fisher and the elder Byrne) resigned?
And why is Groves resigning now over a lawsuit filed in early February? Fisher quit in March.
Are there other disagreements that have not been disclosed?
And why wasn't the reason for Groves's resignation disclosed in the press release?
Remember that Hewlett-Packard recently was penalized by the SEC for not providing a full disclosure of the reasons for a board member resigning.
It is interesting, I think, that the two board members who have left -- supposedly solely because they don't like the lawsuit -- were both on the audit committee. This company is under SEC investigation, and one of the subjects of its subpoeanas to the company and Byrne is its accounting practices. Sam Antar has, additionally, raised many serious questions concerning the company's accounting, particularly for inventories, on his blog. I understand that accounting practices are a central focus of the SEC's investigation.
As usual when bad news is about to hit the headlines, Byrne dispatched his in-house cyberstalker, the newly promoted director of communications (and official corporate spokesperson) Judd Bagley, to produce a diversion on the antisocialmedia.net corporate smear site. It appeared on ASM early this morning, and was announced by Gagley (sorry, I wrote that while gagging) on the Investor Village message board shortly after 6 a.m., Eastern time, today.
This one claims mysterious "emails" asserting a closeasthis relationship between myself and the hated Depository Trust and Clearing Corp., the Wall Street back office operation that is a subject of a junk-lawsuit campaign by the naked shorting nutcases.
Bagley also drags in Roddy Boyd of the New York Post, who clearly terrifies Byrne. Boyd was the subject of Bagley's last smear. With the Boyd smear, Overstock.com now has a 100% track record on the media -- it now has published lies about every single reporter who has written negatively about Overstock, via smears from surrogates like Bagley and directly from Byrne.
My favorite part of the ASM post is the last line: ". . . a disturbing picture of that organization’s policy of defamatory, surrogate-driven, scorched earth public relations is beginning to emerge."
Note that the nauseating Bagley precisely describes himself and his own job at Overstock.com, in the context of lies directed at innocent people. The term "surrogate-driven," of course, describes Byrne's own use of surrogates such as Phil Saunders, a/k/a "Bob O'Brien," to smear critics and members of the media.
Byrne's and Bagley's habit of projecting on others their own sleaziness will make for an interesting study in abnormal psychology after this is all over, and Overstock.com is just a foul memory.
Speaking of which, I think a test of the SEC's credibility will be the extent to which it includes this nightcrawler in its future Overstock.com- and Byrne-related enforcement actions. Surely those fabricated "emails," if they exist, should be promptly subpoeanaed by the SEC.
Yes, I realize that Overstock.com's accounting practices are the focus of regulatory scrutiny. But its systematic violations of corporate ethics -- via the employment of at least one full-time cyberstalker and smear peddler -- surely deserve appropriate sanctions.
© 2007 Gary Weiss. All rights reserved.
Wall Street Versus America was published by Penguin USA on April 6.
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