Monday, July 23, 2007

Overstock.com CEO Patrick Byrne Admits He Posted Under Pseudonyms

Seems that Overstock.com CEO Patrick Byrne is now admitting that he "pulled a Mackey" after all.

In a post on the Overstock.com website late last night, Byrne admits that he posted on the Internet under anonymous pseudonyms -- the same grave offense that has snared Whole Foods CEO John Mackey, prompting an SEC probe, internal investigation and an apology by Mackey.

The Times article had quoted Byrne as saying that he always signed his name to his copious Internet message board posts. But as I noted in a previous blog item, that's a blatant lie. Byrne until recently always used a pseudonym, and almost never signed his full name or disclosed his corporate affiliation and massive share ownership when posting on Internet message boards. His user profile on his two favorite message boards, Investor Village and Motley Fool, is "private" and does not disclose his identity.

Byrne claims that the Times did not properly convey the Great One's meaning. However, given his penchant for dissembling, I think it's fair to assume that he was fairly quoted and is now backing off from a lie that is contradicted by the evidence.

Byrne says:
Please provide a citation for this claim: "Mr. Byrne said that he never hides his true identity and always signs his name when he posts under his online handle, 'Hannibal'". Is it your claim that I used the words "always" and "never" in some message board post (and if so, please cite that post), or is it your claim that I stated this in our interview? I know for a fact that the claim is false as regards our interview, and believe it to be false with regard to any online posting, but I stand ready to be corrected. [emphasis added]
(Note that Byrne is contradicting what he said in a rambling, sick rant on his website a week ago, in which he said: "I post in a way that is anything but anonymous." I guess he forgot he said that.)

What's not clear to me is why Byrne seems so anxious to backtrack. The SEC is already investigating Byrne and Overstock, so that is one possible source of pressure.

The media has given Byrne a pass over his online conduct, which was far more egregious than Mackey's and raises serious Reg. FD issues. I wonder if he will continue to be ignored now that he has fessed up. I also wonder if the SEC will take action against him or cower before his real or perceived political influence. His pet senator, Utah Republican Bob Bennett, recently gave a floor speech calling for Senate hearings on his favorite constituent's obsession, the nonexistent "naked short selling" bogyman that is a favorite of penny stock promoters and inept CEOs.

Elsewhere on the Overstock front, fraud-fighter Sam Antar has a sizzling post today on how the SEC was a victim of a "trojan horse" disinformation campaign by Overstock in its war against an analyst who dared to publish negative information about the company.

UPDATE: To round out the day's tidings from this train wreck of a company we have this: it seems that Overstock left out something pretty significant in super-hyped press release glorifying as a major "victory" the denial of a motion to dismiss in its junk lawsuit against prime brokers.
In addition, the Court granted Overstock (and its co-plaintiffs) leave to amend other of their claims for restitution under the Unfair Business Practices Act and for the common law claim of interference with advantage, to more specifically plead the factual basis of these claims.
What Overstock left out was that there were two motions, and that Overstock lost one.

An investor named Al Petrofsky, who attended the court hearing at which the ruling was made from the bench, fills in the gaps in a post on a stock message board:

[The judge] granted the defendants' motion to strike, and ruled that the plaintiffs' may not, as part of the Unfair Competition Law claim (the fifth cause of action), seek to recover any compensation for a decline in the stock price. However, they can still seek to recover such compensation under some of their other theories, such as Tresspass to Chattels (the second cause of action) or Market Manipulation (the fourth cause of action).

He gave Overstock until September 14 to submit an amended complaint that is consistent with his rulings.
Gee. Isn't it materially misleading to not disclose that you lost one of the two motions pending before the court?

Petrofsky confirmed by email that he was the author of the post.

Overstock's skewing of the truth is predictable. What is also predictable is that the media, in its coverage, swallowed whole what Overstock said, without checking further. Let that be a lesson to all of my brethren in the media.

© 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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