Monday, July 09, 2007

Patrick Byrne Confronts His Reg. FD Demons

Overstock CEO Patrick "Sith Lord" Byrne is a man of many demons, most of them imaginary, but one seems to have finally gotten the best of him -- Regulation FD.

In Internet posts over the weekend, it became clear that Byrne was being pushed, dragged, manhandled and otherwise forced into admitting that -- much as he revelled in ignoring it -- yes, there is a Reg. FD, and yes, he must make some gesture at obeying it, ancestral wealth and real or perceived political influence notwithstanding.

His weekend posts also contained -- unintentionally, as usual -- some interesting tidbits about the ongoing SEC investigation into this train wreck of a company, as well as official word that "Omuse," a lame Wikipedia wanna-be that was created to provide a cover story for in-house stalker Judd Bagley, is an absolute flop.

This rich harvest of (unintentional, as usual) self-revelation emerged in a post by Byrne on his favorite venting venue, the Investor Village Overstock message board. Seems he is not posting there anymore. Maybe.

As usual, he failed to disclose his full name and corporate affiliation and thus, for the umpteenth time, spat in the eye of Regulation FD. As I've described in the past, to Byrne Reg. FD is more of a joke than a requirement that he must obey. This rule requires that companies provide information to the investment community in a fair and even-handed manner -- not in whispered conversations or, say, posts to small numbers of crackpots on limited readership message boards.

After first acknowledging that there are indeed Reg FD issues with his posting corporate information on message boards, Byrne blurted that "the Omuse blog is still not very workable."

That's pretty amazing when you consider that this Wiki wanna-be has been up and running since February -- five months -- and had been the subject of Bagley's tireless efforts for six months before that. So here we have Byrne, in a desperate attempt to salvage this failing enterprise, announcing that he has made Omuse a collection point -- a kind of septic tank -- for his ravings and smears.

Byrne inaugurated his new policy of turning into a literal chamber pot by posting in toto (copyright be damned!) a recent blog item by fraud-fighter Sam Antar, and calling him "Crazy Sam."

No other wiki project--and there are many--has been reduced to attracting readers by posting personal attacks on the CEO's critics, using schoolyard epithets. You really have to search long and hard in the underside of Corporate America, starting with CEOs confined to prison, to find a corporate executive or a company quite this slimy.

Responding to speculation that he has (more or less) stopped posting on IV because of pressure from the Overstock board of directors, Byrne blurted out another goody:

. . . no one has brought the least pressure on me about my posting here (well, other than by a certain polite and proper government official, who politely and properly asked me why I post on message boards: I politely noted that the first amendment applies to me, too). [emphasis added]
It's reasonable to surmise that the "polite and proper government official" quoted above is an SEC investigator or worse. It's significant, I think, that this "official" was talking to Byrne directly and not his lawyers.

Byrne was asked to clarify the point on the Investor Village board but, in keeping with his policy of ignoring discomfiting questions, he did not do so.

(Note also Byrne's whining that Yahoo and the Motley Fool are infested with "bad guys" and "shills for powerful interests" -- Byrne-speak for "people who think I suck as a CEO.")

Sam Antar has a post today describing in detail the chain of events, and how it does suggest that finally the Overstock board has woken up.

As I observed previously, external pressure also probably explains Bagley's absence from Investor Village, and the sudden disappearance of menacing comments, including a threat directed at me, from's corporate smear site.

Of course, I suppose you can believe Byrne's story that he is taking leave of IV because his precious jewels of baloney "scroll off the screen." But he can't use that cock-and-bull story to explain the fact that he has stopped using a pseudonym on his own website. That's an action he obviously would not take unless forced to do so.

In recent days, Byrne has retroactively changed his screen name on his "Take 5 With Patrick Byrne" message board from "Hannibal" to "patrickbyrne." This is how it appeared in May:

And here it is today:

Byrne likewise abandoned his Hannibal user name on Omuse, replacing it with "patrickbyrne." Apparently the wiki software doesn't allow replacing one user name with another.

The rest of the planet, of course, is aware of the Reg. FD problems presented by a CEO posting obsessively on message board, particularly under pseudonyms. At real companies with real boards of directors, posting on message boards is such a serious flouting of Reg. FD that it is a firing offense (as the CEO of a company called Medifast has learned the hard way).

Obviously Byrne is not going to be fired, as any ordinary CEO would be who acts as Byrne does, by his lapdog, sham board of directors. Still, maybe one day somebody will give him the good word about other elementary concepts every CEO should know, such as "making money," or "not hiring people to stalk your critics." Stuff like that.

It will be interesting to see if this lame backfilling will be enough to placate the SEC and if he has enough juice from his campaign contributees to call off the hounds. It will take a gutsy SEC to withstand such pressure, so don't get your hopes up.

Elsewhere on the Overstock front, Gradient Analytics has filed an appeal with the California Supreme Court against Overstock's junk lawsuit.

UPDATE: A reader comments:

Reg FD is only half the problem for Byrne and the BOD as it relates to Byrnes/Bagley's internet message board & blogging.

Take the example of the clearly derogatory put-down "Crazy Sam" - does this comply with, Inc.'s corporate policy on Code of Conduct and Ethics? The short answer is no - it is reasonable to conclude the CEO has once again violated Company Policy. This is a Sarbanes-Oxley compliance problem for the BOD. For the BOD to ignore this translates into tacit approval, or waiver, of Corporate Policy requiring a pesky 8-K filing as Sam Antar has pointed out.

And that, as I have remarked before, is 300lbs of steaming dog poop on the Board table.

To ever so briefly put myself in Bryne's ego-ravaged shoes, it must be enormously frustrating to be barred from matching tit for tat all those who have made disparaging remarks about Bryne, his lieutenants, and his Company. However, Corporate Policy demands that he take the high road, and as the highest officer of the Firm, he has a special obligation to do so. Obviously, he either doesn't agree or doesn't care, either way that's another BOD problem.

It is possible to convey his disagreement with Sam Antar and all other critics (including myself) without diving head first into the cesspool.

One more point if I may - Byrnes semi-departure from message board posting is clearly the result of a change forced on him by presumably the BOD. Therefore, his explanation of why-fores is false, or at best, intentionally misleading, and that appears to me to be yet another Reg FD problem.

As Herb Greenberg would say - "the beat goes on".
The code of ethics referred to above is not, of course, available on the Overstock website -- even Byrne is not capable of such a monumental hypocrisy. However, it can be found on Sam Antar's blog, here.

© 2007 Gary Weiss. All rights reserved.

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