Friday, November 02, 2007

Byrne a No-Show at the SEC

As I reported a few days ago, white collar crime fighter Sam Antar challenged Overstock.com CEO Patrick Byrne to meet with him on Wednesday at the Salt Lake City office of the SEC.

The aim was to get Byrne to answer, on the record, the dozens of questions that have arisen in recent months about Overstock's slippery accounting and ethical lapses. The venue made sense because the SEC is conducting a formal investigation of both Overstock and Byrne.

Well, guess what? Sam was there-- he had just given a talk to the Utah Attorney General's office -- but Byrne was a no-show. Sam Antar's blog has all the details.

My suspicion is that Byrne was too busy using corporate resources to defend his dumb remarks on race and school vouchers, as AOL blogger Zac Bissonnette has noted in his blog. Or maybe he just doesn't have the guts to face Sam without a retinue of lawyers present.

Of the many dozens of questions that Byrne is dodging, here's one that I'd like to have heard answered: at a recent conference call with analysts, Byrne pretended to invite questions from Sam, knowing full well that he was not participating in the conference call.

Is that a legitimate thing to do during a publicly broadcast conference call, or does it fall afoul of the securities laws? Byrne surely knew that Sam was not participating in the call. A list of participants is known to Overstock's investor relations people at the beginning of a conference call.

This is just one of many deceptive and deceitful tactics Byrne has employed over the years, as Sam has chronicled. However, he won't be able to duck these issues for very long. In addition to the SEC probes, Rocker Partners and Gradient Analytics have are preparing a counterclaim against Overstock's junk libel suit, according to Dow Jones news service.
People familiar with the matter said Rocker will allege in its counterclaim that Overstock and its CEO orchestrated a short squeeze to boost the company's stock in violation of a California securities statute. The fund is likely to claim that Byrne made false statements, perhaps through the use of Internet bloggers, in order to inflate the price of his company's stock in violation of California Corporations Code.

The "bloggers" mentioned in this article probably include thesanitycheck.com, which the New York Post has revealed is operated by a former used medical equipment salesman named Phil Saunders. Cringing behind the pseudonym "Bob O'Brien," Saunders used the blog and Internet postings to spread nutty conspiracy theories, sling mud at Byrne's critics, and to give Byrne a kind of de facto investor relations mechanism. Saunders also was active in touting a dreadful subprime lender called Novastar.

Thesanitycheck was at one point promoted on every Overstock website page, under the misleading link title "Market Reform." Since that ceased. the site's readership has dropped to practically nothing, according to Alexa.

The discovery proceedings in this suit are going to be interesting.

© 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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