Wednesday, April 02, 2008

What's an ' Depth'?

CJR Daily, discussing today allegations that short-sellers drove down the shares of Bear Stearns before the bailout, observed: "Let’s hope the madness induced by their net-worth deflation doesn’t lead to depths."

The link is to Bethany McLean's 2005 article in Fortune, "The Phantom Menace," which described a company and CEO, Patrick Byrne, on the brink of a meltdown. Well, the meltdown has taken place, as we all know, and has sunk to far lower depths since then.

So just what is an " depth"? How about this: he is now openly diverting corporate resources for his campaign of menace against critics.

At the top of a web page on the Overstock web page that Byrne has devoted to attacks on real and imaginary adversaries, he has inserted the following:

The link directs one back to the Overstock web page, with a code that diverts 5% of the proceeds to Lord knows where.

So here we have a company, which is already bleeding red ink, openly diverting revenues to feed its CEO's obsessions. That's on top of Byrne setting aside a portion of his company's website to attack critics, an obvious violation of its code of ethics.

As I've pointed out previously, CEOs who violate their code of ethics have a securities law issue if they have not gotten a waiver from their board of directors. Overstock is under SEC investigation, focusing on its accounting, so this falls under the category of "icing on cake."

Not that any of this matters, for this is, and not a normal company with a functioning board, and not a panel of snoozing sycophants like this one. Any dissenting voices, including Byrne's own father, have long since absconded.

The telegenic lifelong bachelor, having long since given up on turning his company into a profitable enterprise, whiles away his ample spare time nowadays by editing Wikipedia and getting a windfall from executive stock options. In 2007 he enjoyed $1.2 million from options that his captive board generously gave him, in recognition of the great job he has done running his company into the ground.

So, to answer the question, what is an Overstock-style depth? The answer is "about as low as you can go."

© 2008 Gary Weiss. All rights reserved.

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