John Thain And That 'No More Capital' Prediction

It's hard to argue that Merrill Lynch needs capital -- and lots of it. One can't seriously dispute Merrill's decision to unload $30.6 billion of its mortgage-related debt at a loss.

What's interesting about this decision is not that CEO John Thain had to do it, but that his doing so is a stunning repudiation of the comments that he made to me (in my recent Condé Nast Portfolio profile), to other journalists, analysts, and the rest of the world a few months ago -- that he would not have to raise capital. In fact, he said that he had more than enough capital.

He didn't.

Thain wasn't lying. He honestly believed he would not have to do that, and events have overtaken him, and neither this very smart guy nor his staff of very smart guys has been able to do anything about it.

Merrill not only had to sell all those CDOs at a loss, but it had to sell $8.6 billion in new shares.

Thain is not a CEO who shoots from the hip. If he was taken by surprise by the depth of the problems in the mortgage market, it only one thing: things are getting worse, and worser, and worser......

UPDATE: I love the illustration in this Wall Street Folly item:



Such is the price of unwarranted optimism.

© 2008 Gary Weiss. All rights reserved.

Advice to Journalists: Don't Email Naked Shorting Nuts

"Give him some grief!!!": Seattle reporter's private email publicized

The SEC extended its widely ridiculed naked shorting order yesterday, as expected, so the anti-shorting publicity campaign, funded by Overstock.com CEO Patrick Byrne, is going into overdrive. While Overstock's highly-paid lobbyists hammer at the SEC, his minions, including a bunch on his personal payroll, are working on the media, mainly by email. My advice to journalists: be careful not to write back to naked shorting conspiracists.

You can't reason with these nuts, and you risk you'll make yourself a target of a Byrne-funded smear campaign. (Ask Herb Greenberg, Joe Nocera, Susan Antilla, Roddy Boyd, Bethany McLean or moi.) Or you'll find your servers snowed under by protest emails, much as happens when reporters take on religious cults.

SOP is for journalists to respond to readers' emails, but if you do that you risk what happened to a reporter for the Seattle Times named Drew DeSilver. Note this post yesterday on the stock message board for Overstock, which mainly serves as a kind of organizing center for stock promoters, hatchet men on Byrne's personal payroll and deranged stock market conspiracy theorists.

DeSilver, who tells me that has never actually written on the subject, made the mistake of responding to an email from a seemingly rational naked shorting conspiracist who gave his name as "Shawn Brandom." DeSilver made the mistake of disagreeing with Brandom, who retaliated by posting his email and his email address with this message to his fellow loons: "GIVE HIM SOME GRIEF!!!!!!"

"Grief" could mean bombarded with loony emails, or it could mean being vilified by Byrne's nauseating paid cyberstalker Judd Bagley, who used to target unfriendly reporters for Florida Republicans, or Byrne's latest hire, the delusional ex-journalist Mark Mitchell, known mainly for running CJR's Audit column into the ground.

Note the subject heading: "this guy refuses to accept it." That's the kind of religious fervor you find among cults or political extremists, not among people rationally expounding on market issues. There is no middle ground, no possible counter-argument. You either "accept" their stock market conspiracy theories or you are the "enemy."

These are weird people, so again my advice: keep your distance.

© 2008 Gary Weiss. All rights reserved.

Mark Mitchell Agonistes

Conspiracy theorist/fantasist Mark Mitchell, Deep Capture blog

Sam Antar today has an intriguing exchange of emails with the loathsome ex-journalist Mark Mitchell, who drew widespread condemnation for his poor job of editing CJR Daily's Audit section, and is now a paid shill for Overstock.com CEO Patrick Byrne.

I use the word "loathsome" conservatively because this creep called me some weeks ago to "interview" me, claiming to be writing for a legitimate journalism outlet and concealing his employment by Byrne. Not just concealing, but lying about it -- claiming that he had no employer, and that he was shopping the piece. He then he went ahead and lied about our conversation on Byrne's "Deep Capture" smear site -- just literally making stuff up, even after I printed a transcript of our conversation.

What's amusing is that Mitchell is upset not about the really serious stuff -- that he is a paid shill for Byrne and a liar and a skunk -- but that he was "escorted out of the building" when he left CJR, which was followed by a year of unemployment and then being swept off the streets to work for Byrne.

Personally I couldn't care less how he left CJR (I've heard a lot worse). I think the "related party transactions" issue, noted by Sam, is more interesting. Still, it's funny to see how a professional corporate hatchet man can be so thin-skinned.

© 2008 Gary Weiss. All rights reserved.

'Swatting an Imaginary Fly'

There's a terrific editorial today in Barron's on the SEC's naked short selling publicity stunt, and it is the most powerful and well reasoned commentary I've seen yet on the subject. The title is "Swatting an Imaginary Fly," the "fly" being the phantom menace of naked short selling.

Editorial page editor Thomas G. Donlan writes:

. . . What isn't obvious from the news or from the historical record is whether the SEC understands its mission.

Does the SEC have its eye on the ball? Hardly. It is the agency that preserved and protected the shared incompetence of a few favored "nationally recognized" credit-rating agencies. It is the agency that watched while auditors became corporate consultants, selling the kind of services that audits should detect and report and eliminate, and even selling methods of hiding deleterious facts from auditors. It is an agency that attempts to regulate speech because it's easier than detecting and prosecuting fraud.

Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there's no dead bug.

This is a courageous stance, because opponents of naked short selling conspiracy theories -- which the SEC has explicitly not endorsed, not that it matters to kooks pushing that line-- are immediately subjected to a smear campaign. It is orchestrated by the free-spending trust fund baby, Overstock.com CEO Patrick Byrne, successor to the recently jailed fraudster Richard Altomare as head of the Baloney Brigade naked shorting conspiracists.

Byrne has said that the SEC's politically motivated pandering means that he has "won the intellectual argument" on naked short selling. But there hasn't been an intellectual argument. There has been a campaign of intimidation and personal attacks against critics of his poor management of his company and his naked shorting jihad.

A recent SEC filing shows how Byrne has pissed away the money-losing Overstock's scarce cash on behalf of his obsession, paying a high-priced lobbyist, Ken Salamon, to goad the SEC to pursue Byrne's imaginary demons. Overstock has wasted $680,000 on Salamon and other lobbyists and pos, according to OpenSecrets.org numbers quoted in the New York Post.

Despite all the bucks Byrne has thrown at this, and endorsements by anti-investor organizations like the Washington Legal Foundation and "consultants" paid to tout conspiracy theories, like former commerce secretary Robert Shapiro -- a "litigation consultant" in junk lawsuits against the DTCC -- not a single editorial commentary has favored the SEC action. The SEC, I suspect, is reacting less to Byrne's bucks than it is to SEC chairman Chris Cox's desire to find a scapegoat for his agency's poor performance.

I'm sure that Donlan and Barron's will be subjected to the usual attacks by Byrne's paid stooges, and their inboxes stuffed with harassing emails, because of this editorial.

The same goes for Elizabeth MacDonald, who wrote a smart analysis in her blog today on the Fox Business News website.

© 2008 Gary Weiss. All rights reserved.

'History and Mystery' on Sharesleuth

As I've said in the past, I'm no fan of Sharesleuth because its owner, Mark Cuban, finances it (or tries to) by shorting in advance of articles on the website. That's a no-no for anything purporting to be journalism.

Sharesleuth's business model has been a flop for the same reason it has been editorial failure: over the past two years it has written about a grand total of four companies. Compare this with ProPublica, which churns out a constant stream of investigative articles and is funded by a nonprofit group. When it was commenced two years ago, Cuban hyped it as the savior of financial journalism. It has been anything but.

In fact, you get more timely share-sleuthing from Zac Bissonnette on AOL in one month, than you have from Sharesleuth in its two years of existence.

All that aside, I think that the latest Sharesleuth offering is worth reading -- a detailed depiction of the matrix of stock fraud and overseas boiler room schemes. Some of these were targeted by Internet sleuth Floyd Schneider, making him a target of the stock fraud aficionado Judd Bagley, the nauseating cyberstalker who makes his living harassing critics of Overstock.com's nutty CEO Patrick Byrne.

Sharesleuth would have proven its value, despite its business model, if it had produced articles frequently, dealing with overpriced or fraudulent shares that are currently in the public eye, whether or not its owner was able to make a few bucks. Instead, its readership has dropped, embarrassing, to pretty much nothing.

That's a shame, because there really is a need for a "share sleuth." ProPublica is an outstanding news outlet (despite an annoying technical glitch that cuts off the left side of the page). But its business section lacks hard-hitting financial journalism.

What's needed is a truth squad guarding against ongoing hype in the markets, not historical overviews or massively documented hits against companies on a once-per-blue-moon basis. So when Byrne tells outlandish lies about Force Protection Inc., describing that financially quaky company as a "victim of naked short selling" (as he did on Fox Business News yesterday), the truth squad could roll into action.

Perhaps ProPublica could fill that role. There are lots of journos being cast out of newspapers around the country, and it would be great to put them to work doing some real share-sleuthing -- in the public interest, not to make a billionaire richer.

© 2008 Gary Weiss. All rights reserved.

Will This Change Mean Anything?

Evidently somebody has been reading Wall Street Versus America, which argued forcefully against the inherently unfair system of mandatory arbitration of brokerage disputes. Today, Dealbook reports the commencement of a two-year pilot program excluding industry representatives from arbitration panels.

This program is limited and chintsy-- a great deal more hype than substance. Only five firms -- admittedly big ones -- have agreed to participate, and only a minute number of investor cases will be involved.

The SEC should bypass FINRA and take the lead in applying this pilot program across the board. Unfortunately, that's not likely to happen under the current SEC leadership.

The injustice of mandatory arbitration is a far more significant investment issue than anything currently on the agenda of securities regulators, but has been obscured by the recent anti-shorting hysteria, eagerly adopted by SEC chairman Chris Cox to disguise his own failures in the mortgage crisis. Cox is shaping up to be the worst SEC chairman in recent history, worse than even the oafish corporate shill Harvey Pitt.

© 2008 Gary Weiss. All rights reserved.

Collateral Damage From the War on Shorts

Mark Mitchell, ex-CJR Audit columnist

CJR Online's Audit column discusses a provocative issue -- how the SEC's politically motivated campaign against short selling has hurt business journalism.

The Audit, also points out that media has failed to cover a possible short squeeze in shares of the financial stocks affected by the SEC emergency order.

But it's the possible effect on tough journalism that intrigued me about thsi column. The Audit's Ryan Chittum quotes an email from a journalist saying as follows:

Any financial journalist committed to delving beyond the corporate handout knows that shorts can be great sources—they can provide all sorts of perspectives and information about a faltering company that you never would have thought of otherwise, and they’re an invaluable counterweight against all those unthinking analysts who just keep bleating “buy.” As long as you keep in mind that they have an ax to grind (though no more or less so than those on the other side dedicated to seeing a stock go up), and verify that their information is accurate, it’s very valuable for a journalist to talk to them.

And now that source of information is going to be severely crimped, because shorts will be leery of being perceived as “spreading rumors” if they give negative information on a company to a journalist. It’s already happening; this week I tried calling a well-known short I’ve spoken to in the past, to get his thoughts about the SEC crackdown, and he wouldn’t even get on the phone with me.

It's reassuring to see that the Audit is now fully repaired from the damaged caused by the pro-corporate slant of its former editor Mark Mitchell. As I've previously reported, Mitchell has found his true calling as a hatchet man for Overstock.com CEO Patrick Byrne. The Audit has come a long way since Mitchell was blaming Enron on short sellers and signing wacko SEC comment letters while on the CJR staff.

Meanwhile, SEC chairman Chris Cox continued his tawdry publicity campaign in the op-ed pages of the Wall Street Journal, while economist Ed Yardeni raised some sharp questions about his emergency order, including: why hasn't Cox reinstated the uptick rule?

© 2008 Gary Weiss. All rights reserved.

Richard Altomare Gets Sprung (Without a Hacksaw)

All good things must come to an end

Famed anti-naked-shorting activist Richard Altomare, ex-CEO of the Universal Express stock fraud, was ordered released today from incarceration at Metropolitan Correctional Center in New York City, according to court records.

Altomare was tossed in the clink in early May, and ordered to rot there until he paid back some of the millions of dollars he stole from the company. He never did, so he just stayed there, while his supporters carried out an obscenity filled email-spam campaign. Judge Gerald Lynch believes that further imprisonment won't do any good.

Lamentable as it is to see Altomare walking the streets with respectable citizens, I think that Lynch has a point. And besides, Altomare should really be held accountable by a court of law, and on criminal charges, and not for civil contempt. That's a kind of backdoor way of getting justice.

So the question remains: where is the U.S. Attorney, anyway? By not prosecuting a slug like Altomare, George Bush's Justice Department is proving yet again that it turns a blind eye toward white collar wrongdoing.

© 2008 Gary Weiss. All rights reserved.

Debunking the SEC's Fear Mongering on Naked Short Selling

Media coverage of SEC chairman Chris Cox's "naked short selling" publicity stunt has suffered from the usual shortcomings of SEC coverage: naiveté, credulousness, and a tendency to accept pronouncements from our toothless watchdogs at face value. Nothing really terrible, just mediocrity and lack of skepticism.

There have been, however, some reassuring exceptions over the past couple of days.

In a commentary today, Jonathan Weil of Bloomberg expertly dissects Cox's emergency order for the fear-mongering fraud that it is:

"Forget naked short sellers. The fellow who isn't wearing any clothes is Securities and Exchange Commission Chairman Christopher Cox," he said.

Weil notes that Cox's order is filled with contradictions and only serves to "deflect public attention from the government's own failures in the subprime-mortgage debacle." In an op-ed piece, Cox spoke of "distort and short" schemes while at the same time saying that the 19 stocks affected by his order have not actually been hit by naked shorting.

In other words: Boo! The SEC has presented no facts suggesting that anything like this has happened at these 19 companies, or at any other major financial firm. Meanwhile, the SEC is spreading unsubstantiated rumors that gangs of undressed, short-selling bogeymen might conspire to hurt the investing public, if left unchecked.

This isn't inspiring confidence. It's fear-mongering.

Holman Jenkins made a similar point in the Wall Street Journal today, also noting the vacuousness of Cox's action. Naked shorting, he said, involves "technical concerns -- unless you imagine that naked shorts just take the money and run and never deliver any shares at all, flooding the brokerage accounts of innocent investors with 'phantom' shares.'"

That devil theory, popular among a few conspiratorialists, was not endorsed by Chris Cox, the SEC chief who enacted this week's new rules saying that naked short selling, which was already a violation, is now . . . a violation. Instead, what we have here is an exercise in symbolic confidence-building.

As I previously noted, Joe Nocera was first on the case, and in a recent CNBC appearance set out the issues clearly: "The technical term for that [Cox's emergency order], it's 'a joke.' It's an attempt to show that they're doing something without actually doing anything."

Charlie Gasparino, in the same appearance and elsewhere, has taken the lead in denouncing the fatuous theory, being pushed by respectable commentators as well as the usual Patrick Byrne nutjobs, that CNBC was responsible for bringing down Bear Stearns.

I'm still waiting for someone to quote Cox's comment in December 1989 at a hearing on short selling abuses. It was reported in Barron's at the time, and I quoted it in Wall Street Versus America. After hearing the sorry pedigree of the CEOs blaming their misfortunes on shorting. Cox said, "Is this subcommittee being snowed?"

Today, in his desperate effort to divert attention from the SEC's crummy record in the housing crisis, Cox is the snow-er, not the snow-ee. It's time for the financial press to show a bit more historical depth and initiative in reporting the SEC's abysmal handling of this issue.

© 2008 Gary Weiss. All rights reserved.

Overstock.com Slaughter Proves Its Analysts Are Useless

My favorite corporate sleaze poster child, Overstock.com, plummeted 41% today on immense volume, despite the usual happy-talk conference call featuring a slap-happy CEO Patrick Byrne and chirping minions. As usual, all was sweetness and light, glossing over the fact that sales and marketing expenses zoomed 80% as the company puked red ink for the umpteenth consecutive quarter.

The reason for the shares plummeting, however, appeared to be that one of Overstock's analysts, who are notoriously timid in their assessments of this company, had the temerity to downgrade the company to "sell." The reason: fear that the company may not "grow" as much as previously.

While it's nice to see one of the sell-side analyst worms turn, I'd say that this sudden realization that all is not well with Overstock is astonishing. Two of my favorite bloggers, Sam Antar and Tracy Coenen, both experts at corporate fraud, have been pointing out the weakness in Overstock's accounting for many months.

Unless these analysts are deaf, dumb and blind, they would surely know that Overstock takes Sam and Tracy very seriously -- and has deployed three paid stooges, led by the nauseating Judd Bagley, to attack and discredit them.

Sam has specifically warned that Overstock was distorting the "growth" numbers reported to the public. He set forth his case in exhaustive detail. But analysts and the clowns at the SEC -- who just gave Overstock's accounting a clean bill of health -- paid no attention.

Until today, analysts have studiously ignored the company's shortcomings, its accounting issues, and other obvious stuff such as the sheer looniness of its CEO, and have swallowed whole the pronouncements of the company. Which only goes to prove that far too much of what passes for research on Wall Street is pretty near useless. That is especially so for companies such as Overstock.com, which make it their business to intimidate critics.

It's not surprising that Byrne placed Eliot Spitzer on his enemies list when he targeted overoptimistic Wall Street research. Aggressive research is the enemy of inept and crooked CEOs. Today's events demonstrate that even tepid research stating the obvious can have a devastating effect.

UPDATE: As usual, Sam and Tracy stepped up to the plate with two great pieces, here and here, on Overstock's latest quarterly book-cooking and the negligence of the SEC.

© 2008 Gary Weiss. All rights reserved.

What They Won't Be Asking at the Overstock.com Conference Call

Overstock's supine analysts won't be asking about the Omuse disaster

My favorite corporate sleaze poster child, Overstock.com, has a quarterly earnings conference call tomorrow, and you can bet that there's one subject that Overstock's supine and intimidated analyst corps won't be raising: the company's disastrous "Omuse" user-generated wiki.

Omuse was a blatant squandering of corporate resources, initiated in late 2006 as a cover story for the hiring of the nauseating Judd Bagley as a kind of in-house stalker, under the title "director of social media." The site was an instant failure, but it didn't really matter because Bagley's real job was to attack critics of Overstock CEO Patrick Byrne on his "antisocialmedia.net" smear site. Byrne recently dropped any pretense of separation between stalker and company, and now pays the salary of Bagley and two other halfwits, Evren Karpak and the eccentric ex-journalist Mark Mitchell, via a website he finances called "deep capture."

But what about poor old Omuse? Well, it has been in "beta testing" now for over a year and a half, and it is essentially defunct. Its most active user is the terminally wacky Byrne, where it serves as a forum for nutty tirades, but no one else seems interested.

Over the past three months, the users of Omuse, which is promoted on Overstock's main page, have created a grand total of seven new pages, all but one consisting of brief starter pages. See for yourself.

Given Byrne's habit of bullying and intimidating analysts, most notoriously in his junk lawsuit against Gradient Analytics, analysts walk on eggshells at these quarterly conference calls, rarely challenging Byrne and his minions on much of anything. Yet despite an ostensible interest in issuer retaliation, the SEC has turned a blind eye to Byrne's aggressive tactics.

I doubt that even Overstock's board of directors, which Byrne has under his thumb, would dare to raise the subject either.

So don't expect sore subjects like Omuse to come up tomorrow. The analysts who cover this company may not be very bright, or courageous, but they aren't dumb. I realize that being assigned to cover a company run by a one-man lunatic fringe is no bed of roses, but these guys don't even try.

© 2008 Gary Weiss. All rights reserved.

Chris Cox Earns His Pay as SEC Chairman

A schematic model of the new rule

Chris Cox today earned his pay as SEC chairman -- proving that he is exceeded only by his predecessor from the 1990s, Arthur Levitt, at making grand gestures that actually mean little.

Today he told the Senate Banking Committee that he is instituting a "pre-borrow" requirement for short-selling Fannie Mae and Freddie Mac. The Wall Street Journal says this afternoon that this "will likely limit short-selling for the two mortgage entities." (A later version of the article backed off from that assertion.) I beg to differ.

No, what it will do is limit naked short selling of the securities -- and, as Bob Pisani points out today, there's no evidence that this great phantom menace is actually taking place in the mortgage stocks.

The SEC is imposing a "pre-borrow" requirement. What that does, as described (in a different context) in a famously indifferent SEC rulemaking called Regulation SHO, is bar short sales "without borrowing, or entering into a bona-fide arrangement to borrow [the shares]. . ."

Since shorts already have to borrow or arrange to borrow shares before shorting, this doesn't do much of anything.

The market greeted Cox's bright idea by pushing down the prices of Fannie and Freddie stocks 27%.

CNBC today asked me to appear today on the air to discuss this totally useless bit of rulemaking. I declined. My feeling is, why contribute to what is plainly a publicity stunt?

UPDATE: The SEC issued at day's end an "emergency order" and made it effective June 21 (must be one heck of an"emergency"). The order extends to all "substantial financial firms." I guess insubstantial financial firms, or substantial non-financial firms, are not worthy of inclusion in this meaningless gesture.

As Joe Nocera puts it, "this is about chasing bogeymen, not getting to the root of any real problem."

I forgot to mention Floyd Norris's discussion of a similar SEC publicity stunt a few days ago -- a Sunday press release on its jihad against "rumors":

In other words, they haven’t yet found anybody who used “rumor-mongering and abusive short-selling” to drive down the prices of financial stocks. So now they will try to find some unfortunate firm that does not have adequate controls to prevent violations, even though they can’t seem to find any actual violations.

They still haven't found any evidence -- there is no effort to do so in the bare-bones SEC release issued late in the day.

I'm not been one of the SEC's biggest fans, but I must say that I have rarely seen such intellectual dishonesty -- bordering on outright fraud, in my view -- from our supposed securities watchdogs. Unfortunately, no one in Congress seems to grasp the issues either.

© 2008 Gary Weiss. All rights reserved.

'Shop to Lose' (a/k/a ShoptoEarn) Bloviates Against Blogger

I don't cover the multilevel marketing business very much, but one company obviously warrants attention: ShoptoEarn. A better name may be "Shop to Lose" because it is one of the most egregiously dumb ideas around, targeting housewives who don't know better.

Dumb, that is, from the consumer standpoint. For ShoptoEarn it is a clever idea.

What drew this company (which I had never heard of before) to my attention is its latest gambit, which is to seek to silence forensic accountant Tracy Coenen, who has been writing negatively about this company.

As can be seen from item linked above, ShoptoEarn is simply dumb, this time from its own perspective, because it doing nothing more than drawing attention to itself.

© 2008 Gary Weiss. All rights reserved.

Today's Market Commentary

© 2008 Gary Weiss. All rights reserved.

Overstock.com's July Festival of Misleading Press Releases.

It's hard to ignore my favorite corporate sleazebucket, Overstock.com, no matter how restful it may be to do so. In recent days, this third-rate Internet retailer and its looney-tunes CEO Patrick Byrne have treated us to the latest examples of their favorite product: false and misleading press releases.

The latest is a press release yesterday that, as swallowed whole by some in the media, indicates that Byrne is engaged in a humanitarian quest: he has stopped selling fur products. Isn't the man an absolute doll? However, as pointed out by a Baltimore Sun blog, it's quite obvious that Byrne has taken this action because of a belated discovery that he had been selling dog fur.

Puts a different spin on it, don't you think? Evidently Overstock's ace buyers were showing their usual competence. Overstock is foregoing $5 million in annual sales by this move, but "what’s another $5 million for a company that’s been bleeding red ink since it went public? ," asks Tracy Coenen. (Mind you, that is $5 million in "Patrick Byrne dollars," which is hazardous to translate into actual revenues.)

Next we go from hokum to outright lying: a press release the other day indicating that Overstock had a "favorable court ruling" in its ongoing junk lawsuit against Gradient Analytics. However, as Gradient pointed out in a counter-press release, this was actually a big fat defeat.

All in a day's work for Patrick Byrne, I guess. Hey, he's not a perennial on "worst CEO in America" lists for nothing

© 2008 Gary Weiss. All rights reserved.

Patrick Byrne Rewrites History on the 'Sith Lord'

Byrne takes a blue pencil to his Sith Lord ravings

My favorite flipped-out CEO, Patrick Byrne of Overstock.com, has been working intently at his day job, which is haunting Internet message boards in pursuit of whatever demons (mostly in his head) that are bothering him. Lately Byrne has a new jihad: rewriting the history of his famously paranoid "Sith Lord" conspiracy theory in August 2005.

As Bethany McLean later described in Fortune:

Even hardened denizens of Wall Street were shocked by a conference call that Patrick Byrne, the CEO of online retailer Overstock.com, held on Aug. 12. "I want to get something off my chest," Byrne announced. Then he launched into a rant about a "miscreants ball" in which he mentioned hedge funds, journalists, investigators, trial lawyers, the SEC, and even Eliot Spitzer. "I believe there's been a plan since we were in our teens to destroy our stock, drive it down to $6--$10 ... and even a plan for how the company would then get whacked up." The "designated final owner," who provided the "orchestration," was someone Byrne dubbed the "Sith Lord," a person he refused to identify other than to say that "he's one of the master criminals from the 1980s."

It was just the first of many such episodes for Byrne, who subsequently established a unique position in Corporate America as a kind of one-man lunatic fringe. Today, his credibility has bottomed out to the point that nothing he does, not even hiring the washed-up former journalist Mark Mitchell to shill for him, generates the publicity that it might have a year or so ago. Not even personally and openly running a smear site is greeted with more than a shrug of the shoulders. The "oh my goodness" factor (to use Joe Nocera's phrase) is gone.

Now, probably just for the joy of lying, Byrne is trying to go back and change what he said in the Sith Lord rant. He can't, for the simple reason that he said it, but little things like that have never stopped Byrne. Note the exchange of comments at the bottom of this blog post (that's right, Byrne spends his waking hours responding to criticism on obscure blogs):

William [a previous commenter] is lying. For exmaple, he writes, “Another lie Patrick was caught in was his recent assertions that he never said his fantastic claim about a ‘Sith Lord’, who was supposed to be controlling a vast web of people who were naked shorting Overstock, really referred to an individual.” This is a lie. At first the Party Line was to exaggerate what I had said: once I succeeded in getting people to understand the truth (in this case, by pointing out that the “Sith Lord” comment was made in passing at the end of an hour speech), the Party Line became … well, just what William is regurgitating above.

In fact, as a transcript from 2005 attests, Byrne didn't just drop in a comment at the end of the speech. It was an extended and specific rant, in which he said that the Sith Lord was "a name that everybody on the phone, every single person on the phone would recognize this person’s name. He’s one of the master criminals from the 1980s, and he’s back in business."

He went on in that same conference call to say, "the man I’ve identified here as the Sith Lord of this stuff I just say, you know who you are and I hope that this is worth it, because if the feds catch you again, this time they’re going to bury you under the prison. And I’m going to enjoy helping."

The Sith Lord, of course, turned out to be imaginary, and Byrne went on to move on to other demons, starting with Bethany McLean, and including me and others who have criticized him. He now has three stooges on his payroll -- Mitchell, the ever-nauseating Judd Bagley and Evren Karpak -- whose job it is to smear people Byrne doesn't like.

Having made a fool of himself on larger outlets once too often, Byrne now begs for interviews on low-wattage AM stations, where he spews his nonsense to whomever will listen. His latest "media appearance" was a chat on Internet radio with a gent who runs a flooring company. Here's an amusing item on his latest rant from Tracy Coenen's blog. (Note Byrne saying that the financial press makes Byrne "throw up in his mouth a little." I have no doubt that Byrne throws up in his mouth, and frequently, but not because of anything he reads.)

Any other corporate board would have long ago tossed out Patrick Byrne on his keister. But he just goes on and on like the Energizer rabbit, endlessly lying, the gift that keeps on giving.

© 2008 Gary Weiss. All rights reserved.

Common Sense Prevails on Dick Grasso

An appellate panel of the New York State Supreme Court has thrown out the longstanding litigation aimed at forcing Dick Grasso to cough up all the money he extracted from the New York Stock Exchange. I've long felt that while Grasso was greedy, he earned his money by keeping the NYSE antiquated -- a goal ardently desired by his constituency.

Besides, it struck me and many others as an odd use of public reasources for the New York State Attorney General to pursue a case on behalf of the millionaire seatholders of the NYSE. The court more or less agreed, in a decision that hinged on the fact that the NYSE is now a public company.

The decision can be found here. The relevant language is as follows:

Here, the Attorney General is using public funds out of appropriations to his office to prosecute causes of action on behalf of an entity that is no longer a not-for-profit corporation and seeks only a money judgment that would benefit the owners of the for-profit entity into which the not-for-profit has been converted (even if the judgment nominally would be paid to the not-for-profit corporation). The Attorney General's continued prosecution of these causes of action, as is clear from People v Ingersoll and People v Lowe, vindicates no public purpose

No public purpose except advancing the career of Eliot Spitzer, and we know what happened with him.

© 2008 Gary Weiss. All rights reserved.