Tuesday, February 02, 2010

Man Bites Dog in Salt Lake City

A week ago I described how Utah's two statewide newspapers, the Salt Lake Tribune and Deseret News, had inexplicably failed to cover the departure of a key exec from the corporate crime petri dish in their backyard, Overstock.com.

Today, a week late, the Tribune decided to clue in its readers on the departure of David Chidester, head of internal financial controls, with this article in its business section. It's so lame that the Trib might just as well not have bothered.

Chidester left a day after an article in the Big Money described how Overstock's wacky CEO Patrick Byrne had concocted a sales tax avoidance scheme, "Operation Heist and Freeze," and how the SEC-investigated company had pretty much no internal controls. Both involved Chidester, who was CFO when that was happening.

Byrne was, uncharacteristically, "unavailable," but the Trib quoted Overstock president Jonathan Johnson mouthing this pap:
"David had been with us over 10 years. It felt like for both David and the company it was time to move to something new.
"I don't know who said what first, but it was clearly a mutual agreement. We've grown a lot in 10 years. We are a big organization and thought it was time for both parties to move on."
It's understandable that the Trib would publish this hooey, but less understandable why there is no evidence of a follow-up question, such as "Who is going to take his job?" I mean, he didn't even have to ask the guy anything obvious like, "OK, what's the real reason?"

Apart from that, the Trib did not clue in its readers on just why the Big Money story was relevant. It says only that the Big Money article "said [Byrne] is frequently in the news for alleged 'outrageous pronouncements,' especially connected with his efforts to stop naked short-selling of the company's stock and his battle with" a hedge fund.

"Alleged" outrageous pronouncements? Naked shorting? The article had nothing to do with that, or its junk lawsuits. Actually, the Big Money said that he attacks critics and the media, to prevent journalists from publishing critical reporting on Overstock. I realize the Trib doesn't cover Overstock--that's a given--but at least it could report the truth about Overstock's reaction to the reporters who do write about the company.

Nor is there a mention of what the Big Money did report that was relevant to Chidester: the sales tax scheme or its discussion of the absence of internal controls. It talks about emails involving Chidester and documents, but doesn't describe what they say. But it does quote Johnson as saying that
"allegations that Chidester was forced out because of the article [are] 'conjecture' that is 'just wrong.'"

Sure, they would be conjecture, if the Big Money article hadn't specifically dealt with accounting issues, and just had dwelled on Byrne's attacks.

By the way, just assuming for a moment that there is a connection with the Big Money article, or it was other than a happy-as-a-lark mutual thing, this latest Johnson pronouncement means that Overstock has yet another shareholder-disclosure issue. It's not copacetic for a company to publicly lie about why key execs leave.

I really don't know any other statewide newspaper in the country worth its salt that does such a shoddy job of covering a major newsmaker within its borders. Was the Trib deliberately taking a dive for Overstock or does it simply not know how to do its job? I honestly don't know. I will say this about the Deseret News: it's not worried about appearances. It wouldn't write anything negative about Byrne if he was arrested for a triple homicide.

Except for the Big Money and occasional articles in non-Utah newspapers, the only time Overstock's sliminess is ever analyzed is by blogs, notably white collar crime expert Sam Antar. He has a further analysis today of what Chidester's departure means.

I have to admit the explanation Johnson gave is funny. Imagine the following exchange between Chidester and Byrne:

Chidester: Hi there, Patrick. How's it going? You know, I've been with the company for 10 years. I make $300,093 a year, nice stock options, pension plan. Real cushy job. I've really grown a lot.

Byrne: Yeah, you have. Big organization!

Chidester: Yeah, big organization. So I was thinking, hey, cushy job. Grown a lot. No problem, right?

Byrne: No problem at all. Love your work.

Chidester: You do. I mean, you didn't even cut my pay when you demoted me a year ago! I love the work, grown a lot, I'd say it's time to move to something new.

Byrne: Yes! I was thinking the same thing. So shall I issue the customary press release saying what a great job you've done?

Chidester: Naah. Just wait five days and issue a one-line 8-K. That way they'll think I'm being pushed out or quit cause I was mad or something.

Byrne: Yeah! By the way, where are you going to get another cushy 300K job in Salt Lake City?

Chidester: Beats me.
Funny, huh? Too bad for Utahns that the Salt Lake Trib decided to be part of the joke, rather than letting in its readers on the punchline.

Seriously, though, Utahns, whether or not they are shareholders or employees of Overstock, really are short-changed by the neglect of its two major papers. A company is going straight to hell right in their backyard. A little effort could produce some significant journalism--I know that from the trans-continental communications I personally have received. But they just don't have the guts, or competence, to do their job.

It doesn't have to be this way, you know. Years ago, when I was working in Connecticut for the Hartford Courant, we used to get our asses kicked daily in coverage of local businesses (such as General Dynamics and Pfizer) by the The Day of New London. A hometown paper doesn't have to suck.

© 2010 Gary Weiss. All rights reserved.

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