Court Shuts Patrick Byrne's 'Deep Capture' Libel Factory

Patrick Byrne's website has a new look

UPDATE: Overstock.com CEO Patrick Byrne and his hireling Mark Mitchell lost the Nazerali lawsuit in May 2016. Details can be found here.

More evidence emerged yesterday that Overstock.com CEO Patrick Byrne definitely made a serious boo-boo when he published fairy tales about a Canadian stock promoter in his Deep Capture astroturf website. A Canadian court has issued an injunction shutting down the site.

The details are described here.

As I pointed out in my blog post yesterday, Byrne, his hireling Mark Mitchell, and other defendants (including his web host, GoDaddy), were sued by a stock promoter named Altaf Nazerali, who was named by Mitchell in a nutty conspiracy theory linking him with every crime since Jack the Ripper.

I have no idea why Byrne & Co. targeted Nazerali. His Middle Eastern name? Whatever the reason, they picked the wrong victim.

Conspiracy theorist/fantasist Mark Mitchell, Deep Capture blog

What makes this suit interesting is that we don't often see libel suits in which the defendant just simply makes stuff up from top to bottom. It's one thing to make mistakes or to exaggerate, but it's not every day that a court gets before it a libel suit in which stuff is simply fabricated without a shred of evidence. I'd say that blanking of the website is just the prelude to what is likely to be a messy and costly (for Byrne) bit of litigation.

I almost feel sorry for Mitchell. He's clearly a troubled person, and I don't want to poke fun, but I honestly don't think he has any idea of the ordeal that is ahead of him. I know a fellow who was the defendant in a libel suit who was subjected to two weeks of grueling cross-examination in a pre-trial deposition. The other side's lawyers probed his private life in grim detail. And in that case he was dealing with an American court, the plaintiff was guilty as hell, and he was telling the truth!

The same is true for any other person or entity associated with the site, including Byrne's loyal hatchet person Judd Bagley, a former company spokesman who was moved back to Overstock in late 2010, and former message board stalker Evan Karpak, who remains a principal of Deep Capture LLC and was, inexplicably, not named in the lawsuit. An oversight, I'm sure, that can be rectified in due course.

In Canadian courts, the usual burden is reversed and the defendant has to prove the truth of the libelous statements. Good luck, Mark.

So far, a single Canadian judge has shown considerably more fortitude in dealing with Byrne & Co. than the SEC, which ended an investigation into his financial-statement fabrications inconclusively, and has another probe dragging along for months without action.

The Deep Capture fictions are now dealt with, at least for the time being, but the fictions in his oft-restated financial statements remain unresolved and unpunished.

It will be interesting to see what happens next. I presume the website was shut by its web host, and of course there's nothing to prevent Byrne from moving the content to Iran or wherever -- or return DC to Overstock's own servers, where it used to be -- all the while bleating about how his right to make stuff up about people has been infringed by dastardly Canadians. The judge is just going to love that.

Golly, I wonder if Overstock or Byrne have any Canadian assets, or expect to have any in the future? Given the paper-thin corporate veil, and the interrelationship between Overstock and Deep Capture, it's going to be fun to see that litigated if Byrne should default. If he decides not to take it on the lam, I certainly expect to see an "O.co Coliseum" arising within proximity of the courthouse in Vancouver, as it has in Oakland.

For Overstock, this is looking more and more like a disclosable event, not that the fine print in the securities law has ever meant anything to Byrne. Stay tuned to this channel for more developments.

Meanwhile, I assume that certain Canadian lawyers are focusing on the links between Deep Capture and Overstock, a subject I have explored in the past. (See also this detailed blog post by Sam Antar.) Overstock is fast running out of cash, but it is a tempting target nonetheless.

© 2011 Gary Weiss. All rights reserved.
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