Patrick Byrne's Growing Defamation Payroll

Seems that Overstock.com CEO Patrick Byrne, the unsuccessful Utah Internet tycoon, has been subsidizing defamation of his critics longer than anyone thought.

That interesting tidbit emerged in a post by Byrne on the Motley Fool message board a couple of days ago, and in an exchange today on Herb Greenberg's blog. Scroll down to the April 29 entries here.

In his post, Byrne admits that he hired a lawyer for a dude named Dave Patch. As anyone knows whose spent more than a few minutes on stock message boards, Patch -- a fraudulent-stock aficionado -- spends much of his (spare?) time disseminating stock market conspiracy vitriol, and slinging mud at critics of Byrne and other CEOs who blame naked short selling for their incompetence.

Now it emerges that Patch (right) was subsidized by Byrne in his vicious attack on Jim Cramer a couple of years ago. In his post, Byrne strolls down memory lane as follows:

The last time I saw a threatening letter from these knuckleheads was from the General Counsel of TheStreet.com, directed at Dave Patch. There were a series of them, threatening lawsuits. I hired a lawyer for Patch, and the lawyer responded simply, Go ahead and sue: the first thing we are going to do in discovery is demand the personal financial statements of certain journalist(s) associated with TheStreet.com (you guess which one[s]).

You know what? They never wrote back.

Just so you can get an idea of what he's talking about, hold your nose and wander over to this link to a January 2006 item in Phil Saunders' "Sanitycheck" website, in which Patch describes his solitary faceoff against big, bad TheStreet.com -- not saying he had Patrick Byrne's lawyer on his side.

In his post today, we get this cock-and-bull story from Patch:

Reality is, I sought out legal counsel from a mutual third party. An individual I had dealt with for years and before I ever spoke to Mr. Byrne. This counsel agreed to draft a document for me for which I sent a check shortly thereafter. After receiving the document my check was likewise returned stating that “we are covering the bill.” Who the “we” was I did not ask, I simply extended my gratitude.

Yeah, right. Byrne just descended out of the blue, just happening to know the lawyer representing this creep. But then we get this:

I can tell you that Patrick Byrne offered to match Jim Cramer dollar for dollar if Cramer wanted to persue [sic] this any further but it never came to that.

...which is credible, particularly since it contradicts his claim that he didn't know who paid the lawyer.

Patch goes on to say that

As I have also stated before, I have been compensated in the past for efforts involving the requisition of and the analysis of FOIA requests into fails data on selected companies by the lawyers that represent these companies. The payments were nominal considering a FOIA request costs $28.00 ea. and I spend a few hours breaking each one down.

It's already established that Byrne puts on the payroll whatever carpet sweepings he finds on the Net that he thinks can be programmed to sic on his critics: Judd Bagley, Evren Karpak and now Mark Mitchell are three names that have become public, and undoubtedly there are others.

It would be useful to know how much of the anti-naked shorting campaign -- be it phonies like Patch or astroturf groups like the so-called "National Investor Protection Coalition"-- are subsidized with "nominal" under-the-table cash and legal fees from Byrne and other wealthy corporate benefactors.

UPDATE: Forensic accountant Tracy Coenen lays out the gruesome details of Overstock's history of dissembling in its financial statements -- the root cause of its campaign of menace against critics -- in a blog post.

Bethany McLean has a review in Fortune of David Einhorn's new book, in which he recounts his encounters with creepy companies like Overstock. The beginning of her review is food for thought:

"This is indeed a concern and we will tackle it." That was SEC chairman Christopher Cox's handwritten note to a senator worried that companies were retaliating against analysts who produced research critical of them.

Almost three years later, it's hard to see any sign that the SEC takes this issue seriously. Stories about companies not permitting questions on conference calls from critical analysts, or excluding them from meetings, are routine. These days we have lawsuits, job loss, and the slander of those whose livelihoods depend on their reputations.

The SEC, which is already investigating Overstock for the reasons detailed in Tracy's blog, needs to take seriously the history of issuer retaliation practiced by the company.

© 2008 Gary Weiss. All rights reserved.

A Tireless Voice for Bad Companies is No More

"Investigatethesec.com" in its glory days. Note the advertiser.

I've always felt that the name of the loony website "investigatethesec.com" perfectly captured the Orwellian character of the anti-naked-shorting movement.

After all, it advocated a cause pushed by penny stock promoters and CEOs who are themselves being investigated by the SEC -- charlatans like Patrick Byrne of Overstock.com and the effervescent Richard Altomare of Universal Express.

Similarly, its adherents like to call themselves a "market reform movement," when in fact they are not interested in genuine market issues, such as punishing bad brokers and changing the mandatory arbitration system. Their one and only interest is in giving bad companies a ready excuse for stock prices caused by mismanagement. That is why it is pushed by the anti-investor, anti-consumer U.S. Chamber of Commerce.

Anti-naked-shorting types, which include a number of bad-stock holders, always harp on how horrible Wall Street is. For the most part they are right. But how this lessens the lousiness of the stocks they own is beyond me.

Exploiting the fears and paranoia of gullible small-cap bagholders are sites like "Investigatethesec.com." The site was run by someone named Dave Patch, best known for positing that Enron was a victim of naked short-selling. Its "sponsor" was a Vancouver-based penny stock promoter, and the inevitable Overstock.com advertisement added to the site's creepy patina.

Note my use of the past tense. "Investigatethesec.com" announced its passing today, joining ncans.net, which represented a nonexistent "organization" devoted to fighting the nonexistent problem, and nfi-info.net, in that great padded cell in the sky.

Today the crackpots who ran "investigatethesec.xom" said they were closing their site because "We've accomplished our goals."

Nonsense. There are plenty of bad companies, plenty of future Richard Altomares and Patrick Byrnes out there, happy to cynically use conspiracy theories to excuse their own incompetence. And there are plenty of stupid small investors ready to suck up that trash.

I'd say the work of these phonies is only just beginning.

UPDATE: Taking pity on the rotten companies and inept CEOs who benefit from his crusade, Mr. Patch has reopened his website. Bravo! Here's what I wonder: It takes $20 or so to maintain a website every year. Did he received an infusion of cash from Overstock.com's telegenic CEO Patrick Byrne?










© 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.

The Real Mess at Enron -- Naked Shorting, Of Course!

I promised myself that I could let at least one day go by without saying anything about the wild and (literally) crazy naked-shorting cult, but .... well, I can't resist. They are fascinating in a grotesque way, and attract interest the way people crowd around a traffic accident.

Anyway, a reader brings to my attention what is actually a very typical message on a Yahoo stock message board from Mary Helburn, who is executive director of something called the National Coalition Against Naked Shorting.

After first noting a report of supposed naked shorting in UAL stock in 2002 (shortly before it went bankrupt), she went on to point out that everything you have read is wrong. Enron and other major corporate disasters of recent years were all victims of naked short-selling:

It isn't just UAL. It is any company that has bad news.. CPN, DAL, Enron...

This is the tip of the iceberg.... and it is all coming out..

They prey on small caps that they can manipulate and large caps under stress. They sell,sell, sell and make it look like it was all the company when it was really naked short selling. Wall Street, hedge funds, brokerages, do not want this out for the public to know. [Emphasis added]

Enron shareholders should be collecting from the brokerages for their losses.

M.

CPN was the stock symbol of Calpine Corp. and DAL was Delta Airlines -- both of which wound up in bankruptcy after years of well-publicized corporate woes. Or at least, that is what "they" wanted you to think. That it was the company. It wasn't! It was them! Them! Themmmmmm!

Another message board poster tried unsuccessfully to reason with Helburn. . .

Do you really think UAL could have sold some shares in a secondary at $5 to pull it out of its debt death spiral, but was prevented from doing so by abusive shorting causing its stock to go to 30 cents?

That isn't what happened. There was abusive shorting, but the stock went worthless because the business went bankrupt due to debt overcome by massive operational losses.

You are mixing 2 separate issues together, Mary, and I cannot understand why you continue to do so.

. . . but she held her ground.

Remember, this is typical -- a mainstream example of the rubbish disseminated by the Baloney Brigade.

To answer the gentleman's question, there's a simple explanation why the Baloney Brigade "continues to do so," generating this pap day after day: It is all they have.

There is no naked shorting scandal, only paranoid fantasies. Deprived of facts, all they are left with is fiction -- and it would be funny if these bozos weren't so influential with our regulators and lawmakers.

UPDATE: A reader points me toward another manifestation of this effort to slap "naked shorting" on every financial scandal of recent years, this one appearing on the "blog" of a Baloney Brigadier named Dave Patch. On Feb. 13 (a Friday, perhaps?) he posted a rambling essay devoted to explore that Enron-as-shorting victim theory.

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Wall Street Versus America will be 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.