Overstock.com Nears Default While Utah Media Sleeps

The always-intriguing story of Overstock.com ratcheted up a notch on Monday, as word emerged on Sam Antar's blog that Overstock is on the verge of violating its debt covenants and is therefore close to default, This devastating news was buried in a footnote.

That's probably the best example I've found of the need to read the footnotes of financial statements. Significant news is often buried therein. In this case, the news is so significant that I wonder if perhaps there may be a disclosure issue, and that Overstock should have issued a public disclosure highlighting its flirtation with bankruptcy.

Among Sam's findings, just from reading the latest 10-Q, is that Overstock is juggling the books:

At the end of its third quarter, the Overstock.com had $18.4 million of net working capital (current assets minus current liabilities). However, the company would have reported a mere $1.4 million of net working capital had it not played a shell game and window dressed its balance sheet during the third quarter. Apparently, the company wanted to avoid reporting dangerously low net working capital going into the fourth quarter, while at the same time it is trying to renegotiate terms of its Master Lease Agreement (sale leaseback) with U.S. Bank.

One thing I find especially interesting is the utter indifference to all this by the local Utah newspapers, especially the Salt Lake Tribune and Deseret News and the local Associated Press bureau, which seem to view their role as that of extensions of Overstock's public relations department. Not a word has appeared in the local newspapers about the company's third-quarter financial woes, the libel suit against its CEO Patrick Byrne, or the downgrade that led to a sell-off in the stock on Friday.

Here is typical Salt Lake Tribune "coverage," a rewritten press release on a routine postponement in the company's lawsuit against Goldman Sachs.

Here is a typical puff piece from the Deseret News on the company's disastrous "rebranding" strategy -- but not a word from the company's conference call last week on how "O.co" was causing confusion among customers and has hurt sales.

In the unlikely event that word ekes out into the press on its financial travails, legal woes or the default threat, you can be sure that it will be written with an overt pro-Overstock bias.

In other words, one of the largest and most interesting companies in Utah just isn't covered at all, except when it issues a press release. If that isn't a "captured media," to use one of Byrne's favorite phrases, I don't know what is.

The stock today is down 7% so far, and is testing its 52-week lows. If you relied upon the Utah newspapers to tell you about this dog's breakfast of a company, you'd be scratching your head and wondering why.

UPDATE: By the end of the day Overstock shares were down 8.4%, trading at a 52-week low, possibly because of Sam's blog item.

On Nov. 1, Overstock's descent into insolvency was picked up by the Going Concern accounting blog, and the stock is still falling, but the Utah media continues its radio silence. Not to worry, if Overstock comes up with a positive spin or some non-news p.r. event they'll be right on top of it.

© 2011 Gary Weiss. All rights reserved.
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Salt Lake Tribune is Hot on the Story -- Two Years Late

Several times in this blog I've described how the Salt Lake Tribune and Deseret News, the two statewide newspapers in Utah, have failed miserably at covering the corporate crime petri dish in their midst, Overstock.com. Today we have the latest example.

A day after the rest of the media, the Trib today finally got around to covering the lawsuit by seven California counties accusing Overstock of defrauding its customers by using phony price comparisons and inflated list prices. For a discount retailer this is about as serious an accusation as possible, for it means that you're not really a discounter after all--that your prices are, in this case, as phony as your accounting.

The Trib article, a regurgitation of AP copy from yesterday, begins, "Utah’s Overstock.com Inc. is under fire from district attorneys in seven northern California counties who claim the online discount retailer regularly made false and misleading claims about the deals it offered consumers."

In fact, Overstock has been "under fire" from seven northern California counties for the past two and a half years, and this is the first time the Trib has deigned to inform its readers of that fact. The Deseret News never has nor, to my knowledge, any other Utah paper.

As I described in a blog post at the time, Overstock disclosed the probe by California authorities in April 2008, in an SEC filing and accompanying press release.

The Trib ignored the story back then, and I trust it would have ignored the story now if the non-Utah media wasn't all over this story.

At the Deseret News, the only coverage given to Overstock.com lately was this article mentioning in passing Overstock's support of a union-busting measure.

Not to worry, Overstock, the Deseret News and the rest of the Utah media have got your back.

© 2010 Gary Weiss. All rights reserved.

California Sues Overstock.com on Pricing Scam

In my Street.com column a couple of weeks ago I described one of the ways companies conceal bad news -- by burying it in the "risk factors" section of their SEC disclosures. I cited as an example my favorite corporate crime petri dish, Overstock.com. For the past two years, Overstock has buried news that its pricing practices were under investigation by California criminal authorities.

Yesterday, the district attorneys of now seven California counties sued Overstock for $15 million, claiming fraudulent pricing practices. The counties had offered to settle with Overstock for as little as $7.5 million, but Overstock refused. No wonder: if the company had coughed up such a substantial amount of cash, it probably would have been driven into bankruptcy.

The allegations in California allege one of the oldest consumer scams in the books:

"Beginning no later than January 1, 2006, Overstock routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products," the civil complaint states. "Overstock used various misleading measures to inflate the comparative prices, and thus artificially increase the discounts it claimed to be offering consumers."

Here is the lawsuit:

California AGs vs. Overstock

The company's general counsel "denied the allegations in the complaint and said the district attorneys failed to understand how Overstock advertised its prices." No, actually it seems to me that the DAs understood how Overstock advertised its prices.

Seems that an outraged consumer's complaint led to the charges against Overstock:

In 2007, Mark Ecenbarger bought a patio set for $449 on Overstock. The website claimed the list price other companies were charging for the set was $999.99.

But when the furniture was delivered, there was a Walmart sticker on the side of the box showing the set was really worth $247.

The reaction of the market to this news, which emerged after the markets closed last night, is intriguing. The stock is actually up substantially. The reason for that is simple: fraud is already incorporated into the share price. This company is under SEC investigation for systematically cooking its books. Why should consumers be treated any differently than shareholders?

Overstock is pretty shameless in its fraudulent pricing. As noted in the lawsuit, BusinessWeek surveyed its pricing practices back in 2004 and found that it systematically overstated "list" prices. For example,"of the 92 Toshiba and Panasonic products available Mar. 2, 40 had list prices higher than the manufacturers' list."

Just for the heck of it I checked out Overstock's price for the paperback edition of Andrew Sorkin's Too Big to Fail. The price at Overstock is $11.06 and the search page for the book fraudulently says "compare at $20.55" and "you save 46%."



Baloney. The biggest online retailer, Amazon, lists the book at $9.90 and gives the list price as $18.00, not "$20.55." Barnes & Noble also prices the book at $9.90, and gives the correct list price.

So where did Overstock conjure up that "compare at" price? The Future Felons of America outlet shop in Salt Lake City? Misstating an easily determined (you look at the book cover or website) publisher's list price takes a degree of unmitigated gall, and contempt for the law, found only at Overstock.com.

Seems that Overstock has as much contempt for its customers as it does for its long-suffering shareholders.

UPDATE: Predictably, the two statewide Utah newspapers, the Salt Lake Tribune and Deseret News, always happy to run trivia like this, published not a word on the lawsuits.

But numerous other media outlets have picked up on the story including an ABC affiliate in California. Hey, you can't buy publicity like that, especially at the beginning of the holiday season.

© 2010 Gary Weiss. All rights reserved.

Invitation to a Puff Piece, Overstock.com Edition

The financial media has been so beaten down lately that critical reporting has been largely a thing of the past. So the question arises, "Where is the next generation of puff pieces coming from?"

The answer appears to be, "email spams."

My favorite corporate crime petri dish, Overstock.com, is slamming into the email boxes of the media a spam email offering up the company's wack-a-doo CEO, Patrick Byrne, for interviews -- about his favorite subject, which is what a wonderful, generous guy he is.

The email was directed to my mailbox by the geniuses at this company's p.r. department. Any journalist wanting to fill some stress-free, news-free, reader-unenlightening space, is invited to write about Overstock's "Worldstock" p.r. gimmick. The "hook," as they say in the p.r. game, is a "humanitarian" trip to Malawi, of all places, being offered in a sweepstakes. Sort of a p.r. gimmick to promote a p.r. gimmick, a "p.r. gimmick-squared."

Here's the email:

From: Roger Johnson
Date: Mon, Sep 13, 2010 at 4:30 PM
Subject: Humanitarian Trip to Malawi, Africa to be awarded by Worldstock for 9th Anniversary
To: Roger Johnson

For interviews with Worldstock Founder Patrick Byrne about how this program has changed the lives of artisans all over the world please contact Roger Johnson at rojohnson@overstock.com or 801-947-4430

Social Media Release: http://pitch.pe/85377

Worldstock to Celebrate 9th Anniversary by Awarding a 10-Day Trip to Malawi, Africa

SALT LAKE CITY — Overstock.com, Inc. (NASDAQ: OSTK) announced a grand prize trip to Malawi Africa will be awarded as part of Worldstock’s Nine Year Anniversary Giveaway. The 10-day, all-expenses-paid trip for two will be awarded on September 17, 2010, by a random drawing from all giveaway entries. To enter visit www.overstock.com/worldstock-anniversary

“Worldstock is a department within Overstock.com devoted to fair trade with artisans in over 50 countries,” said Overstock.com chairman and CEO Patrick Byrne. “Worldstock’s mission is to create sustainable livelihoods for [blah blah blah]

It will be interesting to see if the spineless journalists of Utah, who have ignored every accounting gimmick and whitewashed every restatement made by this company, snap up the opportunity to write some spoon-fed pap.

The two Salt Lake City papers, the Deseret News and Salt Lake Tribune, have even ignored the company's recent quarterly earnings travails and share price slaughter. Investigative reporting? Fugetaboutit.

I assume that the papers out there have plenty of opportunity to write about the dark side of Overstock, judging from the kind of insider emails that I get (which I usually refer to the SEC). But the people out there are either wise to the uselessness of the papers and don't bother. Or they bother and are ignored.

No worries. Why should the Utah papers bother with actual news, when they've got a sweepstakes to write about?

© 2010 Gary Weiss. All rights reserved.

Overstock.com's Loss and Patrick Byrne's Prescient Stock Trade

My latest column in TheStreet today describes the dangers of investing in cult stocks, ranging from Sirius XM to Apple to my all-time favorite, Overstock.com. My point was that falling in love with stocks is a bad idea--and, as if to prove my point, Overstock decided to take a swan dive into the toilet late last week.

The issues are, as usual, multiple. Overstock had a real bang-up quarter, and investors celebrated by selling the stock in droves, pushing its price down 17% on Friday on heavy volume. But that's not really the problem, as Sam Antar and Caleb Newquist point out.

The problem is that CEO Patrick "Wacky Patty" Byrne made the far-from-wacky decision to dump $3 million in shares in May, and then gave a misleading interview in which he implied that the company's finances were on an even keel. They were not, and the resulting surprise can be seen in Friday's share price action.

Volume is again heavy today, and the shares are down again as of this writing. There was no press release celebrating the latest bad news, but there is a conference call, scheduled for 3 p.m. today. It will be interesting to see if CEO Patrick Byrne can find the right evasions and Buddhist aphorisms to mask the bad news. If past is prologue, I think that we can expect no impolite questions from the quaking analysts in attendance, and no questions permitted from Sam Antar.

Another prediction: the Salt Lake Tribune and Deseret News, Overstock's hometown papers, having both ignored the shareholder slaughter--the second-biggest on Nasadaq on Friday--will figure out a way of producing happy-talk articles. Stay tuned.

UPDATE: Still waiting on the Utah papers' latest lotion job. Meanwhile, Byrne's brief conference call falsely claimed that there was only one caller with a question--ignoring Sam Antar, who not only signaled for a question by pressing *1 on his phone, but had previously emailed Overstock on the subject.

I assume that the SEC will let this stunt passed unnoticed, as Overstock has pulled it in the past. I wonder what they have to fear from Sam? (As if I didn't know.)

Overstock shares are down 4% for the day on heavy volume. If this trend continues, the company's cult status may be over.

© 2010 Gary Weiss. All rights reserved.

The Utah Newspapers Fail -- Again

Overstock.com, best known for its Facebook pretexting campaign against journalists, yesterday restated its financials for 2008 and 2009, turning a much-ballyhooed fourth quarter 2008 profit of $1.014 million into a $705,000 loss--vindicating critics, especially Crazy Eddie mastermind-turned-crime fighter Sam Antar.

At the time the now-retracted "profit" was announced in January 2009, Overstock shares climbed 21% in one day. The company had "beaten analyst expections" of a loss, Reuters reported at the time. I am amazed that Overstock has not been prosecuted criminally for this blatant securities fraud. Yet an ongoing SEC investigation has produced not so much as a slap on the wrist.

Also yesterday, Overstock announced a $7 million profit for 2009 that would have been a loss were it not for paper-shuffling and nonrecurring items. It faces a serious criminal probe of its advertising practices in California, for which it is on the hook for as much as $8.5 million, and its internal controls are a shambles.

All of the above is plainly disclosed in the company's filings with the SEC yesterday. But you wouldn't know about any of this by reading Overstock's hometown newspapers, the Salt Lake Tribune and Deseret News, or by reading an AP puff piece that was subsequently churned out of its Salt Lake City bureau.

Sam today recounts how Overstock.com CEO Patrick Byrne and its president Jonathan Johnson systematically lied about their financials over the past few months--lies they were officially forced to disavow yesterday, as they issued restatements for four financial statements in 2008 and 2009.

Sam describes in detail how Byrne used nonrecurring items to turn his latest loss into a profit -- thereby engineering a 20% rally in the stock yesterday. Thus Overstock shareholders and employees, who are concentrated in Utah, had to read Sam's blog, this one or the Jr. Deputy Accountant to find out what really happened yesterday, thanks to the sheer cowardice of the Utah media.

The Deseret News picked up an AP rewrite of the press release. (The puff piece followed a few days later.) Neither the AP in its two articles nor the Trib article today mention that Overstock's fourth-quarter 2008 "profit," trumpeted by Byrne at the time in a gloating press release-- pumping up the shares by 21%-- was a big phony. It was, as restated yesterday, a loss. The brief Deseret News item doesn't even mention the restatements.

The Trib makes no mention of how it trumped the fourth-quarter 2008 "profit" in this article by the same reporter, which turned out to be a load of hooey.

Instead, the Trib quotes Overstock president Jonathan Johnson uttering this drivel: "When you look at what this restatement is really, it is positive."

Positive? Overstock admitting that its profit was a loss is a "positive"? Indeed, reading the Trib article, you'd think that the restatements were a triumph and not an admission of incompetence at best or, more likely, intentional fraud.

Nor does the Trib or Deseret News point out that California law enforcement authorities want either $8.5 million or $7.5 million from Overstock to settle a criminal investigation of its advertising practices. Both contradictory numbers are used in the 10-K released yesterday. Not only is the contradiction not mentioned in the papers' coverage, but this entire mess is not even mentioned.

Instead we get vague references in the Trib to "questions about its finances," without any mention made of the fact that those questions have been answered. Nor is it mentioned that the company's auditors at KPMG said in the 10-K yesterday that the company's internal controls were FUBAR.

Probably the worst omission in the coverage is this: neither newspapers points out that the $7.7 million profit for 2009 would have been a $6.5 million loss were it not for (as Sam points out):

• Gain from extinguishment of debt (Consolidated Statement of Cash Flows): $2.8 million
• Gain from settlements of legal matters (Footnote 16: Commitments and Contingencies): $7.1 million
• Reduction of sales return allowances $4.3 million (Page F-16)
• Total: $14.2 million

This is not the first time the Utah media has failed to do its job, or been used by Overstock to mislead its shareholders. Byrne and Johnson were quoted by the Tribune in November 2009 misstating the magnitude of the financial problem that it corrected yesterday. Johnson was quoted as saying as follows:

Johnson said the company believes its 2008 year-end financial statement was accurate and that its accounting firm at that time, PriceWaterhouseCooper, agreed and signed off. . . .

"None of these changes that they [Grant Thornton] are talking about, or that people at the SEC are now asking about, make any of our quarters go from negative to positive or from positive to negative," he said.

Byrne said much the same thing in a conference call with analysts.

There's no mention of any of this in the Trib's article, even though the same reporter wrote both articles. It's almost as if the Trib was covering up for the fact that it was used by Overstock.com to spin the dreadful condition of the company.

Now, we can't expect reporters to be accountants. But we do expect reporters to call accountants when confronted with companies that have a history of making false or misleading statements--particularly to their own newspapers.

The lesson for Utah's newspapers, and other newspapers in similar situations, is Journalism 101: Call an expert. Read the 10-Ks. Sure, you had to go to page F-53 of the 10-K to read about just how significant the 4Q 2008 restatement was -- and how much the company had lied in the past. Given the company's history of lies, evasions and misstatements, what else could they expect? Relying on the press release of a company like Overstock is simply inept.

Years ago you had to pay document retrieval services big bucks to get SEC filings. Now they're on the web, instantaneously. Sure these are big documents. So? If you can't figure them out, there are people who can do so.

The bottom line is that there is no excuse for incompetence nowadays in covering corporate slimeballs like Overstock.com. All it takes is Internet access, a telephone, and something lacking in Salt Lake City's media--a little backbone.

Yes, it's true, the company has a history of smearing the media and whistleblowers like Sam, and there's no doubt at all that Byrne will sic his hired thug, the kiddie stalker and possible pederast Judd Bagley, on any Utah reporter who doesn't toe the company line. Bagley once got in touch with Sam's estranged wife to dig up dirt on him --I mean, the guy will stop at nothing. To quote Barry Rithholtz, he is a "career douchebag." Harassing reporters is his job. He belongs in jail, but meanwhile he's on the loose, and he is doing a great job--just read the Salt Lake City papers today and you can see what I mean.

The journalistic malfeasance in Utah is understandable--but not excusable.

UPDATE: The AP's Paul Foy moved on the wire this atrocious article today, containing the following whopper from Byrne:

Byrne, who owns nearly 30 percent of the company's shares, says Overstock's accounting errors were generally conservative. The latest involved 0.1 percent of revenue and gave the company no advantage, he said.

Seems to me that a profit that really was a loss is an "advantage."

What makes this odd is that Foy knew that Byrne was dissembling. It's in the 10-K that the restatement had changed the fourth quarter 2008 gain to a loss, and Sam tells me he pointed that out to Foy, by phone and in writing.

More on the AP's messed-up reporting can be found in this follow-up.

Also, the Going Concern accounting blog weighs in.

Going Concern also live-blogged the Overstock conference call on Monday. Always a great show.

© 2010 Gary Weiss. All rights reserved.

Restatements Highlight Overstock.com's Lies to Salt Lake Tribune

Overstock.com's stunning admission yesterday that its recent financial statements were phony --vindicating years of hammering by whistleblower Sam Antar-- highlights an issue that I think could loom large in the SEC's probe of this creepy little company.

It all has to do with a fish story that Overstock.com president Jonathan Johnson gave to the Salt Lake Tribune, which appeared in the paper on Tuesday. Of all the lies that have spewed forth from this corporate crime petri dish over the years, these were among the most blatant and, I think, could be damaging to him personally, and to the company.

Johnson told the Trib that David Chidester, the senior vice president for internal controls, had not departed from the company because of any material issue. Johnson piled on the hooey, saying that Chidester had left because... well, because. No particular reason. He had been there for ten years, and it was time to move on.

Yet at the same time that Johnson was giving that rubbish to the Trib--the article appeared online the evening of Monday, Feb. 1--Johnson already knew that a decision had been made to restate all the recent financials, and that the Overstock board's Audit Committee had specifically determined, three days earlier, on Jan. 29, that its financial controls had been deficient for an extended period of tiem.

In the Form 8-K filed with the SEC yesterday, Overstock disclosed that the Audit Committee said the following on Jan. 29:

The Audit Committee has instructed management to prepare a comprehensive review and analysis of the causes of the errors identified above. The Audit Committee has further instructed management to submit to the Audit Committee a comprehensive detailed plan for the remediation of the underlying cause of the errors and for the implementation of stricter policies to avoid errors or deficiencies in accounting procedures and application going forward.

. . . In connection with the restatement of the Company’s fiscal 2008 consolidated financial statements, management has reassessed the Company’s controls and procedures including internal control over financial reporting as of December 31, 2008. Management has concluded that there was a deficiency in the operating effectiveness of the Company’s controls in place related to accounting for billings to drop ship fulfillment partners which constituted a material weakness. Accordingly, management’s report on internal control over financial reporting for fiscal 2008 can no longer be relied upon. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Johnson surely knew all of this--it had happened on Friday, Jan. 29--at the time that he fed the following ca-ca to the Trib three days later concerning the exit of the exec who was CFO through the end of 2008, and afterwards head of internal financial controls:

"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."

Johnson was right in one sense. No, Chidester hadn't left because of a recent Big Money article describing a sales tax avoidance scheme and FUBAR internal controls. He left because of something considerably more important. But Johnson--who, remember, wasn't obliged to say a thing to the Trib--decided to mislead and lie by withholding a material fact, which was that Chidester was in hot water with the board of directors. He wasn't walking away from a 300K job because he felt like going out into the job market in a recession.

Johnson's motivation in not lying would not be something as old-fashioned as "telling the truth," but a more primal urge called "self preservation." Rule 10b-5 of the securities laws forbids corporate officers not just from lying, but make it verboten "to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading."

Johnson once famously said about Sam Antar that he "can’t read his blog because it’s so full of lies." He clearly meant to say "full of truth."

I'll be interested to see if the Trib ever gets around to reporting Overstock's disclosures yesterday. And if it does, will it describe its own role in Overstock's scheme to mislead the media, the public, and its shareholders.

Most newspapers would be upset about being lied to this way, let alone to be used by a company to commit securities fraud. But remember that this is Utah, and evidently the rules of journalism don't apply there. Remember that there is another statewide paper, the Deseret News, and it hasn't breathed a word about any of the travails of this open sore in its neighborhood.

Another thing I'll be interested to see is if either Salt Lake City newspaper adjusts its heretofore uncritical view of Overstock and its wacky CEO, Patrick Byrne, in light of recent events. Byrne has so far been out of pocket, but I'm sure he'll deploy his possible-pederast fetchit boy, Judd Bagley, on a diversion mission fairly soon. Plenty of kids out there for these two douchebags to stalk.

UPDATE: The Going Concern accounting blog has this to say about the SEC finally taking action against these bums:

So while this appears to wrap up the SEC’s Division of Corporation Finance investigation, one little problem that still remains is that the SEC’s Enforcement Division has not wrapped up its probe of the company. Yeah; so there’s that. Considering the the track record of the SEC, we’d typically give a company a 50/50 shot of coming out of a probe by the Enforcement Division unscathed but in the case of Overstock, we’ll be going with Schape’s {SEC chairperson Mary Schapiro's] crew.

© 2010 Gary Weiss. All rights reserved.

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.

Are the Salt Lake City Papers Asleep?

Seth Jayson of the Motley Fool expresses bewilderment at the lack of media coverage of the departure of a key financial officer at the corporate crime petri dish, Overstock.com, coming as it did immediately after a devastating article in the Big Money.

He was focusing on the big wire services, and he's right, but what I wonder about is the bewildering (or maybe not so bewildering) silence of Overstock's hometown newspapers, the Salt Lake Tribune and the Deseret News. Not one word in those two newspapers about the departure of David Chidester, head of internal financial controls.

Are they too terrified of the Nastiest CEO in America, Patrick Byrne, to do their jobs? Are they worried about personal attacks by Byrne? Are they afraid of their families being terrorized by the child-stalker, Byrne's nauseating go-fer Judd Bagley?

They have good reason to be afraid. Bagley has engaged in pretexting and cyberstalking of the wives, kids and grandparents of media people. He has boasted about personally stalking my apartment in New York, and has targeted my wife in his Overstock-financed smear campaign. He tracked down the estranged wife of one Overstock critic, in unsuccessful effort to get dirt on that critic. He once targeted a teenage blogger. As author and financial blogger Barry Ritholtz correctly put it, he is a "career douche bag."

These newspapers' silence seems to substantiate one of the points in the Big Money article, which is that Byrne uses crude tactics to discourage coverage.

Said Roddy:

I am one of only two reporters—the other is my former Fortune magazine colleague Bethany McLean—apparently evil enough in his eyes to warrant a reference to oral sex and ejaculation in his assessment of our ethics and reporting skills.

. . . consider that investigating the likes of Overstock is to be propelled back into a parallel world of eighth-grade recess writ large, replete with smears, tricks, and dirty language. And just like eighth grade, Byrne has learned that many people simply don’t like to fight back.

Apparently these tactics work, and they certainly do close to home.

Keep in mind that Chidester's resignation is not a rumor. Overstock filed an SEC Form 8-K announcing his departure, five days after the event.

The resignation came one day after the Big Money story, citing internal company documents, pointed to Overstock engaging in a sales tax avoidance scheme and suffering from a total lack of internal financial controls. Blogger Sam Antar, a prime target of Overstock's hoods, perceptive blog post on the troubles facing David Chidester.

In his post today, Seth Jayson pointed out:

The guy [Chidester] who knows where the bodies are buried (or doesn't, which would be more interesting) at a firm that's under SEC investigation, the day after a story breaks about a tax-evasion scheme, and no one bothers to report on it?

That's what happens when clowns like Patty and Judd, the unacomplished Facebook Granny and Child stalker behave so insanely for so long. The media starts to ignore the simpler evidence of skankiness that's too boring and too obvious.

That, or as Roddy Boyd discussed in this article, the writers and editors out there are too afraid to risk the wrath of con.

The Salt Lake papers don't always ignore the loony activities of Overstock.com, with the Salt Lake Tribune (not the Deseret News) belatedly mentioning, after it was reported elsewhere, that the the company has fired its auditor, filed an unaudited financial statement, and engaged in a public row with the fired auditor.

But as far back as I can recall, neither paper has broken news about Overstock -- and no, occasional puff pieces and reprinted press releases and wire stories don't count as "breaking news."

The heavy lifting, and the exposure to attack, is left to out-of-town reporters like Joe Nocera of the New York Times, Carol Remond of Dow Jones, Bethany McLean, now with Vanity Fair, Herb Greenberg and Roddy Boyd, formerly of the New York Post and Fortune. All have been viciously attacked by Byrne and his employees.

With the Salt Lake papers shirking their responsibility, Utahns are left with out-of-town reporters like Roddy and bloggers like Sam Antar, who today described in detail how Overstock has violated accounting rules by failing to disclose related party transactions with its Deep Capture astroturf website. Byrne uses Deep Capture to intimidate his critics and the media. It is run by Byrne's employee Bagley, who has focused so obsessively on stalking kids that he is described by blogger Barry Ritholtz as a "possible pederast."

Just to put Barry's terminology in context:

. . . The reality turned out to be far more insidious than that: A career douche bag (and possible pedarast) named Judd Bagley decided to engage in some fraudulent pretexting. He assumed a false persona on Facebook, using someone else’s name and photo (perhaps committing a Felony in NYS). He then began cyber-stalking the children, friends and family of numerous journalists, bloggers and fund mangers. After friending all the kiddies, Bagley posted their names, friends, etc. at the Deep Capture site.

Sam describes in his blog how Overstock has systematically violated accounting standards that require disclosure of related party transactions. The transactions were with the Deep Capture site. Yep, that's the kind of company we're talking about. Yet not a word on any of this in the newspapers that purport to cover prim, proper Salt Lake City.

William Wolfrum, meanwhile, takes a satirical approach, as he did previously.

I don't expect the Salt Lake City papers to consider it news that a CEO in their midst is a laughingstock, reflecting on Utah companies generally, but an executive departure of such importance should not be ignored.

Once Overstock collapses under the weight of its own self-generated scandals, you can be sure of one thing: you won't be reading about it in Salt Lake City, unless Overstock issues a press release.

UPDATE: Talking Biz News asked both papers for reaction. Nada. Sam's work, meanwhile, received an enthusiastic endorsement from a leading academic authority on corporate accounting, Prof. David Albrecht: "As only Sam can, the Overstock.com fraud situation is dissected. Sliced and diced. This is a must read for any honest person who is curious about just how fraudsters go about their business."

© 2010 Gary Weiss. All rights reserved.