Overstock.com's No. 1 Risk Factor: Patrick Byrne

A duly disclosed risk factor: telegenic CEO Patrick Byrne

One of the remarkable things about Corporate America's one-man lunatic fringe, Overstock.com CEO Patrick Byrne, is how this company's deaf-dumb-and-blind board of directors allows Byrne to make a fool of himself practically every day by shirking his job and spewing his stock market conspiracy theories. Pretty much everyone knows how much damage it has done to the company's reputation and credibility.

Michelle Leder, who writes the respected Footnoted.org website, points out today that Overstock.com actually disclosed that very danger -- that Byrne's nutty spewing can hurt the company -- in the 16-page "risk factors" disclosure in its latest 10-Q.

This rather obvious risk is, of course, clouded in the usual corporate-speak:

Additionally, Dr. Patrick Byrne and the company have fostered and supported a national debate concerning illegal trading practices called “naked short selling” and have advocated regulatory changes and enforcement action designed to end these practices. The profile of the company and Dr. Byrne, and their positions on issues associated with the debate, may make the company and Dr. Byrne the target of criticism and derision in the financial markets and associated media, and this may prove to have an adverse effect on the company’s stock price.

Translation: Patrick Byrne is screwing his shareholders by neglecting his duties and ranting and raving about stock market conspiracy theories.

What's interesting is that the board of directors, rather than disclosing this rather obvious fact, doesn't kick him out on his keister--which is what any corporate board would do that did not make a mockery of corporate governance. So instead we have the daily spectacle of an out-of-control CEO living on message boards, editing Wikipedia day and night, while his hand-picked board snores in the distance.

Even his father, former GEICO CEO John J. Byrne, realizes that sonny boy is a liability. He told the AP the other day that " I would rather him spend his time on getting things right with the company, not on that jihad."

Byrne made much the same comments when he was chairman of Overstock -- and then, rather than live up to his responsibilities as chairman, he cravenly quit rather than push the issue. The younger Byrne responded by implying publicly that his father might be getting a bit senile. What a dear man he is.

So Byrne has raved on, truly the gift that keeps on giving. Still, things like this makes you wonder: wouldn't the world be a better, more honest, less slimy place if John Byrne cut off junior's allowance?

© 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.

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.

For Sale: Ten Tons of Baloney

The court-appointed receiver for Universal Express, the fraud-infested company that is a poster child for the naked short-selling conspiracy nuts, has come up with a novel way of dealing with the issue: she has put the baloney for sale.

That's right. In her most recent progress report, thoughtfully posted here, Miami attorney Jane Moscowitz -- picked to head the company in lieu of the now-jailed ex-CEO Richard Altomare -- announced that she is putting up for sale the cause of action that the company is a victim of naked short selling. She has done the same with a default judgment the company won against some brokerages it accused of naked shorting.

I think that this is an excellent idea. I am sure that Overstock.com's delusional CEO Patrick Byrne, who freely spends his trust fund inheritance to promote market conspiracy theories and other nutty causes, will be delighted to buy this litigation for what it is worth to the shareholders of Universal Express.

Byrne has spoken out in the past in defense of Universal Express, saying "mine is just one battle in a larger war, and that others are fighting their own equally worthy ones." So this is an opportunity for him to put that belief into action.

Indeed, since the naked shorting conspiracy types claim that damages run into the billions if not trillions, it is logical to assume that Byrne could spend every penny that his daddy has given him on this worthy cause, and still make a neat profit.

If Byrne shies away from this challenge, I am sure that many others can step up to the plate. It will be interesting to see if the naked shorting nutcases are as crazy as they appear to be, and will plunk down some hard cash on their delusions.

True, Moscowitz cautions that "the Receiver has no ability to judge the value of this potential cause of action or whether it exists at all, but will assign it to the highest bidder if the Court so allows."

Let the bidding commence! Or, to put it another way, "put up or shut up."

UPDATE: Floyd Norris adds:

Before anyone sends in a bid, they might ponder the evidence regarding how Mr. Altomare ran the company, and the fact that despite his pleas of relative poverty, he seems to have told people he had taken over a shell company in Europe and was hoping to make acquisitions. . . .

The Altomares brought money into Universal Express by illegally issuing billions of shares, and then spent it on themselves while stiffing company creditors and even employees, who were persuaded to put company expenses on their personal credit cards. It amazes me that people who lost money in the stock still defend the Altomares.

It is amazing, isn't it? People act strangely after they've been ripped off. I was told by an FBI man once that doors would slam in his face when he approached victims of charlatans.

© 2008 Gary Weiss. All rights reserved.

Patrick Byrne Covers Up Ownership of 'Deep Capture' Smear Site

A couple of months ago I described how Overstock.com's terminally wacky CEO Patrick Byrne has thrown caution (and any lingering sanity) to the winds and was openly sponsoring attacks on journalists and other critics, on a smear site that he owned and was operated on Overstock servers, "Deep Capture."

This was a change from Byrne's previous tactic of claiming that smears and attacks were by people who just coincidentally happened to be his employees. The word for this is "astroturfing," and it is a particularly sleazy method of concealing corporate (and sometimes government) involvement in dirty tricks campaigns.

Well, it seems that Byrne is back to astroturfing. For some unknown reason he has been frantically trying to distance himself from Deep Capture's ownership, while at the same time boasting about his and Overstock's involvement in the site.

An eagle-eyed reader points out that Byrne has changed the ownership of the site, as recorded in the records of the Utah Department of Commerce. Here are Deep Capture's registered principals, duly recorded with the Utah Dept. of Commerce, as of April 20:



As I pointed out in my earlier post, High Plains Investments=Patrick Byrne, according to Overstock's SEC filings.

Here's Deep Capture's registered principals as of today:



"Judson Bagley" is, of course, Overstock's nauseating house stalker Judd Bagley, the former low-level Republican dirty tricks specialist who Byrne put on Overstock's payroll to run his "antisocialmedia.net" corporate smear site and to attack his critics on the Internet generally. "Deep Capture," the ironic term Byrne uses for his website, is the successor to antisocialmedia. I say "ironic" because Byrne is quite arrogant about using his trust fund income to capture not only regulators but also ex-journalists such as Mark Mitchell, the ex-journalism review editor now on Byrne's personal payroll.

Evren Karpak is not an ex-journalist, but just some creep who won Byrne's heart by attacking his enemies. Karpak was put on the Overstock payroll after a distinguished career silencing critics of Overstock on the Investor Village message board. I've always found the hypocrisy of all this amazing, by the way. Byrne screams about "paid bashers" criticizing his company, always without evidence, while he very openly puts people on the payroll to smear his critics.

In addition to changing the registered principals of the company that owns the smear site, Byrne has changed the registration of the website, which used to be in his name.

Here's the registration of the Deep Capture website as it was on April 20:



. . . and here is the website registration today:



Apparently he anonymized the registration on May 2. Note that he hasn't yet taken Deep Capture off Overstock's servers. I guess that will come later.

It's not clear to me why Byrne is trying to hide his and Overstock's ownership and operation of Deep Capture. Just the other day he boasted that Overstock.com had financed an advertising truck at the SABEW convention. Deep Capture is linked from Overstock's "community" tab, and openly benefits from a share of Overstock revenues.

I can't figure out a rational reason for any of this. To shield himself from liability? A court would strip away that corporate veil in five seconds. But, then again, rationality has never been Byrne's strong suit.

UPDATE: Forensic accounting guru Tracy Coenen has a cogent follow-up.

© 2008 Gary Weiss. All rights reserved.

Return of the Phantom Menace

Byrne: still pushing the '1,000 companies' fairy tale

Yep, the "imaginary thousands" are back.

In an interview with the Wall Street Transcript, America's premier blame-shifting CEO, Overstock.com's self-confessed crook Patrick Byrne, trotted out the old line that you could fill a good-sized auditorium with the CEOs of companies destroyed by the nefarious forces of naked short selling.

There are hundreds, maybe 1,000 or more companies that have been destroyed by hedge funds using an illegal technique. It's a perfect crime because nobody even sees there is a crime. A typical citizen just sees that her stock portfolio goes down, and she doesn't understand that behind the scenes the game has been rigged.

Texas lawyer John O'Quinn said pretty much the same thing on Dateline NBC three years ago. As I recounted in Wall Street Versus America, I called him to ask for the names of some specific companies, and am still waiting, hand on phone, for a callback. More of O'Quinn's baloney here. Notice that in five years not a single "victim" has been named, and the poor dear has been unable to squeeze a single nickel out of the junk lawsuits he has filed on this non-issue.

One even loonier estimate that circulated a few years ago, pushed by a stock promoter named "Bud" Burrell, was that "7,500 companies have been bankrupted since November, 2000, by illegal naked shortselling and conspiratorial manipulations, resulting in a loss of $17 trillion in market cap, 'greater than all the losses in the 1929 market crash.'"

The word for this, coined by Fortune three years ago, is "phantom menace."

"Phantom" as in "not happening."

The interviewer for Wall Street Transcript, no doubt mindful of Byrne's habit of personally attacking journalists who ask annoying questions, didn't trouble him by asking for specifics.

Still, I'd have expected that the comments section of the Seeking Alpha excerpt of the interview would have contained some specific names of companies destroyed by naked shorting, along with proof that naked shorting was the cause.

Not a one. (Though there was an interesting comment from an apparent Overstock insider, describing Byrne's mismanagement of the company.)

Ditto for Tracy Coenen's item on the subject. Tracy asked, "Can any of the NSS crusaders name even one and support their allegations with real proof?"

Tracy said:

There is supposedly this vast conspiracy of hedge funds to carry out this Naked Short Selling, yet no one can come up with any real proof of it? No one can prove that even one company was destroyed because of NSS?

Sorry kiddos, you’ve done nothing to convince me. All you’ve done is stalk and terrorize people. You’ve smeared journalists. You’ve raved about conspiracies and Sith Lords and secret fax machines. You’ve come forward with no actual proof.

The Baloney Brigade, always swift to yammer away on their conspiracy theories, greeted this post with silence.

Byrne himself appeared on the Investor Village message board last night, posting under his favorite pseudonym "Hannibal," and ducked the question. Compare his sneering evasion with this cogent post by a rare message board skeptic. (He posted again some hours later. Still can't name a single one. Surprise surprise.)

It's funny how the deluded knuckleheads of the stock market conspiracy campaign -- mostly stock promoters, paid corporate shills and assorted nutcases -- are struck with laryngitis when asked for the names of companies actually destroyed by naked shorting. They bombard the SEC with reams of statistics on "fails to deliver," but can't seem to cough up the name of a single company actually destroyed by naked short selling.

Cause there ain't any. The SEC and other regulators have occasionally found that naked shorting takes place, but has never found that it has "destroyed" any companies. Except, of course, for Enron -- a victim of naked shorting according to a glassy-eyed corporate shill named Dave Patch (right).

The shame is that our market regulators, knowing this, continue to appease these creeps -- knowing that it is easier to placate crackpots than to face them down. Particularly when the leader of the crackpots is a major donor to Republican causes, and is the top political contributor in the state of Utah.

The word for this is "cowardice."

© 2008 Gary Weiss. All rights reserved.

Patrick Byrne Pulls a 'Reverse Dick Nixon'

Patrick Byrne admits the obvious

Forensic accountant Tracy Coenen observes today that Overstock.com CEO Patrick Byrne has admitted what has been obvious for ages: that he is a crook.

This is a refreshing gust of honesty from the famously dissembling Byrne, who has made a second career out of hounding analysts and members of the media who call him to account for his serial lies. Unlike Dick Nixon, who famously said "I am not a crook," Byrne is forthright in admitting his crookedness.

Bravo!

She notes that Byrne said as follows in a CNBC telecast in 2004:

Well, first of all, I’m all about gap. [sic] I have been so critical of the companies that do–I don’t believe in one-time charges; I don’t believe in EBITDA. If somebody talks EBITDA, put your hand on your wallet; they’re a crook.

The "gap" in the transcript is supposed to be "GAAP" -- generally accepted accounting principles -- which Byrne has disregarded when it suits him. Tracy and Sam Antar have been hammering away at that point for some months now.

Sam Antar adds:

The double talking Patrick Byrne not only likes EBITDA, he also likes to violate Securities and Exchange Commission Regulation G and materially overstate EBITDA in Overstock.com's financial reports. My blog and Tracy Coenen’s blog have detailed Overstock.com’s SEC Regulation G violations and resulting material overstatements of EBITDA in its financial reports starting from Q2 2007 and continuing to Q1 2008.

Indeed, Byrne's latest stock-pumping conference calls have been EBITDA-love-fests. Tracy's blog has a good analysis here on how Byrne has not only "talked EBITDA" but overstated it.

Tracy concludes, "I agree with Patrick: He is a crook." I agree with him too on that point. Whenever he talks about EBITDA (or stamp collecting, or ornithology, or if it is raining outside), put your hand on your wallet. A crook is talking.

I guess it's time for the SEC to wake up from its slumber, conclude a nearly two-year-old investigation and make it unanimous.

© 2008 Gary Weiss. All rights reserved.

Another Publicity Coup for Overstock.com CEO Patrick Byrne

Visiting hours at Overstock.com corporate headquarters

I see that some of my friends at CNBC reflected this morning on one of the more embarrassing blatherings of Overstock.com CEO Patrick Byrne: that there's a "fax machine" at CNBC where reporters take instructions from "hedge funds" (presumably not the hedge fund that his brother operates, or the one through which Byrne owns Overstock shares).

"Did you see that total whack job at Overstock says there's a fax here or something?" asked an amazed Joe Kernan. "We now know he is not above blatant lying."

We now know? Mr. Kernan, with all due respect, where have you been?

Still, I think it's pleasing to see Byrne described accurately for a change, and not with weasel words like "eccentric." The media, I think, has a hard time coming to grips with the possibility that a CEO could be, as one blogger artfully put it the other day, "nucking futs."

True, the "crazy act" could be just that. But I have to admit, it works. Byrne has certainly managed to divert attention from his company's financial woes by behaving like a clown. But is the price that he is paying -- the demolition of his credibility, the damage to his company's reputation, and the humiliation of being an object of fun on national TV -- worth that laudable objective?

© 2008 Gary Weiss. All rights reserved.

More on the Overstock.com Con Game

White collar fraud-fighter Sam Antar has a lengthy and prodigiously detailed post today on Overstock.com CEO Patrick Byrne's latest effort to pump his failing company's stock.

Byrne told Reuters in a story that moved late Thursday that

. . . he expected Overstock to lose 2 cents per dollar in sales in the first three quarters of 2008, but hoped to make it up in the fourth quarter to realize a profit for the year, and then continue profitably in 2009. "It is very realistic. I think we can," he added.

The stock climbed 2.6% on Friday, probably as a result of this shameless pumping.

As Sam describes, such an outcome is unlikely to say the least. Indeed, from reading Sam's detailed analysis , it seems to me that Byrne conjured up these numbers out of thin air. CEOs can't just decide that an earnings number sounds good and call up Reuters. They can't throw around numbers and projections that have no basis in reality.

Which means that if he doesn't get the profit that he projects, saying "my bad" and slinging more mud at critics won't do. The SEC-investigated clown prince of corporate miscreants will be in even more hot water than he is in now.

© 2008 Gary Weiss. All rights reserved.

Another Patrick Byrne Public Relations Triumph

Boozer: The Overstock public relations genius strikes again

The flailing Internet retailer Overstock.com, reeling from a string of public relations triumphs mostly inflicted by CEO Patrick Byrne's big mouth, has really bitten the big one this time: the SEC-investigated company has signed controversial NBA player Carlos Boozer as a spokesperson, promptly resulting in new calls for a boycott of the company.

A popular Cleveland website, the Cleveland Leader, describes the real mensch Overstock has signed up:

What do you get when you fool a blind man? Well, Overstock.com likes to reward the most despised NBA player in Cleveland, signing him today to a 4 year contract to help hawk their goods and services. If you are new to the Cleveland sports scene you may have no idea what I am talking about. If you follow Cavaliers basketball there is little doubt that you know that I am speaking about Carlos Boozer, who betrayed Cleveland and the team's then-owner Gordon Gund, who is legally blind, by shaking on a contract.

Hey, come on. Fooling a blind man is kid's play for a despicable company like this, whose CEO shocks what little conscience Corporate America has with his cowardly campaign of menace against critical analysts and the media.

The item goes on to say, quoting the AP:

Among the intriguing pieces of fallout was the decision by SFX, the company that represents Boozer, to disassociate itself from the player, a rare move that spoke to the bad public relations it must have received in the wake of the contract. The agent who worked out the deal, Rob Pelinka, resigned from the company, as well.

What a guy! The Overstock press release heralding the hiring of this nincompoop said "Carlos and Cindy share the same values and ideals as Overstock.com." That's for sure. In fact, I think Boozer may have to adjust his "values" downward to fit in with the cretins who run this company.

Byrne has a full-time stalker on the payroll, the nauseating Judd Bagley, and to make matters more atrocious he has taken in-house an astroturf site operated by Bagley. Byrne just sinks lower with every passing day, to disguise the fact that he is just no good as a CEO and is running his company into the ground.

I assume that the slug-like Bagley was put in charge of vetting Boozer, judging from the terrific reception it's getting. The Cleveland item concludes by saying, after quoting the "values" prattle:

So what is Overstock.com saying, that they share in fooling blind people? Obviously Overstock.com doesn't know who they are messing with. Rabid Cleveland sports fans are known to hold a grudge. Ask Art Modell, Albert Belle, or Papa John's pizza company. They have all felt Cleveland sports fans ire and probably regret it.

There's plenty of reason to boycott this train wreck of a company, and Byrne's hiring of Boozer -- at a prodigious sum, no doubt, for this chronically cash-byrne-ing company -- is just icing on the cake.

One interesting aspect of the Boozer contract is that its duration is four years. In the view of some observers, it is doubtful that this red-ink-gushing company is going to last that long. Hopefully Boozer had his lawyers review the contract thoroughly and had a strong "in the event of bankruptcy" clause written in.

© 2008 Gary Weiss. All rights reserved.

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.

The Overstock.com Publicity Juggernaut Continues

Jossip picks up on Overstock.com CEO Patrick Byrne's famous "CNBC fax" revelation, as the "Big M's" (as in "mouth") public relations juggernaut enters its third day:



Isn't that just what you need to burnish your company's reputation: lavish publicity that your CEO is nuts?

Hey, you can't buy that kind of coverage (though Byrne sure is trying).

© 2008 Gary Weiss. All rights reserved.

Tracking the Lies of Overstock.com and the Fantasies of Patrick Byrne

A kind of parlor game follows every quarterly conference call of the slo-mo train wreck Overstock.com: What will be the latest distortions, fantasies and outright lies? Yesterday's produced such a rich assortment that it's hard to know where to begin.

The fantasy emerged after the conference call, in an appearance on Fox Business News. Herb Greenberg reports that Overstock's dipsy doodle CEO Patrick Byrne said that he "happen[ed] to know for a fact that there’s a fax machine in the CNBC offices where hedge funds send instructions and journalists sit around and take instructions.”

Host Liz Claman shot back, “Well I worked in CNBC and I never saw that fax machine.” This was a refreshing change from the usual reaction of interviewers in Byrne's live TV appearances, who usually sit gape-mouthed after Byrne sets off a stink bomb like this.

Byrne's rejoinder was "I have a good source on that." Translation: "I'm making this up out of thin air."

Herb wonders whether it's "time to feel sorry for Patrick Byrne. . . whose comments at times, such as today, appear to be detached from any sense of reality."

I assume Byrne won't be posting a video clip of this embarrassing spectacle on his website the website operated by his 100%-owned hedge fund. But who knows? Maybe he is as detached from reality as he appears to be. I have my doubts. (One of his more dimwitted followers proudly posted a clip here.)

Turning from pathology to garden-variety lies -- they came fast and furious at the conference call, and I am sure that forensic lie-pathologists will be dissecting this one for weeks. A number of boners stood out. Here are two of them:

The first involved the non-comparability of the first quarter sales numbers to the ones a year ago. That's an undeniable fact, as laid out by reformed felon Sam Antar in a blog item on Monday.

General counsel Jonathan E. Johnson was quoted by Wired.com as saying the following:

"Sam is just wrong,". . . "They're both GAAP numbers . . . I can't read his blog because it's so full of lies."

The only problem with this statement is that it is a flat-out lie. Overstock was comparing a non-GAAP number (the first quarter 2007 number) with a GAAP number (the first quarter 2008 number). Sam has more details. "Leave it to Overstock to make matters worse," says forensic accountant Tracy Coenen.

Tracy further expounds on the farcical nature of this whole charade in a follow-up.

I'm saving the best for last. The pièce de résistance was the fish story provided at the conference call and in the Wired article as to why the earnings were released unexpectedy on Friday. As I pointed out the other day, this was a blatant effort to squeeze the shorts on an options expiration Friday, and to bury devastating news of a five-county criminal investigation of its advertising practices by California prosecutors. Even one of the normally supine analysts who cover this company acknowledged at the time that a short squeeze was at work.

Explaining this one away would take a real whopper, and Overstock's "designated liar" (the way you might appoint a "designated driver" after a party) obliged in the Wired article:

"What happened was this: Patrick Byrne was speaking at Wharton [School of Business] on Friday, and we wanted to get to the numbers out before he gave that speech," Johnson says.

But if that's the case, then why did the company schedule the release of fourth-quarter results beforehand, but it didn't schedule the release of first-quarter results?

"This time we did not know when we would have a full sign off from auditors," Johnson says.

Yup. Overstock is physically incapable of putting out an earnings release when its invaluable CEO, a man dedicated 24/7 to editing Wikipedia and posting on message boards selling memory foam and toasters, strays from the premises and is engaged in giving one of his excellent speeches.

So "what happened was" that the auditors "signed off" on the earnings, a runner was sent to check if the CEO was giving a speech or in the bathroom or sumthin and zoom! the release went out. (Which kinda begs the question of why the auditors would have to sign off on first quarter earnings, since quarterly results are unaudited, but what the hey....)

Or maybe the speech was to contain details of the quarterly results, so rather than simply not talk about the numbers, they rushed out the release and accidentally on purpose surprised the market.

Both are fantastically believable scenarios. I believe 'em. Don't you?

UPDATE: The widely followed Silicon Valley Insider spread word to all and sundry about Byrne's sicko fantasy, and was picked up by Huffington Post and TV Newser. The man's capacity for self-humiliation is awe-inspiring.

© 2008 Gary Weiss. All rights reserved.

Overstock.com's 'Stock Manipulation Friday'

Byrne's Friday gambit caused his shares to jump

The fascinating corporate train wreck Overstock.com has added a new term to the financial lexicon: "Stock Manipulation Friday."

A devastating item this morning in reformed felon Sam Antar's blog describes how Overstock combined a misleading press release and an options expiration to create a short squeeze that sent the shares climbing by nearly one-third on Friday.

The gambit on Friday was a blatant attempt to artificially inflate the company's share price and to conceal bad news.

This is, as Sam points out, easily the most significant of the many accounting and disclosure irregularities that Overstock has committed over the past two years. Sam's past posts on Overstock can be found here. Sam was the mastermind of the Crazy Eddie stock swindle, and he has since become an unpaid consultant for law enforcement agencies around the country and the SEC, which is investigating Overstock. This is a guy who knows fraud from the inside, and he has honed in on Overstock, fascinated with its systematic effort to conceal is poor finances.

As in all serious frauds, what happened was so simple that a first year high school student can figure it out. Overstock.com reported that revenues in the first quarter were $200.7 million, vs. $157.9 million a year earlier, a 27% increase. However, Sam notes, "in its earnings release, Overstock.com failed to disclose that it compared Q1 2008 revenues reported on a GAAP basis to Q1 2007 revenues that were reported on a non-GAAP basis."

Comparing non-comparable numbers is a big, fat no-no. It's like saying "this day is 27% warmer than last year," when your thermometer was broken a year ago. Fraud expert Tracy Coenen points out that

. . . accounting rules are pretty simple in this regard: If you’re going to compare numbers, you have to make them COMPARABLE. You just can’t take numbers that were calculated with different methodology and pretend they mean the same thing. Unless you’re Patrick Byrne, I suppose.

In engineering this clumsy scheme, Overstock.com's dipsy doodle CEO, Patrick Byrne, was obviously trying to overshadow the criminal investigation of its advertising by five California counties. Byrne improperly delayed for three days release of news on this probe, by the Marin County District Attorney and other prosecutors, in the hope that he would overshadow it with this latest gambit. Instead of issuing a separate 8-K disclosing the investigation, he buried in in the bottom of the earnings release.

I'd say he did a fine job of overshadowing his latest legal troubles, but not quite in the way he anticipated.

Tracy observes in her blog today:

Wow…. this is some pretty damaging stuff, and Sam makes a very strong case. I wonder how surprised Patrick Byrne is that Sam unraveled all of this?

That's a good question. My theory is that Byrne is so wrapped up in his delusions that he he has pretty much lost hold of reality. Remember the "Sith Lord"? It is anybody's guess whether he really believed that fantasy or was just flat-out lying in his famous 2005 conference call. I have long leaned toward the latter, but I am not so sure anymore.

Overstock's analyst conference call is tomorrow. Since Byrne has a habit of hounding, attacking and suing analysts who question his sleazy accounting, you can count on a calm and pleasant session.

© 2008 Gary Weiss. All rights reserved.

Overstock.com Under Criminal Investigation on Ads

The fascinating corporate basket case Overstock.com, and its dipsy doodle CEO Patrick Byrne, have engaged in a flurry of activity in recent days. Byrne has been doing stuff that didn't seem quite rational -- like moving the antisocialmedia.net corporate smear site to the Overstock website.

Now we know why: Overstock is the target of yet another investigation, this one a grave criminal probe by not one but five counties in northern California. That's on top of the active probe of its accounting that has been slowly chugging away by the SEC for the past two years.

This calamitous news is buried in the Overstock first quarter earnings loss press release. It is buried so far down you'd that Byrne could have used camouflage netting if he could:

On April 15, 2008, we received a letter from the Office of the District Attorney of Marin County, California, stating that the District Attorneys of Marin and four other counties in California have begun an investigation into the way we advertise products for sale, together with an administrative subpoena seeking related information and documents. We follow industry advertising practices and we intend to respond fully to the subpoena and cooperate with the investigation.

That's a material event, to say the least. Funny that Overstock didn't disclose it at the time, even while it was churning out a press release putting a spin on a libel suit filed recently against the company. How come that is a "material event" and not an investigation by five counties in California? Under Sarbanes Oxley, material events must be disclosed within 48 hours, and something this grave, I would think, would have to be disclosed even sooner. Nasdaq also mandates swift disclosure of piddling stuff like criminal investigations.

As for the numbers in the press release.... stay tuned. The numbers were so hyped by Byrne in the earnings release that the stock took an enormous pop -- 35% at last look -- even though the company is still losing money at such a rate that it will be out of business before long. In the past, particularly when it comes to non-GAAP accounting measures, Overstock's numbers have proven dubious, to say the least.

UPDATE: Tracy Coenen weighs in on AOL Bloggingstocks.



© 2008 Gary Weiss. All rights reserved.

The 'Mark Mitchell Mystery' Solved

Updated 4/20

It was never much of a mystery, but the bizarre tale of Mark Mitchell, the eccentric ex-journalist who used to write CJR Daily's Audit column, has been resolved.

White collar crime-fighter Sam Antar has a post today that clears up a question I raised a few weeks ago.

It appeared then that Mitchell -- who fruitlessly pursued for Columbia Journalism Review a hatchet job on Herb Greenberg and other journalists critical of Overstock.com CEO Patrick Byrne -- was now working for Byrne while masquerading as a journalist.

A Utah college newspaper had referred to Mitchell, who made a joint appearance with Byrne on campus, as a "business associate" of Byrne's, but the reference was pulled at Byrne's insistence. (See also Mitchell's bizarre comments in this Deseret News article.)

Turns out the college paper was right, as indicated by his email to Sam and his reply to this item here. Mitchell now very proudly states that he works for something called "Deepcapture.com."

According to Utah corporate records, Deepcapture LLC is operated by High Plains Investments LLC. According to the SEC, Byrne "holds 100% of the voting interest in and controls High Plains Investments LLC."