Overstock.com CEO Patrick Byrne Loses 'Deep Capture' Libel Suit

Defendant Mark Mitchell: "the truth was of no consequence"

Update: Byrne's appeal of the Nazerali suit was rejected by the British Columbia Court of Appeals in March 2018. The decision is posted here.

No libel suit victory is worth celebrating, not even the famous suits against the anti-Semite Henry Ford and the red-baiter Westbrook Pegler. The same goes for the C$1.2 million libel judgment just awarded against Overstock.com CEO Patrick Byrne and his minions for unleashing a campaign of lies.

While occasionally used to advance the cause of truth, as they were against Ford, Pegler and Byrne, more frequently libel suits are used to punish and harass reputable journalists. This is one of those rare cases when a libel suit was used against a corporate astrotufing site dedicating to spreading kooky conspiracy theories and Trumpesque smears.

In a scathing decision released on May 6, a Vancouver court found Byrne and his "Deep Capture" fake news venture had fabricated lurid accusations of criminal conduct against a Vancouver businessman named Aly Nazerali. The damage award consists mainly of punitive and aggravated damages, and the judge found that the conduct of Byrne and his minions was so egregious that he slapped a permanent injunction on the defendants.

Judd Bagley after his forgery arrest

I've written about Byrne quite a bit in the past because he was the very worst of Corporate America, from his bizarre stock-market conspiracy theories to his well-documented accounting games, which he countered by vicious personal attacks on critics and the media. He is a kind of small-bore Donald Trump, a "born on third base who thinks he hit a triple" kind of guy. Byrne lies so frequently and with such gusto that it's hard to say if he can distinguish fact from fiction. He is on indefinite leave from Overstock because of a Hepatitis C infection, a disease ordinarily caused by intravenous drug use—or, if you believe him, a wound sewn up by "barefoot doctor in China."

Byrne's main vehicle to attack his critics was "Deep Capture," a fake news website created by his public relations director, a convicted forger and drug addict named Judd Bagley. Joining Bagley was the right-wing conspiracy theorist Mark Mitchell, who was fired several years ago from Columbia Journalism Review.  (Bagley went back on the Overstock payroll before the Nazerali articles were published. He was dismissed from the case, as was Overstock itself.)

Mitchell wrote the Nazerali articles and was the main architect of this fiasco. His strange behavior—more like a television detective than a journalist—was lambasted in the decision.

The 102-page judgment, which I've embedded at the bottom of this blog item, is worth reading for anyone who has followed the erratic career of this CEO, who lately has reinvented himself as a Bitcoin advocate. Long before this suit was filed, Byrne was noted for his rich fantasy life. Once he recounted how a gangster straight out of a film noir once sat down next to him at a bar and made threats out of the side of his mouth. He fancied himself "Wall Street's worst enemy," and he expended considerable effort finding journalists dumb enough to believe him (his only success outside Utah was Cade Metz of Wired).

Byrne also has political ambitions, once financed a failed school-choice initiative in Utah, is a major GOP donor and is almost single-handedly financing the Utah governor campaign of former Overstock chairman Jonathan Johnson. The latter has repaid the favor by calling the Nazerali suit "spurious."

As recounted in a November 2015 article in The Daily Beast, the articles made wild accusations. If true, you'd think Nazerali would be in Guantanamo, not Vancouver:

. . . Mitchell described Nazerali as a man in cahoots with “Osama Bin Laden’s favorite financier,” and said that he worked with a variety of criminal outfits around the globe, including La Cosa Nostra, the Colombian drug cartel, the Russian mafia, and various “jihadi terrorist groups” including al Qaeda’s Golden Chain. According to court documents, Deep Capture also accused Nazerali of “delivering weapons to war zones in Africa and to the mujahedeen in Afghanistan,” of orchestrating “small-time ‘pump and dump’ scams… [and] bust-outs, death spiral finance and naked short selling,” and of carrying out dirty work for “a Pakistani ISIS asset” who “works for the Iranian regime.”

Nazerali was raked over the coals by Byrne's lawyers in days of pretrial examination. But at the trial the defendants did not put on a case, producing not a shred of evidence. The judge blasted Byrne & Co. for abusing pretrial discovery, saying:

The reasonable inference to draw is that they knew from the beginning of the trial that they could not justify the Articles’ false and extravagant language. Their approach to the defence of the action was an attempt to intimidate the plaintiff and to humiliate him into abandoning his lawsuit.

In justifying the award of punitive damages, the judge pointed to the extreme malice shown by Byrne and Mitchell, "the overt animosity, even hatred of the plaintiff, expressed by Mr. Byrne," their "reckless indifference for the truth," their "reckless disregard for the reputation of non-parties." The decision singles out Mitchell's creepy attempt to blackmail Nazerali, contained in an email published in the decision.

Among the highlights, so to speak, of the decision:

• "Mitchell did not attempt to contact the plaintiff before posting the Articles;" and blew off Nazerali's effort to get him to remove his lies. "No effort of consequence was made after Mr. Nazerali contacted Mr. Mitchell to review the Articles to determine if they were false. On the contrary, Mr. Nazerali’s approach to Mr. Mitchell was treated with scorn."

•  Byrne said to Nazerali during a deposition, in the presence of the court reporter and parties: "I know your kind, you are not the kind that does the dirty work themselves. You employ others to do your dirty work.  I hate your kind of people."

• Mitchell emailed Byrne “this is going to be fun” and said, "I am open to changing the story if he can provide other verifiable information that would be valuable” and “I might even suggest that I will be willing to remove his name from the story altogether if he were to provide me with, say, trading records" on a "global terrorist."

• Mitchell added: “if Nazerali agrees, nothing lost, after he gives me the information I will just put him back in the story. Sleazy, but, well it is what it is”;

Sleazy is putting it mildly. The decision concluded:

Mitchell, Byrne and Deep Capture LLC engaged in a calculated and ruthless campaign to inflict as much damage on Mr. Nazerali's reputation as they could achieve. It is clear on the evidence that their intention was to conduct a vendetta in which the truth about Mr. Nazerali himself was of no consequence. Their mission was to expose what they conceive to be corrupt business practices damaging to the global economy. Mr. Nazerali became a convenient means to that end, even when he himself could not be demonstrated to be corrupt.

"The tortious misconduct of Mitchell, Byrne and Deep Capture LLC demonstrates an indecent and pitiless desire to wound," the decision continued.

The court imposed a permanent injunction on Mitchell, Byrne and Deep Capture, as well as Google, given the likelihood that they will seek to evade payment of the judgment, as well as their "apparent intention to inflict as much damage on the plaintiff." The judgment also provides for imposition of costs, which means that Nazerali can petition the court to award him his legal fees.

The verdict, while not in the megabucks frequently awarded in U.S. courts, is large, perhaps even a record, by Canadian and especially British Columbia standards. At the current rate of exchange it comes to about $925,000 (U.S.), which is well within the capacity of Byrne's trust fund. His father was the insurance mogul John J. Byrne.

Like I said, no libel verdict is worth celebrating, not even this one, brought by the victim of faux journalism written by a faux journalist in the pay of a deranged CEO. I hope that this one doesn't become weaponized against real journalists who have written real articles about bad people. If that happens, it will mean that Byrne, described a decade ago as a "menace" by Joe Nocera of the New York Times, has once again stuck it to the press.

Altaf Nazerali vs Mark Mitchell Et Al - Reasons for Judgment by Sam E. Antar

Some previous posts on the libel suit; see also posts tagged "Deep Capture":

• Genesis of a libel: How Mark Mitchell turned a rehash into a nightmare
• Patrick Byrne defies court order
• Mark Mitchell botches CJR article

© 2016 Gary Weiss. All rights reserved.

Closing the File on a Criminal and Junkie Named Judd Bagley

Bagley copped a plea to eight felony counts of forgery

Updated October 2015 with police interrogation video and photo of Mark Mitchell.
Updated April 2015 with mugshot and details from arrest record and libel suit.

I've written about a rogues gallery of criminals over the years, ranging from Mafia capos to penny stock hustlers to Bernie Madoff, but by far the most nauseating was a corporate hatchet man from Utah named Judd Bagley.

Bagley (a/k/a "Judson Bagley") called himself a practitioner of "P.R. 2.0" or something like that, but there was nothing novel about his job, which was to be sure that if you were a reporter or analyst, you didn't dare criticize Overstock.com and its much-ridiculed CEO, Patrick Byrne. That was no easy job, because Overstock has been beset by a series of grave allegations since it went public in 2002. Its long history of serious issues runs the gamut from cheating customers, as successfully charged by California prosecutors, to gross mismanagement, to misleading investors about its financial condition.

Byrne after his arrest on gun charges

Bagley did his job with maniacal zeal. From 2006 to 2011—when he abruptly ceased his activities after a libel suit by a Canadian stock promoter his website falsely accused of ties to Al Qaeda—he frantically stalked and harassed journalists and critics of this third-rate retailer. He didn't beat around the bush; one of his tactics was extortion. In the process he went on and off the company payroll. (Even after the events depicted in this blog, which would prevent him from getting a job as  bank teller, Byrne named him "cryptocurrency [Bitcoin] general manager" as well as "director of communications." In January 2017 he left to join something called InsideSales.com. In August he switched to Evernym, Inc. as director of communications.)

Byrne is noted for misogyny and paranoid delusions, so preventing the media from writing negative stuff like this about him, and keeping his arrest on gun charges out of the occasional puff pieces, was a full-time job in itself.

To accomplish his mission, Bagley spun elaborate conspiracy theories and engaged in smear campaigns like this one targeting Bloomberg's Susan Antilla. Bagley stalked the wives and children of critics, once creating a fake Facebook identity for that purpose. He was largely ignored by the media. One exception was Cade Metz, a conspiracy-minded tech writer with The Register and then Wired who swallowed whole Bagley's fabrications.

One of his tasks was to threaten and intimidate critics. Here he sought to blackmail a blogger who ran a website exposing the Overstock smear campaign.

More examples of Bagley's efforts to silence critics of his boss can be found here.

It was a dirty job, but there's little question that his tactics deterred critical coverage by both the media and analysts. In 2010, after a relentless series of posts by Sam Antar, the accounting fraud expert and reformed felon, Overstock restated its earnings to throw out years of phony profits. Sam wrote about it here. See if you can find a reference to it in the media.

Fake news promoter Mark Mitchell

 
Bagley was joined at the Deep Capture fake news website by Mark Mitchell, a disgraced former Columbia Journalism Review columnist who wrote for the site meandering, largely fictional paranoid conspiracy theories. He was the principal author of the article that resulted in the Canadian libel suit.

With the media tamed, Bagley has paved the way for Overstock.com chairman Jonathan Johnson, a doctrinaire libertarian and foe of unions, to run for governor of Utah. It's not known if Johnson's political ambitions have curbed Bagley's cyberstalking in recent years. But we can surmise that what I'm about to describe, which has not come out publicly until now, wouldn't do him a bit of good if he runs.

Bagley always seemed a bit strange, a bit "off"—obsessed, paranoid, prone to public tantrums that seemed odd for a p.r. guy. He gave the impression of being a ticking time bomb. Once he directed a racist anti-Indian slur at me because I have an Indian-born wife.  Financial commentator Barry Ritholz once described Bagley as "a career douche bag" and, due to his stalking the children of Overstock critics, a "possible pederast." Still, no one ever quite got a handle on why Bagley was quite so weird. I certainly couldn't figure him out.

Well now we know the answer: It turns out that Bagley was and is a raging drug addict. His habitual lying now makes sense as well, as he is a confessed forger.

Sam Antar's blog revealed today that Bagley was arrested in 2013 on eight felony counts of forging prescriptions so he could illegally acquire the addictive drugs Lortab and Adderall during 2012 and 2013. He pleaded guilty to reduced charges, was fined and sentenced to one year in prison, which was suspended, and 120 hours of community service and probation, monitored by an ankle bracelet. The court filings can be found here. It's not clear from the record if Bagley was required to undergo periodic drug testing. If not, that was a significant oversight.

Bagley tells the truth (for a change)

Sam also reveals that Bagley, who liked to project a "family man" image as he stalked the families of Overstock critics, preys on lonely housewives when he isn't shooting up. (And they would have to be desperate housewives too, given his less-than-matinee-idol physical appearance.)

In lawsuit filings, Bagley confessed to cheating on his wife Kristen with a married woman, the mother of a student at a school where he is a sponsor, the Karl G. Maeser Preparatory Academy in Lindon, Utah. This took place at about the same time he was forging drug prescriptions, and continued even after he was arrested and "rehabilitated." The husband of the woman he preyed upon sued Bagley, who first lied about the affair and blamed his victim. After stonewalling discovery and seeking to smear the husband, Bagley finally admitted to the affair as the evidence mounted up. The suit's filings are online here.

Bagley copped a plea to avoid prison

As Sam points out today, "It was not the sad excess of a man in midlife crisis, but the vicious act of an out-of-control drug addict, a tawdry affair that smacks of sexual harassment--in addition to exposing Bagley as an absolute hypocrite."

Forging a prescription is low-life addict behavior, really high-risk, and Bagley was caught doing it repeatedly. He obviously needed a fix badly.  Lortab, "when used illicitly... is often crushed into a powder and either snorted or an mixed with water and injected. Both of these routes of administration result in a faster and stronger high, often compared to the high of heroin." Adderall has been dubbed "America's Favorite Amphetamine."

After this blog post initially appeared I obtained Bagley's arrest records from prosecutors under the Freedom of Information Act.

The arrest records can be found below in all their nauseating splendor, replete with surveillance photos.

In a rambling confession to police, Bagley tried to excuse his conduct by treating his addiction like an Overstock book-cooking scheme—by lying about it. He said that he needed the two drugs for "focus issues," but that a nurse-practitioner wouldn't give him a prescription, which made him "frustrated," and that he "took it into his own hands to make up the deficit" by forgery. (In other words, he used the same technique he deployed in his smear campaigns against the media and Byrne critics: if Bagley couldn't find anything, he "took it into his own hands to make up the deficit" by making stuff up.)

He went on to wheedle and manipulate the cops as if they were gullible reporters, piling lie upon lie as addicts do, claiming "what he was doing was not for Euphoria or anything like that."

Bagley at the pharmacy that alerted police to his forgeries (security camera photos).

Sure, I guess that's why he committed eight felonies, a crime so blatant that he was not surprised at all when the Lehi Police Department appeared at his door. (He said he "knew what this was regarding.") Fortunately for himself, Bagley wisely copped a plea. He is not so lucky in Canada. Byrne has insisted on going to trial in a libel suit brought by a victim of fabrications on the "Deep Capture" conspiracy site. The trial began in mid-April 2015, and does not seem likely to end well.

Note that the darling man brought along his young daughter while he was getting a fix, according to a surveillance photo from Wal-Mart security in his police file, showing the "suspect" emerging from the scene of the crime.

Bagley brought his daughter to commit a forgery at Wal-Mart (security camera photo).

Since Byrne is now devoting his energies (and Overstock's limited cash) to various bitcoin-related publicity stunts, with Bagley in charge of the hype, it's reasonable to speculate if Bagley has been getting his fixes on the Silk Road since the prescription-forgery route hasn't worked out for him. If I were a Utah narc, that's what I'd be exploring.

I knew that one day Bagley would be disgraced and discredited, and that his victims would be vindicated by his own self-destruction. It was inevitable: he was just too out-of-control. But I assumed the coup de grâce would come from the libel suit or from stock-fraud charges. I never expected that his downfall would be quite so grimy and pathetic.

UPDATE: In October, 2015, Utah authorities released Bagley's interrogation video in response to a Freedom of Information request. It's available below, edited only to remove personal information at the beginning. It's nauseating stuff, to be sure, but the video is filled with stuff that might intrigue any student of criminology, drug addiction, or just plain sleaze.


This line from the Lehi detective interrogating Bagley, at 53:35 in the tape, is particularly insightful:  "obviously this is stuff that has been going on for years." You'd thing he's been reading this blog.

In November 2015, M.L. Nestel of The Daily Beast authored this article on Overstock.com, which contained the first media mention of Bagley's legal troubles. Shortly before the article appeared, Nestel was attacked by Byrne's Deep Capture blog, in a hysterically-worded item (Nestel was accused of "serving the dark side") that was later taken down. It is archived here.

© 2015 Gary Weiss. All rights reserved.
------------------------------

My latest book is AYN RAND NATION: The Hidden Struggle for America's Soul, published by St. Martin's Press. Click here to order the book from Amazon.com, and here to order it from Barnes & Noble. Follow me on Twitter: @gary_weiss