Inside an Issuer Retaliation Scheme

Roddy Boyd's Financial Investigator blog today has a riveting inside account of the dirty-tricks campaign against hedgie David Einhorn from an interesting perspective -- from a journalist courted by a p.r. guy for Einhorn's nemesis, Allied Capital.

Roddy was working for Fortune when he was approached by Sitrick & Co. Seems that Einhorn's fund had hit some rough spots.

...once the hoped-for story touched upon Einhorn’s losses, [Sitrick flack Jeffrey] Lloyd had ready any number of other facts and figures designed to illustrate rather convincingly a very important premise to Lloyd’s client: that David Einhorn was a really, really over-rated fellow. In fact, if I had gone farther and implied that Einhorn was a pretty bad guy, well, Jeff and his clients would have been fine with that too.

All Sitrick’s Lloyd needed was a reporter to bite.

So he called a reporter at Fortune who he thought would be a lapdog, and was unpleasantly surprised to find himself referred to Roddy.

The rest of this fascinating account can be found here.

© 2010 Gary Weiss. All rights reserved.

The Problem With Overstock.com's Latest Problem

Byrne: Tried to pull a fast one in his SEC filing

In my blog item yesterday about the corporate street thugs at Overstock.com, I pointed out that that there was a problem with the "notice of late filing" that these child-stalking douche bags quietly slipped into the SEC's files a few minutes before deadline.

Leave it to Overstock.com to have a problem with a problem. Of course, to use the word "problem" in the same sentence with "Overstock.com" is a bit of an oxymoron in itself. Well, as promised, here's the problem with the problem: It lies.

Hey, they don't call Overstock.com's financial statements the "Quarterly Lie" for nothing. Today's installment, described in Sam Antar's blog this morning, is that Overstock slipped in "new previously undisclosed material violations of Generally Accepted Accounting Principles (GAAP) and other Securities and Exchange Commission disclosure rules."

The problem is that Overstock specifically says these were not previously undisclosed issues.

If you turn to "Part III - Narrative," Overstock's chief can't-count-to-save-his-life officer, Stephen J. Chestnut, recounts a bunch of "errors" that need to be fixed before these geniuses can file their 10-K for 2009. Chestnut prefaces this list of goofs by saying, very nonchalantly, "As announced on January 29, 2010, Overstock.com, Inc. . . "

He then goes on to list some serious GAAP and disclosure issues that weren't announced on Jan. 29.

Overstock.com's wack-a-do CEO Patrick Byrne has been hiding under his desk while all this is going on, dodging a demand by Sam Antar that he apologize for lying about Sam correctly identifying Overstock's fraudulent accounting.

Not only that, but Byrne attacks Sam on the Overstock website, as Sam describes in his blog today.

That's a pretty clear case of issuer retaliation. I wonder if the SEC will wake up long enough to take action against these hoodlums? Banning its management from ever coming within 500 feet of a public company would be a good start.

UPDATE: Barry Ritholtz and Jr. Deputy Accountant weigh in. Love that graphic.

© 2010 Gary Weiss. All rights reserved.

Patrick Byrne Celebrates Pretexting Debacle

Byrne takes joy in being a scumbag

In the furor over the Overstock.com pretexting scandal, I missed this gem: Overstock's wacky CEO, Patrick Byrne, staggered onto the corporate p.r. blog, Deep Capture, long enough to celebrate his being whacked upside the head by his infuriated victims.

Here's a quote from Byrne that was published on a Salt Lake Tribune blog (so as to obviate the need to duck malware and tracking bugs at Byrne's website):

We can always tell when we are getting to them by the whine of the Spin-Blender’s motor in the blogosphere and financial media. Right now, they’ve punched the button marked, “Purée”.

Getting to whom, is what I would like to know:

Facebook, which just banned his cyberstalker Judd Bagley from the premises and issued a statement condemning the pretexting scheme?

The SEC, which now has something else to investigate, in addition to the "cookie jar reserve" he used to manipulate earnings?

His board of directors, which has given silent assent to his misconduct, thereby changing their status from "bird brains" into "accomplices"?

Investors, who sent the share price spiraling down in the wake of the scandal, who have a new reason to stay away?

Oh, I know what he means. He means his victims--the dozens of previously uninvolved journalists and bloggers whose privacy was violated, and would like to see Overstock boycotted Byrne and his henchman Judd Bagley tossed in jail.

He has definitely "gotten" to all those people.

© 2009 Gary Weiss. All rights reserved.

Teed-Off Facebook Dumps Patrick Byrne Accounts, Issues Stern Warning

Facebook expelled stalker Judd Bagley--even deleting his personal account

UPDATE: Judd Bagley copped a plea to eight drug felonies in April 2013. See "Closing the File on a Criminal and Junkie Named Judd Bagley," March 30, 2015.

As I've described in various blog posts since 2006, Overstock.com CEO Patrick Byrne has been waging a war on the Internet -- sending paid stalkers to websites throughout the web, harassing and smearing critics. But he's been treated less like a menace than as a nut, and hasn't received much pushback -- until now.

A clearly teed-off Facebook today issued a strongly worded statement condemning Byrne's Facebook pretexting scheme, in which Byrne's hood Judd Bagley set up at least one phony account to stalk critics and smear them on an Overstock corporate p.r. website.

In a previous blog post I noted that Bagley's own Facebook account had been deleted as well as the phony one that he created on Byrne's behalf, "Larry Bergman." It wasn't clear by whom -- I once incorrectly posted that the accounts were deleted by Byrne.

The Facebook statement makes it abundantly clear that the accounts were deleted by Facebook, after what was described as a "thorough investigative review."

Facebook spokesman Simon Axten, responding to my request for comment on the Overstock pretexting, emailed to me the following statement:

We take the privacy and safety of our users very seriously. Using a fake name or operating under a false identity is a violation of Facebook’s policies, and we encourage users to report anyone they think is doing this, either through the report links we provide on the site or through the contact forms in our Help Center. In this case, we conducted a thorough investigative review, discovered accounts linked to the reported misconduct, and promptly removed them.

Axten wouldn't elaborate on the accounts removed, citing policy, but "accounts linked to the reported misconduct" obviously refers to Bagley's now-deleted personal account and "Bergman." If there are other pretexting accounts controlled by Byrne, Axten isn't saying.

Facebook has been criticized a lot for its own approach to privacy, and today was the target of complaints to the FTC, so clearly the last thing it needs is criminal activity on its own website. The timing of using Facebook, of all things, for pretexting and invasion of privacy was about as moronic as I've ever encountered. Bagley must surely go down in history as the most inept p.r. practitioner since Baghdad Bob.

Bagley, meanwhile, is continuing to insist that pretexting -- establishing phony accounts and seeking to gain people's confidence -- is... well it's honest, that's what it is, and is such a routine practice among p.r. practitioners that it's as second nature as writing a press release.

He said in one blog comment that "Larry was just a tool for determining whether or not certain people accept every Facebook friend request.' That's like saying he threw a rock through someone's window to see if it was shatterproof.

The guy is a psycho. Seriously. No p.r. person that I know of would ever tell embarrassing whoppers like that, no matter how desperate for employment (or terrified of criminal prosecution) he or she may be. It's also flat-out dumb. If there ever is a criminal prosecution, this kind of defiance would be evidence of criminal intent.

Though some friend lists were not kept private, most Facebook pages contain private, personal information that only can be accessed by "friends." Bagley was compiling that information, under false pretenses and using a stolen photograph, for clearly hostile purposes, in the course of his employment by Byrne.

Copyright violation and identity theft are a violation of federal law. Indeed, Facebook nuked the stolen photo of "Bergman" -- actually the photo of an Italian art critic -- before it deleted the account.

Pretexting in pursuit of a corporate agenda has been prosecuted. Just ask Hewlett-Packard. Overstock is already under SEC investigation for cooking the books.

Byrne and his cronies are endlessly entertaining, but they're remorseless criminals. They belong in prison. Until Byrne, Bagley and their accomplices are locked up, no critic of Overstock.com, real or imaginary, or their families, will be safe from harassment and invasion of privacy.

© 2009 Gary Weiss. All rights reserved.

Patrick Byrne's Facebook Pretexting Lasted Seven Months

Byrne hard at work at his day job: stalking his critics and their families

(Updated with length of scheme corrected. See this update on Facebook expelling Overstock's pretexting guru Judd Bagley.)

I've been perusing the wreckage left behind from "Larry Bergman," the phony Facebook account used by Overstock.com CEO Patrick Byrne in his pretexting and identity theft scheme to stalk critics.

What I've found was that this pretexting scheme was the full time occupation of his creepy cyberstalker, the nauseating Judd Bagley, for the past seven months. Bagley went to elaborate lengths to establish an alternate identity, doing everything from creating a fake Twitter ID to using the stolen, copyrighted picture of a well-known Italian art critic to establish his identity.

Among the tidbits I've found:

1. "Bergman" was fabricated seven months ago to stalk whistleblower Sam Antar and his family.

As best as I can tell -- if anyone knows differently, please let me know -- Sam was his first target back in May, seven months before Byrne's pretexting chief Bagley loused up so badly that a little checking revealed that "Bergman" was a phony.

Sam is the former CFO of the Crazy Eddie stock swindle, a convicted felon who has devoted his life to fighting white collar crime. He has exposed on his blog systematic financial fraud at Overstock.com, in particular how Byrne created a "cookie jar reserve" that he used to create earnings where there should have been a loss. Sam single-handedly prompted an SEC investigation into those very issues.

Byrne's henchman Bagley (right), a glassy-eyed p.r. hack and ex-Florida Republican dirty-trickster, began stalking Sam through "Bergman" in May 2009.

At that time, Byrne knew that Sam had been sending emails to the SEC ripping apart the company's phony financial statements. Overstock board member Joseph Tabacco was cc’d on those emails.

Tabacco is on Overstock's audit committee, and he fulfilled his role handsomely: he forwarded the emails to Byrne, and went right back to sleep. This was immediately before the SEC opened its investigation.

Therefore, Byrne was attempting, through pretexting and identity theft, to spy on an independent whistleblower that he knew was communicating with the SEC.

After he succeeded in "infiltrating" (to use Byrne's words), the Facebook "network" of "miscreants" headed by Sam, Byrne then had Bagley target Sam's son, a kid in his twenties.

From: Facebook

Sent: Monday, June 08, 2009 11:36 PM

To: xxxxx Antar

Subject: Larry Bergman added you as a friend on Facebook...

Larry added you as a friend on Facebook. We need to confirm that you know Larry in order for you to be friends on Facebook.

Larry says, "Hi xxxxx I'm a friend of Sam's.".

To confirm this friend request, follow the link below:

http://www.facebook.com/n/?reqs.php&mid=97xxxxxxxxxxxxxxx

Thanks,

The Facebook Team

When Sam raised the issue with Bagley on a message board after the scheme fizzled, Bagley responded in his typically big-hearted way: "Time to cut the apron strings, don't you think?"

Bagley continued to work the"Bergman" charade through the summer and into the fall and winter. He tried to gain Sam's confidence on Nov. 4 by posting a sympathetic question concerning this blog post, which described how Byrne refused to take questions from Sam at a quarterly conference call.:

Sam, did you email your questions to Overstock IR guy Kevin Moon beforehand? If so you have good reason to be bothered.

What's ironic is that this is the first time I've ever seen this psychopath utter anything that wasn't a lie or dishonest spin. And he did it posing as a "friend" of Sam's, trying to work his way into the "Facebook conspiracy."

2. The Facebook pretexting scheme targeted Marc Cohodes -- a hedge fund manager who was being sued by Overstock -- and (of course) his family.

Bagley has long claimed to have severed his connections with Overstock. He had been corporate spokesman before joining the ostensibly independent website "Deep Capture" in 2007. But that was actually an astroturf site, financed by Byrne, owned by him through corporate shells, with its content aimed almost exclusively at smearing critics of Overstock and Byrne. By targeting Cohodes, who was involved with a dispute with Overstock, any pretense of independence went out the window.

"Bergman" stalked Cohodes on Facebook in mid-November, and when that failed he went after Cohodes' wife and daughter, an 18-year-old college student, all of this while the litigation was still pending. It was settled earlier this month. (Bagley did the same thing with me, "friending" my wife in early December shortly after she posted on her page that I was her husband. Bagley was watching me that minutely.)

It takes a special kind of douchebag to stalk the wives and kids of your critics and adversaries. Bagley and Byrne are that kind of douchebag.

I think you can imagine the shit storm that would have developed if some hireling of Cohodes had stalked Byrne, his family members, or Bagley's wife and kids. You'd have the entire Utah congressional delegation up in arms. They'd have quit sabotaging the Obama health plan long enough to get the SEC and FBI to put Cohodes on the hot seat.

Bagley, again functioning in a p.r. capacity for Overstock, yesterday posted an elaborate presentation on his "antisocialmedia" website (another Overstock astroturfing outfit) trying to spin the settlement of the Cohodes litigation.

There is now no daylight whatsoever between Bagley, Byrne's two astroturf websites and Overstock.com. Astroturfing is not only the lowest form of life in the p.r. industry, it is fraudulent conduct because it presents corporate p.r. as "independent" coverage. Doesn't the SEC have rules against fraudulent conduct?

3. Byrne had my Facebook account under tight surveillance.

My Facebook account was inactive until Dec. 4, when I activated it in order to connect with some friends who recently moved abroad. There was a flurry of activity from Dec. 7-12, as I added several dozen Facebook friends, and then, bingo! Byrne's thug Bagley tried to get me to friend the phony "Bergman" account on Dec. 10.

What this means is that Bagley -- he is paid to do this full time by Byrne, remember -- was closely watching my Facebook account, noticed the sudden spurt of activity and then pounced, hoping that I would accept him as a "friend" without noticing:




This friend request came to me a few hours after I wrote a post on the outrage that had greeted posting of Byrne's enemies list on the corporate p.r. site. The timing of the invitation to me was typical of the narcissistic Bagley. He's smarter than anyone else, you see.

True. He's so smart that he has singlehandedly destroyed what was left of his and his boss's reputation.

In the past few days we've seen the most ridicule I have ever seen directed toward Wacky Patty, including a serious effort to boycott the company and criminally prosecute Byrne, spearheaded by financial blogger Barry Ritholtz.

Ritholtz, and other targets like Felix Salmon of Reuters, had barely uttered a word about Byrne or Overstock. Thanks to the pretexting scheme and the clumsiness of his thugs, Byrne has a whole new tranche of people who would like to see him and Bagley put in jail.

Byrne has been desperately scrambling since his pretexting scheme was exposed. He backpeddled furiously, reducing the size of the "conspiracy list" he published on the corporate website, and he and Bagley claimed that the intent was to show that ties between journalists and hedge fund managers were too close.

But if that were the case, Byrne would have pursued media people and bloggers who cover hedge funds. He didn't. That flimsy lie is contradicted by the fact that he only stalked media people and bloggers (and the family members thereof) who had been critical of Overstock.com. Some had nothing to do with hedge funds, such as Eric Savitz of Barron's, who covers the tech beat, which includes Overstock, and occasionally has made mildly critical references to the company.

Byrne omitted from his hit list all of the hedge fund beat reporters for the New York Times, Wall Street Journal, Bloomberg, Forbes, Fortune and BusinessWeek. Hey, it's good he didn't: a half dozen fewer reporters stalked. But he included an obscure but talented newsletter writer and blogger named Chris Faille, who has occasionally written critically of Overstock. What all this proves is the true purpose of his pretexting scheme -- to stalk media critics of Overstock.com.

In fact, he went after media people who are critical of hedge funds: myself, John Carney and Felix Salmon, to name a few. I've been critical of the hedge fund industry for years, and devoted much of Wall Street Versus America to excoriating the hedgies. Sam Antar, of course, is not a media or hedge fund guy. He's a whistleblower who has nailed Overstock's accounting, pure and simple.

Journalists and bloggers who stayed away from Overstock, and the few deemed friendly of course, were left alone. Byrne never bothered throwing in people like that for balance, because he never expected his scheme to be discovered.

(Bagley later said that "Larry was just a tool for determining whether or not certain people accept every Facebook friend request." I'm serious. That's like the old joke about the burglar who said he was breaking into someone's house to test their alarm system.)

Bagley, meanwhile, has deleted his former Facebook page. The poor dear is worried about his privacy, you see.

Not to worry. He can put that page right back up. Nobody gives a damn who Bagley "friends" on Facebook (under his real name, that is). Nobody is stalking him, his wife or his kids. Normal people don't do that. Criminals like Bagley and his sicko boss do that.

That's a charitable interpretation of his account vanishing, by the way. The uncharitable interpretation is that Facebook kicked him off for his cyberstalking.

Bad as this is getting for Byrne and his crew, it's going to get a lot worse before it doesn't get better.

I expect Byrne to make more mistakes, to give vent to more anti-Semitic jibes, to engage in more pretexting, more cyberstalking and accounting fraud, to tell more and more lies. That's how he's wired. It will be fascinating to watch.

UPDATE: Based on other corroborative details brought to my attention, I'm now fairly certain that Bagley was kicked off Facebook.

What that means is that Facebook is not pleased. I wonder if this is the end of it.

© 2009 Gary Weiss. All rights reserved.

Barry Ritholtz: Boycott Overstock.com

Overstock.com's unhinged CEO, Patrick Byrne, has won a new pal from his recent foray into pretexting and cyberstalking: respected economics blogger Barry Ritholtz, who last night called for a boycott of Overstock.com.

Barry turned up on Wacky Patty's enemies list because of some mildly skeptical posts on this nutty CEO. He was completely fed up when this blog revealed that Byrne had been garnered names for his enemies list through a fraudulent pretexting and identity theft scheme dreamed up by his full-time cyberstalker, Judd Bagley.

Bagley and Byrne really need to see the inside of a jail cell over this, and Barry has set the wheels in motion:

I am totally out of patience with Patrick Byrne, his firm Overstock.com, and the punks at DeepCapture.com. Here is what I propose to do:

1) Request the FBI investigate and prosecute the identity theft, online cyber-stalking, and fraud of Judd Bagley of Overstock.com

2) Request the SEC investigate Patrick Byrne, Judd Bagley, and Overstock.com for their part in this scam. If they find it to be a fraudulent scheme, then they should prosecute.

3) Call for a boycott of Overstock.com.

Lastly, some free advice to the Overstock Board of Directors: You have a fiduciary duty. It does not appear to me that you are fulfilling it. At a certain point, you will be called out for how you handled your obligations. Wise up . . .

While I agree in principle, I would point out that Byrne would not have hand-picked the cronies and dimwits who serve on that board if they weren't going to say "how high?" when he says "jump!"

There's only one problem with a boycott, raised by a commenter on Barry's blog:

Given Patrick Byrne’s rather obvious issues, and given that the Americans with Disabilities Act of 1990 covers “mental impairment”, are you risking litigation by calling for a boycott?

The same point was not lost on a Motley Fool writer expounding on retailing stocks yesterday:

Writers take potshots at Patrick Byrne at their own risk -- but recent reports that the Overstock CEO is compiling an electronic "hit-list" of journalists deemed unfriendly to the company are truly frightening (and some have suggested, legally questionable). While the company has done a reasonable job of maintaining sales and generating free cash flow in the middle of the Great Recession, investors would be foolish (small "f") to discount the risks of investing in a company ... run by a madman.

You see, at bottom, that's the issue at Overstock: not the jihad against naked shorting, not the Sith Lord fantasy, not cyberstalking, not even Overstock's cooking the books, so that its "sales and cash flow" are actually not maintained, but manipulated. The fundamental problem with the company, the one from which all its problems flow, is that its CEO is stark, raving nuts.

I don't mean that in a bad way. Seeing a nut run a company is fascinating, sort of like watching Marley tear up a garage.

As for that boycott: great idea, except that with Byrne manipulating the financials, how would you know if it is having any impact?

UPDATE: Caleb Newquist suggests that the boycott bid may hurt Overstock's search for an auditor.

Now personally I don't have such faith in the accounting profession that I believe nobody would be dumb enough to work for these pigs. I'm sure they'll find an accounting firm dishonest or dumb enough to take the job because, believe me, Wacky Patty isn't getting anyone for the job who won't say "How high?"

© 2009 Gary Weiss. All rights reserved.

Patrick Byrne Disables Phony Facebook Account

"Larry Bergman," R.I.P.

UPDATE: Facebook later confirmed that it deleted the phony account. See this blog post.

Overstock.com's wacky CEO, Patrick Byrne, has disabled the phony "Larry Bergman" Facebook account that he used to track, stalk and harass media people deemed unfriendly. I've gotten a number of emails from Byrne's stalking victims, asking me why "Bergman" is not on their friends list, and that's the reason.

There's growing outrage among the affected people that they were targets of this tawdry pretexting scheme. Byrne and Bagley seem taken aback by the rage directed toward them over this. I've been writing about these slimeballs for three years, but to newcomers they seem shockingly wretched, sort of like creatures from outer space. I'd say the repercussions of this are far from over.

Byrne pulled the plug on "Bergmann" at about 7 p.m. Saturday night, in the middle of a frantic damage-control frenzy orchestrated by his in-house computer hacker, full-time cyberstalker and pretexting specialist Judd Bagley.

It's possible that Facebook killed the account, but I doubt that they'd do this on a weekend. Bagley has claimed that Bergman was a "composite" used by several Byrne employees -- something contradicted by Byrne himself, who posted on the corporate blog that "Bagley used an assumed name to infiltrate their Facebook network."

Note the use of the expression "Facebook network" (singular). It's all a conspiracy, you see, a "network." "Infiltrate" is also a precise use of the term, and it also contradicts Bagley's spin. Byrne and Bagley really have to get their stories straight. Note also the haziness over whether there are other phony Facebook accounts that haven't yet been exposed. Given the size of Byrne's enemies list, that seems likely.

The enemies list can be found here on Overstock's "Deep Capture" corporate p.r. website, an astroturf operation that Byrne has hidden behind corporate shells, but until recently was clumsily hosted on Overstock servers.

It doesn't really matter whether the "Bergman" account was one person or several, because it was an identity theft and pretexting scheme orchestrated by Byrne. The identity theft element comes from the fact that Bagley used a photograph of a person who did not give his consent, as I described in my last item. Keep in mind that this was not some hobby photo; it was the work of a professional. Yet it was obscure, not some famous photo in the public domain. The identity theft victim and the photographer, whose picture was used for nefarious purposes without his consent, in violation of the Lanham Act, have been notified. It will be up to them whether they want to press charges.

Chances are they won't bother, but you never know. Just another "contingent liability" for Overstock's ever-lengthening list of risk factors. If I were Byrne, I'd dip into the trust fund and settle with these people fast. Oh, and don't forget getting them to sign a gag order.

Bagley has been trying frantically, like the loyal subordinate that he is, to divert attention to himself (while carefully sidestepping legal responsibility for "Bergman"). I've never seen him in such a frenzy. His latest gambit was to ask an intermediary to set up a "debate" with me not about naked shorting, but the "personal stuff." That's like Bruno Richard Hauptmann asking to debate Lindbergh. I want Bagley prosecuted and jailed, not given a forum to spew his lies and hate or to attack my wife, as he has done in the past, and aid his effort to divert attention from his boss.

Bagley's frenzied effort to take a bullet for Byrne isn't working. He and his accomplices were acting on behalf of Byrne. All of the media and blog attention to this wretched episode (such as this post by Seth Jayson and this one by Felix Salmon) have recognized that.

The irony is that he's turned a bunch of people who otherwise would be indifferent to Overstock into outraged, personally offended, teed-off people. You might say that in compiling his enemies list, Byrne created enemies where none previously existed. Nice going! And hey, he had the world's most incompetent p.r. man, Judd Bagley, to carry out this task.

Sam Antar posted on his blog this morning his issuer-retaliation complaint against Byrne with the SEC, and I think it bears careful reading. Note the nauseating exchange with Bagley over his targeting Sam's kids. I hear that Bagley has been obsessed with tracking the kiddies, probably feeling that they're plotting against his nutty boss in their dorm rooms.

Byrne couldn't have chosen a worse time to pull this stunt. Facebook has been under increasing scrutiny for its abysmal security, and in fact, Overstock was already sued for participating in the controversial, now defunct Facebook Beacon service. Its latest 10Q -- you know, the one that isn't certified by an auditor, putting Overstock on the fast track to be delisted by Nasdaq -- discloses:

On August 12, 2008, the Company along with seven other defendants, was sued in the United States District Court for the Northern District of California, by Sean Lane, and seventeen other individuals, on their own behalf and for others similarly in a class action suit, alleging violations of the Electronic Communications Privacy Act, Computer Fraud and Abuse Act, Video Privacy Protection Act, and California’s Consumer legal Remedies Act and Computer Crime Law. The complaint relates to the Company’s use of a product known as Facebook Beacon, created and provided to the Company by Facebook, Inc. Facebook Beacon provided the means for Facebook users to share purchasing data among their Facebook friends. Plaintiffs and Defendants, including the Company, have stipulated to an extension in the time for answering the complaint, while the parties engage in a mediation of the dispute. The Company has not responded to the Complaint.

...The nature of the loss contingencies relating to claims that have been asserted against us are described above. However no estimate of the loss or range of loss can be made. If the case is not settled, the Company intends to vigorously defend this action and pursue with Facebook its indemnification rights under the Facebook Beacon agreement.

Note the solicitude directed toward Internet privacy by Overstock spokesman Judd Bagley.

According to TechCrunch, the suit alleges:

The Beacon program sent information regarding specific user transactions on Facebook Beacon Activated Affiliates’ websites to Facebook regardless of whether the user was a Facebook member or not. Thus, no consent was sought, nor was any consent obtained from persons who utilize the Facebook Beacon Activated Affiiliate’s website who were not Facebook members. . .

It was deceptive because, in almost every instance, the information sharing was contrary to the stated privacy policies of the Facebook website and every other Facebook Beacon Activated Affiliate that had signed up for the program.

Not to worry. "Invasion of privacy" is Patrick Byrne's middle name! He'll think of something. Surely Byrne can sic Bagley on the plaintiff's and their lawyers, their Facebook friends, their kids, their friends' kids, their friends' kids' friends.

The suit was settled a couple of weeks ago, so Byrne won't have to deploy Bagley and his phony accounts in that battle. Or at least Facebook settled. I don't know if Overstock did. No matter. Now he has a nice, big fat, Facebook scandal, one for which he has only himself to blame.

Meanwhile, Byrne can get back to work on defending himself from an SEC investigation into his cooking the books, manufacturing profits and reducing losses over a period of years by creating a "cookie jar reserve." That's the main event. All the rest is distraction -- deliberate distraction, if you ask me.

UPDATE:An amusing item in Going Concern today was titled,"Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?"

We haven’t really touched on the Patrick Byrne’s ill-fated attempt to stalk his critics (and all their friends, acquaintances, and complete strangers) mostly because we weren’t on the list and those that were (including Gary Weiss, Sam Antar, Joe Wiesenthal, and Barry Ritholtz) are doing a fine job of pointing out how desperate, shady, and just plain fucking bad this makes Patsy, his head minion at DeepCapture Judd Bagley, and Overstock look. . .

. . . This agonizing torture method will eventually wear down the haters to the point to where no one will be able to take the man, his doomed-to-fail quest to locate an auditor, and his company seriously and will thus give up their quest of destroying him.

You just can't buy publicity like this. It also shows that Bagley's stop-the-bullet p.r. strategy is not working. Bagley is personally responsible for some of the most denigrating ridicule I have ever seen directed at his very amoral, very sick employer. I wonder whether Byrne, beneath the haze of whatever intoxicants he may be on, is lucid enough to comprehend that.

If he doesn't, others may remind him of the consequences of playing the fool once too often. The New York Times observed in an editorial on Saturday that "The government is increasingly monitoring Facebook, Twitter and other social networking sites for tax delinquents, copyright infringers and political protesters."

I'm fairly sure that Overstock is not being overlooked in this scrutiny. In fact, I'm certain it isn't.

© 2009 Gary Weiss. All rights reserved.

How Patrick Byrne Stalked Critics and the Media on Facebook

A Byrne minion used this stolen photo in an elaborate ruse

(See this update: Overstock was already being sued over Facebook privacy breaches, and this update on Facebook expelling Overstock's Judd Bagley.)

So I only just recently got an account at Facebook up and running, just a few days before word broke that Overstock.com's wacky CEO, Patrick Byrne, was hacking into Facebook accounts of his critics -- violating their privacy and stalking their friends, acquaintances, business contacts and family members, including little kids.

One of the people who tried to "friend" me on Facebook was the person with the above picture, who gave his name as "Larry Bergman."

But that's not his name, and that's not his picture. (See update. That's a copyrighted, stolen photo.) His name is Judd Bagley, and he is Byrne's pretexting specialist.

Bagley created "Bergman" and an unknown number of phony Facebook accounts to con people into "friending" him. That way he could circumvent Facebook security, violating their rules and, well, Lord knows how many laws he broke in this pretexting scheme.

The aim was to get their friends' lists in order to publish them on Byrne's "Deep Capture" corporate p.r. website. That, in turn, is then used to concoct elaborate conspiracy theories. ("Deep Capture" is what is known as an "astroturfing" website, claiming to be independent but owned by Byrne via corporate shells, and used to attack his critics.)

I presume that Bergman is just one of a number of phony accounts Bagley set up to carry out this scheme, because he targeted Felix Salmon and others not among the 56 persons on the Bergman friend list.

Byrne succeeded with my wife (family members are prime targets of Byrne's thugs), as well as media people and short-sellers, as well as innocuous folks tossed in to make it all look legit. Sam Antar, who mistakenly accepted his invitation to be "friends," says he tried to friend his kids too.

Among the people who were targeted by "Bergman" were journalists like Joe Nocera of the New York Times, Big Money editor James Ledbetter, teen blogger (and insightful Overstock critic) Zac Bissonnette, Barron's writers Bill Alpert and Eric Savitz, Columbia Journalism Review Audit columnist Dean Starkman -- whose predecessor, Mark Mitchell, went to work for Byrne after he was canned from that job -- blogger Barry Ritholtz, hedge fund managers like Daniel Loeb and David Einhorn, and a sprinkling of people (some real, others probably fellow phonies) to make it all look legit.

The only anomaly is Starkman, who has not written critically about Overstock. I imagine this was just payback by Mitchell.

Oh, and one of the people he conned was Michael Milken, a target of occasional Bagley salvos, no doubt to establish if any of the awful people he targeted were tied in with that person.

I don't think Bagley is cut out for pretexting work, because he was incredibly sloppy.

"Bergman" claimed to work for Goldman Sachs, which was dumb. Maybe he figured it was such a common name there had to be a few "Larry Bergmans" working there. But a GS spokesman told me earlier on Friday that there is no record of any employee by the name of Larry or Lawrence Bergman, and hadn't been except for a part-timer some years ago.

"Bergman" claimed to be a UCLA graduate, class of '96. The alumni association had never heard of him, and a database failed to turn up anybody with that name living in southern California in the 90s.

Another slip-up: Bagley gave "Bergman" my birthday.

"Bergman" also has a Twitter account, following Overstock critics Sam Antar, Tracy Coenen, Herb Greenberg, and with a request to follow me.

Here's an exchange I had with "Larry" earlier today:



After I asked him another question, asking if he worked for Goldman Sachs, he proved he was Bagley by excising most of the information from his profile, including access to his friends list.

Here's how the phony profile looked before my query (I've redacted the birth date):



Note the "sellrshort@gmail.com" email address, in keeping with Bagley's comic-book image of a typical Goldman Sachs-ite.

Here's how it looked later in the day, after my questions:



Now that was really dumb. I was not 100% sure he was Bagley until he tried to cover it up. In fact, I posted an item earlier today and thought better of it, deleting it immediately afterwards.

(Shortly after this item came out, I got a sneering Facebook message from "Bergman" confirming that he was indeed Judd Bagley.)

Oh, and one thing I almost forgot to mention: before I got the friend request from "Bergman," I found that somebody -- gee, I wonder who? -- hacked into my Facebook account and uploaded photographs of "guilt-by-association" presentations Bagley has drawn up over the years, one of which was made the picture associated with my account. Now that ain't legal either, obviously. And yes, I will prosecute.

That indicates that Byrne may have harvested some of these friends lists by hacking into accounts as well as by creating phonies like this.

The objective of this crude scheme is the same one that Joe Nocera described in his February 2006 column, "Overstock's Campaign of Menace":

This is what Mr. Bryne does: along with [Bagley predecessor Phil "Bob O'Brien" Saunders]. . . he bullies and taunts and goads the small handful of reporters who dare to write about Overstock, making it clear that there will be a price to be paid for tackling the company or its chief executive. And as a result, financial reporters have become very chary of taking him on.

I wonder why anyone would shop at an Internet retailer that makes invasion of privacy part of its business model. I also wonder what Facebook thinks of its members being harassed in this fashion by a corporate functionary of Overstock.com, a publicly traded company.

(See this update on Facebook shutting down the "Bergman" account, expelling Bagley from the site, and issuing a sternly worded statement on this pretexting scam.)

I also wonder if the SEC is investigating Byrne's Facebook pretexting scheme and if not, why not.

Even if Bagley hadn't tried this crude stunt, it was already obvious he infiltrated Facebook, one way or the other, for the purpose of harassing Overstock critics, intimidating members of the media, and all with the intent of boosting Overstock's share price by discouraging negative coverage and criticism.

Bagley seemed a bit pissed off in his email to me from the "Bergman" account after the jig was up, so I assume that we'll be seeing a lot of anti-Semitic diatribes on Byrne's Deep Capture website, and perhaps some new lies a-fomenting.

The thing that matters is not that Byrne engages in pretexting and has a staff of people stalking his critics, but that he cooks the books and is facing delisting by Nasdaq.

And I hear that's just an appetizer.

UPDATE: A reader, using a website called "IDThis," ascertained that the picture is an award winning portrait of Matthias Dusini by Heribert Corn . I'm sure they both appreciate their work being stolen and used in a pretexting scheme by corporate scam artists.

They have ample reason to be more than just annoyed. Byrne may learn the true meaning of "copyright" and "identity theft" before too much more time has passed. It's OK for hobby bloggers to use photos like that to illustrate articles, but not for paid corporate p.r. people to do so, and to misrepresent the identity of the person in the photo.

I'm told "Larry's" friends list is still available via this link.

Tracy Coenen opines:

But here’s the best thing about this whole pretexting project of Bagley and Byrne: It completely disproves exactly what they were trying to prove with the project. Their theory was that anyone on their enemies list who was “friends” with one another on Facebook must be part of a conspiracy. After all, Facebook is the perfect tool for co-conspirators to show love for one another, Bagley would have you believe.

Except the fact that people were accepting the friend request of a fake person named Larry Bergman, shows that people on their friends lists don’t even have to exist to get there. They may have “friends” on their lists that they’ve never met and don’t even know. Which completely disproves the theory that “friends’ on Facebook are automatically part of a conspiracy.

What idiots. Who in their right mind wants to shop at Overstock.com when this is the kind of nonsense that CEO Patrick Bryne promotes and pays for? Do you really think any of your private information is safe with them? Do you want even one cent of your hard earned money to go to sleazeballs like this?

UPDATE: As expected, the following day Bagley posted in various forums, under his name and others, wearing his fingers ragged attacking me, deflecting and evading. This exchange is typical. First Bagley suggests he didn't need to create phony identities to create an enemies list for his boss, which raises the question: why did he?

The reason is immaterial, but what is significant is this exchange:

John Carney: Is Gary correct in saying you are behind the Larry Bergman profile? Why friend us with a fake profile? Why has Deep Capture put together a list of our Facebook friends?

Bagley:

No response. The reason is that Bagley blundered. He stole someone's identity. In addition to his usual tactics of lies, lies, and more lies (I trust he was not born "Larry Bergman" and dropped off at the Bagley doorstep), he used someone else's picture to establish a false identity for the purpose of causing harm to third parties, and for the benefit of his employer.

Say, isn't identity theft a criminal offense?

Bagley later tried to diffuse and deflect responsibility for this debacle, saying that "Bergman" was a "composite" (translation: it was Bagley) and that "The reason for creating him was to simplify the process of finding links, since gathering the data was a pain in the ass." Translation: "Bergman" was created by Bagley to stalk critics of Patrick Byrne.

Separately, Bagley heatedly denied that he uploaded the pictures to my Facebook account, and then described how it was done before demanding an apology from me for accusing him of doing that.

Er, I didn't accuse him of doing that. Methinks the man doth protest too much. But one thing he ain't protesting at all is the fact that he stole the identity of an innocent man and put it on his phony Facebook page.

Byrne himself, however, had no such compunction, freely admitting on Deep Capture his employee's illegal activities:

DeepCapture investigative reporter Judd Bagley used an assumed name to infiltrate their Facebook network and discovered that, yes, the hedge fund managers are in fact Facebook Friends with each other and precisely the financial journalists and bloggers about whom we have been writing, and that (while no one would claim that Facebook Friendship = “co-conspirators”), this fact is interesting.

Gee, that's convincing. Sure does explain why Bagley friended my wife, who doesn't know hedge funds from Adam, or tried to friend Antar's young kids, or Zac.

Byrne and his loyal toady may want to read this New York Times article about how someone was arrested in Manhattan for using someone else's identity on the Internet.

The "Larry Bergman" account was deactivated at about 7 p.m. on Dec. 12. It's unclear whether Bagley removed the account or if it was done by Facebook, since I understand that there were complaints. A bit late for that, wouldn't you say? And note the ambiguity in Byrne's comment, which leaves open the question about whether there are other phony accounts, and other stolen identities, out there.

As Felix Salmon points out, "You really can’t make this stuff up, but the problem is that public ridicule has no effect on these people."

© 2009 Gary Weiss. All rights reserved.

Patrick Byrne Update: Hacking into Facebook to Compile an Enemies List

UPDATE: Judd Bagley copped a plea to eight drug felonies in April 2013. See "Closing the File on a Criminal and Junkie Named Judd Bagley," March 30, 2015.

I was debating what image I should use to illustrate today's item on my Marley, Overstock.com's wack-a-doo CEO Patrick Byrne: our beloved 37th president or Dale Carnegie?

Byrne is being whacked upside the head today by word of his latest gambit: an enemies list, which he got by glomming private information off the Facebook pages of people who had written critically about him.

Is this guy a p.r. genius or what? The man really ought to write a book, "How to Win Enemies and Alienate People."

Seems that Byrne's paid thug, the eternally nauseating cyberstalker Judd Bagley, posted a list of critics of Overstock and Byrne, along with a spreadsheet of their Facebook friends. The list contains 7,483 names, mostly people in the media and friends thereof, their relatives and friends -- all to be tracked, stalked and lied-about by Bagley and Byrne's other pigs, down to the last babe in arms. Still more issuer retaliation and critic-harassment from my favorite corporate crime petri dish.

Evidently it was first noticed by Reuters columnist Felix Salmon on his Twitter feed, and then spread like wildfire among people who don't ordinarily follow Byrne and his nutters.

We're talking invasion of privacy and computer hacking, folks. Some of these people, such as white collar crime-fighter and Byrne nemesis Sam Antar, have high privacy settings, protecting the privacy of their Facebook contacts, which in Sam's case includes little kids. See the update to Sam's item here.

Byrne's enemies list is bigger than Nixon's, though obviously there's a difference between an enemies list compiled by a sitting president and one compiled by a guy who (despite his fathers billions and, I've heard, presidential ambitions), couldn't buy himself election to dog catcher of Provo.

So here's the great publicity Byrne received, even before it became apparent his thugs had been on a hacking spree:

Barry Rithholz:

Here is something weird, and a little creepy:

The freakshow that is DeepCapture.com seems to have grabbed all of the Facebook friends of anyone who has ever: a) written anything positive about short selling or 2) said anything negative about Overstock.com.

Business Insider:

This is amazing and disturbing though not at all surprising.

Patrick Byrne, the CEO of Overstock.com (OSTK), has always had it out for journalists who don't buy into his theories about the naked short-selling cabal.

But, Barry Ritholtz has discovered the most ridiculous thing yet. His site DeepCapture.com -- which is ground zero for the naked short selling fringe -- has a public database of all the journalists he despises AND THEIR FACEBOOK friends. . . .

. . . John Carney, Henry Blodget, and many, many others are on there as well. So if you're friends with any of them, you're now officially being watched by Patrick Byrne and crew. Sorry!

The latter has an update on Byrne's cockroaches glomming private friends lists. The first comment theorizes on how Bagley hacked into the Facebook accounts.

Felix Salmon:

The sleazy anti-shorting crowd at Deep Capture has published a list of my facebook friends, along with those of other critics of the site. . . .
I’m a semi-public figure, and although I might not be happy with this kind of cyberstalking, I know I’ve put myself out there and that there will be consequences of that. But that decision of mine shouldn’t have some kind of transitive property which feeds through to my personal friends, and I don’t want the list of their names to be publicly available to everyone.

I tell ya folks, Dale Carnegie is chortling out there in the great beyond. I mean, how many CEOs do you know who can make enemies like this? Particularly among financial bloggers like Felix with such a wide readership?

William Wolfrum says:

When the business you run can’t make a profit, you fire auditors at a whim and the SEC just won’t get off your ass, you might make some enemies. Such is the case of Overstock.com (OSTK) CEO Patrick Byrne. Byrne, however, is proactive about these types of things.

White collar crime-fighter Sam Antar points out that "Obviously, Patrick Byrne is in a deep panic" because of the ongoing threat of an SEC investigation and Nasdaq delisting, the struggle to obtain an auditor to attest to his phony financial statements, and the accumulated stress that comes from cooking the books for years and knowing that the jig is up.

That, of course, assumes that the man is rational enough to understand the kind of hot water that he is in. I wonder if he is so nuts that he believes his own lies.

UPDATE: A Barron's blog picks up on it, and Chief Cyberstalker Bagley does some frantic backpeddling.

Why haven't these mutts been prosecuted?

© 2009 Gary Weiss. All rights reserved.

A (Bio)Vail of Tears

There was weeping and wailing and blubbering among inept CEOs across the land in recent days as a federal court judge threw out a junk lawsuit against hedge fund manager SAC Capital Advisors and Gradient Analytics by the veteran underperforming blame-shifter, Biovail Corp.

In retrospect it was one of more well-engineered blame-shifting lawsuits of recent years, as this cruddy little pharmaceutical company carefully targeted one of the least sympathetic hedge fund managers in creation. Biovail even managed to con 60 Minutes into a brain-dead segment celebrating its cause. But at the end of the day junk is junk, and out the suit went.

Here's the unanswered question: what is the SEC going to do about the larger issue raised by this lawsuit, which is the nagging problem of issuer retaliation? That's the practice of companies retaliating against analysts, investors and other critics. Biovail raised issuer retaliation to a high art, and was filing lawsuits against shorts since back in the early 1990s.

My favorite corporate crime petri dish, Overstock.com, still has a junk lawsuit pending against Rocker Partners, a hedge fund that made the terrible mistake of shorting Overstock's perenially overvalued shares.

It's the aim of issuer retaliation to keep the market from working properly and preventing the free flow of information. Issuer retaliation works, because small research shops can be bled white by lawsuits, while public companies have plenty of shareholder money to use for lawyers.

The SEC has neglected issuer retaliation entirely, while sometimes paying lip service. SEC chairperson Mary Schapiro won't even do that. After all, talking about blame-shifting lawsuits won't put her on the cover of Equities magazine or other stock-pumping rags.

Getting off her fanny and doing something about it won't win her any political brownie points, but it might actually change the direction the agency has taken since slip-sliding into corporate-protection mode when Harvey Pitt slithered onstage in 2001.

© 2009 Gary Weiss. All rights reserved.

Patrick Byrne Teaches a Lesson in Issuer Retaliation

I missed the Overstock.com conference call yesterday (I was washing my hair or feeding pigeons or sumthin'.) Well, what a major shame. The conference call transcript, published on Seeking Alpha today, shows that Overstock.com's forever shameless CEO Patrick Byrne taught a graduate-level seminar in issuer retaliation.

He personally attacked the only person coming to the conference call with any probing questions--white collar crime fighter Sam Antar--thereby intimidating the brokerage analysts into a kind of gasping, quavering series of obsequious questions.

That's a shame, because Overstock's second quarter numbers were even sham-ier than usual. The company reported "earnings" of 2 cents a share based entirely on accounting card tricks and smoke and mirrors--as evidenced by the fact that the company is continuing to burn through cash at an alarming rate and has a $4 million shareholder deficit.

Sam had submitted his questions in advance, and posted them here.

Byrne's sneering non-answers to Antar's questions begin on page four of the transcript. This exchange stands out from the ususal evasions:

[Sam] asked how the recognition of legal fees related to that litigation affected comparable quarters last year. Those litigation expenses were included in our G&A for Q1 and Q2, and we've never disclosed detail amounts of legal expenses in any of our litigation matters.

Patrick Byrne

And is Sam afraid his checks may stop clearing?

Jonathan Johnson

That could be.

Patrick Byrne

I'm going to get whacked for that one later. So, that was Sam. Anything else we want to say about Sam Antar?

Steve Chesnut

No.

Patrick Byrne

But if Sam's worrying that we've shut down the litigation against his friends, he shouldn't worry. It's still going on, right?

Jonathan Johnson

That continues and we're pleased with how it continues. They're going well.

Patrick Byrne

So maybe you should go to pay in advance, Sam. Okay, question from Steve Rubis of Stifel Nicolaus.

In other words, Sam Antar is not to be believed, because he is being paid to pursue Overstock.com.

He isn't, but when has the truth ever stood in the way of Patrick Byrne? Byrne has long contended that he is a victim of a conspiracy of people who don't actually find him wretched, but must be persuaded by cash to ask difficult questions of this fine man.

It's sick. But it works. To no great surprise after that exhibition of bullying, Mr. Rubis of Stifel Nicolaus was suitably stifled, slobbering over himself with a softball question. Nat Schindler of Banc of America could be heard cringing over the line as he applied tongue to the boots with "Thanks for taking my question and it seems like a very strong quarter this quarter."

You bet it was strong. It was so strong that revenues declined. That trifling detail--and Byrne's refusal to elaborate on insurance reimbursement of litigation expenses--went unpursued, in a conference call that had the tenor of a government press conference in Iran.

The Securities and Exchange Commission has the tools, in Sarbanes-Oxley, to do something about this kind of behavior. Perhaps even the will. The SEC's "wish list" of 42 suggested changes to the securities laws even has a "Deep Capture clause" that would amend Sarbanes-Oxley "to make clear that subsidiaries and affiliates of issuers may not retaliate against whistleblowers."

But the SEC doesn't have to expand the rules to curb this kind of behavior. This isn't Byrne hiring yet another Judd Bagley to intimidate critics. It is him, acting as CEO, doing it openly on a conference call, for the express and undisguised purpose of boosting the price of his stock by curbing serious analysis and questioning.

And boost it did. Share prices jumped 12% yesterday, climbing from 12.27 to 13.78, based on Byrne's uncontradicted hype and intimidation of a critic.

He accomplished that by giving a graduate level course in issuer retaliation. The only question is, will the SEC learn anything from it, and act?

© 2009 Gary Weiss. All rights reserved.

Where Was the Press While an Analyst Was Being Crushed?

Gretchen Morgenson today has a great column in the New York Times today on the successful effort to crush an independent analyst by Matrixx Initiatives, the criticism-phobic pharmaceutical company whose OTC cold products were recently ordered recalled by the FDA.

Reading her column got me to thinking: all this occurred some years ago. Where were the media while it was happening?

Gretchen focuses on the company's legal war against Tim Mulligan, editor of the Eyeshade Report newsletter, which drove him out of business. Her account of Mulligan's encounters with the SEC is startling, even to those of us accustomed to SEC passivity on corporate transgressions and--in this case--blatant issuer retaliation:

In addition to his dismay over the legal battle, Mr. Mulligan said he was perplexed by encounters with S.E.C. officials regarding Matrixx. Amid his legal wrangle, he contacted two S.E.C. enforcement officials offering his research about the company. They dismissed him as “suspicious,” Mr. Mulligan said, and refused to provide e-mail addresses to which he could send his work.

In April 2004, he wrote a letter to William H. Donaldson, then the chairman of the commission, about the hostility that he had met. “In my humble opinion, your agency’s purpose would be better served by being more open to outside information,” he wrote.

Writing a letter to the do-nothing Donaldson was, of course, about as useful to his cause as taking the letter and flushing it down the toilet.

Morgenson concludes:

To be sure, Mr. Mulligan’s encounters with the S.E.C. occurred five years ago. But the officials’ dismissal of him doesn’t appear to have been an anomaly — just think of the warnings that were ignored on Madoff.

Perhaps under its new leadership, S.E.C. officials will be more welcoming to independent financial sleuths. Given how outgunned it is by Wall Street and corporate America, surely the commission can use all the help it can get.

No, it certainly wasn't an anomaly. Readers of this blog have learned, in realtime, how white collar crime fighter Sam Antar has repeatedly blown the whistle on misleading accounting at the corporate crime petri dish Overstock.com, only to be ignored by the SEC.

Articles like Gretchen's are welcome, but they are the exception to the rule. Whistleblower warnings tend to be disregarded by the media--as they were in the case of Madoff whistleblower Harry Markopolos--and Antar's detailed dissection of Overstock accounting has been similarly ignored by the press, which instead prefers to print puff pieces generated by Byrne's new p.r. firm, such as this rubbish today in the Boston Globe.

The media, unfortunately, can sometimes exceed the regulatory agencies in laziness and irresponsibility. Except for a Joe Nocera column a couple of years ago, Matrixx's battle with Mulligan received only sporadic coverage in the press, mainly small articles on hiccups in the legal battle.

There's been some coverage by Nocera and others of Overstock's vicious campaign to intimidate its critics, which recently included dispatching a hireling named Judd Bagley to contact Antar's estranged wife. Byrne has sicced his hoods on reporters who dare to describe his activities in less than flattering terms, and Sam's accounting analysis--such as his finding that a fourth quarter profit was a result of smoke and mirrors--has received virtually no coverage.

Maybe it's the intimidation campaign, or maybe simple laziness. Hell, the Boston Globe reporter who cranked out the puffy Q&A with Byrne today would have had to actually read Sam's blog, or give him a call if she didn't understand the accounting terminology involved.

Accounting watchdogs like Mulligan and Antar have an annoying tendency to be right. So when Overstock finally meets its maker, either by much-delayed SEC action or sheer weight of mounting losses, the usual postmortems can be expected. Where were the media? The answer will be "Just where they when Matrixx was hounding Tim Mulligan and Internet message board posters. Doing nothing."

Chris Byron once called the media the SEC's "seeing eye dog." But all too often the press is as apathetic as our famously lethargic regulators.

The Anti-Shorting Nuts Are Loose

I'm fascinated by the split personality of the anti-short selling campaign. At the top you have a phalanx of lobbyists and pressure groups, some totally respectable (if predictable), like the U.S. Chamber of Commerce and Washington Legal Foundation, and including consultants and other top-level spokespeople for the cause, such as former SEC commissioner Roel Campos. 

 And then, on a sliding scale of respectability, you have astroturf organizations and websites spouting "stock counterfeiting" conspiracy theories. These tend to have "market reform" in their titles -- even though genuine market reform, such as abolishing mandatory arbitration and reforming executive compensation, is not part of their mission. 

Below them are what I call the "pond scum," the crazies and the hired thugs. 

What all levels of the campaign have in common are the inspiration and deep-pockets financing of the guru of the movement, Overstock.com CEO Patrick Byrne. 

As part of his mission to gain respectability, for himself as well as his movement, Byrne recently has hired a Los Angeles public relations firm, Levine Communications, to get Byrne face time with members of the media as the "Wyatt Earp of Wall Street." That's odd because the real Earp was married to a Jewish lady named Josephine Marcus and was buried in a Jewish cemetery. Byrne, by contrast, is an old pal of the far-right wingnut Bo Gritz and has been beset by charges of anti-Semitism for years. 

That brings me to the latest examples of the pond scum element that have come to my attention. 

One was a post on a Yahoo stock message board shortly before 7 p.m. yesterday. It said as follows:

WOULD UNDERSTAND IF SOMEONE SHOT AND KILLED CRAMER AT HIS HOME at [address redacted]. He's an alan berg wannabee.

The message, which was quickly deleted by Yahoo, was signed "kikevermin3." Alan Berg was a radio talk show host who was killed by a right-wing extremist in 1984. 

What apparently caused this spasm of hate was a posting on Byrne's "Deep Capture" blog, which weaved a conspiracy between Cramer and others, while reviving the old and easily refuted claim that Dendreon Corp. was a victim of "naked short selling." 

 Now, I can understand how Byrne might disclaim responsibility for this death threat--even though it was directly inspired by his latest Internet craziness. In my view, he would be directly culpable for any harm that might come to people as a result of the trash published in his blog. What he publishes in Deep Capture is believed by the conspiracy-minded, many of are "nucking futs," and some whom are crazy enough to actually carry out their fantasies. 

Byrne realizes that, or should realize that, and is morally--and perhaps legally--responsible for the actions of his followers.

There is certainly no question that he is directly responsible for the second recent example of the pond scum element: I'm told that his hireling Judd Bagley has sought to get in touch with the estranged wife of Sam Antar, a frequent critic of his boss. 

Mrs. Antar, I'm told, has refused to respond to Bagley's request for phone call. Bagley was, no doubt, intending to dig up dirt on Antar and, at the very least, to harass him, in a disgraceful attempt at issuer retaliation. 

Byrne's p.r. campaign has already resulted in some dumb journalism, and that's ok. Heck, that's why the good Lord created p.r. people. But the pond scum element, whether they are Bagley or the creep who threatened Cramer, are a different order of magnitude. Such punks are dangerous, and they need to be criminally prosecuted. 

© 2009 Gary Weiss. All rights reserved.

Requiem for a Junk Lawsuit

One of the most noxious corporate blame-shifters I know is Biovail, a Canadian biotech company whose primary product appears to be litigation----suing short sellers in an unsuccesful effort to prove that it isn't a heap of dung. A few months ago the company pleaded guilty to criminal charges. Here's a blog item from last May describing the charges and some of the awful press coverage Biovail has received.

Yesterday, a federal judge tied a bow around this whole stinky mess, by throwing out a junk lawsuit against some hedge funds that had been accused of conspiring to drive down the company's share price.

In so doing, Judge Stanley R. Chesler described the suit as a preemptive strike against a class action suit. The judge said:

“The record before the court suggests that these proceedings and the RICO action proceedings were all part of a choreographed strategy by Biovail and its attorneys designed to constitute a counterattack against the Biovail securities action,” he wrote. “The conduct is so egregious, and the futility of imposing alternate sanctions is so clear, that dismissal is the only appropriate sanction.”

I can think of a more appropriate sanction: fine the responsible parties and their lawyers, and insist that they be paid out of their own personal funds. It would be nice if the Obama administration started taking strong action against companies that file frivolous lawsuits like this. It's called "issuer retaliation" and it's a major problem.

© 2009 Gary Weiss. All rights reserved.

Overstock.com Lifts the Corporate Veil on Issuer Retaliation

Judd Bagley: poster boy for issuer retaliation

In a previous post I described how Overstock.com's wacky CEO Patrick Byrne has gone to great lengths to distance himself from "Deep Capture," the equally wacky smear site that he established to attack his critics and advance stock market conspiracy theories.

Overstock's board -- comatose as it usually is -- no doubt felt that there's something more than a little slimy, even by Cox SEC standards, about a public company devoting shareholder resources to advance the personal vendettas of the CEO. So Byrne threw his brainchild behind a flimsy corporate shell, as I described in the item.

Well, it seems that Byrne's putrid hatchet man Judd Bagley, and Byrne himself, have thrown that facade of separation right out the window in recent days.

Bagley, who works full time smearing Byrne's critics, made two posts in a stock message boards in which he let slip that he was intimately familiar with Overstock's marketing strategies. Given that "black ops" is one of Overstock's principal marketing strategies, that makes perfect sense.

One posting, 12:01:53 AM on Feb. 2, said:

Re: SuperBowl ad

Overstock buys all its ad time on remnant. I guarantee you it was less than half what everybody else paid.

The other, posted about twelve hours later, said:

Re: SuperBowl ad

It was probably a spot that opened up late due to a cancellation, forcing NBC to sell it cheap or lose the inventory. I've heard stories of some shocking ad deals Stormy has negotiated in the 11th hour.

I'm not posting URLs because these posts were deleted by Bagley, after I presume someone in the ace Overstock legal team, presided over by an ex-SEC lawyer named Brent Baker, pointed out how incriminating they are. Fortunately, a copy was retained by an eagle-eyed reader. (Baker, who apparently specializes in "scum," also represents a member of the Universal Express ripoff crew.)

A few days before, Byrne sent a moronic email to one of his critics, reformed felon Sam Antar, in which he blurted out "Would that be your award-winning, Best Business Blog on the Internet blog? Oh no, wait: that would be my blog, which details what a lowlife you are . . ." [emphasis added]

In contrast to that rare moment of candor, Byrne has typically twisted himself into a pretzel to avoid being linked to the smear site, as in this convoluted crap, published as a comment to the TheStandard.com website last August.

There now can be little doubt (not that there ever was any) that Deep Capture, along with its predecessor antisocialmedia.net, are owned and operated by Overstock.com and were set up at the direction of its its loopy CEO, to divert attention from his disastrous management of the comapany. Byrne's actions fly in the face of Sarbanes-Oxley, which require that CEOs get an explicit waiver from their codes of ethics before engaging in Byrne-like tactics.

The only question now is what will the SEC, under its new chairman Mary Schapiro, do about it.

In a post yesterday I talked about how the SEC needs to start taking seriously the issue of "issuer retaliation," which was only paid lip service by former chairman Christopher Cox. Here's an article in Compliance Week that described the lip service that Cox paid to the subject three years ago. Note the date of the article and the narrow definition of the practice utilized by Cox, who refers only to retaliation against analysts, ignoring retaliation against investors, the media and critics in general.

“The Commission staff has been reviewing this matter and is currently considering several possible solutions for recommendation,” Cox said in a Sept. 1, 2005 letter to Sen. Ron Wyden (D-Ore.), before doing absolutely nothing (a Cox specialty).

The Obama administration takes a dim view of ethical lapses, and talks a good game about the need to stiffen regulation, but the question is whether the agency has the cojones to seriously address this issue. If Schapiro truly wants to be a reformer in the Obama mold, this is a good place to start.

The SEC needs to begin making an example of companies like Overstock and Allied Capital that retaliate against critics. It also needs to reopen and re-examine all of the investigations that were ended inconclusively under Cox's disastrous term, and it should put cases of issuer retaliation at the top of the list.

It's become clearer than ever that that the SEC made a major error in ending its investigation of Overstock without action, despite clear evidence of wrongdoing. That decision was probably politically motivated, because Byrne is the Utah Republican party's piggy bank, responsible for one out of twenty dollars in individual political contributions in the state, and his inherited wealth is a major sugar daddy for right wing causes, such as his "65% solution" anti-education jihad. Putting the defiant, kooky Byrne on the hot seat is a change that I certainly could believe in.

UPDATE: Perhaps Harry Markopolos' testimony will point the way, on this and other issues.

© 2009 Gary Weiss. All rights reserved.