Sunday, March 15, 2009

It's Official: Patrick Byrne Admits Owning Smear Sites

Overstock's wack-a-doo CEO, Patrick Byrne, can always be counted on to insert his Florsheims in his mouth when given the opportunity. It happened again yesterday, when Byrne threw away all the carefully crafted corporate shells, repudiated earlier lies and admitted that he owned two astroturf websites created to attack critics, and Deep Capture.

As previously, Byrne made these damaging admissions in an off-the-cuff posting on a stock message board, responding to my post on Friday describing how he had spat in the eye of Sarbanes-Oxley by violating the Overstock code of ethics for the umpteenth time.

Byrne helpfully corrected one error in my post--the email I described went to millions, not thousands of Overstock customers--and then proceeded to respond to other points in the article.

He denied being a conspiracy theorist, even though he pushes conspiracy theories.

He denied violating the code of ethics which was, I presume, a joke. He claimed that the prohibition on derogatory business communications, including emails (such as the one that was the subject of my article) relates only to "communicating inside our corporation," and that the same statements made publicly are just jim-dandy. The code of ethics, of course, makes no such distinction.

Byrne's next comment is a doozy. I'll quote from Byrne and a response subsequently posted in response, from one of the few non-Byrne aficionados using that board:

Byrne: "running his company into the ground"? A mischaracterization. The last quarter I checked was profitable, and we seem to be holding some pretty good cash flows for the last couple years, while much of the rest of retaildom is melting down. Things could be better, of course, but we're still chugging along better than most.

Reply: So, running your company into the ground is a "mischaracterization"? How so? I don't want to mischaracterize anything, so let's reiterate those working capital levels: end of 2004 - $ 267,640; 2005 - $79,561; 2006 - $59,475; 2007 - $62,621; 2008 - $39,679. (It's getting a little thin, isn't it? "Holding some pretty good cash flows for the last couple years" seems an odd characterization of those numbers, but I express no definite opinion.) Then there are those stockholder equity numbers: 2004 - $169,504; 2005 - $89,148; 2006 - $56,367; 2007 - $18,212; 2008 - ($2,985). All in thousands, of course, and ending with those embarrassing parentheses. It appears that Overstock has disposed of about $172.5 million in capital just in the last few years. I certainly hope that doesn't mischaracterize anything, since there's not much opinion involved in stating those numbers.

But the pièce de résistance was this slip of the tongue:
"...gleeful hopping on the get-Cramer bandwagon". A lie. Gary knows I have been at loggerheads with Cramer for years, was banned from CNBC over it. The video Jon Sewart used to destroy Cramer has been on for a couple years, and for a year. Also, a year ago I published this lengthy critique of Jim Cramer's career ("Jim Cramer is a Complicated Man"). So by describing me now as "hopping on the get-Cramer bandwagon" Gary is lying through his teeth. [emphasis added]
Actually he disappeared from the CNBC screens in March 2006, after holding up a sign (right) promoting "," a now-forgotten nutcase conspiracy site run by a former used medical equipment salesman named Phil Saunders.

But I stand corrected on the statement that he was "hopping on the get-Cramer bandwagon." Not true, he had done so years before via the websites he runs through proxies. How silly of me.

I can understand how Byrne might "forget" being persona no grata at CNBC after the oafish "sign" episode, but surely he had to remember his many tall tales he and his henchman Judd Bagley have told claiming that Byrne has no relationship with those websites. Byrne made that claim insistently concerning antisocialmedia, as analyzed by Sam Antar in this blog post. (For example, on Jan. 31, 2007, Byrne wrote: “Overstock and I have precisely 0 to do with AntiSocialMedia.”) And just a week ago, Bagley, "managing director" of Deep Capture, claimed that he didn't work for Byrne.

The lies, and the Florsheim-in-mouth episode, is old news from Byrne. But I'm a bit curious why Byrne bothered to go to the trouble of dredging up excuses for his flouting of Sarbanes-Oxley. Could he be concerned that the new regime at the SEC may not be as tolerant as it was under the do-nothing Christopher Cox?

© 2009 Gary Weiss. All rights reserved.

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