Wednesday, August 12, 2009

Happy Birthday, Sith Lord: Patrick Byrne's Delusion is Four Years Old

The 'Sith Lord' dropped from Byrne's vocabulary after 2005's wacky CEO Patrick Byrne has been flacked to the news media by his two p.r. firms in recent days, giving a series of softball video interviews and expounding on his formula for "success"--i.e., years of unprofitable losses and occasional "profits" through accounting card tricks.

I'm not surprised that any of the interviewers have asked Byrne about his accounting, which I doubt most would understand, but I am surprised that none of the interviewees have raised an obvious question: Who is the Sith Lord?

Today is the the fourth anniversary of the celebrated analyst conference call at which Byrne said that someone he called the "Sith Lord" was attacking Overstock via the horrid plague of naked short selling.

The Sith Lord was not a figure of speech. Here are excerpts from the conference call. As Bethany McLean reported at the time in Fortune,

Even hardened denizens of Wall Street were shocked by a conference call that Patrick Byrne, the CEO of online retailer, held on Aug. 12. "I want to get something off my chest," Byrne announced. Then he launched into a rant about a "miscreants ball" in which he mentioned hedge funds, journalists, investigators, trial lawyers, the SEC, and even Eliot Spitzer. "I believe there's been a plan since we were in our teens to destroy our stock, drive it down to $6--$10 ... and even a plan for how the company would then get whacked up." The "designated final owner," who provided the "orchestration," was someone Byrne dubbed the "Sith Lord," a person he refused to identify other than to say that "he's one of the master criminals from the 1980s."
So who is that person? Byrne never talks about it, even when discussing his amazing conference call on his blog, and he ducks the question on the rare occasions it has been raised. But keep in mind that this was taken seriously at the time that Byrne talked about the Sith Lord. He went on CNBC to reiterate his fairy tale, under questioning from Ron Insana.

There's no problem with fairy tales at bedtime for the kiddies. A conference call arranged to disseminate information to investors and the public is another matter. Since it's a federal crime for a CEO to lie at a conference call on something quite so significant as some master criminal conspiring against your company's stock, the ball is in the SEC's court. New chairperson Mary Schapiro talks a good game, and the SEC's press release machinery is in overdrive. Here's one way for her to put her enforcement machinery where her mouth is.

© 2009 Gary Weiss. All rights reserved.

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