Wednesday, May 26, 2010

Patrick Byrne Dumps His Overstocked Overstock Shares's wack-a-doo CEO, Patrick Byrne, has apparently found a new kind of crud to foist on the his ever-suffering shareholder base--$3.1 million in shares.

White collar crime fighter Sam Antar has an analysis today of Byrne's dumping of the shares, which were shed by Byrne's wholly-owned hedge fund, High Plains Investments LLC.

Barry Ritholtz points out today that he owns shares in the company -- an example, I suggest, of the downside of quantitative investment strategies -- even though "I personally think it is a steaming pile of shit, that the CEO is an asshole, and that the entire company is probably corrupt."

He has some thoughts on the sale:

Is Byrne in possession of material insider information? Would he be so stupid as to sell the shares? (I doubt anyone could be that dumb).

Perhaps he sees a favorable outcome to the SEC investigation? Maybe he is raising money to pay a fine?

A favorable outcome of the SEC investigation is entirely possible. The agency, despite all the much-ballyhooed changes in its enforcement division, has retained the mantle of uselessness that it earned under Chris Cox and his predecessors. The Allied Capital fiasco certainly proved that. The question is whether Byrne's political connections and ex-SEC lawyers can prevent him from being penalized to the extent that he deserves.

Sam today provides a good review of the company's history of seeking to silence critics of its accounting -- which, of course, would make nonsense of any claim by the company that its serial book-cooking was "unintentional."

That would be obvious to any intelligent observer, which is why I have little hope that it will persuade the SEC. Still, the SEC pursued an enforcement action against Goldman Sachs when it was least expected, so perhaps another "man bites dog" moment is in the offing. Don't count on it.

© 2010 Gary Weiss. All rights reserved.

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Tuesday, May 25, 2010

How to Make the SEC Even Worse

Another brilliant idea from Mary Schapiro

In today I have a suggestion on how to make the SEC even worse than it is: merge it with the Commodities Futures Trading Commission.

The idea is backed by the SEC's wretched chairman, Mary Schapiro, and by former chairman Artie Levitt. With these two geniuses favoring the move, how can it go right?

Levitt, of course, was the one who helped Alan Greenspan and his other pals sabotage the CFTC's effort to regulate OTC derivatives in the late 1990s. He has now graduated to become a consultant to Goldman Sachs. The man has no shame.

© 2010 Gary Weiss. All rights reserved.

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Tuesday, May 18, 2010

Richard Blumenthal's Weird Lies -- and The Times's Weird Omission

Read all about it -- in 2002

Reading the devastating expose on Richard Blumenthal in the New York Times today, I was as amazed as everyone else.

I became even more amazed when I ran his name and a couple of relevant keywords through the Google News Archive.

The Times reported: "In at least eight newspaper articles published in Connecticut from 2003 to 2009, he is described as having served in Vietnam."

OK, that's bad. But it took about ten seconds on Google News Archives to come up with this AP story, which ran in The Hour, a newspaper in Norwalk, on Oct. 6, 2002:

At a time when American youths were burning draft cards, Blumenthal enlisted in the Marine Corps Reserves. He said he enlisted because he had a "pretty low draft number."

Blumenthal did not go to Vietnam. Records from the Marines, obtained from a Freedom of Information Act request, said that he served no active duty, although recruits are technically on active duty while training.

Blumental insists he did six months on active duty. With the Marines, he studied administration and was classified as an "Admin Man."
Note what I put in boldface. In the news biz, we call this "old news."

Obviously, back in 2002, Blumenthal wasn't trying to hide anything. Nor does this excuse any of Blumenthal's subsequent lies; all it does is make them seem weirder. After all, all the facts were already out there, and thanks to the AP they were on Nexis. How could Blumenthal have expected to get away with it?

But I'm nonplussed by The Times's behavior here. Rather than picking up on this frank admission and the AP's ancient FOI request, it trots out instead a timeline showing his draft number and so on, which I guess is more impressive than an on-the-record quote in the AP eight years ago.

The Times should have at least mentioned this article.

By the way, note that it was published on the Hour's obituary page. Since the Times article was in the nature of a political obituary, placement there might have been warranted too. Amazing, isn't it, that the Democrats may lose a seat in the Senate over this kind of stupidity?

OK, the Times focused on the lies, not the truth-telling, and this is still a scoop that is probably going to get Blumenthal pushed out of the race.

Even so, I find it weird that the AP story from 2002 wasn't mentioned in the Times. It makes the story even more interesting. I assume the reporter knew about it. Or did he?

© 2010 Gary Weiss. All rights reserved.

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Thursday, May 13, 2010

GEICO's John J. Byrne Regains His Sanity

As a longtime GEICO policyholder I've long admired John J. Byrne, the man Warren Buffett hired to run GEICO, which he turned into a powerhouse that also provides terrific customer service. So I was saddened to hear about his slide into senility.

Yes indeed. Sad, isn't it? His own son, CEO Patrick Byrne, said as much in an interview with CNet four years ago, at a time when the elder Byrne, then the non-executive chairman of Overstock, was critical of his wack-a-doo son's paranoid anti-short-selling campaign.

Chairman John "Jack" Byrne called Overstock CEO Patrick Byrne's fight distracting. The younger Byrne is waging a public-relations and legal battle with short-sellers and analysts he contends are conspiring to depress the company's stock price.

"I can't tell whether this jihad adds to the value of the stock or subtracts from it, but what it does is take from Patrick's time," the senior Byrne said in a Wall Street Journal story on Thursday. He said his "headstrong" son has ignored his pleas to drop the fight.

John Byrne said he'd seriously consider stepping down as chairman after stockholders meet next month, but would remain on the board as a director.

In fact he did step down as chairman and then from the board entirely. In the Overstock tradition, the widely publicized reason for his leaving the board was tastefully and fraudulently omitted from the company's SEC disclosures.

Such comments meant only one thing to Patrick Byrne--his father was mentally ill. He told CNet:

"You know, when you're 74, you feel differently every day, based on what you have for breakfast that morning," the younger Byrne said of his father. "I never really expected him to get this fight."
Poor man. Well, you'll be pleased to know that John Byrne is no longer drifting into dementia. He's now 78 and sufficiently in possession of his faculties to rejoin the Overstock board of directors.

"My father brings tremendous wisdom and experience, which will help Overstock continue to grow and mature as a company," said Patrick Byrne. "I am pleased that the Board of Directors nominated him, grateful that he was elected by the stockholders, and look forward to working with him again."
It will be interesting to see if John Byrne "drifts into senility" again by taking issue with its thug-in-chief, or instead chooses the route taken by the rest of Overstock's board of directors--which is to do nothing in the face of rampant securities fraud.

© 2010 Gary Weiss. All rights reserved.

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Thursday, May 06, 2010

Reporter's Stalkers Aped Hood Judd Bagley

Bagley arrested for forging prescriptions, 2013

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.

Over the past couple of days there's been a lot of ink spilled about Spongetech, a dodgy penny stock firm -- noted mainly for suing critics -- that yesterday was the subject of an SEC action, its top execs arrested by the FBI.

But there's another element of this creepy company that is emerging: the company's supporters, which include rabid anti-naked-shorting nutcases, made a conscious effort to ape's chief stalker, the nauseating Judd Bagley.

A New York Post article today says that Post reporter Kaja Whitehouse was stalked by Spongetech hoods in a manner that is straight from the Bagley playbook:

[A libel suit against Whitehouse] followed a months-long online campaign to discredit and intimidate Whitehouse that also extended to members of her family. Last month, current and former colleagues received an e-mail alleging Whitehouse was part of a criminal enterprise that "launders money for the Mafia and the South American Drug Cartels." The same e-mail, which also implicates her father in the alleged manipulation scheme, was sent to co-workers at the consulting firm where he works.

The individuals also went to lengths to dig up private details about Whitehouse and her family. One anonymous commentator, who uses the handle "Mingy," posted pictures and personal information, including addresses and work history for her father and siblings.
Bagley, a possible pederast, is famous for stalking the kids of critics of his boss, CEO Patrick Byrne. His other occupation is hanging out on Internet message boards under multiple aliases, smearing critics of Byrne.

Bagley's latest pretexting scam on behalf of Overstock and Byrne has been to send spurious emails to blogger Barry Ritholtz, posing as a "Latin American" investor.

Spongetech's masterminds are going to prison. File that under "unfinished business."

© 2010 Gary Weiss. All rights reserved.

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Wednesday, May 05, 2010 Reports Profits! (By Juggling the Books....)

You have to admit: my favorite corporate crime petri dish,, may be many things, but one thing it is not is unpredictable. When last we left our heroes, they were reporting "profits" for 2009 by juggling the books, in the process manipulating its shares upward by one-fifth.

Yesterday, the company again announced profits, this time for the first quarter of 2010 -- and again, pulled off this fete by juggling the books, and again concocting a surge in the company's shares.

We know this is happening not because of the atrocious Utah media coverage of this company, but because of white-collar crime fighter Sam Antar, whose analysis of the latest Overstock smoke-and-mirrors show is linked above.

This time, Sam finds, Overstock was able to manufacture black ink by manipulating its return figures. Additionally, he notes, the company's internal financial controls remain FUBAR, making pretty much anything it says about its financials suspicious at best.

According to the company's latest quarterly report, the long-pending SEC investigation of these very issues is continuing. The issue before our securities watchdog is one of intent. There is now no doubt that Overstock has systematically cooked its books. The company admits to that. The question is whether the SEC will swallow Overstock's malarkey that it threw its financial statements into the stew pot strictly by accident.

Hey, that makes sense. Most fraud is an accident, right? At least it is, according to the fraudsters.

That defense is even sillier than usual, because it's a matter of record that Overstock CEO Patrick Byrne was repeatedly warned of those very accounting issues by Sam Antar -- and that Byrne responded by stalking, smearing and harassing Antar.

It remains to be seen whether the SEC will let itself be sold the Brooklyn Bridge by the con men at Overstock. Stay tuned.

© 2010 Gary Weiss. All rights reserved.

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Monday, May 03, 2010

Deja Vu? Drexel Burnham and Goldman Sachs

In my column in today I describe the eerie parallels between the Goldman Sachs scandal and the demise of Drexel Burnham a few years ago.

There are several major difference, including the one that I think is biggest: the apparent indifference of the U.S. attorney in Manhattan, Preet Bharara. Remember that this case was dropped on his lap, referred to him, and not initiated by his office. The Justice Department generally has shown little interest in prosecuting securities fraud since the beginning of the Bush administration.

© 2010 Gary Weiss. All rights reserved.

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