28 May

The Overstock.com house of cards

Quite a lot happened this past week at Overstock.com. Is the house of cards finally falling down?

Some think so. Gary Weiss even wrote a blog post entitled “Will the Last Overstock.com Director Please Turn Out the Lights.” And Sam Antar is wondering why people are distancing themselves from CEO Patrick Byrne.

The Overstock.com directors are dropping. It’s always a bad sign when one’s daddy is the first to resign from the Board of Directors, don’t you think? The stated reason for the departure of John J. Byrne was:

On July 31, 2006, John J. Byrne announced his retirement from the Board of Directors of the Company due to his new role as Chairman of White Mountains Insurance Group. The resignation did not result from a disagreement with the Company on any matter relating to the Company.s operations, policies or practices.

It is interesting that the resignation supposedly has nothing to do with disagreements, but in an interview with CNet News a few months earlier, Patrick admitted that he and his father disagreed about his “jihad against short sellers”:

Even Overstock.com Chairman John “Jack” Byrne, the father of CEO Patrick Byrne, wants his son to give up his fight against bankers, investors and journalists who the younger Byrne claims are trying to purposely deflate his company’s stock price.

In an interview with CNET News.com, Patrick Byrne acknowledged that taking up the issue, which has made him one of the nation’s most controversial executives, has prompted his father to consider stepping down as chairman.

“I’ve never expected him to (understand) this fight,” said Patrick Byrne of his father. “He’s been making noise about stepping down.”

Jack Byrne was quoted on the Wall Street Journal’s Web site on Thursday as saying that “Patrick and I have had some wonderful times together on Overstock, but we’ve also had some stormy times. I’d rather keep my relationship with my son than be the chairman of the board…I don’t think it’s a wise idea to be chairman with a headstrong son.”

Director Ray Groves resigned late last week from the Overstock Board of Directors, stating the following:

Please accept my resignation from the board of directors of Overstock.com, Inc. effective immediately. My resignation relates to the Company’s prime broker suit.

Sam E. Antar asks an interesting question… Why now? The prime [tag]broker suit[/tag] started months ago. When it did, director John Fisher resigned immediately. Why did Groves wait?

The Wall Street Journal explains the broker suit:

Overstock’s $3.5 billion lawsuit, which alleges a massive, illegal stock-market manipulation scheme by major brokerage firms, including Morgan Stanley & Co., Goldman Sachs Group Inc., Bear Stearns Cos. and Citigroup Inc., has been a major source of tension within the company.

Led by Overstock Chief Executive Patrick Byrne, the suit claims the defendants’ actions caused dramatic distortions to nature and amount of trading in Overstock’s shares, causing its share price to fall. Mr. Byrne has often referred to his fight as a “jihad,” and he has also been critical of journalists — including several columnists employed by Dow Jones & Co., publisher of this Web site — whose work he says aided the conspiracy.

Because, of course, the “distortion” (drop) in Overstock’s share price has absolutely nothing to do with the fact that the company is poorly run and can’t turn a profit? Or with the fact that a total clown is at the helm? Or with the fact that the head-clown-in-charge is too busy writing about Sith Lords and conspiracy theories?

One commenter on Gary Weiss’s blog wisely stated:

Of course, because there is already a foul stench wafting out of Utah (and has been for some time), it is impossible to take the resignation of Grove at face value.

It’s hard to take anything at Overstock.com at face value anymore, what with all the conspiracy theories and tortured explanations to questions that should easily elicit straightforward answers.

So who’s left on Overstock’s Board of Directors? Allison Abraham, a member of the Audit Committee, and who made a tidy little profit of almost $80,000 on her recent sale of Overstock.com shares. So two Audit Committee members (Fisher and Groves) left, and one is liquidating her shares of stock.

Who in their right mind is going to fill the open positions on Overstock’s Board of Directors? Well since Patrick Byrne is insistent that he wants to be as “candid” as possible, why not get a fraud expert to sit on the board of directors. Heck, I even know one who would love to help you out. Oh, wait. She thinks you don’t have enough D&O insurance to make it worth the risk.

In perfect “Patrick Byrne style,” the CEO of Overstock.com hit the message boards this weekend. Posting as Hannibal, Byrne had this to say about some of the recent events involving Byrne, Judd Bagley, and the Overstock.com Board of Directors:

How come you didn’t say in the press release that Ray left because of the prime brokers lawsuit? BECAUSE WE FILED AN 8K AT THE SAME TIME THAT INCLUDED HIS RESIGNATION LETTER, AND FELT IT BEST TO LET THAT SPEAK FOR ITSELF.

Any material disagreements with him?
IF THERE WERE WE WOULD HAVE DISCLOSED THEM.

Other than the prime broker stuff, was Ray upset about anything related to Overstock or you? Why did he quit now? What happened since February to make him quit?
SORRY, ALL SUCH ISSUES DO NOT REQUIRE DISCLOSURE AND ARE BEST LEFT TO THE PRIVACY OF THE BOARD ROOM.

Looking forward to your usual rational, non-flip, non-evasive answers (only kidding).
ONCE AGAIN, TAM, I DO NOT SEE WHY ANYONE COULD SEE THESE ANSWERS AS LESS THAN FORTHCOMING, OR AS FLIP OR EVASIVE. BUT I KNOW YOU GUYS HAVE A GOAL OF JUST REPEATING LIES OFTEN ENOUGH, SO I HAVE NO DOUBT YOU WILL CONTINUE.

PATRICK

Well, Patrick… One might suggest that your statement that”…all such issues do not require disclosure and are best left to the privacy of the board room” indicates there were other issues with Groves. Not that any of your statements, past and present, are less than clear or anything…

And after all of this, the one person who is actually paid to comment on Overstock.com issues, Judd Bagley (Overstock’s Director of Communications) has no comment. Odd. He usually has plenty to say.

3 thoughts on “The Overstock.com house of cards

  1. Tracy, It is amusing to see the latest media conspiracy theorist join the bandwagon.

    Has Gary Weiss, Sam Antar, Herb Greenberg, or for that matter yourself been able to provide any hard evidence for which you speak? Each of you can guesstimate all you want – Sam and Gary even questioning the accuracy of an SEC filing – yet none have any shred of evidence to dispute claims being stated. Groves works for Wall Street if I am correct and that makes it simple as to why he left although several feeble minded reporters have trouble connecting such dots.

    More importantly, have you noticed the number of Blogs Weiss and Antar have written specifically against Overstock.com. As each accuses Overstock management of being a criminal and a stalker it is pretty clear who the real stalkers are.

  2. Thanks for your comments, Peter. As you can see, everything “for which I speak” is in black and white.

  3. Pingback: Patrick Byrne, the omniscient | Sequence Inc. Fraud Files Blog

Leave a Reply