Patrick Byrne Absent From Third Quarter Earnings Call

Updated on 11/12/10 to include other blog feedback

Yesterday, Overstock.com (NASDAQ: OSTK) finally held its scheduled conference call with analysts to discuss the company's dismal third quarter earnings report which was released last Friday. On that day, Overstock.com stunned investors and reported a Q3 2010 $3.381 million loss or a loss of $0.15 per share compared to a Q3 2009 reported loss of $1.379 million or a loss of $0.06 per share. It was the second consecutive quarter that Overstock.com failed to meet Wall Street analysts’ consensus expectations for earnings.

However, instead of facing the music, Overstock.com CEO Patrick Byrne was absent from the call. According to company President Jonathan Johnson:

Patrick Byrne, he is not with us today. He came in this morning and took ill and is unable to be on the call and he apologizes. So Steve and I will go forward without him.

The onset of such sudden illnesses is common among the targets of an SEC investigation, like Patrick Byrne.

Back in the Crazy Eddie days, it was known as "SEC induced sudden illness syndrome" or by the short acronym SIS. Common symptoms include panic attacks, headaches, nausea, cold sweats, trembling, stomach pains, vomiting, and worst of all, diarrhea. At least the weight loss isn't so bad. However, the SEC commonly refers to anyone suffering from SIS as a SISsy.

Patrick Byrne self-medicating through intoxication

Patrick Byrne could have avoided all of this. He should have listened to me in early 2009 about certain GAAP violations identified in my blog and promptly taken steps to correct them. However, his arrogance and vanity got in the way of rationality and reason.

Instead, Patrick Byrne publicly disparaged me, sent his paid stalker Judd Bagley to interfere with my divorce, and even had Bagley pretext my children and relatives on Facebook after I pointed out the company's accounting violations. Some of those relatives stalked by Bagley were minor children.

Patrick Byrne fired Grant Thornton as Overstock.com's auditors after they agreed with me and recommended that the company correct those GAAP violations. Eventually, the SEC started investigating Overstock.com and the company was forced to restate its financial reports for the third time in three years.

More recently, I've raised questions of possible illegal insider trading by Patrick Byrne. Last May, Byrne's 100% controlled High Plains Investments LLC dumped 140,000 company shares at an average price of $22.11 per share and collected over $3 million in proceeds, according to SEC filings.

After Byrne sold his stock, Information Week interviewed him and reported that Overstock.com:

...can roll up its profit-and-loss position in two hours, giving executives accurate, up-to-date insight for fast decision-making.

However, investors were not privy to such timely inside information.

Both before and after Byrne sold his stock, he hyped Overstock.com's prospects by leading investors to believe that the company would break even in its second and third quarters and beat Wall Street analysts' consensus expectations for Q2 and Q3 2010. However, in both quarters Overstock.com stunned investors by losing money and failing to meet analysts' expectations for financial performance.

In the time since Byrne sold his stock, Overstock.com’s shares have dropped about 41% in market value from his average selling price of $22.11 per share to $13.02 yesterday. The company’s market capitalization (shares outstanding multiplied by market price per share) has dropped approximately $200 million since Byrne sold his shares.

I have no doubt that Patrick Byrne will play deaf and dumb or what the SEC refers to as "D & D" when the investigators ask him what he knew when he sold his stock and profited handsomely off the backs of unsuspecting investors. Even a "SISsy" like Byrne will eventually have to face the music.

Written by,

Sam E. Antar

Recommended Reading

November 11, 2010: William K. Wolfrum Chronicles - Has Patrick Byrne been abducted by Russian Mobsters? Sith Lords? Sure, why not? by William K. Wolfrum

Of course, while all these abduction and SIS scenarios are likely true – even simultaneously in the fevered mind of Byrne – it’s probably more likely that his lawyers, his Daddy, and others have him under orders to keep his mouth shut. Because you never know what Patrick Byrne will say next, except for the fact it won’t be the truth about how he’s criminally mismanaged Overstock.com.

November 8, 2010: The Street.com - 3 Ways companies Try to Trick Investors by Gary Weiss

In contrast to previous quarters when the company had something positive to say, Overstock's usually hyperactive corporate PR machinery, ranging from Twitter feeds to a Facebook page to a PR website personally financed by the CEO -- all were silent.

Overstock's no-release earnings announcement was the latest example of how companies nowadays manage the bad news that has been showering over corporate America in abundance. Overstock's approach was perhaps more extreme than most, but it was an example of one of the common ways company's handle bad news. They ignore it.

Disclosure

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.

If it weren't for the heroic efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them

For example, I exposed GAAP violations by Overstock.com which caused the company to restate its financial reports for the third time in three years. The SEC is now investigating Overstock.com and its CEO Patrick Byrne for securities law violations (Details here, here, and here).

I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time.

I do not own any Overstock.com securities long or short. My investigation of that company is a freebie for securities regulators to get me into heaven, though I doubt I will ever get there. My past sins are unforgivable.