Showing posts with label Evren Karpak. Show all posts
Showing posts with label Evren Karpak. Show all posts

Monday, November 27, 2017

Marc Cohodes Buys Stock & Vanishes From Overstock CEO’s Smear Site

Summary
  • In recent months, every disparaging reference to former hedge fund manager Marc Cohodes was removed from Deep Capture, a website that viciously smears the financial press and critics of Overstock.com CEO Patrick Byrne.
  • Cohodes acquired a position in Overstock shares (NASDAQ: OSTK) beginning in May 2017, and hyped Overstock at a widely publicized Grant’s conference on Oct. 10, saying the stock was going “way the f**k up.” His praise of the company caused the shares to climb as much as 8.7% on the day he spoke at the conference.
  • By late October 2017, Cohodes’ name was completely excised from the Deep Capture posts that had falsely claimed he improperly colluded with the press. The names of journalists and other Byrne targets were not removed from those posts. A post referring to him favorably was not touched.
  • Coinciding with his vanishing from Deep Capture, Cohodes has lavishly praised Byrne, falsely contended that the smear campaign is a “legacy” issue of no current relevancy, derided Byrne’s victims as “haters,” and said that targets of Byrne’s smears should “let it go” even though Byrne has never retracted his defamatory claims or closed his website.
  • Removal of Cohodes’ name from Deep Capture was not disclosed by Cohodes or Byrne, or by the website.
People change their minds about stocks and CEOs all the time. But I am deeply troubled by the way a retired money manager named Marc Cohodes, who once was sued by Overstock.com, has morphed into a shrill advocate of the company. He also has become a tireless shill for its CEO, Patrick Byrne, a con artist who has cooked the books, attacked the press and stalked critics.

His sudden conversion has been written up in Bloomberg and Barron’s, but with all due respect to the fine journalists who wrote those articles, they did not tell the full story.

What these articles did not point out was that Byrne has done Cohodes a really big favor in return for becoming both a shareholder and a lapdog—a favor so significant that I believe that it may be construed as compensation:

In recent months, every disparaging reference to Cohodes has been removed from posts that had previously attacked him on Deep Capture, a fake news site Byrne created in 2007 to harass, stalk and smear critics, short-sellers and the media.

It is true that the Deep Capture site was discredited by the forgery conviction of the one of the founders and longtime operators of the site, Byrne aide Judd Bagley, and by a devastating 2016 libel verdict which excoriated Byrne and found that the truth "was of no consequence” to him and Deep Capture. However, despite this, I have no doubt that removal of his name was worth a great deal to the hypersensitive, egotistical Cohodes.

According to Bloomberg, Cohodes commenced his stock positions in Overstock in May 2017 and added to them after meeting with Byrne a month later. He appeared at a Grant’s conference on Oct. 10, giving an enthusiastic promotion of the stock, which immediately staged a run-up, aided by Cohodes’ intense hype and resulting publicity.

After buying the stock, Cohodes lavished praise on Byrne at the Grant's conference saying "I admire him" and through his Twitter feed, despite his history of atrocious behavior (detailed below).

After taking his Overstock position, Cohodes also engaged in a vigorous behind-the-scenes effort to pressure critics to stop criticizing Byrne on Twitter. He has made phone calls and sent emails and text messages to various parties, myself included, recently telling me to “lay off Byrne.”

I could not do so in good conscience because Byrne has never retracted a single one of his lies. In addition, Byrne has never apologized to me for his vicious attacks against me in retaliation for the accounting shenanigans that I exposed, that he denied, and in which I was vindicated—Overstock was forced to restate its financial reports.

Cohodes has never provided any facts to support his view that Byrne has changed in any way whatsoever—that his character had improved, that he is no longer dishonest, no longer ready to cook the books if it suited his purposes, no longer willing to stalk and smear critics. In fact, by word and deed, Byrne has reiterated that he stands by everything he has said and done.

Nevertheless, Cohodes has been insistent, constantly nagging me directly and through third parties. He even made up out of thin air a personal history between us that never existed, to support his claim that I owed him an obligation to shut up about Byrne. It was strange and creepy, it was childish, and it made no sense.

It is still strange and creepy, but now it is starting to make sense.

How Byrne Expunged Cohodes From Deep Capture

A comparison of Deep Capture posts as they currently appear, vs. recordings of their past appearance on the Wayback Machine, shows how Cohodes was edited out of disparaging posts on the website. Those posts were not removed and were not edited in any other way. The conspiracies and attacks on journalists remain on the site to this day, but with Cohodes no longer mentioned.

For instance, an attack on the integrity of journalist Bethany McLean, “Fortune Magazine Stonewalls Exposure of Bethany McLean Perfidy,” looked like this as recently as Sept. 29, 2017, according to the Wayback Machine (click on image below to enlarge):


As of October, 23, 2017, two weeks after the Grant’s conference, it looked like this according to Google's cache (click on image below to enlarge):


The editing took place sometime between Sept. 29 and Oct. 23. The Grant’s conference, as noted, was on Oct. 10.

Observe that Byrne has changed “Marc Cohodes” to “[redacted].” This implies that his name was removed by some legal or official mechanism, when in fact his name was taken out to make Cohodes happy.

There was just one mention of Cohodes in that post. But there were numerous references to him in another smear job “Bethany McLean: Your Benefit of the Doubt is Hereby Revoked,” which quoted emails that were obtained through pretrial discovery in a lawsuit not involving Overstock. Its purpose was to show a conspiracy between Cohodes and McLean and it attacked the integrity of McLean, Roddy Boyd and Herb Greenberg (all investigative reporters). The three are sneeringly referred to as “journalists,” using scare quotes, and McLean, the principal target of this post, is attacked at length.

The Deep Capture post looked like this as of Sept. 29, 2017, according to the Wayback Machine (click on image below to enlarge):


But by October 22, twelve days after Cohodes did his pump job at Grant’s conference, and coinciding with his pleas to myself and others to shut up about Byrne, every reference to Cohodes was cut out of that post. It now appeared like this, according to Google's cache (click on image below to enlarge):


It was like that throughout the post. Rather than delete it entirely—he was still on board with the underlying conspiracy theory and attacks on journalists—Byrne removed Cohodes’ name from this Judd Bagley post, which turned a routine exchange between reporter and source into the convening of an evil cabal.

Byrne even retained the ridiculous suggestion that “the emails you’ve just read are the real reason Bethany McLean made a sudden departure from the world of business journalism earlier this year.” That’s a reference to her departure from Fortune to work for the prestigious Vanity Fair magazine. That would be considered upward mobility anywhere but in Byrne’s nutty world—and he still feels that way.

That nonsense was retained. McLean’s, Boyd’s and Greenberg’s names were retained. The attack on their integrity remained. Cohodes, however, was gone.

Another example is a crude 2008 Byrne smear job on journalist Roddy Boyd.

It still retained Cohodes’ name on Oct. 13, 2017, three days after the Grant’s conference, according to the Wayback Machine (click on image below to enlarge):


But sometime between October 13 and October 20, 2017, according to Google's cache, the article was edited to look like this (click on image below to enlarge):


Cohodes’ name was removed from the end of the sentence “Hedge funds can do no wrong, particularly if they belong to a small constellation whose brightest lights are Stevie Cohen, Dan Loeb, David Einhorn, Jim Chanos, and David Rocker.” He was retroactively removed from the conspiracy nine years after Byrne concocted this rubbish.

The same editing job took place in post after post in which Cohodes was negatively mentioned prior to becoming a Byrne fan and shareholder. In every instance he was gone by the latter part of October, after he had acquired shares and had become a Patrick Byrne cheerleader.

The only article I could find in which Cohodes’ name was retained was a 2009 Deep Capture post in which Byrne praised Cohodes while attacking his former partner David Rocker. But if Byrne was taking a shine to Cohodes as far back as 2009, or at least trying to drive a wedge between him and Rocker, why did he wait eight years before cutting his name out of Deep Capture?

What happened to cause this sudden removal of his name—as if we didn’t know?

Cohodes likes to make a big show of giving to journalism nonprofits, and he praises journalists he claims to admire. He sometimes beats his chest and “defends” reporters who have been intimidated by CEOs. But he does so in self-serving fashion on Twitter in conjunction with his attacks on short targets, whose CEOs he scorns even though most are not nearly as bad as Byrne.

He only seems to care about journalists, it seems, if they are not writing negatively about his favorite stock. If they do, they are “haters” and “bleacher bums.”

Ironically, Byrne did much the same thing over the years, praising some journalists while attacking others.

Deep Capture and Byrne’s obsession with critics

Even before Deep Capture was created in 2007, Byrne was obsessed with criticism of the company and, directly and through surrogates, viciously attacked critics and tried to co-opt them. He has never repudiated his tactics and continues to employ them to this day.

In a Fortune article, McLean revealed that Byrne taunted her in misogynistic fashion while she was researching the story, saying in an email “why exactly did you become a reporter? Giving Goldman traders blowjobs didn't work out?"

His vicious personal attacks on McLean continued when he established his Deep Capture fake news website in 2007, and they forced her to stop covering the company, as she recently told Columbia Journalism Review.

Byrne was believed to have advance knowledge of a 2006 SEC subpoena of journalists who wrote negative articles about the company. After an uproar, the subpoenas were later withdrawn.

When Bloomberg columnist Susan Antilla wrote a column on his smear campaign in early 2007, Byrne’s operative Judd Bagley attacked her viciously on a stock message board. Deep Capture was established later that year. Byrne has denied that it is run by Overstock, but he conceded that he is Deep Capture’s publisher and “ultimately controls what is published on the website” in sworn deposition testimony.

I have written frequently about Byrne and Deep Capture, as have many others. One of the most notorious episodes took place in 2009, when Byrne used Judd Bagley to pretext journalists and critics (including me) to gather information about their family members (including minor children) and friends by setting up a phony profile on Facebook under the name Larry Bergman. That got Bagley kicked off Facebook. Barry Ritholtz wrote about it at the time, as did others. Even though it was a public relations disaster that would shame most CEOs, Byrne expressed no regret.

In February 2009, I exposed violations of accounting rules by Overstock.com that allowed it to fabricate a Q4 2008 profit rather than properly report a loss in that quarter and overstate its reported income in later quarters. Byrne retaliated by personally attacking me on a stock market chat board, during various earnings calls, and in the press, in an effort to discredit me. During that time, Judd Bagley injected himself into my divorce proceedings by contacting my former spouse, who ignored him.

Bagley’s illegal actions were a clear retaliation for my pointing out the company's accounting violations. My work was vindicated when, at my request, the Securities and Exchange Commission investigated Overstock.com and forced it to restate its financial reports to correct its illegal accounting practices.

Again, Byrne has stood by everything I’ve just described.

Cohodes dissembles to protect Patrick Byrne

Cohodes has said that he “bets the jockey, not the horse.” Until recently he viewed Byrne as a crazy fool. During deposition testimony in a lawsuit between Overstock and Goldman Sachs, Cohodes described Byrne as a nut who was not fit to run a public company (click on image below to enlarge).



Cohodes now says he has changed his mind. He has not explained, either publicly or privately, what facts support his view that Byrne is not crazy, never has been crazy, and is and was fit to run a public company. That’s because there aren’t any.

Byrne has not changed one bit. Even his widely debunked naked short selling conspiracy theory has been cited by Byrne in explaining his widely ballyhooed effort to replace Wall Street’s clearing mechanisms with blockchain technology.

Cohodes has claimed on Twitter—without disclosing his Deep Capture vanishing act—that concerns about Byrne’s character and his attacks on the media are all “legacy bullshit” dating back “thirteen years”.

Here is a typical recent Cohodes tweet pumping Overstock, slobbering over Byrne, disparaging his victims as “haters,” and hyping a new Overstock that suddenly materialized after he took a position in the stock.


This kind of cynical behavior is amoral and insulting to Byrne’s numerous targets, including myself, his ex-partner David Rocker, other short-sellers, bloggers, analysts, and journalists like Carol Remond, Joe Nocera, Herb Greenberg, Gary Weiss, Roddy Boyd and Bethany McLean, all of whom are currently under attack on Deep Capture.

By whitewashing the past, dissembling about the present, and mocking Byrne’s victims, Cohodes has misled investors about a risk factor that is unique to Overstock: its CEO, whose behavior has damaged Overstock’s reputation.

Cohodes has every right to have his own opinion about Byrne. But as Daniel Patrick Moynihan once put it, “everyone is entitled to his own opinion, but not his own facts.”

Byrne’s smear site is alive and well. Not a word on Deep Capture—or any of the other venues Byrne and his surrogates have used to spread their lies—has ever been repudiated by Byrne. He has not recently created fresh posts smearing journalists and critics for the simple reason that his tactics work.

There hasn’t been any negative media coverage of Byrne since November 2015, when M.L. Nestel wrote an article on Byrne and chairman Jonathan Johnson for the Daily Beast. As he prepared that article, he sent over to Overstock some questions that Byrne did not like. As a “shot across the bow,” Byrne’s aide Mark Mitchell attacked Nestel on Deep Capture, saying he had gone over to the “dark side.”

Byrne renewed his attacks on the media in an interview with Jesse Ventura on the Kremlin’s RT network on November 3, just three weeks ago. Byrne surrogate Evren Karpak, a Byrne hireling since 2007 and now a Deep Capture “partner,” unleashed a vicious personal attack on investigative journalist Gary Weiss and myself on a stock message board on November 23, just four days ago.

Byrne is also vigorously fighting the libel suit that I mentioned earlier, which resulted in a lengthy judgment so scathing that even the Utah newspapers reported it. The judge dissected in detail Byrne’s deployment of lies to attack his victims. An appellate court hearing is scheduled for January 2018.

Byrne has never withdrawn his vicious lies concerning the plaintiff in that libel suit, Altaf Nazerali, never apologized, never retracted the blog posts that smeared him. Instead he is fighting that suit tooth and nail, even though his case was so thin that he didn’t produce a single witness in his behalf.

Clearly an active corporate attack site, with a staff ready to spring into action at a moment’s notice, a Byrne surrogate smearing a journalist just four days ago, and a team of lawyers fighting a libel suit at a hearing scheduled for January 2018—none of this is either “legacy” nor “bullshit,” and is happening now, not “thirteen years ago.” Opposing such a CEO does not make one a “hater.” The correct word is “rational."

Cohodes likes to brag about how he has “skin in the game” while Byrne’s critics are “in the bleachers” and are “bums.” That of course turns ethical behavior on its head, by saying that only people who have a conflict of interest have a right to speak out about corporations and CEOs. People with no conflict of interest, in Cohodes’ view, occupy “cheap seats.” (That would include, as I noted earlier, all of the journalists Cohodes seeks to cultivate.)


But when it comes to Byrne’s smear campaign, the Overstock CEO saw to it that Cohodes no longer has skin in that game.

Deep Capture has been used for blackmail

The libel suit I referred to above, brought by Canadian businessman Altaf Nazerali, revealed in detail how Byrne and his surrogates systematically published fabrications on his Deep Capture site. It also exposed how Byrne sought to use the site for blackmail.

According to pretrial deposition testimony cited in the court judgment:

After his telephone conversation with the plaintiff, [Byrne surrogate Mark] Mitchell emailed Mr. Byrne “this is going to be fun” and “I am going to talk to him on Friday and see if I can meet him in person”, and also “unless you [Byrne] have objections I am also going to suggest to him (I can do this in a roundabout way) that while I consider the facts to be correct, I am open to changing the story if he can provide other verifiable information that would be valuable”, and “I might even suggest that I will be willing to remove his name from the story altogether if he were to provide me with, say, trading records of global terrorist Yasin al- Qadi”, and lastly “if Nazerali agrees, nothing lost, after he gives me the information I will just put him back in the story. Sleazy, but, well it is what it is”; (Emphasis added)

The libel suit judgment also cites a recorded phone conversation in which Nazerali told Mitchell about errors in the Deep Capture post. After Nazerali enumerated the errors, Mitchell said “the arrangement that I usually have with sources is that if they’re helping with a story, I leave them out.”

In addition to using Deep Capture for blackmail, his surrogate Bagley attempted to blackmail an anonymous blogger who wrote several posts exposing Bagley’s cyber-stalking and smear campaign.

In the email below, Bagley threatened to “dox” the blogger if he did not desist (click on image to enlarge).


This attempt to blackmail the blogger, which received attention at the time in Dealbreaker, did not succeed because the blogger would not be scared off. Bagley made good on his threat two days after his extortion attempt was exposed. The blogger didn’t care. He kept up his good work for months afterwards.

I believe that this is important context in evaluating the removal of Cohodes’ name from Deep Capture. I don’t believe that Cohodes was blackmailed, but the foregoing shows that Byrne will go to any lengths to remove unflattering content from the Internet.

Conclusion

It is possible that Byrne removed Cohodes’ name from Deep Capture out of the goodness of his heart, without even thinking about how Cohodes was showering him with praise, and was driving up the price of a stock in which Byrne is the largest shareholder.

It is possible that Byrne was not aware that Cohodes was now a shareholder, was not aware of the Grant’s conference and Cohodes’ statement that the shares are “going way the fuck up.”

It is possible that Byrne did not know the share price climbed as much as 8.7% the day Cohodes pumped it at Grant’s.

It is possible that Byrne did not read the Bloomberg and Barron’s articles, and thus could not possibly have had any intent to compensate Cohodes for any of the foregoing.

It is possible that Cohodes had no idea his name was being cut out of the Deep Capture articles where he was under attack.

All this is possible, but not very probable.

Everyone who knows Cohodes can attest to his vanity and his sensitivity to criticism. Even his Twitter profile makes that clear, saying that “the best motivator is disrespect,” which suggests that the converse is true, that he craves stroking. Therefore I do not believe that his name was expunged from Deep Capture without Cohodes knowing about it.

If that indeed is his alibi, one has to wonder whether the rest of his due diligence on companies he analyses is equally incomplete and sloppy. I no longer have much respect for Cohodes’ judgment and character, but I find it hard to believe that he is that inept.

Written by,

Sam Antar

Recommended Reading:

Recommended Reading:

5,000 Reasons Why the Overstock.com Saga is Crazier Than Ever, by Gary Weiss Blog, January 30, 2018

Stock Promoter Marc Cohodes Issues a Death Threat, by Sam Antar, YouTube, November 18, 2018

How to NOT Do Investigative Journalism, by Tracy Coenen, The Fraud Files Blog, November 13, 2019

Why Roddy Boyd’s Ethics Failure Matters, Tracy Coenen, The Fraud Files Blog, November 14, 2019

Disclosure:

I am a convicted felon and a former CPA. As the CFO of Crazy Eddie, I helped mastermind one of the largest securities frauds uncovered during the 1980's. Today, I advise law enforcement agencies and professionals about white-collar crime and train them to catch the crooks. I perform forensic accounting services for law firms and other clients.

I have no investment position in Overstock.com shares, long or short.

Wednesday, January 27, 2010

Open Letter to KPMG: The Ties That Bind Overstock.com and Patrick Byrne With Deep Capture LLC

To KPMG:

You must investigate Overstock.com’s (NASDAQ: OSTK) relationship with Deep Capture LLC as part of your continuing audit of the company and take steps to require management to make disclosures under Statement of Financial Accounting Standards No. 57 (SFAS No. 57) governing "Related Party Disclosures."

At the direction of Overstock.com CEO Patrick Byrne, the company has used Deep Capture's resources, such as its web site, as a conduit to intimidate, harass, threaten, smear, and pre-text company critics. For example, Deep Capture Managing Partner Judd Bagley violated Facebook's Statement of Rights and Responsibilities and deceptively posed as "Larry Bergman" in an effort to gather personal information and spy on Overstock.com 's and Patrick Byrne's critics, including me (See Item 3 Safety and Item 4 Registration and Security).

Altogether, Judd Bagley posted on DeepCapture.com the names of 7,483 "Facebook friends" of Patrick Byrne's critics and that list included spouses, minor children, and other people that have nothing to do with Overstock.com, Patrick Byrne, or Byrne's delusional short selling conspiracy theories. Judd Bagley, posing as an imposter, even tried to "Facebook friend" minor children!

Note: For additional details, please read Gary Weiss blog, Felix Salmon's Reuters blog, and Barry Ritholtz's The Big Picture blog.

Overstock.com fails to make material related party disclosures

In a recent "unreviewed" Q3 2009 10-Q report filed with the SEC, Overstock.com claimed the following risk factor:

We and our chief executive officer, Patrick M. Byrne, have from time to time made public statements regarding our or his beliefs about matters of public interest, including statements regarding naked short selling. Some of those public statements have been critical of the Securities and Exchange Commission and other regulatory agencies. These public statements may have consequences for us, whether as a result of increased regulatory scrutiny or otherwise.

If the above claimed risk factor is actually for real, Overstock.com has failed to disclose a more likely and significantly more material risk factor: the fact that certain predatory and retaliatory actions taken by Deep Capture managing partner Judd Bagley, such as pre-texting of company critics, at the direction and blessing of Patrick Byrne may lead to "increased regulatory scrutiny" of the company and significant material legal liabilities in the future. To date, Overstock.com has not disclosed to investors its close financial relationship with Deep Capture LLC anywhere in financial reports filed with the Securities and Exchange Commission.

SEC Staff Accounting Bulletin No. 99 (SAB No. 99) "Materiality" notes that:

The Supreme Court has held that a fact is material if there is –
a substantial likelihood that the . . . fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.

As I will describe below, investors relying on Overstock.com's financial reports are being kept in the dark about the relationship between Overstock.com and Deep Capture LLC and the potential material legal consequences of the company's use of Deep Capture as a platform to attack its critics. Deep Capture LLC is in substance an affiliate of Overstock.com and is in substance controlled by the company, despite certain legal maneuvers made to disguise the true nature of the relationship between the entities. First, let's review certain accounting standards on "related party disclosures."

Related Party Disclosures under Generally Accepted Accounting Principles (GAAP)

Statement of Financial Accounting Standards No. 57 (SFAS No. 57) entitled "Related Party Disclosures" provides some "examples of related party transactions" such as:

transactions between... (d) an enterprise and its principal owners, management, or members of their immediate families; and (e) affiliates.

SFAS No. 57 defines an affiliate as:

A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an enterprise.

In addition, SFAS No. 57 defines control as:

The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an enterprise through ownership, by contract, or otherwise.

Furthermore, SFAS No. 57 defines related party transactions to include "services received or furnished" between such related entities. Deep Capture LLC furnishes services to Overstock.com in the form of retaliation against company critics.

How Patrick Byrne tried to conceal his control Deep Capture LLC

On April 17, 2008, investigative journalist, bestselling author, and blogger Gary Weiss reported that Deep Capture LLC is controlled by High Plains Investments LLC which is 100% owned by Patrick Byrne and owned 23.5% of the Overstock.com's common shares (See Proxy Report). See the filing below (Click on image to enlarge):


Later in his blog post, Gary Weiss noted that the Deep Capture website was registered by Patrick Byrne and is "operated over Overstock servers." See below (click on image to enlarge).


On June 19, 2008, Gary Weiss reported that Patrick Byrne took steps to conceal his ownership and control of Deep Capture by substituting High Plains Investments LLC as a principle with two former Overstock.com employees: Judd Bagley and Evren Karpak. See the filing below (Click on image to enlarge):


In addition, Patrick Byrne anonymized Deep Capture's registration. However, Deep Capture's website was still hosted on Overstock.com's servers. See below (click on image to enlarge):



Sometime later, Overstock.com servers stopped hosting the Deep Capture web site.

Financial relationship between Overstock.com, Patrick Byrne, and Deep Capture LLC

Most, if not all, of the funding for Deep Capture LLC comes from Overstock.com which is controlled by Patrick Byrne and directly from Byrne himself. As I described above, two of its managing partners, Judd Bagley and Evren Karpak, are former Overstock.com employees. Patrick Byrne claims to moonlight as a "journalist" for Deep Capture. Mark Mitchell has described Byrne as a "business associate."

Currently, Deep Capture claims that:

The Deep Capture website was created to bypass the “captured” institutions that mediate our nation’s discourse. It was initially funded by Patrick Byrne, CEO of Overstock.com, but it is not part of Overstock. It functions as a separate, limited liability media company, whose co-owners and managers are Judd Bagley, Evren Karpak, and Mark Mitchell.

Overstock.com's heavily promotes DeepCapture.com on its website. Deep Capture receives commissions from customers who purchase merchandise from Overstock.com through referrals from its website to the company. However, such income from Overstock.com is not enough to fund Deep Capture's operations. Apparently, Patrick Byrne funds Deep Capture's operating deficit.

A January 12, 2010 article in the New York Observer quoted Patrick Byrne as saying:

I put in about $500,000, and I think I made one additional smaller infusion.
 
Examples of how Overstock.com and Patrick Byrne use Deep Capture as a platform to attack critics of the company

On October 31, 2009, I sent Patrick Byrne an email and asked to participate in Overstock.com’s Q3 2009 earnings call, so I could ask questions about Overstock.com's violations of GAAP and other SEC disclosure rules. In response, Patrick Byrne responded with an angry anti-Semitic diatribe, called me a “gonif” (Hebrew/Yiddish word for thief), and posted my email on the Deep Capture website, despite previous claims that Deep Capture is unrelated to Overstock.com (See Gary Weiss blog for more details).

On November 18, 2009, I sent Patrick Byrne another email asking to participate in Overstock.com's Q3 2009 conference call where it was going to discuss its filing of an "unreviewed" 10-Q. Again, Byrne posted my email on his Deep Capture site and again referred to me as a "gonif."

On January 13, 2010, investigative journalist Roddy Boyd sent Patrick Byrne an email asking him about Overstock.com's failure to make certain material disclosures about its cash problems and internal control problems. In addition, Boyd asked Byrne about Overstock.com's New York sales tax dodge known as "Operation heist and freeze." See Roddy Boyd's article in The Big Money here).

Byrne responded by posting Boyd's emails on Deep Capture's web site and posted the following tantrum (click on image to enlarge):


If Deep Capture is "not part of Overstock" as it claims:

1. Why did Patrick Byrne post on the Deep Capture web site my emails to him asking to participate in various Overstock.com conference calls and personally attack me with anti-Semitic slurs?

2. Why did Patrick Byrne have to respond to Roddy Boyd's requests for information on Overstock.com's failure to disclose certain material information and a tax dodge scheme by posting his vile rant on Deep Capture?

Certainly, the above issues relate to Overstock.com.

Judd Bagley has refused to answer my emailed questions (cc'd to the SEC) asking him as a "Managing Partner" whether or not and he or others approve Patrick Byrne's blog posts prior to publication on DeepCapture.com. In addition, Judd Bagley has refused to answer questions about whether or not Deep Capture has a "conflict of interest" policy and if he approves of Patrick Byrne calling his critics, who happen to be Jewish like me and Gary Weiss, "gonifs."

Why is Judd Bagley so afraid to answer such questions about Patrick Byrne's activities at Deep Capture?

Apparently, Judd Bagley does not want to answer any questions because it is not in his interests or the interests of his real employers, Overstock.com and Patrick Byrne.

As I will describe below, Deep Capture LLC is a corporate public relations entity doing Overstock.com's bidding by attacking critics of the company.

The Society of Society of American Business Editors calls Deep Capture a "corporate public relations" entity

The Society of Society of American Business Editors and Writers denied Deep Capture membership to its organization because Patrick Byrne's activities as a self-proclaimed "journalist" and "those of DeepCapture seem closer to corporate public relations." See the email below posted by Byrne on Deep Capture's website (Click on image to enlarge):


Conclusion

As I described above, Overstock.com and Deep Capture LLC service each other hand-in-hand. Overstock.com and Patrick Byrne provides just about all of Deep Capture's funding. Steps were taken to conceal the true nature of the relationship between the two entities.
Statement of Auditing Standards No. 45 (SAS No. 45) cautions that:

...the auditor should be aware that the substance of a particular transaction could be significantly different from its form and that financial statements should recognize the substance of particular transactions rather than merely their legal form.

Therefore, KPMG should examine the substance of the relationship between Overstock.com and Deep Capture LLC and not be fooled by the smoke and mirrors used by Patrick Byrne to conceal his control over Deep Capture.

In addition, SFAS No. 57 cautions that:

Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. For example, an enterprise may receive services from a related party without charge and not record receipt of the services.

Even if Overstock.com does not directly compensate Deep Capture LLC to carry out its agenda, Deep Capture is providing services in the form of issuer retaliation against critics of the company and those services are considered "transactions between related parties" under accounting rules. Those services are funded by Overstock.com through commissions and by Patrick Byrne, simply by writing out a personal check.

Please note that this open letter has been sent to the Securities and Exchange Commission to assist it in its investigation of Overstock.com.

Respectfully,

Sam E. Antar

Other information:

January 25, 2010: Open Letter to KPMG: A Warning About Overstock.com, Your New Audit Client

Disclosure:

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

If it weren't for the 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.

I do not own Overstock.com securities short or long. My research on Overstock.com and in particular its lying CEO Patrick Byrne is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I will probably end up joining corporate miscreants such as Patrick Byrne in hell. In any case, exposing corporate crooks is a lot of fun for a forcibly "retired" crook like me and analyzing Overstock.com's financial reporting is a forensic accountant's wet dream.

KPMG has sponsored at least two of my free speaking engagements to universities and colleges.

Monday, December 14, 2009

Open Letter to the Securities and Exchange Commission (Part 5): Issuer Retaliation Complaint Against Overstock.com

To the Securities and Exchange Commission:

Last week Overstock.com (NASDAQ: OSTK) CEO Patrick M. Byrne ordered his paid internet stalker Judd Bagley to post an enemies list that included the "Facebook friends" of his critics on the DeepCapture.com web site, which has received both direct and indirect funding from the company and Byrne. As I will describe below, Overstock.com uses DeepCapture.com as a vehicle to viciously vilify and intimidate critics of the company and Patrick Byrne.

Recently, the Securities and Exchange Commission started investigating Overstock.com's improper use of "cookie jar" reserves to inflate the company's financial performance starting in Q4 2008 as well as other financial reporting violations, as a result of reporting in this blog. I urge you to also investigate Overstock.com's vicious corporate sponsored retaliation and intimidation campaign against company critics such as myself.

Overstock.com's Board of Directors have breached their fiduciary duty to investors by failing to act on violations of the company's Code of Business Conduct and Ethics by Patrick Byrne and others acting at his direction. Therefore, Patrick Byrne was given an implicit waiver from the company's code of ethics which was not reported as required on form 8-K.

Overstock.com enemies list

Judd Bagley violated Facebook's Statement of Rights and Responsibilities and deceptively posed as "Larry Bergman" in an effort to gather personal information and spy on Patrick Byrne's critics, including me (See Item 3 Safety and Item 4 Registration and Security).

Altogether, Judd Bagley posted on DeepCapture.com the names of 7,483 "Facebook friends" of Patrick Byrne's critics and that list included spouses, minor children, and other people that have nothing to do with Overstock.com, Patrick Byrne, or Byrne's delusional short selling conspiracy theories. Judd Bagley, posing as an imposter, even tried to "Facebook friend" minor children!

Note: For additional details, please read Gary Weiss blog, Tracy Coenen's Fraud Files blog, Joe Weisenthal's Business Insider blog, Felix Salmon's Reuters blog, and Barry Ritholtz's The Big Picture blog.

For example, below is an exchange between Bagley and I that was posted in the comments section of Joe Weisenthal's Business Insider blog.

Sam Antar to Judd Bagley:
According to the Deep Capture website, the following is claimed:
"The Deep Capture website was created to bypass the 'captured' institutions that mediate our nation’s discourse. It was initially funded by Patrick Byrne, CEO of Overstock.com, but it is not part of Overstock. It functions as a separate, limited liability media company, whose co-owners and managers are Judd Bagley, Evren Karpak, and Mark Mitchell."
Your website states that Patrick Byrne provided the initial funding for Deep Capture, but it claims that there is no connection between the Overstock.com and Deep Capture. Yet, Patrick Byrne recently made two blogs posts on Deep Capture and published my emails to him asking to participate in Overstock.com’s recent November 3 and 18 conference calls to ask critical questions about financial reporting violations by the company.
What does the subject of my participation in Overstock.com’s November 3 and 18 conference calls to ask questions about the subject of GAAP and SEC disclosure violations by Overstock.com have to do with Deep Capture’s editorial policy?
Is it your contention that money from Patrick Byrne and/or entities controlled by him are not the source of the salary that you and your fellow employees of Deep Capture receive? If not, who is the source of that funding?

After I did not receive a response from Bagley, I posted the following comment:

Patrick Byrne now admits that Judd Bagley used an assumed name aka Larry Bergman on Facebook:
"DeepCapture investigative reporter Judd Bagley used an assumed name to infiltrate their Facebook network...."
What's even more disgusting is the fact that Bagley tried to FB friend my children, too. Bagley succeeded in becoming Facebook friends with other friends of mine that have nothing to do with issues concerning Overstock.com, short selling, hedge funds, etc.

Finally, Judd Bagley responded and showed his callous indifference to adding the names of my children to Overstock.com's enemies list:

Hey Sam, your "kids" are like 30 years old. Time to cut the apron strings, don't you think.

I responded to Judd Bagley:

Judd Bagley:
My children are actually in their 20s. As their father, I unconditionally love them and will protect them from you, Patrick Byrne, and others no matter what their ages are.
In addition, you also posted the names of my minor nieces and nephews on your enemies list. What do my minor nieces and nephews have anything to do with Overstock.com, hedge funds, naked short selling etc?
You attempted to interfere with my matrimonial litigation by threatening me to settle it. You even contacted by ex-spouse. According to her, she rebuffed you.
You used your false Larry Bergman Facebook identity to invade the privacy of other Facebook friends of mine who have nothing to do Overstock.com, hedge funds, naked short selling etc.
So please stop your charade. You are fooling no one, except your cool aid drinkers.
As you know, Overstock.com, Patrick Byrne, and its other officers are under investigation by the Securities and Exchange Commission, as a result of my reporting GAAP and other SEC disclosure violations by the company to the SEC. Overstock.com CEO Patrick Byrne provided the initial funding for Deep Capture LLC and you are a managing partner of that entity.
Your complicity with Patrick Byrne in retaliating against a whistleblower makes you a willing participant in helping Overstock.com defraud investors by trying to intimidate me into silence about the false and misleading financial disclosures by Overstock.com and its management.
Somehow, you don’t seem to care about the legal risk you have brought upon yourself.
In any case, I refuse to back down from exposing GAAP and SEC disclosure violations by Overstock.com and its management team and I will not be intimidated into silence by paid stalkers like you.
Sam E. Antar (convicted felon, former CPA, former Crazy Eddie CFO, and proud member of Patrick Byrne's enemies list)

After broad condemnation by other bloggers, Patrick Byrne trimmed down his enemies list to 1,689 names. However, the name of my oldest son still remains on that list (as of this posting).

Overstock.com's intimate relationship with Deep Capture

Deep Capture claims that:

The Deep Capture website was created to bypass the “captured” institutions that mediate our nation’s discourse. It was initially funded by Patrick Byrne, CEO of Overstock.com, but it is not part of Overstock. It functions as a separate, limited liability media company, whose co-owners and managers are Judd Bagley, Evren Karpak, and Mark Mitchell.

Both Bagley and Karpak are so-called former Overstock.com employees. Mark Mitchell is a washed up former Columbia Journalism Review reporter who left CJR after his lapses of their journalistic ethics.

Overstock.com's web site heavily promotes DeepCapture.com, Patrick Byrne claims to be a "journalist" working for Deep Capture, and Deep Capture receives commissions from customers who purchase merchandise from Overstock.com through referrals from its website to the company.

The Society of Society of American Business Editors calls Deep Capture a "corporate public relations" entity

The Society of Society of American Business Editors and Writers denied Deep Capture membership to its organization because Patrick Byrne's activities as a self-proclaimed "journalist" and "those of DeepCapture seem closer to corporate public relations." See the email below posted by Byrne on DeepCapture.com (Click on image to enlarge):



Patrick Byrne post my emails asking to participate in various Overstock.com conference calls on DeepCapture.com

On October 31, I sent Patrick Byrne an email and asked to participate in Overstock.com’s Q3 2009 earnings call, so I could ask questions about Overstock.com's violations of GAAP and other SEC disclosure rules. In response, Patrick Byrne responded with an angry anti-Semitic diatribe, called me a “gonif” (Hebrew/Yiddish word for thief), and posted my email on his Deep Capture blog, despite previous claims that Deep Capture is unrelated to Overstock.com (See Gary Weiss blog for more details).

On November 18, I sent Patrick Byrne another email asking to participate in Overstock.com's Q3 2009 conference call where it was going to discuss its filing of an "unreviewed" 10-Q. Again, Byrne posted my email on his Deep Capture blog and again referred to me as a "gonif."

If Deep Capture is "not part of Overstock" as it claims, why did Patrick Byrne post my emails asking to participate in various Overstock.com conference calls and personally attack me with anti-Semitic slurs?

Judd Bagley has refused to answer my emailed questions (cc'd to the SEC) asking him as a "Managing Partner" whether or not and he or others approve Patrick Byrne's blog posts prior to publication on DeepCapture.com. In addition, Judd Bagley has refused to answer questions about whether or not Deep Capture has a "conflict of interest" policy and if he approves of Patrick Byrne calling his critics, who happen to be Jewish like me and Gary Weiss, "gonifs."

Why is Judd Bagley so afraid to answer such questions about Patrick Byrne's activities at Deep Capture? Apparently, Judd Bagley does not want to answer any questions because it is not in his interests or the interests of his real employers, Overstock.com and Patrick Byrne.

Certain other retaliatory actions by Judd Bagley on behalf of Patrick Byrne

In 2007, Judd Bagley colluded with his trusted friend Edward Manfredonia to spread vile anti-Semitic trash talk (download) about Conde Nast contributing editor Gary Weiss and I on his antisocialmedia.net blog. Manfredonia once wrote the International Herald Tribune, “Don’t judge the Nazi’s too harshly.” He has sued Gary Weiss, the Securities and Exchange Commission, and Yahoo claiming among other things delusional criminal conspiracies singling out Jews, in particular. All of those cases were thrown out of court.

Later that year, Patrick Byrne even bribed Utah Attorney General Mark Shurtleff to write a letter (issued as a press release and still posted on Overstock.com’s web site) defaming me by claiming that I made certain agreements that I never made with Shurtleff's office. I went to Utah at my own expense and took no fees to train Shurtleff’s staff on combating white collar crime. However, taped transcripts of phone conversations with Chief Deputy Attorney General Kirk Torgensen and Deputy Attorney General Richard Hamp revealed Byrne’s scheme with Shurtleff to defame and discredit me (Details here).

In April 2009, Judd Bagley threatened me to settle my matrimonial litigation with my ex-spouse and told me to, "settle the suit...give her whatever she wants. Because if it goes to trial, I'll probably attend."

Overstock.com's financial reporting violations

Every initial financial report issued by Overstock.com for every reporting period since the company's inception has violated Generally Accepted Accounting Principles (GAAP) and SEC disclosure rules. The company has restated its financial reports two times in the last three years due to such GAAP and SEC disclosure violations and is now desperately trying to avoid a third restatement of its financial reports.

The SEC started investigating Overstock.com after I alerted them to new GAAP violations by the company. Afterwards, Overstock.com fired Grant Thornton as the company's auditors and publicly vilified them when they recommended another restatement of the company's financial reports, just as I previously called for in my blog. The company filed an "unreviewed" Q3 2009 10-Q and CEO Patrick Byrne and CFO Steve Chesnut did not sign required Sarbanes-Oxley certifications. NASDAQ sent Overstock.com a letter warning the company of a possible de-listing.

A clear case of scienter

Here you have a clear case of scienter for a rule 10b-5 violation based on Overstock.com’s unwillingness to restate its financial reports and instead retaliate against its critics by such as myself.
Conclusion

Your failure to act on blatant issuer retaliation by Overstock.com will encourage even more dishonest companies to retaliate against their critics and result in significant losses to investors.

Respectfully,

Sam E. Antar

Other open letters to the SEC (please note that each letter is based on Overstock.com's deliberately vague, incoherent, and inconsistent, and often contradictory disclosures at the time each one was issued):

08/05/09: Open Letter to the Securities and Exchange Commission: Stop Overstock.com GAAP Violations Now!

11/22/09: Open Letter to the Securities and Exchange Commission Part 2: New Information on Overstock.com's GAAP and SEC Disclosure Violations

11/23/09: Open Letter to the Securities and Exchange Commission Part 3: Overstock.com Lied About Grant Thornton and Concealed Error

11/26/09: Open Letter to the Securities and Exchange Commission Part 4: Patrick Byrne Ignores Real Issues As He Vilifies Grant Thornton

Other documents submitted via email:

Overstock.com's enemies list containing 7,483 names including minor children

Overstock.com's enemies list containing 1,689 names which still includes my oldest son's name.

Disclosure:

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. If it weren't for the efforts of the FBI, SEC, Postal Inspector'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.

I do not own Overstock.com securities short or long. My research on Overstock.com and in particular its lying CEO Patrick Byrne is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I will probably end up joining corporate miscreants such as Patrick Byrne in hell. In any case, exposing corporate crooks is a lot of fun for a forcibly "retired" crook like me and analyzing Overstock.com's financial reporting is a forensic accountant's wet dream.

Monday, November 12, 2007

Overstock.com vs. Gradient and Copper River (aka Rocker) Part 3: Details of Countersuit

Michael Chertoff, former prosecutor and now Homeland Security Secretary called ‘Crazy Eddie' Antar, the "Darth Vader of American Capitalism." After reading Copper River's countersuit and independently researching Patrick Byrne's despicable, vile, and malicious acts (many of which are detailed in this blog, other blogs, and major media outlets), any rational person can conclude that Overstock.com CEO, Patrick Byrne, is the Sith Lord of American capitalism or rather the scum of American capitalism. As a criminal, I executed my crimes in cold blood and with a heartless soul. My own cruel, heartless, and vile past criminal conduct is apparently now surpassed by the baseless venom spewed by Patrick Byrne's irrational, cruel, vindictive, and evil actions.

Cooper River Partners accuses Overstock.com, Patrick Byrne, and others of securities fraud

The countersuit suit filed last Friday by Copper River Partners (formerly Rocker Partners) describes Overstock.com as a business, much like Crazy Eddie, built on deceit. The Copper River countersuit seeks both compensatory and punitive damages from the defendants including Patrick Byrne, his father Jack Byrne (former Board member), Jason C. Lindsey (President), Allison H. Abraham (Director and Audit Committee member), John A. Fisher (former Director), and unnamed "Roes" or yet to be identified defendants. Cooper River's countersuit details false, misleading, and deceptive disclosures by Patrick Byrne dating before Overstock.com's initial public offering in June 2002. The countersuit further alleges a conspiracy to inflate the value of Overstock.com's stock to finance the company's perennially money losing operations, after it went public.

Overstock.com, which was founded in 1997, has never had a profitable year, and has accumulated losses to date of over $230 million. According to the countersuit:

Overstock and its chief executive officer, Patrick Byrne, with the active and knowing participation, approval, and ratification of the company's Board of Directors, have made false claims that the company was profitable when it was not; false projections that it would become profitable when it could not; baseless projections of future revenues that were not attained; false statements that the company did not require additional capital; false predictions of success of new business ventures; and misleading mischaracterizations of the operation of the company's business and of its business prospects. They have tried to distract from Overstock's persistent failure to attain the results the company itself projected through accounting gimmicks that present a deceptive picture of the company's results of operations and, in some instances, represent highly questionable treatments under Generally Accepted Accounting Practices ("GAAP"). [Emphasis added.]

Many of Overstock.com's deceptive financial disclosures have been outlined in this blog, such as Copper River's charge that Patrick Byrne made "false claims that the company was profitable when it was not; false projections that it would become profitable when it could not; baseless projections of future revenues that were not attained; false statements that the company did not require additional capital...." For details, read my blog item entitled, "Patrick Byrne, the CEO of Overstock.com: A history of deception, deceit, and distortion - Part 1: The Early Days."

Cooper River's countersuit alleges that Overstock.com's management deliberately manipulated inventory reserves during the first three quarters of fiscal year 2006 in an effort to reduce net losses and increase financial results reported by the company prior to selling new common stock to raise capital in December 2006. This blog examined Overstock.com's misleading disclosures about its financial performance in a series entitled, "Did Overstock.com CEO Patrick Byrne cook the company's numbers and mislead investors?," Part 1, Part 2, and Part 3. I will continue to investigate and detail misleading disclosures by Overstock.com and other questionable activities by Patrick Byrne and others working in concert with him in future blog posts. In future blog posts, I will provide detailed analysis of Copper River's countersuit, too.

Cooper River Partner's charges Patrick Byrne with orchestrating a "desperate and malicious" campaign to silence the company's critics, including Copper River, and inflate the company's stock price:

Overstock and its senior management responded to public criticism with a desperate and malicious campaign to silence the company's critics, including Copper River, and inflate the company's stock price. As set forth in greater detail below, Overstock, Byrne, the company's other officers and directors, and other persons acting in concert with them
a. made false and misleading statements about the company's financial performance and business prospects to distract from legitimate criticism;
b. made false statements about the motives of its critics;
c. falsely accused its critics (and others with no known connection to or interest in Overstock) of conspiring to damage Overstock;
d. attempted to threaten, bully and intimidate critics, including members of the press, with false accusations of wrongdoing and vicious personal slurs; [Emphasis added.]

Very troubling is Patrick Byrne's assault on people who questioned Overstock.com's business model, its accounting policies, its financial disclosures, and its deceptions. According to the countersuit by Copper River, Overstock CEO, Patrick Byrne, orchestrated a "desperate and malicious" campaign to silence the company's critics, including Copper River and Gradient Analytics, to inflate the company's stock price.

As detailed in the countersuit and previous blog posts here, Patrick Byrne and others working in concert with him have attempted to discredit journalists, Wall Street analysts, Gradient Analytics (an independent research firm and co-defendant with Copper River), a 19-year-old teenage blogger, a divorced woman journalist, and other perceived enemies who stood in the way of his business and personal agendas. Patrick Byrne and his collaborators have used intimidation, harassment, threats, blackmail, anti-Semitism, and false accusations to attack the credibility of any person Byrne deems a threat to his agendas.

Patrick Byrne's chief henchman in carrying out his smear campaign is Judd Bagley. Bagley was officially hired by Byrne in August 2006 under the job title Director of Social Media and was recently promoted to Director of Communications and spokesman for the company. About three weeks after being hired, in September 2006, Judd Bagley created an anonymous smear web site, antisocialmedia.net, to stalk, disparage, harass, threaten, intimidate, blackmail, and smear Patrick Byrne's critics. In January 2007, Roddy Boyd of the New York Post exposed the fact that Judd Bagley was administering the web site on behalf of Patrick Byrne. Patrick Byrne has claimed that he is "not behind" antisocialmedia.net, "offers it no support," and that it has "nothing to do with overstock." As late as a week before Roddy Boyd's expose, Byrne denied knowing that Bagley was behind antisocialmedia.net. However, a thorough analysis in my blog post entitled, "The Deceptions of Patrick Byrne (CEO of Overstock.com) and Judd Bagley (Director of Social Media at Overstock.com)," shows Byrne's claims to be implausible.

According to Copper River's countersuit:

Until his identity was revealed by a reporter for the New York Post, Bagley launched his attacks anonymously in an effort to conceal his direct relationship with Overstock. He continues to use multiple pseudonyms to send email and post messages on the internet. Bagley and Overstock have also used electronic spyware embedded in emails and message board posts to spy on and intimidate Overstock's critics. Much of Bagley's efforts on behalf of Overstock were attempts to vilify, harass, and discredit financial reporter and author Gary Weiss, another outspoken critic of Overstock's business and management. [Emphasis added.]

Patrick Byrne has permitted Judd Bagley to post anonymously on internet message boards under multiple pseudonyms to stalk, disparage, harass, threaten, intimidate, blackmail, and smear his critics. The O-Smear blog has detailed how Overstock.com's own internal computers were used to edit the antisocialmedia.net smear web site.

Many of those persons, who researched, questioned, and exposed Patrick Byrne's despicable, malicious, and vile actions have been the target of his baseless vile hatred and cruel attacks. This blog has detailed how the unprincipled and nauseating Judd Bagley permitted his advisor on capital markets, Edward Manfredonia, to post vicious anti-Semitic comments on antisocialmedia.net. After, Judd Bagley found out that I was investigating Edward Manfredonia's anti-Semitic comments, Bagley threatened my future employment and family using a pseudo-anonymous alias on a Yahoo message board. In a posted message on the Yahoo chat board, under his alias panamapump, Judd Bagley listed my internet visits to antisocialmedia.net and angrily issued the following threat:

On behalf of your family and in the interest of your own employability I ask you never to visit ASM [antisocialmedia.net] again.

Another target of Patrick Byrne's baseless and vile hatred had been investigative journalist, book author, and blogger Gary Weiss. In a blog post entitled, "Open Letter to the Audit Committee of Overstock.com: About how Patrick Byrne's vindictive smear campaign uses threats and anti-Semitism," I detailed how Judd Bagley let a person post physical threats directed against Gary Weiss on the antisocialmedia.net, smear web site. The following threat was posted in September 2006:

alpineanalytics wrote:
"Gary Weiss is PATHETIC…his books suck …he is a weasel. In fact, there are quite a few people out there that are going to make an example out of him. He should be looking over his shoulders more carefully when he wants to engage in disrespectful behavior with people that will hurt him…economically, emotionally, and probably physically. Hey Gary…Louie P and Benny S. say hi…you $cumbag."
Posted 10 Sep 2006 at 8:36 am

That threat was finally deleted from antisocialmedia.net in June 2007, after I notified Overstock.com's Audit Committee. Shortly after that threat was deleted, Judd Bagley permitted his pal Edward Manfredonia to post new vicious anti-Semitic slurs on antisocialmedia.net. Edward Manfredonia's new slurs were deleted after new Overstock.com board member, Joseph J. Tabacco Jr., intervened.

According the Copper River's counter suit, Judd Bagley stalked and tried to intimidate 19 year old teenage blogger, from AOL Money & Finance, Zac Bissonnette. In a blog post entitled, "Judd Bagley, Director of Communications at Overstock.com, stalks a teenage blogger," I detailed Judd Bagley's threats to Zac Bissonnette.

Copper River's countersuit details other irrational, baseless, vile, and malicious attacks on other journalists by Patrick Byrne:

Byrne and Overstock continued their efforts to distract the market from the substantive questions raised by Copper River, Gradient, McLean, and others by bullying and disparaging Overstock's critics with false accusations and personal abuse. In response to McLean's Fortune article, Byrne sent her an email in which he referred to the article as "crap" and closed by asking, "so why exactly did you become a reporter? Giving Goldman traders blow-jobs didn't work out? [Emphasis added.]

Patrick Byrne has falsely and maliciously attacked CNBC contributor, Wall Street Journal and MarketWatch columnist Herb Greenberg. According to Copper River's countersuit:

Byrne accused Greenberg of being a "crooked reporter" paid by hedge funds to write "hatchet jobs" on stocks the hedge funds have sold short -a claim that Greenberg denies and Byrne has never substantiated.

Many other journalists have been subjected to irrational, cruel, and malicious smears by Judd Bagley acting on behalf of Patrick Byrne. According to Copper River's countersuit:

For example, after Bloomberg reporter Susan Antilla wrote an article critical of Overstock in February 2007, Bagley wrote a pseudonymous post to an internet message board challenging Antilla's objectivity by claiming falsely that she was married to a hedge fund manager. Bagley responded to articles critical of Overstock by New York Times columnist Joe Nocera with another pseudonymous post asserting that Nocera was a "hack" who had "sold his soul" and was fabricating his stories. In August 2007, moreover, Bagley sent a threatening email to a 19-year-old student who runs a satirical web site about stocks and who had made a humorous posting about Byrne.

According to Copper River's countersuit Overstock.com has used "anonymous agents" on the internet to harass and intimidate critics:

Overstock has also used anonymous agents to attack, threaten, spy on, and disparage the company's critics on internet message boards and on websites that those agents control.

Apparently, Patrick Byrne rewards his cronies very well for their services. According to Copper River's countersuit:

Further, in some cases, individuals who have most vigorously promoted Overstock's shares and attacked its critics have been rewarded with employment at Overstock.

Recently, Overstock.com hired Evren Karpak, a message board troll, who together with Judd Bagley attempted to blackmail the O-Smear blogger, known as Scipio Africanus (pen name). The O-Smear blog has provided detailed information about Patrick Byrne's smear campaign and Judd Bagley's use of spyware to collect information on Byrne's critics on the internet.

In my blog post entitled," InvestorVillage is the place for Overstock.com CEO Patrick Byrne, his henchman Judd Bagley, and their cronies," I detailed how both Judd Bagley and Evren Karpak, now officially employed by Overstock.com, used the InvestorVillage message boards, the antisocialmedia.net smear web site, and the Yahoo message boards in an attempt to intimidate and blackmail O-Smear blogger, Scipio Africanus into silence.

On May 13, 2007, in a post (message number 7306) on InvestorVillage, under his alias De Daumier-Smith, Judd Bagley threatened Scipio Africanus:

This is going to get very interesting, very quickly, folks. To quote Patrick, I'm going to do Scipio "slow."

On June 14, 2007, Judd Bagley sent Scipio Africanus an email threatening blackmail. He wrote:

I'm also very much aware of the impact this could have on your reputation, especially where you live, and I feel obligated to offer you a way out. So, if you're ready to set things right, I'll keep your name to myself and figure we'll both be karmically better off for it.

Copper River's countersuit alleges:

Although this conduct by Overstock, Byrne, and Bagley is unlawful and violates Overstock's own code of ethics, the Director Defendants have never taken any action to prevent it.

Other than maybe the newest board member, Joseph J. Tabacco, Jr. in certain limited situations, I would have to say that I agree with Copper River that Overstock.com's board of directors has its head in the sand.

Other individuals have been rewarded for helping further Patrick Byrne's vile agendas. According to Copper River's countersuit:

At the same time, in or around November 2004, Overstock and Byrne obtained help in their scheme to inflate Overstock's share price and silence its critics from an internet stock tout who operates under the pseudonym Bob O'Brien. "O'Brien" later continued these efforts through his organization, the so-called National Coalition Against Naked Short Selling ("NCANS"). Plaintiff Mary Helburn is the Executive Director of NCANS and Byrne has admitted providing substantial amounts of money to NCANS.
"O'Brien" began touting Overstock on investor message boards without disclosing his true identity or his relationship to Overstock and Byrne. In fact, at all times relevant to this Cross-Complaint, "O'Brien" was acting as Overstock's agent.... [Emphasis added.]

A co-plaintiff of Overstock.com in its litigation against Copper River and Gradient is Mary Helburn, the Executive Director of the National Coalition Against Naked Short Selling ("NCANS"). Prior to Overstock.com and co-plaintiff Mary Helburn filing their lawsuit against Copper River and Gradient, Patrick Byrne, in different stories, claims that he contributed from $20,000 to $75,000 to NCANS to place an advertisement in the Washington Post about naked short selling.

We need to ask, did Patrick Byrne buy a co-plaintiff and an ally in his litigation and smear campaign against Copper River and Gradient?

In February 2005, Patrick Byrne had originally claimed that he donated only $20,000 to NCANS for the Washington Post ad:

We came out swinging last week with a full page ad in The Washington Post, explaining this issue. It cost $100,000: I donated about $20k of that, and spent a lot of time working with O'Brien through email (as I have never met him yet), getting the ad just right. Meanwhile, he opened his ncans.net site, which explains all of this thoroughly.
In the last few days, The Empire Has Begun To Strike Back. [Emphasis added.]

Patrick Byrne had claimed that he told Dow Jones Newswire journalist Carol A. Remond:

Carol was adamant that you [Phil Saunders aka Bob O'Brien] and I have been cooking up this plan for months. I confirmed for her that I have cooperated in the writing of the Washington Post ad and contributed money to run it. I told her, however, that lots of the money for the ad came in the form of $200 checks from grandmothers (who really have no business doing this), and that in fact, at least $40,000 (O'brien - probably more than $50K) had come in from such folks. She asked if it was safe to infer that you and I had contributed the rest, and I said it was: still, she seemed not to believe that any money had come in from anyone but me and you. (O'Brien - she has received dozens of emails from people who contributed, so it is difficult to be charitable at this point as to why she is ignoring those actual testimonials). [Emphasis added.]

However, on May 28, 2007, in a post (message number 7655) on InvestorVillage.com, Patrick Byrne now admitted to donating $75,000 of the $100,000 cost for the NCANS Washington Post ad. Responding to a question asked by another message board participant, Patrick Byrne using his alias Hannibal wrote:

How much was paid to the National Assn. Against Naked Shortselling?:
A COUPLE YEARS AGO I DONATED AROUND $75K TO NCANS (I ASSUME THAT IS WHAT YOU MEAN?) BUT BOBO [Phil Saunders aka Bob O'Brien] USED THAT TO BUY AN AD IN THE WASHINGTON POST SO I DO NOT THINK OF THAT AS A "PAYMENT" TO BOBO. [Emphasis added.]

Tracy Coenen, a noted forensic accounting expert and author took issue with Patrick Byrne's new story and asked Patrick Byrne for a response. Byrne posted a response in her blog:

Patrick Byrne on June 26th, 2007 8:55 pm Hi Tracy,
“So, Patrick…. how much was really given to NCANS for this Washington Post ad? And why does the amount change in your posts on message boards?”
Because I sent NCANS $22k, then about $25k a few weeks later, and then some time later, I think, another wire of around the same amount. I’m not sure if I did send a third. So in May when asked I rounded up and responded “75k”.
Any more X-File type mysteries you need help solving?
Patrick [Emphasis added.]

We need to ask, was Patrick Byrne backdating his contributions to NCANS for its Washington Post ad?

Originally, Patrick Byrne had claimed that "at least $40,000 (O'brien - probably more than $50K)" came from "grandmothers...and such folks" and the balance of the $100,000 cost was donated by him and O'Brien. In February 2005, Byrne claimed that he specifically donated $20,000 towards the cost of the Washington Post ad. In May 2007, Patrick Byrne changed his story and claimed that he donated $75,000 of the $100,000 cost. If "grandmothers...and such folks" donated "at least $40,000" or probably "more than $50K" about $60,000 to $50,000 or less of Byrne's $75,000 contribution can be applied to the cost of the Washington Post ad. Where did the other $15,000 to $25,000 or more from Byrne's donation go? There are similarities here to the government's allegations against the Milberg Weiss law firm which is accused of buying plaintiffs for lawsuits.

After the Washington Post ad was published, Phil Saunders aka Bob O'Brien, who helped start NCANS, threatened Copper River's Marc Cohodes. According to Copper River's countersuit:

Overstock's agent O'Brien also made personal threats against the family of defendant Cohodes in response to Copper River's short trading activity. In February 2005, O'Brien was aggressively promoting a sub-prime mortgage lender called Novastar Financial. Copper River was a critic of Novastar, based on its belief that Novastar's business model amounted to a sophisticated Ponzi scheme. On an internet message board concerning Novastar, "O'Brien" posted threatening messages with a picture of Cohodes's disabled son, information about Cohodes's family, and the Cohodes family's home address. After posting that personal information, "O'Brien" included the threat that "[t]his is coming on game over time."
Copper River's assessment of Novastar proved to be true; its stock price later collapsed, causing losses of hundreds of millions of dollars to small investors. [Emphasis added.]

Allegations of stock market manipulation through a short squeeze and orchestrating a Securities and Exchange Commission investigation based false allegations by Overstock.com, Patrick Byrne, and three former Gradient employees

Cooper River's countersuit alleges that Byrne and his cohorts engaged in stock market manipulation and attempted to have the SEC investigate both Copper River and Gradient on false charges. According to Copper River's countersuit:

Overstock, Byrne, the company's other officers and directors, and other persons acting in concert with them....
e. orchestrated illegal "short squeezes" in order to inflate the price of its stock and injure investors with short positions in the stock;'
f. brought this lawsuit premised on assertions of fact that Overstock, Byrne, and the Director Defendants knew to be false and supported those false allegations with a perjured affidavit of a former Gradient employee elicited by Overstock, Byrne, and the Director Defendants;
g. made false allegations of fact and provided false and misleading documents to the Securities and Exchange Commission to convince the SEC to open an unwarranted investigation of the independent stock research firm Gradient Analytics, Inc. ("Gradient") and to subpoena Copper River and Overstock's critics in the financial press (which investigation was closed with no enforcement action, no findings of wrongdoing, and the issuance of a "no action" letter by the SEC);
h. publicly misrepresented the investigation of Gradient, as well as the SEC's continuing investigation of Overstock itself, as an indication of wrongdoing by Copper River and its principals. [Emphasis added.]

For example, Copper River's countersuit states:

When asked about the December 2003 short squeeze, Byrne replied, "when opportunities come along where we can knee the shorts in the groin, that's always good for fun and amusement."

In my previous blog item entitled, "Overstock.com vs. Gradient and Rocker Part 1: Patrick Byrne and his Three Stooges," I examined credibility issues arising from conflicting, inconsistent, and contradictory allegations of the three former Gradient employees against Gradient and Copper River (formerly Rocker Partners). In another blog item entitled, "Did Patrick Byrne, CEO of Overstock.com, Deliver a Trojan Horse to the Securities and Exchange Commission?," I raised the question as to whether Patrick Byrne used his company's lawsuit against Gradient Analytics and Rocker Partners as a "Trojan Horse" diversion tactic to the Securities and Exchange Commission in an effort to thwart their inquiries and later investigation of Overstock.com and him.

Gradient Analytics independent research reports apparently ticked off Patrick Byrne. According to Copper River's countersuit:

In response to a Gradient report questioning the independence and competence of Overstock director Gordon Macklin, who had served as a director of WorldCom during the period it perpetrated the largest financial fraud in U.S. history, Byrne sent an ernail to Donn Vickrey of Gradient. That email stated, "You deserve to be whipped, fucked, and driven from the land." [Emphasis added.]

Cooper River's countersuit provides additional information that further discredits the allegations of the three former Gradient employees and provides additional details on how Patrick Byrne used them to orchestrate the SEC investigation of Cooper River and Gradient.

On August 11, 2005, Overstock.com and co-plaintiff Mary Helburn sued Gradient Analytics, an independent research firm, and Rocker Partners (now Copper River Partners), a short seller. Overstock.com alleged that Gradient's research reports were purposely biased to benefit its customers and that it withheld publication of such reports to allow their clients to accumulate short positions prior to their issuance. Three former Gradient employees (Demetrios Anifantis, Robert Ballash, and Darryl Smith) had signed sworn declarations aka affidavits alleging wrongdoing by their employer.

A day after Overstock.com's lawsuit was filed against Gradient and Rocker Partners, Patrick Byrne revealed that the SEC started an informal inquiry of Overstock.com in February 2005 and that its inquiry "went nowhere." Around October 2005, based on the allegations of Overstock.com, Patrick Byrne, and the three former Gradient employees, the Securities and Exchange Commission started investigating Gradient Analytics. However, on May 9, 2006, the Securities and Exchange Commission started a formal investigation of Overstock.com, in contrast to Byrne's earlier claim that the SEC informal inquiry "went nowhere."

On May 17, 2006, Patrick Byrne received a personal subpoena from the Securities and Exchange Commission. However, Overstock.com waited almost an entire year, until May 9, 2007, to disclose Patrick Byrne's personal subpoena. In February 2007, the SEC dropped its investigation of Gradient, issued them a "no action" letter, and continued its formal probe of Overstock.com. On May 10, 2007, a day after Overstock.com disclosed Patrick Byrne's personal SEC subpoena, about a year late, Patrick Byrne had claimed that the SEC investigation was "not Overstock-centric" and that he was not the focus of their investigation despite the formal SEC probe and having received a personal subpoena from them. However, on August 10, 2007, Patrick Byrne finally admitted to being the "target" of a Securities and Exchange Commission investigation, in contrast to his previous denials.

There are many more details of alleged wrongdoing by Overtock.com, Patrick Byrne, and other persons working in concert with him in Copper River's countersuit. I will provide a thorough analysis of Cooper River's countersuit in future blog posts. In the mean time, Overstock.com's Board of Directors may want to read my blog post about a recent opinion by the Tenth Circuit on whether misrepresentations in financial statements incorporated by reference in a D & O policy application could serve as a basis for policy rescission under Utah law.

To be continued.....

Written by,

Sam E. Antar (former Crazy Eddie CFO & convicted felon)