Don't Mess with Overstock.com CEO Patrick Byrne

As a criminal I knew ugly and vile behavior up close because I practiced it with a cold, dark, and heartless soul. I knew all too well how to use your humanity as a weakness to be exploited. I knew all too well how to win you over with honey. Also, when honey did not work I knew how to instill fear in you through intimidation.

Today, we have a war being conducted by Patrick Byrne (CEO of Overstock.com) against almost anyone who does not fit into his agenda of deflecting from the poor performance of Overstock.com. If you mess with Patrick Byrne, watch out, his anger seems to know no bounds.

As a convicted felon I understand Patrick Byrne’s war of intimidation, smears, and deflection from the personal experience of my own vile criminal actions. Below, I outline some of Patrick Byrne’s actions and some of those persons who work in concert with either him or Judd Bagley (Director of Social Media at Overstock.com).

For more information, I suggest reading the O-Smear blog which in great detail shows the vile despicable actions of Patrick Byrne, Judd Bagley, and their collaborators. In addition, I suggest that you read Gary Weiss’s blog.

Patrick Byrne seems to believe he can control the subject of discussion of Overstock.com on the Investor Village Overstock.com message board

When Patrick Byrne started posting on InvestorVillage Overstock.com message board he wrote (message # 668) the following on August 8, 2006 under his alias Hannibal:

And if you had not guessed, yes I am posting here to try to help Investor Village steal share. When the hordes of bashers show up (Guess We'll have to be on the lookout for them) we want to have our powder ready to eject them.

In late August 2006, he quietly hires his “friend” Judd Bagley to become Director of Social Media at Overstock.com. Shortly, thereafter, on September 8, 2006 Judd Bagley forms an anonymous web site antisocialmedia.net and begins a vile, malicious, and vindictive campaign against Mr. Byrne’s critics and their families.

For many months neither Patrick Byrne nor Judd Bagley would acknowledge who was behind this vile hate spewing web site.

In a taunting post on Investor Village (message # 2426) under his alias Hannibal on November 26, 2006 Patrick Byrne writes:

(Full disclosure: I am not behind antisocialmedia.com, but I could speculate who is.)

Is it bad?

He would issue threats to his critics on Investor Village (message # 2964) while denying rumors of his “friend” Judd Bagley’s involvement in it. On December 23, 2006 he writes:

Can everyone sense these guys sweating? They seem to be getting nervous, don't they? Hence the posts full of non sequitors and picking of nits about unimportant details. They apparently hope that they can confuse the average reader, as long as that reader does not go and read the original antisocialmedia.com material exposing (with screeen shots and IP addresses) these bullies.

But the average reader may still ask, Why are they so nervous, and why now? The answer is, it is because the bullies know what is coming, they know where this antisocialmedia stuff is heading, in a way that the average reader does not. They are flailing in an attempt to derail it.

By the way, since they seem so concerned about these issues, and conflate all their unknowns and half-truths into one steady stream of invective, let me help them out:

1) I know Judd. He has become a friend in recent months, but that is not why we hired him. We hired him to work on a project that should reach fruition pretty soon. That project is completely unrelated to any of this controversy. When you see it, you'll think it is pretty cool.

2) I am not behind antisocialmedia.com, offer it no support, it has nothing to do with overstock. Technically, I do not "know" who out there is behind it (the person who is behind it has made an effort to shield me from that knowledge), though admittedly, I have a very good idea.

That same day in another post on Investor Village (message # 2976) under the alias Hannibal he reiterates:

Overstock has no resources supporting antisocialmedia.com. It is someone's hobby.

On January 2, 2007 Roddy Boyd of the New York Post in an article entitled “Overstock.com Lashes Out at Critics on Web” exposed Overstock.com Director of Social Media Judd Bagley as being behind the smear web site:

Internet retailer Overstock.com's war against its critics is taking an ugly new twist, as a Web site aided and supported by its management is leveling sharp charges against two Internet message board posters. The site, AntiSocialMedia.net, launched bitter attacks last week on the message board critics, accusing them of participating to various degrees in a conspiracy to malign the anti-naked short selling movement that Overstock.com supports….

ASM's work has been vocally supported by Overstock's controversial Chief Executive Patrick Byrne in at least a dozen of his Web posts on the InvestorVillage Internet message board and Judd Bagley, another Overstock executive.

Shortly, thereafter Judd Bagley attached his name to the anonymous smear web site antisocialmedia.net.

Patrick Byrne would try to justify why he claimed not to know that Judd Bagley was behind this smear website. In posts on Investor Village Patrick Byrne later claimed plausible denial as a reason for not knowing who was behind the smear web site and reiterated his support of Judd Bagley’s activities in smearing critics:

On January 29, 2007 (message number 4179) under his alias Hannibal, Patrick Byrne writes:

By way of general response, I will mentioned that I am proud of both mine and Judd's behavior unravelling the charade of miscreants.

On January 31, 2007 (message number 4287) under his alias Hannibal, Patrick Byrne writes:

Oh yes: somewhere in there (after Judd was already working for us) I became aware of ASM. I asked him about it: he suggested that he had a right to expect a "Don't ask don't tell" policy regarding his research and writing. I pointed out to Judd that, if he were involved, he could not be doing anything on our company time, and that he must refrain from doing anything to discuss Overstock from and investment point of view. Only a month or two later, when it began to draw attention, did he confirm his involvement to me. All the questions about "Do you know this guy in Orem who knows this guy and do you fund this or that" are all non-starters. Overstock and I have precisely 0 to do with AntiSocialMedia.

Except for the fact that I am an avid reader and raving fan. In the past, I did not know what was going to go up on ASM before it went up. However, I have sat with Judd and learned about all the ammo he has held in reserve. So I do know, now, what COULD go up, but not necessarily what WILL (or, in fact, if anything else will).

However, Patrick Byrne’s explanation into his knowledge of Judd Bagley’s activities seems quite flimsy. The wall of separation between Overstock.com and the web site antisocialmedia.net is even flimsier.

Was the “Don’t ask don’t tell” policy he referred to above a concocted reason to have plausible deniability of Judd Bagley’s actions? Was Judd Bagley at the very least (if you accept Patrick Byrne’s explanation) lying or being deceitful to his “friend” and boss?

In late September 2006 while Patrick Byrne still had denied knowledge of who was behind the web site antisocialmedia.net, Judd Bagley anonymously posted the following to the site:

….As I feared, my recollection of Overstock.com CEO Patrick Byrne’s past experiences with Linda Mack (aka SlimVirgin) did not get it quite right.

Byrne recently emailed me a fuller, written version of the story which I intended to add as a comment on the original post; however, due to its length (and quality), I’ve opted instead to publish it here.

After reading Byrne’s account, all I can say is: my version really sucked and you owe it to yourself to read what follows, in its entirety.

Antisocialmedia.net then publishes a letter from Patrick Byrne signed “Humbly submitted, Patrick.” Patrick Byrne claims he did not know that letter went to Judd Bagley (Director of Social Media at Overstock.com) who was at the time running the web site antisocialmedia.net anonymously.

On October 22, 2006 Judd Bagley writes in an exchange with another person who posted comments to one of his smear attacks “Patrick Byrne says hello, too.”

Even after Roddy Boyd’s New York Post article exposing that Judd Bagley was behind the antisocialmedia.net web site, Patrick Byrne continued to assert that Overstock.com has nothing to do with Judd Bagley’s activities on that site.

On January 22, 2007 in a post on Investor Village (message # 4287) under his alias Hannibal he writes:

Overstock and I have precisely 0 to do with AntiSocialMedia.

Judd Bagley (Director of Social Media at Overstock.com) claimed on his antisocialmedia.net web site that his time devoted to his web site that:

In fact, given the insistence of my boss, CEO Patrick Byrne, that any continuation of my nearly one year old research be strictly and unambiguously limited to my own time, there’s no question but that my current employment has hampered my progress.

Judd Bagley seems to have as much freedom as necessary to conduct his smear campaign on both his antisocialmedia.net smear web site and posting under multiple anonymous aliases on internet message boards. Judd Bagley has at times posted his messages during regular week day office hours at Overstock.com

In a post on Investor Village (message # 3566) on January 14, 2007, under his alias Hannibal, Patrick Byrne writes:

STRANGE GUY, KEEPS HIS OWN HOURS, COMES IN SOME NIGHTS, STAYS AWAY FOR DAYS. HE HAS BEEN LEADING THE DEVELOPMENT EFFORT OF A NEW PROJECT FOR US. IT IS PRETTY COOL: A SOCIAL MEDIA SYSTEM THAT WILL NOT GERMANATE OR HARBOR TYRANTS.

As to his posting during normal weekday business hours, Judd Bagley posted the following answer on Yahoo (now deleted) under his previously anonymous alias "antsaresocialinsects" around February 8, 2007:

Sam, if I have posted between 8-5 it's either been on a day off, or during lunch using my PDA....

Judd

So let’s get this straight. Judd Bagley who Patrick Byrne has described as a “Clark Kent” type, needs to post vile messages during normal office hours. So, he takes a “lunch” break, leaves Overstock.com premises and changes into “Superman” to conduct his smear campaign? After he is finished with his quick smear on the blogs or internet message boards, he turns back into "Clark Kent" as goes back to work?

If you criticize Patrick Byrne or Judd Bagley you may be subject to vicious attacks on the web site antisocialmedia.net which is run during the so-called spare time of Judd Bagley (Director of Social Media).

If an employee of one of Byrne's adversaries (Gradient Analytics, Rocker Partners, DTCC) was found to be running an anti-Byrne or anti-Overstock site in his "spare time," Byrne and his supporters would be claiming involvement by those companies.

Both Patrick Byrne and Judd Bagley like to use other message board participants to further their agenda by direct communication with them. They will exchange e-mails and private messages with them. They will track your posts and report back to them.

For example, in one post on Investor Village (message # 4954) Judd Bagley under his alias De Daumier-Smith on February 19, 2007 he writes:

Back when I first put Sammy on ignore, I asked Evren to let me know if he (Sammy) ever said anything worthwhile.

Some accomplices have spewed hateful venom on message boards.

One person in particular Edward Manfredonia seems to be Judd Bagley’s new war time consigliore. Like Patrick Byrne, who is known for his now infamous Sith Lord conspiracy, Mr. Manfredonia is no stranger to conspiracy theories himself. Edward Manfredonia likes to accuse certain people he apparently dislikes (including government officials and the press) of covering up murders, perjury, rape, and other vile crimes.

Judd writes fondly about Edward Manfredonia in a post on Investor Village under his alias De Daumier-Smith (message # 6052) on April 2, 2007:

Re: sam, are you really nuts?

As I told Embraceyourinnerhillbilly, Ed may have a quirky way of communicating in writing, but I can assure you he's one of the more knowledgeable people I know. Ed has been enormously generous in sharing his knowledge of how Planet Wall Street works (both in theory and in practice) with me.

If Ed and I spent more than five minutes talking about you or Gary or anything else from this or any other board I'd be shocked.

Note: On March 31, 2007 the anonymous aliase "Embraceyourinnerhillbilly" wrote the following message (# 5943) on Investor Village:

This was Judd's reply to me when I asked him about Mr. Manfredonia. Judd, sorry about posting a PM, but I felt in this case it was warranted. "I have had MANY lengthy conversations with Ed. He is a very good and principled man. But he seriously lacks the ability to communicate effectively. "

In a later message (# 5995) this person who is in direct contact with Judd Bagley would post the following vile message against investigative reporter and Overstock.com critic Gary Weiss:

Re: nutty-weiss

"Weiss is a liar, thief, perjurer and racist. It cannot get worse than that." Sure it can, if Weiss was also pedophile.

Edward Manfredonia in a post on Investor Village under his alias Ed Manfred (message # 6117) on April 3, 2007 writes:

Re: Scipio

I talk to Judd.

I send Judd e-mails.

But 95% of the discussion has nothing to do with Overstock. I have talked about short sales. I have discussed that some people never borrow the stock and that the brokerage houses do not care.

I talked about the puts and some crossed trades

But I have stated one important fact: Gary Weiss shall do everything possible to make certain that Overstock fails- whether Overstock is a viable company or not….

Respectfully submitted,

Ed Manfredonia

Edward Manfredonia has been writing anti-Semitic and hateful posts against Gary Weiss (an investigative reporter and frequent Byrne and Bagley critic on his blog), me, and just about everyone else he dislikes. Mr. Manfredonia has posted multiple libelous claims, vile, anti-Semitic, and hate messages on both the Yahoo Overstock.com board and Investor Village Overstock.com board.
For example, in a post on Investor Village (message # 6023) on April 2, 2007 under his alias Ed Manfred, he writes:

To Sam the Scam:

Tsk. Tsk....

But Tzaddik Morgenthau covered up rape, narcotics smuggling, money launderng, etc. at the American Stock Exchange.

Arthur Levitt and Robert Morgenthau conspired to protect the American Stock Exchange.

Note: Tzaddik means "righteous person" in Hebrew. Mr. Manfredonia uses the Hebrew term "Tzaddick" to associate Manhattan District Attorney (who is of the Jewish faith) with covering up for "rape, narcotics smuggling, money launderng...."

On March 26, 2007 on Investor Village (message # 5835) under his alias Ed Manfred, Edward Manfrdonia writes about Gary Weiss (who is Jewish):

pig's blood

I once accompanied Weiss to a restaurant, Sweet n' Tart, in Chinatown. Weiss ordered pig's blood. It looked scary.

But Weiss consumed the pig's blood with glee. Speaking of treyfe.

Sincerely,

Ed Manfredonia

On April 2, 2007 on Investor Village (message # 6041) under his alias Ed Manfred responding to another person he believed was me he wrote:

Tam, aka Sam the Scam, violated Shabbos.

Edward Manfredonia was upset as evidenced by this post on Investor Village (message # 6046) on April 2, 2007 he wrote:

Sam, why are you so interested in my conversations with Judd Bagley?

He would continue smearing Gary Weiss and I with multiple posts such as this one (message # 6075) on Investor Village:

I have stated that I have never been promised compensation. I have never asked for compensation.

Nor would I ever work for Overstock.

Just because Sam is a crook and Weiss a perjurer and thief, does not mean that everyone else is on the take.

So there has never been and never will be compensation or any type of reward- except the knowledge that I have exposed several liars.

Sam Antar is an Orthodox Jew, yet he had no qualms about stealing hundreds of millions of dollars.

This is merely a new scam by Sam the Scam.

I do not believe that Sam has repented. Sam is a thief.

Respectfully submitted,

Ed Manfredonia

On December 3, 2006 Judd Bagley had written on Investor Village (message # 2571 – now deleted by the board administrator, recreated on the O-Smear blog) under his old anonymous alias AntiSocialMedia:

The guy's name is Ed Manfredonia, his website is wallstreetscandals.com, and yes, he fell off his rocker a while ago.

But while his version of reality and the objective observer's version will likely differ, I don't get the impression that he's actively being deceitful...he's just a bit...touched.

Still, if just 10% of the facts he cites are faithful to reality (and in my opinion, it's much higher than that), well let's just say it fits the larger pattern we're all seeing emerge.

Despite the fact that Judd Bagley writes that Edward Manfredonia “fell off his rocker a while ago” and is “touched” he claims that “...I can assure you he's one of the more knowledgeable people I know. Ed has been enormously generous in sharing his knowledge of how Planet Wall Street works (both in theory and in practice) with me.”

Judd Bagley (Director of Social Media at Overstock.com) denies being an anti-Semite despite his relationship with Edward Mandfredonia. In a post on Investor Village (message #5941) under his alias De Daumier-Smith:

"I'm about as pro-Semitic a goy as you'll meet...."

If you mess with Patrick Byrne you may be accused you of selling your soul

Joe Nocera (New York Times) wrote two columns about Patrick Byrne: On February 25, 2006: Overstock.com’s Campaign of Menace (subscription required) and on March 10, 2007: TALKING BUSINESS; Revisiting Overstock.com And Utah (subscription required). The same day Joe Nocera’s column was published, Judd Bagley (Director of Social Media at Overstock.com) under his alias De Daumier-Smith on Investor Village (message # 5430) wrote the following in a brutal reply:

I pity Joe Nocera:

Joe Nocera's skewed take on this issue can no longer be attributed to mere differences in human perceptions. He has sold his soul. And I guarantee you he hates himself for it. Certainly, whatever he's getting in return helps to numb the pain, but that stuff never lasts.

Therefore, if you write a column that does not fit into Patrick Byrne’s agenda like Joe Nocera, perhaps you should expect one of his surrogates to say you have “sold your soul.”

If you mess with Patrick Byrne details of your marriage and divorce are subject to misrepresentation and innuendo

On February 21, 2007 Susan Antilla (Bloomberg) wrote a column entitled "Overstock Blames with Creepy Strategy." On February 22, 2007 Judd Bagley posted his response on Investor Village (message # 5017) under his alias De Daumier-Smith:

A wee bit of context on Susan Antilla

I just wanted to point a couple of things out about Susan Antilla...you know, add some color to her commentary.

The conventional wisdom has been that her husband, Dennis H Leibowitz , is with Credit Suisse First Boston. Wrong. In 2002 he left SCFB (misspelled should be CSFB) to start his own hedge fund….

One problem with that post was that Susan Antilla was long divorced from her husband. When asked about it by other message post posters Judd Bagley published the following on his web site antisocialmedia.net (before later “editing” it):

I went on to spend about 10,000 moments online searching for evidence of that divorce, yet found no record of the dissolution of the Antilla-Leibowitz union. In fact, I’m on the verge of advising Miss Antilla to ask her divorce lawyer for her money back.

He goes on with his latest smear of Susan Antilla in the same post on antisocialmedia.net:

That’s the bad news. The good news is: during my search, I found something even better.

In 1994, Antilla was a New York Times business writer. In the fall of that year, she learned of a rumor suggesting Robert Howard, head of Presstek, might actually be Howard Finkelstein, a convicted felon known to use various aliases, including “Robert Howard”. Antilla would not reveal the source of the rumor, other than to acknowledge that it came from a short sellers of Presstek stock.

A quick word about good journalism.

There’s an easy way to discern a responsible journalist from an irresponsible one: irresponsible journalists are willing to write about rumors. Responsible journalists may investigate rumors, but insist on reporting facts.

Following interviews with 30 people, including Robert Howard himself and his son, in which Antilla found nothing to support the Howard-as-Finkelstein rumor, she opted to write anyway…about the rumor.

Judd Bagley spent “10,000 moments" online in an obsessive search for evidence of just that divorce.” That is probably over 166 hours researching the issue of her divorce over probably at most a 5 week period.

Certain other message board posters had found out about her divorce in less than twenty minutes by doing a simple web search.

In addition, Judd Bagley seems to have missed or neglected to say an important fact about Mr. Howard. According to the Securities and Exchange Commission web site:

The Securities and Exchange Commission today filed a Complaint in the U.S. District Court for the Southern District of New York against Robert Howard and Robert E. Verrando, the Chairman and President, respectively, of Presstek, Inc., a Hudson, New Hampshire-based manufacturer of printing press technology and related products. Without admitting or denying the allegations in the Complaint, Howard, 74, and Verrando, 66, consented to the entry of final judgments of permanent injunction against them that also require them to pay a total of $2.9 million in civil penalties. In a related matter the Commission issued a Cease-and-Desist order against Presstek by consent. (Source: Securities and Exchange Commission)

If you mess with Patrick Byrne your personal information is up for grabs

Judd Bagley and/or others working in concert with him have been accused of implanting tracking software on their message board posts and “private messages” in an attempt to extract critic's IP addresses and other personal information. (See: O-Smear Blog Label Spyware and Gary Weiss Blog Label Spyware.)

If you post on an internet message board anything that does not fit Patrick Byrne’s agenda, you risk having your personal information (including home address) posted on Judd Bagley’s web site antisocialmedia.net. Your home address is not sacred and may not be sacred to Patrick Byrne and his surrogate Judd Bagley.

If you mess with Patrick Byrne even your wife may be subject to scrutiny

If you publish a blog like Gary Weiss and question the actions of Patrick Byrne and Judd Bagley you risk having every aspect of your life under a microscope. Your wife is not sacred to them but mere fodder for an attack. Details of about your wife will be posted. They will post false or misleading information about you or your family members. See Gary Weiss Blog: January 12, 2007 - Judd Bagley Fesses Up.

If you mess with Patrick Byrne he may help orchestrate a government investigation of you

On February 15, 2007 Herb Greenberg (MarketWatch.com & Wall Street Journal columnist, blogger, and CNBC contributor) wrote the following on his blog in a post entitled "Overstock's Byrne: Thanks for the Memories"

On Feb. 10 of last year, three days after the SEC subpoenaed several members of the press in connection with the investigation -- but weeks before I ever made my subpoena public -- I received this email from Overstock (ostk) CEO Patrick Byrne:

Dear Herb,

I write in the spirit of our little sideline chats of the past. If you are not open to this, let me know.

I am just sitting here with a glass of wine in my hands, reflecting on what a really bad week you and your friends have had. The last two days in particular will likely prove to have been life-ruining events for certain people. As I take a sip, I find myself curious: do you guys know? Are you sitting somewhere, blithely oblivious, still chuckling about Whacky Patty, and all that? Or do you understand now that this is going to end badly for you?

The signs are that you guys do understand, as some of your cronies are starting to make desperate-seeming mistakes. Do you understand what is happening in your world? How do you rationalize it? How do you tell yourselves it will work out? Do you ask yourself if you should have done something differently? I don't suppose you would tell me what it feels like: even were you in a panic, you'd probably write something like, 'Anything you say Patrick!' But you guys cannot be completely oblivious about the meetings that are going on, the questions that are being asked, the documents being drafted, the stories that are being told, the people who are listening. Someday people will be asking you what it felt like, to be where you fellows are now, and I am mildly curious to know: I hope you record the thoughts for posterity, if only as a cautionary tale. And if you would care to send me a letter, I would keep it private if you so desire.

Who knows, I might even be in a position to do you a favor someday.

Call anytime.

Patrick.

One has to wonder whether Patrick Byrne instigated or encouraged the Securities and Exchange Commission.

The SEC started investigating a research firm Gradient Analytics. Their problem was that they published research reports critical of Overstock.com’s business model and certain accounting practices.

Overstock.com and others sued Gradient Analytics and the hedge fund Rocker Partners. So if you are a hedge fund and your trades do not fit into Patrick Byrne’s agenda, watch out too. You may be sued.

Recently, the Securities and Exchange Commission dropped its investigation into Gradient Analytics but continued its investigation into Overstock.com.

When the Securities and Exchange Commission first began its investigation into Overstock.com Patrick Byrne celebrated receiving his subpoena. He attempted to spin the situation into the SEC looking into Overstock.com as a means of them going after Gradient.

The Overstock.com web site states:

Was Overstock behind the SEC subpoenaing business journalists?

No.

Has Overstock been subpoenaed?

Yes. We received a subpoena from the SEC on May 9, 2006. Prior to receiving the subpoena, we were already cooperating fully with various agencies, including the SEC.

Is Overstock being investigated by the SEC or other agencies?

The SEC is conducting an investigation on Overstock.com (see previous question). We are not aware of other investigations by any other agencies."

Are the subpoenas an infringement on these journalists' First Amendment rights?
Again, Overstock is not behind the subpoenas and we do not know what the subpoenas are about.

Notice that the Overstock.com web site states “Again, Overstock is not behind the subpoenas and we do not know what the subpoenas are about” despite the threatening e-mail Herb Greenberg received from Patrick Byrne.

In addition, the web site states “investigation on Overstock.com” rather than “investigation of Overstock.com.”

One has to wonder why the SEC investigation of Overstock.com continues after they dropped the Gradient investigation.

According to Overstock.com's most recent 10 - K filed for the fiscal year ended December 31, 2006:

On May 9, 2006 we received a notice of an investigation and subpoena from the Securities and Exchange Commission, Salt Lake City District Office. The subpoena requested a broad range of documents, including, among other documents, all documents relating to our accounting policies, our targets, projections or estimates related to financial performance, our recent restatement of its financial statements, the filing of our complaint against Gradient Analytics, Inc., the development and implementation of certain new technology systems and disclosures of progress and problems with those systems, communications with and regarding investment analysts, communications regarding shareholders who did not receive our proxy statement in April 2006, communications with certain shareholders, and communications regarding short selling, naked short selling, purchases and sales of our stock, obtaining paper certificates, and stock loan or borrow of our shares. We have responded to the subpoena.

Why you should not mess with Patrick Byrne

If you publish anything that does not fit into Patrick Byrne’s agenda watch out. Anything from your past may be subject to smear, innuendo, and misrepresentation. Your family members may come under attack too.

You may be subject to vicious attacks on the web site antisocialmedia.net which is run during the so-called spare time of Judd Bagley (Director of Social Media).

As a criminal I knew how to instill fear when I had to. So be afraid of Patrick Byrne. Stay away from him since he and his surrogate Judd Bagley know the smear game all too well.

When I look at the actions of Patrick Byrne and Judd Bagley I am reminded of my own criminality. Sometimes when I look in the mirror I see Patrick Byrne.

The only real transparency you can get from Patrick Byrne is the ugliness and maliciousness spewed by his actions against those who do not fit into his agenda.

Written by:

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

Other Blog Posts:

O-Smear Blog:

February 26, 2007 - Controlling the Discussion about Overstock

February 26, 2007 - AntiSocialMedia's False Start

February 27, 2007 - Illegal Computer Access?

Gary Weiss Blog:

March 19, 2007: Ordinary People Versus Corporate Bullies

March 25, 2007: The Overstock Meltdown Continues

April 2, 2007: Overstock.com Finds a Ten Year Old

Jeff Matthews Is Not Making This Up Blog:

December 10, 2005: Weekend Reading: Conspiracy of the Jews?

December 23, 2005: Conspiracy of the Jews? Part II

December 26, 2005: A Necessary Correction

There are other informative posts in the above blogs.

Other Web sites:

The Register:

December 3, 2005: The bizarre world of Patrick Byrne's Overstock

My White Collar Fraud Blog:

January 15, 2007: Overstock.com: An Arsenal of Intimidation and Fear

January 17, 2007: Sam E. Antar and Judd Bagley from Overstock.com Communicate on DealBreaker Blog

February 20, 2007: Investor Village Et al Limits Sam E. Antar from Asking Questions on Overstock.com - Shame on Them!

White Collar Crime: How Criminals Exploit your Humanity

As a criminal, I considered your humanity as a weakness to be exploited in the commission of my crimes. I have often said that white collar crime is a crime of deceit and white collar criminals are artful liars.

A great President Ronald Reagan once said “Trust, but verify” when dealing with Russia during the cold war. However, as a criminal I took advantage of your initial inclination to trust me. I did anything in my power from charming you to pointing out the good deeds I had done in an effort to corrode your objectivity, professional skepticism, and cynicism.

During my many unpaid speaking engagements people often ask if I am still a criminal today. My answer is that you do not know if I am a criminal today since I live with temptation and sin every day. Just because I travel the country and give unpaid presentations on white collar crime and pay all travel expenses out of pocket, how do you know if I am building a false wall of integrity around me as I did during my criminal years at Crazy Eddie. You never know anyone’s intentions.

Herb Greenberg, Barry Minkow, and I Discuss White Collar Crime

Recently I had lunch with Herb Greenberg a columnist at the Wall Street Journal and MarketWatch.com and commentator for CNBC and Barry Minkow a former criminal known for the infamous ZZZZ Best fraud. Barry and I have become very good friends over the years. Unlike me, Barry Minkow went to jail for almost 8 years. Barry Minkow is now a Pastor, writer, teacher, and fraud investigator. His Fraud Discovery Institute has uncovered over about 20 frauds totaling over $2 billion. I talk about fraud, Barry uncovers it.

Herb Greenberg was interested in our perspective on criminality. Our conversation is recounted in an article published in the Wall Street Journal on March 3, 2007 entitled “My Lunch with 2 Fraudsters: Food for Thought for Investors” (subscription required) and in his MarketWatch.com Column: What 2 Crooks Told Me over Lunch - Commentary: You Cannot Accept Information at Face Value.

The most important fact I tried to convey to Herb Greenberg during lunch is quoted his column below:

I don't want to be held up on the pedestal of redemption," he says. "I would rather people learn from my vile, ugly and vicious crimes. It is most important that they understand the ugly nature of criminality. My life is a mistake of history."

A mistake, maybe, but one other people can learn from. "Do not trust -- verify," was his mantra as the meal began.

Verify what?

"Everything."

Even whether Mr. Antar and Mr. Minkow aren't still scamming?

"Everything."

And so it went, with Mr. Antar continuing with emails over several weeks.

"Watch how management handles bad quarters, earnings disappointments, criticism, skepticism and cynicism," he says. "Do they start by saying, 'We take full responsibility and make no excuses' -- only to follow by carefully worded innuendos, excuses and deflection? Do they question the integrity of those who ask questions?"

He continues: "Just because a CEO takes a $1 salary doesn't make that person immune to criminality. Just because I travel the country and teach the government, colleges and universities, and professional groups about white-collar crime and never collect a fee and pay out of my own pocket all travel costs, doesn't mean I am not a criminal today. Remember that many crimes are committed without economic gain for reasons of ego, status and sheer arrogance."

About White Collar Criminals

The Association of Certified Fraud Examiners issues a “Report to the Nation” every year which examines white collar crime. In each report it concludes that over 90% of white collar felons had no previous criminal record. When you exclude low level white collar crimes I’ll bet that the statistic for white collar felons without criminal records is almost 99%.

For example, Bernie Ebbers (WorldCom), Kenneth Lay (Enron), Jeffrey Skilling (Enron), Dennis Kozlowki (Tyco), and Sanjay Kumar (Computer Associates) did not have any criminal records. Until their convictions, they were men known for many of their charitable deeds and community service. However, these men were later convicted of massive frauds.

Did they build a false wall of integrity around them? I explained to Herb Greenberg during lunch as quoted from his article:

He adds: "Criminals are scared of skeptics and cynics," he says. "We are petrified when you verify our representations."

Did he ever have remorse? "Never ... We simply did not care about any one of our victims. We simply committed crime because we could.

"As criminals we built false walls of integrity around us," he adds. "We walked old ladies across the street. We built wings to hospitals. We gave huge amounts of money to charity. We wanted you to trust us.

"Simply said ... if you want to be an investor, you cannot accept information at face value.' Unexamined acceptance' is the greatest cause of investor losses."

Lee Distad’s Professional Opinion Blog about a Deloitte & Touche Audit Melt Down

I recently received an e-mail from another blogger, Lee Distad, whose blog is called “Lee Distad’s Professional Opinion.

Mr. Distad had written a previous post on his blog entitled “Sam E. Antar is not afraid to tell you what he thinks!”

In that post he wrote:

The current front runner to receive the award for 2006's (and at this rate 2007 as well) Most Gregarious Internet Citizen may well be Sam E Antar, the former CFO for Crazy Eddie's, who masterminded one of the largest financial frauds in history…. On top of that, he's not afraid to call a spade a spade, giving his opinion on a number of current financial scandals.

He asked me to comment about his latest post “Institute of Chartered Accountants of Ontario Sends a Message” in which he wrote:

The Institute of Chartered Accountants of Ontario quietly dropped a bombshell earlier this month. Buried deep on the website of the professional body is a scathing report finding three senior Deloitte & Touche LLP auditors—including the accounting firm’s former chairman—guilty of professional misconduct in connection with Livent Inc.’s financial statements.

According to the 72-page ruling from the ICAO Discipline Committee, the auditors failed to follow up on accounting red flags, did not follow their own auditing procedures and continued to rely too heavily on the honesty of Livent’s managers—despite repeated instances where executives allegedly lied to them. “The auditors said that their skepticism was ‘sky high,’” reads the ruling. “However, with respect to the impugned conduct, the evidence disclosed that the auditors failed to exercise the professional skepticism required.” (Source: Canadian Business Online - Professional Misconduct by John Gray)

The Crazy Eddie Audit

The events surrounding the actions involving Deloitte & Touch and Livent remind of an award winning article written by Joseph T. Wells (founder of the Association of Certified Fraud Examiners) in October 2000 entitled “So That’s Why They Call it a Pyramid Scheme.” In discussing the conduct of Crazy Eddie’s auditors he wrote:

"....Were the auditors stupid? No, just too trusting. After all, no one wants to think the client is a crook. But it happens too often. That's why the profession requires the auditor to be skeptical."

The accounting profession is still not adequately prepared to do battle with white collar criminals. Today, less than 20% of accounting students ever take a single specific college level course devoted to fraud or criminology before graduation. The American Institute of Certified Public Accountants only “suggests” rather than “requires” that CPAs take a mere 10% of their continuing education credits in fraud subjects.

Audits are too often used as training grounds for relatively inexperienced staff members. I doubt even today from seeing the mistakes of Crazy Eddie’s auditors and other audit melt downs being repeated by other auditors time and time again that the accounting profession really understands their main enemy – the white collar criminal. The unfortunate result of this lack of understanding has resulted in billions of dollars in unnecessary litigation costs and payouts for many accounting firms and even countless billions in shareholder and creditor losses.

When I read from Lee Distad’s post that “… the auditors failed to follow up on accounting red flags, did not follow their own auditing procedures and continued to rely too heavily on the honesty of Livent’s managers—despite repeated instances where executives allegedly lied to them” I am reminded of my own criminal actions.

Crazy Eddie’s auditors ignored many red flags too. However, as evident from Touch Ross’s actions in this case and many other cases I have studied the accounting profession still has problems dealing with skepticism and cynicism. Too often, Crazy Eddie’s auditors relied on the truthfulness of our assertions despite obvious red flags. In too many instances, they did not know how to ask proper questions, whom to ask such questions too, and how too follow up on our deceitful answers.

As criminals we learned that the most effective way to commit our crimes was with a smile. In the Godfather movie Michael Corleone said, “Keep your friend close, but your enemies closer.”

As a criminal I followed Michael Corleone’s philosophy all too well. We corrupted our auditor’s professional skepticism by giving them extraordinarily rich consulting work in addition to their audit engagements. Today, at least under Sarbanes-Oxley accounting firms cannot engage in consulting work for the clients they audit.

Our auditors felt too comfortable with us as “good, respectable human beings with high integrity.” We would socialize with our auditors by having so-called “three martini lunches” and we would invite them to attend Antar family functions. They believed we were pillars in our community as we gave large amounts of money to charity and were involved in a number of good community causes.

If anyone has ever seen the movie “The Devil’s Advocate” starring Al Pacino they would know that the devil’s favorite sin in vanity. The white collar criminal is equivalent to the devil. We took advantage of the vanity of our auditors.

For example, during the fiscal year end inventory audits, we would climb over stacks of inventory that were piled 10 high and 3 deep and instead of telling the auditor there were 30 items of merchandise in stock we would tell them there was 100 items (10 high and 10 deep).

The different audit staff members in many locations simply never climbed up the stacks of inventory to see what was behind them. It was beneath their dignity to climb boxes and count inventory. After all, they were well dressed in nice suits. As white collar criminals we were all too happy to accommodate their self importance and desire not to get dirty.

When the auditors finally came to our offices to conduct field work we were all too accommodating of their desires. We knew that most of them were relatively young kids who thought their field work was boring. We engaged in a campaign of “obstruction by distraction.”

I instructed Crazy Eddie staff involved in the fraud to do anything to keep audit staff members from focusing on their work. They would talk about baseball, sex, or anything else in an effort to stop them from focusing on the work.

For example, if the auditors had ten weeks to complete an audit, they would be expected to complete about 10% of their field work each week. However, as a result of our “obstruction by distraction” campaign, for example, by the 8th of 10 weeks instead of having 80% of their field work completed they would have only about 25% of it done.

When people have to rush they make mistakes. They skimp over important issues such as red flags and they omit key important work in an effort to make up for lost time and complete their work. The auditors could not blame us for their lack of time. After all we were all too “accommodating” with them.

For the fiscal years 1986 and 1987 the auditors never completed key field work. For example, regarding fiscal year 1986 they failed to conduct proper sales cut-off testing and did not thoroughly review our cash balances.

Had they conducted the required field work for fiscal year 1986 they would have discovered over $1.5 million in fictitious sales. We took money that was previously skimmed from Crazy Eddie as a private company (1969-1984) from secret Antar family bank accounts in Israel and deposited them into the bank accounts of certain stores (included in the computation of comparable store sales) and counted them as sales.

Those deposits of previously skimmed funds were made after the fiscal year closed. Such deposits made after the fiscal year for sales made during the fiscal year would be considered as reconciling items on bank reconciliation. Had the auditors carefully examined our bank reconciliations they would have seen open deposits for drafts in round amounts of $25,000, $50,000, $75,000, and $100,000 for fictitious sales listed side by side with actual sales in amounts of, for example, $318.31, $26.29, $914.26, etc. They were in too much of a rush to complete the audit since they wasted too much time from our distractions.

During audit for the fiscal year 1987 audit the staff member whose job was to audit accounts payable had only 6 months audit experience and no accounts payable experience. He started his major field work on the accounts payable audit on April 27, 1987 – the same day Crazy Eddie’s auditors signed off on a “clean” audit opinion. He did not finished auditing accounts payable until about 3 weeks later. The auditors missed a phony debit memo fraud which reduced accounts payable from about $70 million to $50 million.

The auditors only ended up receiving 3 accounts payable confirmations from hundreds of Crazy Eddie’s vendors. Even those confirmations from vendors showed significant material differences between what we claimed we owed the vendors and what they claimed was the proper amounts owed to them. The auditors failed to adequately investigate those differences.

The Problem with Audit Committees

Auditors are supposed to be monitored by “independent” Audit Committee composed of some members who are supposed to be “financial experts.” Most Audit Committee members including the so-called financial experts know less about accounting, audits, internal controls, and fraud then the independent external auditors they monitor.

Worse yet “independent” Audit Committee members can own stock and have stock options in the company on which they serve as Audit Committee members. The independent external auditors cannot own stock in the clients they audit.

Therefore, I cannot understand how these Audit Committee members who own such stock and have such stock options in the company Audit Committees they serve on can legitimately call themselves independent. In too many cases “independent” Audit Committee members are unqualified and lack true independence despite compliance with current Securities regulation.

The Problem with Wall Street Financial Analysts and How Companies Handle Them

Companies are watched by Wall Street financial analysts. Recently Herb Greenberg wrote in his “Market Blog” on February 26, 2007 a post entitled “UPDATED: BankUnited: Getting a bit Testy!”

In particular I note the following quote from his post:

BankUnited is hosting and analyst/investor meeting today and tomorrow. However, we were not invited to attend and executive management continues to ignore our phone calls and e-mail messages seeking information about several areas where we have fundamental concerns, including rapidly deteriorating asset quality, an acceleration of negative amortization growth on option ARM loans, lower loan sale gains, and subsiding margin expansion.

I wrote the following comment to his post:

To Wall Street Analysts:

Beware of companies that exclude critics and provide “selective” access to management. Too often, Wall Street analysts in the quest to gain access to management end up corrupting their required professional skepticism and cynicism. I played this game very well with Wall Street analysts as the CFO of Crazy Eddie.

It’s not about gaining access at the cost of your professional integrity. It’s about understanding what is really happening and communicating it to your readers.

I played you guys very well by rewarding you with selective access as the CFO of Crazy Eddie. I had you guys eating out of my hand with “selective” disclosures and “favored” access. While you craved for access and wrote your glowing reports in gratitude for your coveted access you unwittingly helped make the frauds we perpetrated on the public easier.

If you had any backbone, you would all boycott any presentation that excludes the more skeptical professionals among you. Frankly, after reading many transcripts lately you guys look like amateurs with your lack of questioning skills, your inability to ask proper follow through questions, and obtain straight, clear, unambiguous, and honest answers.

You seem like hand picked patsies as I read your unchallenging questions and the lame answers management that responds to you without any challenge or follow up. However, you guys never seem to learn as you compete with one another for the affections of management and let access to them rule at almost any cost.

Eventually you will run into a guy like me. You will wish you asked the proper questions and follow up questions too. You will wish your other peers attended the meetings and asked questions you would not ask or could not ask. The questions that will never be asked by you and others will cause you to miss out on the lies and deceit being spun upon you.

When the “surprises” come out your previous work will be considered negligent and amateurish. Your future work will always be under a cloud of suspicion. You will be remembered for the glowing reports you made as management ran circles around you. Do you want people to think you are fools?

The management’s that spread deceit and lies to the selective few who gain coveted access are not your friends. They are using your humanity against you as a weakness to be exploited in furtherance of their crimes. They know about how your efforts at coveted access end up corrupting your professionalism. They don’t care about what happens to you as a result of their actions. As a criminal, I never cared about you too.

You have been warned.

Respectfully,

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

PS: Guys, I see nothing much has changed since my time. Keep it up. When a company you wrote a glowing report on ends up a train wreck

White Collar Crime and Punishment

As a criminal I feared skepticism and cynicism but I never feared going to prison. My good friend Barry Minkow (discussed above) spent about 8 years in prison has said that “The prisons are filled with convicts who never planned on being there.”

Professor Larry E. Ribstein (University of Illinois) wrote a post on my lunch with Herb Greenberg in his Ideoblog entitled “Crazy Eddie speaks.” He wrote:

In general, Antar says corporate criminals will commit crime because they can, and warns investors to distrust financial statements. There are some valuable lessons for the law there.

First, Antar raises questions about the deterrent value of criminalizing corporate behavior, or at least of sentencing. I've focused on the potential for over-deterrence where the conduct is not genuinely criminal. The response I often get is that lighter penalties would under-deter. Yet Antar suggests these criminals aren't thinking much about the penalties when they commit their behavior. Only after the serious fraudsters spend some time in jail do they truly learn they've done something wrong. But do they really need 24 years there?

As a criminal I can tell you that I never thought about going to jail. My co-conspirators and I only thought in terms of whether we could successfully commit our crimes. I believe that no white collar criminal finds new levels of morality by reading or learning about the long prison sentences now being imposed for white collar crime. I believe that no crimes in progress have been stopped or any planned crimes were stopped from being implemented just because of the 20 plus year prison sentences given to many white collar criminals.

The best way to prevent white collar crime is to build strong barriers that limit the opportunity to commit such crimes. Strong internal controls, effective oversight from truly “independent” Audit Committees, a properly trained and experienced accounting profession, and laws like Sarbanes-Oxley stop crime before they happen.

Unfortunately today too many frauds are uncovered through the use of informants and because they implode since they become too large to be sustainable. We have a system from the criminal’s point of view which can be termed:

Catch us when you can, catch us where you can, and catch us if you can.

However, when you catch us it is too late to undo the massive damage done to society.

I respectfully disagree with Professor Ribstein when he writes:

But do they really need 24 years there?

While we both agree that prison sentences have little deterrent effect, it is my belief that they are necessary to impose the proper amount of responsibility and accountability on white collar felons.

White collar crime can be just as brutal as violent crime in that it imposes a collective harm on society. The main pillar of our great capitalist free market economic system is the reliability and integrity of financial information. When our capital markets lose faith in the integrity and reliability of financial information the collective market capitalizations of all companies suffer.

White collar crime not only effects the companies directly victimized. It results in layoffs at the specific company defrauded, losses to the creditors of such companies which in turn result in layoffs at companies who extended credit to the defrauded company.

In the case of Enron thousands lost their jobs at Enron, an entire accounting firm went into dissolution which caused more thousands of jobs to be lost. Pensions lost value and many Wall Street firms paid billions of dollars in litigation. In the early millennium we witnessed a broad decline in the collective market capitalizations of all companies as a result of major securities frauds at several companies.

Do I have any Guilt and Remorse?

In during my lunch Herb Greenberg asked me if I harbor any guilt and remorse for my past vile and malicious criminal acts.

He wrote:

A former CPA, Mr. Antar makes no excuses for his criminal past, referring to himself in emails, casual discussion and his Web site -- whitecollarfraud.com -- as a "low life" and "convicted felon." Even the normally loquacious Mr. Minkow appears to enjoy leaving the talking to Mr. Antar, who takes no money for his speeches. "I don't want to be held up on the pedestal of redemption," he says. "I would rather people learn from my vile, ugly and vicious crimes. It is most important that they understand the ugly nature of criminality. My life is a mistake of history."

Later in his column he wrote:

Did he ever have remorse? "Never ... We simply did not care about any one of our victims. We simply committed crime because we could. During the conduct of my crimes I never lost one nights sleep or spent one moment caring about the harm I was inflicting on others.

Apologies are irrelevant. They don’t change anything. It does not undo any crimes. Does an apology really erase the effects of past criminal behavior?

As a person who used words to deceive and lie to others in the commission of my crimes I say you must judge people by their actions and not by their kind words. Too often we are moved by well meaning but empty words.

As a criminal I used well sounding words too exploit you in an effort to commit my crimes. I knew as good human beings you would feel compassion for me.

However, the white collar criminal uses your humanity such as compassion as a weakness to be exploited. For example if I apologize for my actions, how do you really know if I am contrite or if anyone else who apologizes is really contrite? Therefore, judge people more by the actions they take after a mistake or error rather than their well sounding apologies.

I once posted the following comment about guilt and remorse on Jeff Matthew’s blog for his commentary entitled "Weekend Edition: Page Six comes to the Times":

I am fully aware that my sins are unforgivable and am mindful of the pain and suffering I have caused others.

Do I spend these late nights writing these comments to you because of guilt, redemption, or rather the fear of the ultimate punishment that awaits me when my soul parts my body?

This post was written and respectfully submitted by Sam E. Antar (former Crazy Eddie CFO & Convicted Felon)