BETHANY MCLEAN, 14 November 2005
Even hardened denizens of Wall Street were shocked by a conference call that Patrick Byrne, the CEO of online retailer Overstock.com, held on Aug. 12. “I want to get something off my chest,” Byrne announced. Then he launched into a rant about a “miscreants ball” in which he mentioned hedge funds, journalists, investigators, trial lawyers, the SEC, and even Eliot Spitzer. “I believe there’s been a plan since we were in our teens to destroy our stock, drive it down to $6–$10 … and even a plan for how the company would then get whacked up.” The “designated final owner,” who provided the “orchestration,” was someone Byrne dubbed the “Sith Lord,” a person he refused to identify other than to say that “he’s one of the master criminals from the 1980s.” And that’s just the basic outline. There was more. As Mark Cuban, the billionaire investor, later wrote on his blog, “Never before in the history of Wall Street has a single conference call mentioned the following topics: miscreants, an unnamed Sith Lord he hopes the feds will bury under a prison, gay bathhouses, whether he is gay, does cocaine, both or neither, and an obligatory ‘not that there is anything wrong with that,’ phone taps, phone lines misdirected to Mexico, arrested reporters, payoffs, conspiracies, crooks, egomaniacs, fools, paranoia, which newspapers are shills and for who, payoffs, money laundering, his Irish temper, false identities, threats, intimidation, and private investigators. All in 61 minutes.” Cuban is now short 20,000 shares of Overstock.
Patrick Byrne is from a family that is considered royalty in insurance and investing circles. His father, Jack Byrne, ran Geico, the auto insurer that was later purchased by Warren Buffett’s Berkshire Hathaway, and is the former CEO of White Mountains Insurance. And yet Patrick Byrne, 42, has established himself as a maverick. For the better part of the past year he has been waging a war against critics of his company, from short-sellers to journalists, whom he often calls “hedge fund quislings” or “lapdogs.” (I’ve had a minor scrape with him myself.) The day before that August conference call, his company and one of its shareholders filed a lawsuit against a well-known hedge fund called Rocker Partners; its two top executives, David Rocker and Marc Cohodes; and a research firm called Gradient Analytics, along with its two founders. In the lawsuit, Overstock alleges that the defendants “orchestrated a wide-scale predatory campaign of knowingly distributing false, and covertly biased, written reports about Overstock in order to disparage Overstock and enrich themselves.”