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6/07/2008
SEC Wraps Overstock Probe
No enforcement necessary...

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3/11/2008
Crazy Eddie Makes Wired, Wales on Overstock.com
Friend of the blog, Sam "Crazy Eddie"Antar has got a piece going in Wired right now where he lays in to Overstock.com. He's got quite the feud going with the, lets charitably call him, outlandish Overstock CEO, Patrick Byrne. And he's not the only one - somebody page Gary Weiss.

-- MDT

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2/15/2007
SEC Drops Investigation of Gradient Analytics
You may recall that the SEC's looksee into Gradient Analytics was prompted by one Patrick Byrne, the...interesting CEO of Overstock.com. As with all things, Patrick Byrne, nobody covers it better and with more geniune disdain than Gary Weiss.

-- MDT

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1/10/2007
Overstock CEO Patrick Byrne Brings the Crazy
And muckraker extraordinaire, Garry Weiss, keeps you on top of ever bit of it.

Read the latest here.

-- MDT

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5/11/2006
Overstock Gets SEC Subpoena...The Pat Byrne Drama Fest Continues
Overstock.com CEO Patrick Byrne is actually quite pleased to be receiving this particular summons, as it appears to signal movement from the SEC on Byrne's allegations that forensic accounting firm Gradient Analytics and hedge fund Rocker Partners had manipulating his company's stock price through short-selling. Details, from Marketwatch:
Overstock.com gets SEC subpoena

By Gabriel Madway
MarketWatch
May 10, 2006

Overstock.com Inc. said late Tuesday it received a wide-ranging subpoena from the Securities and Exchange Commission that seeks documents related to its accounting policies, communications with analysts and trading of the company's stock.

The subpoena also requests information relating to the online retailer's complaint against research firm Gradient Analytics Inc., Salt Lake City-based Overstock.com The company has sued Gradient and short-selling hedge fund Rocker Partners LP, claiming that they conspired to push down its share price...
More here. And for a bit of history if you're late to this particular party, click here.

-- MDT

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3/29/2006
Biovail Shareholders Alledges Hedge Fund, Analyst Involvement in Stock Manip
Shareholders of Biovail, a pharamceutical company specializing in advanced drug delivery technologies, have filed a $4billion class action in U.S. Federal court against S.A.C. Capital Management, Gradient Analytics (who some of you may recall from their scrape with Overstock.com CEO, Patrick Byrne) and Banc of America Securities. The shareholder suit alledges that the aforementioned parties had a hand in a manipulation of Biovail's common stock that adversely efffected shareholders. The Federal court suit follows a related superior court suit filed by Biovail in New Jersey pertaining to similar allegations of stock price manipulation.

More here.

-- MDT

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3/08/2006
Lancer Fraud Going Under the Radar?
Another slap for the SEC, as the New York Post's Chris Byron calls the agency out on playing patty-cake with Overstock's patrick Byrne while Lancer hedge fund fraud investgiation lingers:
...while the SEC has been chasing after wrongdoing by hedge funds that may not even have occurred, real examples of hedge-fund misconduct have gone ignored. Consider the Lancer hedge fund case, which has been rotting like a dead fish in the agency's own files for years.

Two weeks ago, a federal judge in Miami unsealed more than 40 pages of internal e-mail, memos and similar materials produced in the Lancer hedge fund fraud case, which developed out of a series of articles that ran in The Post almost four years ago.

This latest round of Lancer documents had been produced, under a court-ordered subpoena, by the fraud-drenched fund group's administrative and record-keeping firm, Citco Fund Services. The Citco brass had fought tooth and nail to keep the documents sealed, and it's not hard to see why...

...This is all happening because, as I have argued many times in this space, the SEC is a poorly led, bureaucratic anachronism from the New Deal that lacks a mission relevant to the times and the enforcement tools to get the job done...
Read the full article here.

-- MDT

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3/03/2006
Byrne Stepping Down from Overstock?
But not the one you think. Patrick Byrne is staying put. His father, John Byrne is considering stepping down from his position as Chairman of Overstock due to disagreements with the younger Byrne. Specifically, father Byrne is apparently aghast at the amount of time Patrick has spent on his public slapfight with supposed short-sellers.

Via CNNMoney:
Overstock.com boss mulling resignation? Chairman John Byrne says disagreement with son Patrick could cause him to step down from post, newspaper says.

March 3, 2006: 7:17 AM EST
Reuters
CNNMoney

John Byrne said he is considering stepping down as chairman of Overstock.com Inc., the online retailer, The Wall Street Journal reported Thursday.

Among the issues Byrne said could cause him to leave his post is a disagreement with one of his sons -- Overstock (Research) Chief Executive Patrick Byrne -- over the amount of time the younger Byrne is spending on a highly public battle with short-sellers and analysts. The son contends they are conspiring to damage the company's stock, the newspaper reported in its online edition.

"After the shareholder meeting (in April) this year, I'm going to give some serious consideration of whether I'm going to stay as chairman of the board," the elder Byrne said in a phone interview with the Journal, speaking from Park City, Utah.

"Patrick and I have had some wonderful times together on Overstock, but we've also had some stormy times. I'd rather keep my relationship with my son than be the chairman of the board of another company," the 74-year-old said...
More here.

-- MDT

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3/02/2006
Cox Slammed in Wake of Subpoena Flap
There were many stinging editorials in the wake of the SEC's San Francisco office issuing subpoenas to several journalists regarding allegations that they participated in a short selling scheme on shares of struggling on-line retailer, Overstock.com. Here's just one sample from Loren Steffy at the Houston Chronicle that takes aim at SEC Chair Chris Cox:
Corporate reform dead; SEC chief should resign

By LOREN STEFFY
Houston Chronicle
February 28, 2006

Corporate governance reform is dead. Its last gasp was stifled by the subpoenas issued last month by the Securities and Exchange Commission against several news organizations and writers.

Last week, Marketwatch.com columnist Herb Greenberg and Dow Jones Newswires columnist Carol Remond acknowledged receiving the subpoenas, which involved stories about Internet retailer Overstock
.com.

Late Monday, the financial Web site TheStreet.com said it and columnist Jim Cramer, who also hosts the wacko stock-picking show Mad Money on CNBC, also were subpoenaed.

The SEC's investigation apparently involves claims that short-sellers conspired with the media to drive down Overstock's price. It's worth noting that Overstock's chief executive, Patrick Byrne, is far from the voice of clarity and reason. He has, for example, claimed in a public conference call that Wall Street is controlled by a mysterious "Sith Lord." That's right, as in Star Wars.

After a blistering column in the New York Times by Joe Nocera over the weekend, SEC Chairman Christopher Cox offered a scathing rebuke of his agency's enforcement staff.

"Until the media reports this weekend, neither the chairman of the SEC, the general counsel, the office of public affairs, nor any commissioner was apprised of or consulted in connection with a decision to take such an extraordinary step," Cox said in a prepared statement issued Monday.

It's tempting to cast Cox as another bad manager, too detached to know what his subordinates were doing, or too spineless to take the blame.

Or he could be something worse: a political hack masquerading as a market watchdog...


Ouch. Read the rest here.

-- MDT

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Overstock CEO Patrick Byrne Says He Didn't "Orchestrate" the SEC Subpoenas
Apparently Byrne also denied responsibility for weather, tides, and the great Chicago fire. More from the Reuters article:
...The San Francisco office of the SEC took the unusual step of issuing subpoenas to two Dow Jones & Co. columnists, Carol Remond and Herb Greenberg, to demand telephone records, e-mails and other documents related to Overstock.com...

...Byrne acknowledged speaking to SEC officials about the probe, but dismissed the notion that the subpoenas were related to a lawsuit Overstock filed in August against hedge fund Rocker Partners and research firm Gradient Analytics...

..."It's my sense that the SEC was onto Herb's scent long before we came along," Byrne said. "I have not orchestrated the SEC investigation."...
Check out the full article here. And, as reported earlier this morning, SEC Chair Chris Cox has since re-called the hounds.

-- MDT

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3/01/2006
TheStreet.com Receives SEC Subpoena on Stock Manip Charges
This would be in regard to the ongoing tribulations at Overstock.com. There lies a tangled tale of egos and executive-level feuds, centering on controversial Overstock exec. Patrick Byrne. According to Mr. Mad-Money himself, Jim Cramer,
"I didn't get the subpoena because I'm corrupt...I got it because I tried to get people out of a stock that we said was going lower, and went lower."
More via BusinessWeek.com:
TheStreet.com subpoenaed in SEC probe

The Associated Press/WASHINGTON
By MARCY GORDON
AP Business Writer
February 28, 2006

A second financial news organization was subpoenaed for records in an investigation by the Securities and Exchange Commission, whose chairman has now put the subpoenas on hold amid controversy.

Financial news Web site TheStreet.com and its co-founder and major shareholder, James Cramer, were served subpoenas by the SEC about two weeks ago in connection with an inquiry into allegations of stock manipulation. Two columnists for Dow Jones online publications, Herb Greenberg of MarketWatch and Carol Remond of Dow Jones Newswires, also received subpoenas in the SEC investigation related to online retailer Overstock.com.

Jordan Goldstein, general counsel of New York-based TheStreet.com, said Tuesday in a telephone interview that the company had objected to the subpoenas dated Feb. 6 demanding records of communications. He declined further comment...
Check out the full article at here. For further details on Overstock's financial restatements and accounting overhaulin', check out this Contra Costa Times article.

-- MDT

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3 Comments.
Anonymous Sam Naihoussaid...
Good post on the Byrne appearance here:

http://garyweiss.blogspot.com/2006/03/sec-chasing-after-good-guys-or-bad.html

Raises a good point about the history of allegations such as this.
Blogger Michaelsaid...
Hi Sam,

Thanks for the tip. I'll check it out.

And thanks as well for reading and responding to the blog. I
appreciate it very much.

Take care,

-- MDT
Anonymous sam naihoussaid...
My pleasure. Great blog and great links, by the way.
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12/12/2005
The Year in Hedge Funds, By Topic
Via CNNMoney.com:

Top hedge fund stories of 2005 -- Fines, proxy fights, rocky returns -- 2005 has proved a tricky year for hedge funds

December 12, 200
By Amanda Cantrell
CNN/Money staff writer

From fines to frauds to proxy fights to rocky returns, the press-shy hedge fund industry grabbed more headlines in 2005 than it has since 1998, when the spectacular blowup of a fund called Long Term Capital made "hedge fund" a household word. Since then, strong performance and other factors have helped these funds rack up $1 trillion in assets worldwide. The industry has swelled to an estimated 8,000 funds, attracting new investors such as endowments and pension plans along the way. Here are the top hedge fund stories of the year:

Bayou blows up

Bayou Group founder Samuel Israel III, scion of a New Orleans commodity trading family, and Daniel Marino, the fund's chief financial officer, pleaded guilty to defrauding investors of $450 million over several years simply by lying to them about how much money the funds were producing and setting up a phony auditor to sign off on the cooked books.

The tale produced news reports containing sordid details such as a six-page suicide note and confession from Marino, who didn't kill himself, and allegations that Israel had a drug problem and threatened his partner with a gun. While Israel and Marino await sentencing in January, investors are trying to get their money back. Numerous class-action suits are hitting court dockets, filed by investors suing third-party firms who invested in Bayou on their behalf.

Tough October; lackluster year

October proved to bethe worst single month for hedge funds in many years, with even typically strong performing managers posting losses in the high-single digits. For some, the month wiped out the modest gains managers have made in what has proved to be a difficult year for getting strong returns. "Performance was terrible," said Daniel Strachman, managing partner of financial services firm Answers & Company Group and the author of "Getting Started in Hedge Funds."

Strachman believes the mediocre performance has also affected funds of funds, or managers who invest in a portfolio of hedge funds on behalf of clients for an additional layer of fees. But a snap-back in November, coupled with what many believe will be a strong December, could lift hedge fund returns out of their doldrums. If that happens, it would be a repeat of 2004, in which many hedge funds racked up their gains for the year during the final quarter.

Rise of "activist" managers

Whatever you call them – shareholder activists, corporate raiders, saber-rattlers – hedge fund managers who battle corporate managements in the hope of boosting target companies' stock prices generated headlines and also cash as the hedge fund style du jour. And they're taking on big targets. Famed agitator Carl Icahn, who launched his hedge fund late last year, rounded up a cartel of investors, including fellow activists Jana Partners, to take on behemoths like Time Warner. (Time Warner is the parent company of CNNMoney.com) Meanwhile, Bill Ackman's activist fund Pershing Square Partners has taken on a corporate behemoth of its own in agitating for change at McDonald's.

The race to registration

While hedge funds have known for more than a year that many of them will be required to register with the Securities and Exchange Commission, some un-registered managers are evaluating their options for not having to comply with the rule, which takes effect in February 2006. The SEC is not requiring managers who "lock up" their investors' capital for two years or more to register and is also giving a pass to firms who agree not to take in new money.

Said Jedd Wider, a partner in the private investment fund practice at law firm Orrick, Herrington & Sutcliffe, "Most of our clients who are required to register have gone through the process already; others are giving very serious thought to extending their lockup periods or looking to close their funds to new investors."

Meanwhile, hedge fund manager Phillip Goldstein, who is suing the SEC on the grounds that the SEC exceeded its regulatory authority, got a short-term boost to his case Friday when U.S. appeals court judge Harry Edwards, one of three judges hearing arguments in the suit, told an SEC attorney the agency stretched the definition of "hedge fund clients" to make the registration proposal work, according to news reports. The panel will issue a verdict in about three months – after the rule will have already gone into effect -- Goldstein's attorney told the Chicago Tribune.

Overstock, Rocker Partners, and the "Sith Lord"

What started out as a brief, straightforward civil complaint rapidly spun into a circus sideshow as Patrick Byrne, chief executive of online closeout retailer Overstock.com, accused famed short-seller David Rocker of conspiring with independent research firm Gradient Analytics to drive down Overstock.com's share price. Byrne filed suit against both firms and their principals, but his bizarre publicity junket soon overshadowed the contents of the suit.

In a conference call to investors and reporters, Byrne launched into a rambling diatribe in which he accused hedge fund managers, journalists, and a well-known Wall Street figure, whom he would not name but instead dubbed the "Sith Lord, " of conspiring to drive the company's stock price down. Rocker and Gradient filed a motion to dismiss the suit, and Rocker founder David Rocker told Fortune he is preparing to file a countersuit.

Automaker downgrades lead to losses

When two bond-rating agencies this summer cut General Motors' corporate bonds to junk, some hedge funds, as well as some investment banks, suffered heavy losses. Particularly hard hit were funds that were shorting the common stock of GM and holding long positions in the underlying bonds. When the bonds got downgraded, investors were forced to try to sell into a market with no buyers; meanwhile, investor Kirk Kerkorian announced he would acquire a large stake in GM, causing a price spike in the stock. While the debacle did not force any large funds to unwind, the events sent jitters throughout the markets.

A once-dependable strategy falters

Once considered a safe, conservative strategy, convertible bond arbitrage, in which managers buy convertible bonds and short the underlying stock, proved to be the worst performing hedge fund strategy this year, and the plunge caused some large convertible arbitrage hedge funds to close, including Marin Capital Partners, which had $2.2 billion in assets at its peak, and Alta Partners, run by Creedon Keller & Partners, which had about $1.2 billion at its peak. The rout began late last year, when investors in these funds, unimpressed with a streak of lackluster returns, began asking for their money back. The redemption requests forced managers to sell into a market with no buyers, which drove returns even lower. Convertible arbitrage funds are down 2.69 percent for the year to date through November, according to Chicago-based hedge fund tracker Hedge Fund Research.

The original article appears here.

-- MDT

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