Friday, October 07, 2005

News Flash: “The Best CIO in America” is Missing


It appears to be true: as reported elsewhere on this blog by a sharp-eyed reader, Shawn Schwegman, “the best CIO in America” (according to Patrick Byrne), is no longer listed as part of the “Management Team”on the Overstock.com investor relations web site. This comes exactly three weeks after the $30 million "inventory upload" because oops-we've-had-an-undisclosed-IT-problem press release.

Also, Patrick's “Sith Lord” rant has been removed to a separate "lawsuit" URL on the site, for some reason, along with the CNBC appearances in which Patrick quoted from affadavits that appear not to have actually been filed in court yet.


Jeff Matthews
I Am Not Making This Up


© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.

60 comments:

MD said...

Given the title of your previous comment on OSTK, does this count as the last piece on Overstock.com?

Personally, I hope this was the penultimate comment. This story has been too entertaining not to have a bang-up finish.

Jeff Matthews said...

This was a "news flash" and not my last word on Overstock.com.

The fact of Schwegman's disappearance from the site appears not to have been picked up by the mainstream press, and I felt it was worth repeating what a sharp-eyed reader of this blog had discovered.

BelowTheCrowd said...

Hardly surprising, given his performance and lack of qualifications for the job in the first place.

That said, I have to go back to my own previous comment about hiring and firing in the tech field: When somebody gets hired and doesn't work out, often there's nobody to blame. But when somebody gets hired despite a lack of qualifications for the job, the person to blame is the person who hired him, and he should be the first one fired.

Also, I've observed that "the most transparent CEO in America" doesn't seem to think that filing an 8-K is appropriate when major management changes are made. Admittedly, there's a fair degree of latitude when it comes to deciding what constitutes a "material event," but many companies do make a practice of filing a report for every top management change, and one would think that a guy who prides himself on "transparency" would want to err on the side of explicitly disclosing more, not less. At the very least, you would expect a press release.

In any case, even with Schwegman gone, stockholders have to wonder about the resumes of several of the other people in upper management, many of whom appear to be young, inexperienced or unqualified as well.

-btc

Its_strange said...

and where is the replacement ? I thought this was a internet company with BIG plans ? They just installed a new $35M system and now there is no CIO ? This is absurd .

Its_strange said...

Here is a partial list of events that happened after OSTK's Aug. 3rd conference call.

8/11 OSTK files Rocker Lawsuit

8/12 Patrick goes on CNBC and discusses naked shorts and the suit

8/17 Patrick & Matthews debate

9/16 OSTK warns " slowed sales sharply "..." downward pressure on gross margins"

10/ 5 Patrick gives Motley Fool three affidavits from former Gradient people

10/6 It appears the CIO is missing and no replacement is named

3rd quarter results are due soon. Will OSTK hold a conference call ? Will the analysts continue to embarrass themselves ?

BelowTheCrowd said...

He's not missing, he's "on leave."

The news was released on Friday, after the close, going into Columbus Day weekend between the major Jewish holidays.

Multiple links out there, all pretty much repeating the same DJ/AP wire report:

http://www.sltrib.com/ci_3097968?rss

Incidentally, a simple Google search reveals that his email is shawn@overstock.com. A message sent earlier did not bounce or generate a typical "out of office" response, which is what I would expect from somebody who was on leave.

And I think it's really odd that you would remove somebody's name from the management roster if it was just a "leave of absence."

His selling of his stock a short while ago suggests that this was not an unplanned departure, or at least not unplanned by him.

-btc

Its_strange said...

btc...This "leave of absence" during the busy holiday quarter is just another absurdity in a long list of absurdities. If they do hold a conference call it should be interesting one with many, many listeners. Once again, will the covering analysts get real or just continue embarrassing themselves? Maybe they will pull a no-show

k9thunder said...

Poor Shawn...

Patty had to find the scapegoat, huh?

It sounds like he probably lacked the experience and credential to play CIO role.

Why didn't Patty announce such sr mgmnt change? Being PR hound he is...

You can bet that for the 3rd qtr in a row, IT will be the badboy scapegoat and Patty will say it'll only get better since the poor guy in charge is gone.

Patty will do more cheerleading misleading on 3rd qtr con call about "huge" volume of biz for X-mas season and all to deflect the "bullet" later this month. So I think I'll cover my shorts in late Jan next year when OSTK will show more losses and really can't explain nor scapegoat... But you can bet there will be more diversionary antics.

Its_strange said...

i just tried to get on the Reverend George Saunders website but i couldn't . I'm not having trouble any other place. I'm wondering if he took it down ?

But his brother Phil just wrote a review for a book he wrote with his brother George..He reviews his own book ! He did so Oct 05 , 2005 .lol !

http://articlecity.com/articles/religion/article_92.shtml

i wonder how many message board posters were really just him and the revernend ?

BelowTheCrowd said...

It's Strange,

Absolutely absurd. CIO's do not take large blocks of time off during a company's "busy time."

At least they don't do it without a strong #2 to backfill the job.

So far no indication that any such strong #2 IT guy exists.

Once again it's bad news, once again it's announced Friday after the close, once again it isn't worth filing an 8K over...

Transparent indeed...

-btc

canceled111111 said...

Byrne's Motley Fool post on Shawn:

D) IT? Stuff happens. Shawn is awesome, and got us through a massive re-architecture over the last two years. First, he got us through a period when our then current systems were redlining so badly we were in danger of imploding. Second, he got us onto a set of systems that scale horizontally and vertically for the foreseeable future (see my Q2 conference call for greater detail). Third, we had reached the point where our code writing was log-jammed: it was taking longer and longer to add new features besides so much of the code was just hard-wired patches. This is not completely fixed yet, incidentally: still, large elements of our code base have gotten transformed, made modular, upgraded, or been replaced by professional third party packages. Not bad for two years' work. And not bad for a tiny fraction of the cost of our competitors.

That said, Shawn ahs been begging to step down for a year, either to go back into business development or take a leave of absence. I described in my Q2 call that there was one more large package to be delivered, probably in August: he delivered it and left for a vacation that might have stretched out to a couple of months. At that time I appointed Sam Peterson Acting CIO, thinking we would sort it all out when Shawn returned. In fact, however, the last package did not really spin up as well as we had hoped, and after a few weeks Shawn cancelled his leave to come back and help. He has been here a few weeks, things are much better (albeit not completely resolved), and so he has taken a leave of absence. Sam is CIO (although, since we eschew "C" titles here, officially it is "SVP Technology"). I do have a non-IT mission for Shawn that will keep until he returns, if he decides to return: he has put in 5 hard years working for Overstock and is due a rest.

Since our executives rarely if ever sell stock, and since I keep buying it, the miscreants claim that there is some kind of "blood oath" among us not to sell stock. Shawn in fact has only bought stock, except for the time he exercises options to buy a car, and the time he exercised some to get $50k to fund a small restaurant in his hometown. Yet Shawn met a girl in Europe and wanted her to come back with him to the USA when he was done his vacation. He needed money to move out of the Marriott Residence Inn (where has lived for 5 years) to buy a home and her a car. So he sold 2,700 shares, some or all of which were shares that he had personally bought in the open market at $11 a couple years ago. This leaves him with about 60,000 options (if memory serves), at least half of which have vested and which he could have cashed in for half a million to a million, but which he choose not to do. He got off the plane and placed an order to sell some shares because our blackout period was about to go into effect (September 15), so he could have the funds to move out of the Marriott and find a home when his gal showed up. He placed the order before even being back in the office, and before he was aware of any inventory uploads or marketing blitz the following Friday.

The reason Shawn sold when he did, then, was that we have about the most restrictive blackout period in corporate America, and if he did not do it then he would not have been able to sell a share until late October or early November; he had a gal moving over from England, and did not want to start off with her in the same Marriott room he has been living for five years; and he was not aware of quite what was going on in the office. That said, Shawn has now split again, and does not expect to come back.

When Shawn left he reminded me of what Jason said when he left. Jason Lindsey, you may remember, was my partner in getting Overstock off the ground: he started as CFO but became President to my CEO, but resigned almost immediately, giving the miscreants opportunity to rail about that, of course. What actually happened was that (as Jason has given me permission to disclose) his wife turned out to have a hole in her heart and he needed to take care of her and his family, and when he came and asked for a few weeks off I suggested he feel free to leave and attend to her full-time. Before he left he said, "Dude, I feel like there is some wild bull that no one else has ever ridden. All these fancy cowboys show up with million-dollar diamond studded saddles and get thrown in seconds. There is some fat slob in the corner who has wasted billions and the crowd fawns over him saying, 'Look at gracefully he sailed into the pile of manure! Look at how quickly he good he looks as the clowns carry him out of the arena.' But here we are, we show up like Mike Tyson wearing a pair of black shorts and some sneakers, and we ride this bull like no one ever rode it. We go like a few years ago no one thought it could be ridden. But all the knuckleheads in the stands say, 'Oh but you said you were going to smile over your right shoulder when you rounded and you smiled over your left, you were supposed to hold that wave a little longer than you did.' Why do you want to work for these jerks another day?" That pretty much sums up Shawn's attitude as well.

The quarter we are in (q4 2005), I expect to reach an interesting mark: we should be somewhere between 1/4 and 1/3 the size of Amazon in North America (in about half their lifespan). We have been growing since we went public at a rate of near 100%: hypothetically, if we continue at 75% we catch Amazon North America in size in about two more years (q4 2007). Our gross margin is quite close to theirs, and has even passed it in at least one recent quarter (put their fulfillment back into COGS to get an apples-to-apples comparison with ours). We have done this on about 1/15th of their corporate G&A, 1/25th of their technology spending, and 1/30th their losses. And we have done it while being true the whole way to the principles of fairness to the common investor: from the way we went public through a Hambrecht Dutch auction (though we were warned that we would be a Wall Street pariah for doing so), to the degree with which we treat shareholders like true owners (though every securities lawyer we knew warned of the high exposure in doing so), to my decision to risk fortune and reputation to start a barroom brawl against a group of folks who for years have used Wall Street machinations to suck the blood of small companies, though most think suicidal of me to do so (wait until you read the affidavits before you make up your mind on that one).

So a bunch of quisling bloggers, lapdog journalists, and hedge fund shills vilify me, lie about what I say, smear my colleagues as strippers and what-not, and try to spew as much mirth, mockery, venom and distortion as they can to prevent any discussion of the claims, which as Bill Mann says, are really quite straightforward. Well, boo-freaking-hoo. Go figure. Never saw that one coming.

Roberto said...

http://bobosrevenge.blogspot.com/

I wonder if Jeff has seen this. I couldn't help but laugh.

Its_strange said...

Patrick, when did Schwegman's leave of absense start ? What date ? Did he start this leave while OSTK couldn't load or post new products on the website?

Its_strange said...

And Patrick, in a Sept 16 warning you announced a "mass upload of new inventory" ....You said " This upgrade was the equivalent of a heart , lung and kidney transplant" ...You said " Investors should note that our restricted ability to post fresh inventory slowed sales sharly, a caesure from which we are now rebounding" Well Patrick why would Schwegman leave when the heavy lifting was just finished ? Why leave when it appears its clear sailing ahead ? Doesn't he stand to make some good money ?

I know alittle about transplants and if the chief surgeon was busy chasing Sith Lords and making newreals with yahoo posters those in need would be in serious trouble

Patrick, In a Dec 2, 2004 press release oSTK told us they auctioned off a $156,000 diamond from Delmar Internation . Thats serious business. Why haven't you two continued auctioning off diamond ?

Jeff Matthews said...

"roberto": thanks for posting the Motley Fool letter, as I do not read Motley Fool.

Whatever spin Dr. Byrne wants to put on his problems is fine--I think the following web discussion is far more revealing about the underlying issues than tales of wiretaps and moles and dummy corporations.

http://forum.abestweb.com/showthread.php?t=61866

Its_strange said...

There is more to Patricks post. Its all on Motley or Bob's blog . You can access that from the NCANS site. Click " Sanity Check" ...

canceled111111 said...

So before posting blogs about strippers and missing CIO's, wouldn't it make sense to call the company yourself and ask them first?
I know that requires due diligence, but it's never to late to start.

BelowTheCrowd said...

Of course, Overstock could have done what most companies do in such cases, which is issue a press release. They seem quite good at doing it when it's to trumpet their charges about Sith Lords and such garbage, but somehow reluctant to do so about bad news unless their back is absolutely to the wall, in which case they do so only while criticizing those who asked for one.

In fact, according to the DJ story that I linked above, many people DID try to get information from the company. The company chose to respond by way of an email late on Friday, long after both the markets and business in general were closed.

Byrne can bitch all he wants about not caring about playing by the "Wall Street Rules," but he's got to deal with the fact that if he chooses not to communicate by established methods (eg, press releases, 8K filings) and to communicate when others have already gone home, the world is going to assume the worst.

There's an easy way around it. Issue the press release BEFORE you take the guy's name off your website. It's the way professional management works. If you chose not to work that way, don't be surprised that people who expect greater professionalism mock you as a fool.

Byrne seems to not get the fact that once you're public, EVERYBODY gets to make demands of you. If you can't deal with that, stay private. There are many, many companies that do much better that way, without the criticism that comes from having a substantial chunk of your company owned by strangers whose desires are not always the same as your own.

-btc

Jeff Matthews said...

The weird thing about Patrick and his explanation for his press release coming at 4:01 PM on a Friday is that I got a call maybe 40 minutes before the close asking if I'd heard about the press release that was coming out after the close.

I said I hadn't and was told the word was going around.

I'm still not clear how anybody knew about the press release that was going to come out after the close.

Its_strange said...

Jeff...Now that is weird. What a bizarre story it all is

canceled111111 said...

From TMF:

Author: Hannibal100 Number: of 1362
Subject: Delivery of our shares Date: 10/11/05 1:21 AM

Here is something odd for those following this story:

Back on August 8th I bought some 25,000 shares (I think the filing ended up showing 50,000 shares because I bought the rest that day or the day before). Oddly, I could not get delivery of them for weeks and weeks. I am not talking about, "paper certificates". I am talking about simply seeing the trade clear. All along, my broker was saying that Morgan Stanley could not deliver on their side of the transaction.

I will now relay an email between myself and my Broker Dealer (whom I will call, "BD") that occurred when it finally cleared, after weeks of unhappy phone calls.
===============================================================
September 29
9:11 AM
Good Morning Patrick:

The 25,000 shares of OSTK originally transacted for on August 8th, came in during the night and we have initiated the process of converting to paper. Settlement is taking place today.

Please call with any questions or concerns, and have a wonderful day!

XXXXXX
==================================================
1:47 PM
Dear XXXXX,

I would like to hear from you or someone on your trading desk what exactly is the meaning of, "The 25,000 shares of OSTK originally transacted for on August 8th, came in during the night".

What does "come in" mean (since they clearly are not mailed pieces of paper)?

How did they manage to keep from "coming in" for 50 days?

From whom did they come in?

Respectfully,
Patrick

=============================================================

2:15 PM
Patrick:

To the best of my knowledge it means that the incoming shares appear in the electronic system (SEI) which displays the stock trade transactions via PC, and this evidently takes place , like bank processing, as an overnight transaction. The August 8th date is the date I have recorded in my notes as the date of your second purchase of shares of OSTK, the date ZZZZZZZ entered into the transaction with Morgan Stanley to purchase the 25,000 shares.

I am going to ask some of our professionals from the trade area to respond, and hopefully give you a better explanation of how the shares move to BD from another brokerage house.

As to the 50 days the shares did not come in, the only answer we have obtained from the Morgan Stanley people when we repeatedly pressured them is this: "you have to understand that this is an extremely hot stock". Obviously not an answer that makes any sense; but an answer that was repeated time and time again as we made calls to the management at Morgan Stanley.

I will forward additional information to you as soon as I am able to obtain it from the BDBDBD group.

Thank you!
==================================================================

Now Fools, I don't know about you, but I find this pretty weird. Let them post more photos of me with UFO's flying out of my head, but something seems messed up in a system that allows this.

(By the way, Morgan Stanley lawyers, when you read this you are going to get ticked off and want to fire off a letter threatening to sue me. Better check with your stock loan desk first to see if you want discovery. Go ahead: make my day.)

Here is the punch line: my Pop bought 200,000 shares right at the end of August. He still has not gotten delivery. Again, I am not speaking of certs. I speak simply of the settlement of the trade. His broker is saying that the other brokerage house is unable to settle the transaction.

Any guesses as to who that brokerage house is? I'll give you three guesses. It is one of the big ones.

Does this strike anyone else here as odd? I mean, I can understand the fellow Tiddman who was writing, more or less, "Byrne, just focus on the business." Ironically, I am entirely from the value school and agree that in almost any circumstance one should just focus on the business. But given that simple stock purchases seem to be cracking the system, and given that I believe we have somewhere between 5 and 20 million electronically counterfeited shares in the market, and given that I suspect there is some relation between these two facts, and given that I think this situation may well be endemic in the market, I think at some point I am supposed to do something about it. Well, someone is, anyway. I could be wrong, though: when it takes 50 days to get 25,000 shares of stock to clear, Lord knows I'm not in Kansas anymore.

Respect,

Patrick

Jeff Matthews said...

That's bizarre. It sounds like a failed trade, and it's up to the clearing firm to take action.

But why is Patrick wasting his time posting this stuff on Motley Fool?

credibility said...

If I had to guess as to why Patrick would waste his time posting the above entry on Motley Fool: because he is probably facing the reality that his business model just won't work.
He has probably come to grips with the fact that he can't deliver on his projections and being the intelligent man that he is, he is not going to waste any more time trying to save the company let alone try to make it profitable.
I think he knows (and probably has known) that the game is over.
All he has left to do (as cbsmarketwatch wrote) is look for distractions.
The distraction is obviously supply and demand of shares(media,hedges,brokers,dtc,etc..)
He is probably advertising his experience on Motely so that he can came across to the public as a "Victim". I also think he is trying to attract the "shortbuster crowd" to buy into a HOT SQUEEZE Play to try and really goose the stock one more time (like last yr's 4th qtr) so that he can continue his pattern of raising more capital.
This is simply a guess.
I think OSTK is a GIMMICK.

Its_strange said...

Anyone hear if Patrick served Rocker ? Or was the suit just bull , a attempt to squeeze ?

settlements said...

Jeff,

It sounds like more than a failed trade. I thought you were a good researcher. You should start your Due Diligence by looking up the Form 4's filed by Patrick and his father. The trades [totalling nearly 250,000 shares] came in an assortment of sizes, times, and days. Tough to carry a failed trade over a metter of days.

Funny how Morgan stanley claims they can't get the shares because it is a "Hot Stock" and yet it is sell side pressure driiving the stock. if Morgan can't pick up 50,000 shares in a matter of several weeks, what it is driving down OSTK's price?

Now I know you and David Rocker claim naked shorting can't be done but, when a company is on the reg SHO list, all FTD that occur once a company is listed is under MANADATORY closeout after 13 days. So how is it it is 20 days past the 13 day 'grace period' and shares are still not available?

Who was Morgan Stanley selling for that they would sell stock they did not own and could not deliver? I doubt it was retail as retail as there is no way Morgan would sell $2 million in stock they do not own for some retail client.

You ought to open your eyes there Jeff. What Byrne did was prove the corruption in the markets. He was out $500,000 before he ever received his stock and his dad is not out $1.2 Million before ever receiving the stock he purchased in August. For the cover to take place today is a huge windfall for somebody.

Jeff Matthews said...

"settlements": Just pointing out the obvious--that if Byrne is describing this problem accurately, a big if in my personal view, then these look like failed trades.

I've never heard of a trade not settling for 50 days, and I doubt anybody in this business has either.

You don't grasp what it means, thinking it's all part of Byrne's imagined Grand Conspiracy. But either Byrne's an idiot, or his broker's an idiot for not settling the trade immediately or breaking it when the counter-party couldn't deliver.

And if indeed this story is for real, Junior should be complaining to his broker, not to motley fools.

And you need to switch to decaf and learn a thing or two about the way the real world works. Good luck.

American_Sucker said...

"You don't grasp what it means, thinking it's all part of Byrne's imagined Grand Conspiracy."

Jeff,

you say that settlements doesn't grasp what it means when a stock doesn't settle for more than 50 days. I would presume then, that that means you do.

Instead of being so condescending, please give us your explanation.

canceled111111 said...

American,

You can't talk like that. Jeff has 25 years on Wall Street. When he says "that's just not how it works" and that people who question 200K share trades not settling for 2 months while MS does the Riverdance just "don't know how the real world works", I believe him.

After all, we've been told that Byrne has no cred and he does. And after 50 blogs pounding the table on that point while splitting hairs on minor points to show how incredible Byrne is, I believe every absolute he has to say. If he says the affadavits are trash, gosh darn it I am not going to question him. He's a lot smarter than you and I and doesn't need to explain absolutes.

Its_strange said...

Hey Patrick. Your trades aren't clearing after 50 days ! Call the FBI ......I mean wouldn't you call the FBI if a few trucks of merchandise were high jacked ? Or would you contact Phil and the message boards ?

Is this how you run OSTK ?

Did you serve Rocker and Gradient ?

You know what i find odd...? Why hasn't the Gradient research made its way to the internet or the press . Everything else has.

"Overstock.com Overstocked with Bargains" ....well you just wait until after the holidays !! Hmmm, maybe a few weeks before..

settlements said...

Actually Jeff,

You are either very naive or you are simply lying.

In documents obtained from teh SEC under court subpoena the DTCC records for one company showed hundreds of thousands of shares with settlement failures exceeding 160 days and with fails reaching as high as 250 days (trading days). Never huh?

As for teh facts, teh Form 4 speaks for itself. these trades took place over days and in various block sizes. If it was a fail - explain how a trade fail takes place over days and represents as much as 40% of the total trade volume over that period in time.

It seeems you may need to review your lesson book on the "real world" as you obviously missed a few chapters.

I have stated all along - Hedge Funds do not go to firms and say "naked short this stock" they say Short me 100,000 shares. The funds themselves do not always know whether those shorts actually settle according to law. That is why we see companies like OSTK on teh SHO list for over 120 days and TASR, MSO, KKD, UAL, etc... on it for the entire 10 months. Nobody fails for 50 days? How do companies have greater than 0.5% in a fail status for 10 months?

Maybe you need more coffee to wake up that brain of yours.

settlements said...

Jeff,

I did a little research for you so that you would not have to.

According to the Form 4's filed with the SEC, Patrick Byrne purchased 50,000 shares between August 9 and August 15 under 39 seperate trade transactions. John Byre purchased 199,900 shares between August 30 and 31 under 61 seperate trade transactions.

Can you now explain how ALL these transactions are fails? Better still, if they are trade fails, why were thay nort cancelled as opposed to being delivery delinquent for over 6 weeks and the cash removed from the Byrne's accounts?

I do not see how or why you would deny the e-mails Dr. Byrne received in which his Broker-Dealer admits that the 25,000 shares due from Morgan Stanley arrived September 29 on Shares purchased August 9th.


Are you accusing Dr. Byrne and his father of filing false Form 4's? I think his e-mail calls out the wrong date as it was August 9 and not August 8 that he made the purchase.

settlements said...

You don't grasp what it means, thinking it's all part of Byrne's imagined Grand Conspiracy. But either Byrne's an idiot, or his broker's an idiot for not settling the trade immediately or breaking it when the counter-party couldn't deliver.

Jeff, tell me why the counter-party(s), all of them failed and sold all those shares they did not have. I can understand maybe one or two fails but...over 100 transactiona and $10 MILLION in trade fails.

Why is it you deny this so vehemently? The facts speak for themselves and speak LOUDER than your personal resume. I will guarantee that yesterdays trading were the crooks working the stock to get real shares in a "raid" tactic.

As for Byrne filing a complaint with the regulators, don't think it hasn't happened. Don't think for a minute the regulators are not following or tracking the trading of this stock. Remember who is Attorney is - A recent SEC Enforcement Attorney.

gvtucker said...

I have dealt with hard to borrow stocks many, many times. I have never seen a trade take 50 days to settle.

If what Byrne says is accurate, he should complain to HIS broker. He should have complained to his broker after 3 days. His broker wsa fully able to force a buy-in from their counterparty.

settlements said...

gv...

And how often do you call your broker to confirm settlement. My Confirms of settlement come via. an e-mail notification and a mailing. When I later call to get the certs is when they tell me they have not yet received the shares yet.

"Book-Entry" settlement takes place in 3-days regardless of actual transfer of custody of shares through DTCC. You buy a stock and you can sell it the next day the BD takes on the liability of any subsequent fail.

I know of many who purchased stock and tried to get physical delivery and were put off for over a year in delivery because the shares suddenly never took place. Unless you research this you haven't a clue what really happens in the back offices. As I said, the SEC provided evidence under court order where hundreds of thousands of shares failed settlement for over 160 days. No buy-ins, nothing. The firms on the fail side (Goldman and the Canadian Depository).

Ever hear of Elgindy? He did his acts through Canada and manipulated many a company by selling short with fails and the US Firms never forced settlement. The Canadian OSC brought up an action against Pacific international where the prsecutor discussed US Organized Crime naked shorting into US Stocks to launder money with no worries about settlement.

gvtucker said...

settlements, Elgindy is a nickel and dime thief. There are plenty of stock manipulators that are no different than him. The only thing that makes Elgindy unique is that he shorted stocks. The vast majority of manipulators manipulate to the upside, because it is much, much easier.

If you shut the thieves down on the short side, you'll end up shutting down a whole lot more thieves on the long side. And directly impacts the speculative crap that dominates the SHO list.

settlements said...

it is not about type of thief it is about your statements regarding fails.

Elgindy sold short w/fails and those fails were longer than 50 days. That goes to your arguement it doesn't happen.

Elgindy would never have accomplished what he did if settlement was enforced.

I suggest you guys open your eyes to a bigger picture. NOTHING on Wall Street is isolated and certainly when the fails came through on Elgindy trades and Pacific International trades the buy-side of the industry ignored them as they frequently did. Hence a new fruad was created - Liquidity induced fraud.

Jeff Matthews said...

"gvtucker": I don't know where you're based, but there's a guy in NYC who stands in the garden plantings in the middle of Park Avenue a couple blocks north of Grand Central and screams about what I believe is the Bible.

He has stringy red hair, never wears a shirt, and it is impossible to understand a word he says, but he is there, screaming.

He doesn't convert anybody that I've ever seen, because nobody goes near enough to see what he's screaming about. But it seems to fulfill his needs.

canceled111111 said...

That's it, Jeff, when you've got nothing to counter with, shrug and call them crazy.

Its_strange said...

OSTK amended thier suit . I can't tell if anyone was served. The next CC should be a good one

Jeff Matthews said...

SALT LAKE CITY, Oct. 12 /PRNewswire-FirstCall/ -- Overstock.com, Inc. (Nasdaq: OSTK - News) today filed an amended complaint in its lawsuit against Gradient Analytics, Inc., Rocker Partners LP, Rocker Management LLC, Rocker Offshore Management Company, Inc., David Rocker, Marc Cohodes, James Carr Bettis, Donn Vickrey, and Matthew Kliber.

Overstock.com's original complaint, filed on August 11 in the Superior Court of California in Marin County, California, alleged that the Defendants conspired to denigrate Overstock.com's business for personal profit. The amended complaint filed today outlines additional causes of action and articulates in greater detail the evidence against the Defendants. Overstock.com, in the amended complaint, also added to its legal team two prominent San Francisco Bay Area law firms -- Freitas, McCarthy, MacMahon & Keating, LLP, and Stein & Lubin LLP.

Patrick Byrne, president and chairman of Overstock.com, said, "With the filing of this beefed-up complaint, I fully expect that the defendants will perceive it to be in their interests to see more disinformation and smears spread regarding the lawsuit, the declarants, and Overstock. Fortunately for the defendants, it seems that a group of compliant reporters provide them such service (a bit of Google research can confirm the wondrous correspondence among Rocker's positions and their shilling). I therefore encourage anyone interested in this suit to read the amended complaint and the sworn declarations for themselves, without benefit of filtering by any hedge fund quislings, and thus I will make them available on our website."

The amended complaint and three relevant declarations will be available for download on the Overstock.com Investor Relations website at http://www.shareholder.com/overstock sometime within the next 24 hours.

Byrne added, "On an unrelated note, but one that may affect Overstock shareholders, I feel obliged to share the following information: on August 8 I bought 25,000 shares of OSTK (as has been filed). My broker was unable to settle the trade: according to them, Morgan Stanley refused to deliver. All attempts by my broker to force Morgan to deliver were met with Morgan statements to the effect that, 'You have to understand, this is a very hot stock.' (I missed the part of the regulations that say, 'You have to settle promptly, unless it is a hot stock.') Incidentally, by 'hot' they did not mean, 'likely to go up': apparently they mean, 'stock in which cheating is being allowed.' On September 29, a full 50 days after the trade, Morgan delivered. Copies of email correspondence confirming this story are posted on the Motley Fool message board. I have filed a complaint with the NASD. Incidentally, I know of another 200,000 share trade that has had similar difficulty clearing for over a month. I urge shareholders to check and double check whatever their brokers are telling them about their positions in OSTK or other stocks, in case other brokerages think their stocks are 'hot' too."
+++++++++++++++++++

That's the release. I could not make that up.

Its_strange said...

Here is the amended suit and affidavits against Gradient and Rocker. Anifantis signed his declaration Sept 1 yet Patrick was reading from Anifantis affidavit on his CNBC appearence in Aug. ..So how many affidavits has he given ?

http://www.shareholders.com/overstock/suit.cfm

Phil reviews the suit and declarations on his blog....He also is advertising a new book he is about to publish...

Its_strange said...

NOPE ! It just plain doesn't make any sense. NOPE ! ...These affidavits seem to be by very young people who are new to the work force. They appear to have been at Gradient for about a nanosecond . They also left on the same day....SORRY Patrick, Mr. O'Quinn. This does not pass the "reasonable" test . Not for one minute does it pass the "reasonable behavior" test . Three kids with very little expereince leave on the same day and sign affidavits that don't say much of anything. ...Certainly there is ALOT more to this story and these affidavits. If i didn't know better i would think a Sith Lord was doing some serious manipulation here.

Jeff Matthews said...

The following was published in MarketWatch today by my friend, Herb Greenberg:

Overactive imagination at Overstock

Commentary:

By Herb Greenberg, MarketWatch
Last Update: 3:20 PM ET Oct. 14, 2005

(Editor's note: This is a free version of Herb Greenberg's RealityCheck. Click here for information on how to subscribe.)

SAN DIEGO (MarketWatch) -- I can only say this about Overstock CEO Patrick Byrne and his merry band of conspiracy theorists: They had better hope the facts they're using to support an amended lawsuit against Rocker Partners and Gradient Analytics are better than facts contained in related affidavits -- at least as they apply to yours truly.

Byrne, as you may recall, claims there's collusion between the media, hedge funds and analysts to hurt his company's stock. He even drew up a silly little schematic, as part of a conference call, putting me somewhere near the hub of this alleged operation that is controlled by a "Sith Lord" who is (according to Byrne) reputed to have a criminal background Byrne then went on CNBC claiming he had proof, in the form of affidavits, of my role in this conspiracy.

Byrne then took the highly unusual step of leaking to the press copies of affidavits before they were filed with a court. The affidavits, according to the New York Post, were made by people who were fired by the research firm -- Gradient Analytics -- for violating Gradient's corporate policy. (One of them, the Post reported, has lost repeated appeals to claim unemployment benefits.)

Other than giving CNBC a statement that Byrne ought to stay away from squirrel-filled oak trees, which was read on-air by anchor Ron Insana during an interview with Byrne, I've avoided responding to his comments or debating him because this story isn't about me. It's about Overstock...

As I've written previously, and believe now, this entire charade by Byrne is a smokescreen to divert attention from his company's floundering fundamentals.

Also, until Thursday night I hadn't seen affidavits; I had only read and heard about them.

Enter the amended lawsuit (which didn't name me) and the affidavits (which did). They were posted Thursday on Overstock's website.

Normally I would ignore this kind of garbage, which is more like the rotting trash often found on investment message boards or the writing on the walls in a public toilet.

But claims contained in the affidavits are so ludicrous, laughable (not to mention false) that I would be negligent to remain silent.

It's one thing to float rumor and innuendo about me, even if it shows a reckless disregard for the truth; being the butt of that kind of stuff comes with the territory of being a columnist who likes to dig up dirt if there's dirt worthy of being dug. But the affidavits (which frequently misspell my last name) made the mistake of also trying to implicate Brian Harris, one of my assistants when I was at TheStreet.com.

According to the affidavits by the two former Gradient employees -- Demetrios Anifantis and Robert Ballash -- Brian was "retained" by Gradient (formerly known as Camelback Research) "to draft research reports on particular companies." It said Brian "is directly affiliated" with TheStreet.com "and Herb Greenburg." In addition, the affidavit said, "Camelback did not disclose that Harris prepared these reports. Harris is listed on www.thestreeet.com as the associate editor of a column called Street Insight."

Ballash, in his affidavit, said that Brian "is an editor of www.thestreet.com and Herb Greenberg." He also said that "Camelback did not disclose that Harris had prepared these reports" and added that he did not see "any billing statements or invoices indicating Camelback paid Harris to draft the reports."

Adding to the story's sizzle, Ballash alleged that Gradient opened "a special office" for Brian and someone else in Seattle.

The content of the sworn affidavits, which Anifantis and Ballash gave under the "penalty of perjury," were so compelling that prior to their inclusion in the amended lawsuit they were leaked by Byrne to select members of the media. One newsletter, called The Pipes Report, wrote that "perhaps most troubling are claims...that editors at TheStreet.com participated in producing the custom reports" for Gradient "while also covering the same companies for TheStreet.com."

So, what's the real story?

Sorry to say it's not quite as exciting as the fiction in the affidavits.

First, I never heard of Donn Vickrey or Gradient/Camelback until well after I left TheStreet.com in April of 2004 to join MarketWatch.

Furthermore, I didn't write about Overstock until October 2004 -- long after my departure from TheStreet.com. The first mention was in a column headlined, "Did Overstock CEO cross the line?"

I subsequently wrote several pieces about Byrne's bizarre behavior, but didn't start focusing on Overstock's crummy fundamentals until February 18, 2005, when I red-flagged it in my subscription newsletter, Herb Greenberg's RealityCheck. Click here for more information.

As for Brian: After I left TheStreet.com...he was promoted to associate editor at TheStreet.com's Street Insight website. He had been studying to get a chartered financial analyst certification in hopes of one day becoming an analyst. I told Brian about Gradient, which he had never heard of while we were both at TheStreet.com; he gave them a call and they gave him a brief tryout of several weeks in the fall of 2004 doing low-level work for one analyst. Gradient didn't hire him. Brian remains at TheStreet.com, but is no longer at Street Insight.

Oh, and no, Gradient never opened an office for Brian in Seattle or anywhere else. Brian lives and works out of his home that is not within an easy commute to Seattle.

End of story, but that begs the question: If those are the facts, why would Anifantis and Ballash give sworn statements based on fiction and so far off the mark as to be malicious? You'll have to ask them, but my guess that somebody somewhere didn't want the facts to get in the way of a conspiracy theory!
++++++

Its_strange said...

And it looks like Jeff called the housing top to the day...well done

Its_strange said...

Herb wrote..." so far off the mark as to be malicious" well perhaps the affidavits are proof OSTK never planned on going to court ?

fedka78 said...

Yet another TMF message by Byrne, written as a preface to the three affidavits (which he then posted to the message board for the benefit of those who can't read pdf files):

1. I have met with all of affiants. I find all three extremely credible, stand up guys. Take my word for it or not, but in my experience, when you meet people who decide to stand for something, they stand out like sore thumbs.

2. I have spent bare minutes with two of them, but have spent hours with Demetrios. He comes from Brooklyn (as I recall), went to Fordham, and got a Master's in economics. In our times together he impresses the heck out of me: straightforward, smart, nothing slick about him, he is he kind of guy you would be proud to have as a brother or a son. His attitude is, I may be young, I may not know everything, but I know right from wrong. Again, take my word for that or not.

3. All three want to amend their affidavits to cover the issue of their termination: they say that they went to their bosses and said, What you are doing in this place is illegal. They were fired shortly thereafter. They want the world to know that so these knuckleheads cannot keep smearing them.

4. We encourage others who are contacting us (not necessarily from Camelback) and are gathering additional affidavits.

In closing, let me mention that two ironic things happened today: it is a laugh worth sharing. All along I have been careful to distinguish between two buckets: Bucket #1 contains this case (involving hatchet jobs for a fee and bent research). Bucket #2 concerns the risk of systemic failure posed by crooked broker dealers, offshore hedge funds, and naked shorting. Is there slop between the buckets? I don't know, I said, but I have been careful all along to place Rocker in Bucket #1. All along certain elements have tried to distort what I said, and tried to dismiss it all as a lot of conspiracy talk and “Sith Lords” and what-have-you, apparently in an attempt to keep people from actually reading what I had said and written).

The two ironic things that happened today are:

A) Rocker's attorney came out with a statement complaining that our lawsuit is not about Sith Lords, vast Wall Street conspiracies, or naked shorting. To that I say, “Fella, that's not your point, that's my point.” Someone let him know that, would you?

B) Refco. Even one formerly antagonist journalist contacted me yesterday to say, “You are going to be a hero. Refco is making your case for you.”

I don't care about the hero, but I am glad that my talk all year of systemic risk posed by crooked broker dealers, hedgies, and naked shorting suddenly does not seem as crazy to some people as it did a week ago.

Its_strange said...

Well Patrick let us all "meet" the affiants. Put them on the stand .

American_Sucker said...

"Well Patrick let us all "meet" the affiants. Put them on the stand."


strange,

I can see it now, three young college grads get on the stand and corroborate each others testimony. They tell the judge and jury that they didn't like what they saw going on at their place of employment, and that when they questioned their superiors about the unethical activities that they were asked to participate in, they were told that they needed to "switch to decaf and learn a thing or two about the way the real world works."

I hate to tell you strange, that isn't gonna go over very well in Marin.

American_Sucker said...

By the way, did anyone see Dave Patch on CNBC's Street Signs today dicussing the Refco debacle? It seems that Ron Insana has found he can no longer ignore the conspiracy "theories" of the "tin foil hat crowd." Insana introduced Patch as a shareholder activist and gave him two segments to explain to viewers why he believed that unsettled naked short positions were responsible for the $450 million dollar debt that has led to Refco's downfall.

I have to say, Patch came off as a very credible guest

Its_strange said...

This from the Rocker press release.." Rocker Partners agrees that there are serious questions that should be raised about Overstock's share price movement but believes that such inquiries should more properly focus on how the stock price climbed to its current value.....despite a persistent decline in earnings estimates, missed sales targets and technology failures" ...You know i'm wondering if Rocker knows something here. Hmmmm.

American_Sucker said...
This comment has been removed by a blog administrator.
Its_strange said...

Watch what he does , not what he says...The OSTK 3rd quarter results are due in 2 weeks. They will show us why the stock is down. And perhaps they will show us why OSTK never served Rocker or Gradient ? ...

All of wallstreet will be listening . Lets see if the covering analysts can get real .

credibility said...

In early August, I recall the CEO Doctor saying that he would not spend any more time talking about this subject(shorts) ever again and that the BIG LAW firm he retained would take care of this entire issue from here on out and that he would focus 100% of his time on his business.
FFWD 2 months to today.
I've heard the CEO constantly posting quotes regarding the same subject on blogs,the motley, message boards, etc..)
ANd to top it off I hear that in this time frame the company had major technical problems.(where was the CEO?)

I guess he was not telling the truth when he said he wasn't going to speak about it anymore. The pattern continues................

canceled111111 said...

"The pattern continues................"

You mean the pattern of Cramer and Team TSCM bashing Rocker short stocks on Mad Money? Tonight was a veritable capitulation of trapped short frenzy.

Oh the Refco humanity.....

Its_strange said...

credibility...I'm figuring Patrick would rather fight with the press, the shorts, the regulators than run his business or any business . Shareholders will pay for it

credibility said...

dnupzero,
I guess you are an expert "spin doctor".
If you reread my post or get someone who comprehends the English language you'll see that I was referring to the pattern of the CEO constantly lying.
I can't help but notice how you responded to my comment within an hour of it being posted. You must really not have much else to do.
Are you retired? Do you have children? Any hobbies? Do you own any other stocks? Bonds? Are you a day trader? Why are you so obsessed with this TICKER? Do you work for OSTK? Isn't there work that you should be doing preparing for the holiday season?
I also see you spend time watching Mad Money and reading a lot of the thestreet.com, WSJ, Barrons,NYTimes, NyPost and Cbsmarketwatch.
Are you a professional trader?
The goal of the Media is to sell newspapers (content), so I guess they are doing a great job because you are obviously memorizing every word they say. That sounds like great journalism to me.
As far as your conspiracy theory pattern: I think the only common denominator between these parties that you hate is:
1. They don't agree with you.
2. They are highly sophisticated.(in other words its hard for unsophisticated individuals like yourself to have a clue to understanding their reasoning.)
3. They are so intelligent that they are early.
4. They must be right because you wouldn't be trying so hard at trying to counter their every word. If they were full of __it, you would ignore them, the way they ignore you.
5. They have been in business probably a lot longer than you with a great deal of success.
6. They are honest.

Just because these individuals agree with one another doesn't make them a team. They just happen to be some of the smartest minds on Wall Street. If this stock was available to short they're would probably be hundreds of other people shorting it. Would they then be part of the team?
I read that Mark Cuban was bearish this name, is he on the team?
There are thousands of people today who are bearish on KKD, are they a big team? The most money made on the BEARS TEAM in KKD was when the Bears had a small team.
Now that there are so many Bears on the KKD team there isn't that much money to make on that team anymore.

Bob Olstein has a tremendous track record, so why wouldn’t a journalist recommend his picks? The same is true with these journalists who are SPECULATING that OSTK will be lower before it goes higher, they are following managers with a proven track record of identifying businesses that have a high probability of failing. I think you give these individuals more credit than they deserve. I’m sure they have been wrong in their life.
Its not like they are the size of Fidelity, Franklin Templeton, Vanguard, AIG, GE etc.
Bottom Line is that they must be on to something because the CEO of OSTK can easily beat tehm by simply being profitable. Obviously he would take that road to profitability if he could. HE EVIDENTLY CAN'T.

credibility said...

IF you were listening to Cramer talk about the importance of Free Cash Flow you would have learned something. Just apply Cramer’s lesson to OSTK's numbers (on the negative side of course):

Trailing 12 months ending 6/30/05
Negative free cash flow of $40,223,000.00.
That’s down from comparable period 6/30/04 of negative $4,473,000.00

That’s -799.2 % decline period over period

Those are audited financials. The TEAM that is responsible for those numbers are employed by Overstock.com. Led by their leader Dr. Byrne of course.

Jeff, if I may use your words, These Free Cash Flow Numbers are not made up, they come from the 10Qs that are on record with the SEC

canceled111111 said...

In case you don't have a TV, that difference is due to a very successful ad campaign.

Care to show the revenues year over year?

You either grow fast by investing in the business, or you get slaughtered by stagnant or falling market share in the biz OSTK is in. Unlike the Y2K Superbowl Dotcom ad blitz, OSTK is seeing the correlating revenues after their ad blitz.

Jeff's favorite would-be stripper is in great part responsible for the success of the recent ads. She's probably underqualified for her job. So was Steve Jobs. So was Bill Gates. Lol. Nitpickers quarreling over a marketing executive's lack of Ivy League status could only come from a bunch of Ivy League hedge fund managers.

Sometimes, like Amazon, you have to spend some money to build a business.

Except OSTK hasn't gotten into the $3B hole that Jeff thought would bankrupt Amazon while reaching similar revenue growth as the late 90's AMZN. Which wasn't profitable for years either.

Amazon's a sore subject for the head blogger here, I apologize for bringing up that "broken business model".

On that note, why is it there's never and advocation of going long a stock on this 100% short sentiment board? I know the title of the board is meant to mock company frauds, perceived, fabricated, or real, but even a hedgefund manager has to go long a stock once in a while. You know, like PALM in 2000 at $420.

Jeff Matthews said...

"dndndup": incoherence is great on Yahoo message boards, but not here.

American_Sucker said...

<"dndndup": incoherence is great on Yahoo message boards, but not here."

That's funny Jeff,

weren't you the one that posted Herb's incoherent response to the claims made by the affiants that he and Brian Harris were up to no good over at Gradient headquarters.

"I told Brian about Gradient, which he had never heard of while we were both at TheStreet.com"

For someone who claims to be a reporter, Herb doesn't express himself very well.