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The Illustrious Henry Blodget Thinks I Am A Very Bad Man, Part 1

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The Illustrious Henry Blodget Thinks I Am A Very Bad Man, Part 1


For some odd reason, I’ve never wanted to kick Henry Blodget in the throat.  I’m not sure why: there are plenty of Wall Street miscreants whom I could, with less thought than I give to picking out my socks, and Henry is, famously, a Wall Street miscreant. But I’ve really just never felt the urge, likely through some hate-the-sin-love-the-sinner moral failing of my own (and surely, when observing those who immiserate millions of retirees, neglecting to hate the sinner is generally but lachrymose oversight of duty to fellow citizens). But I’ve never wanted to, not even metaphorically, and I still do not. Thus, I intend to let my recent correspondence with Henry Blodget  stand on its own, with as little preamble from me as possible.

For those new to the game, however, a modest introduction about Henry Blodget is necessary.  So here it is.

Who is Henry Blodget?  First, watch this 2002 high-buzz advertisement Charles Schwab ran as a swipe against Merrill Lynch (NYSE:MER):

Second, understand that this ad is about Henry Blodget, who, until shortly before, had been head of research for Merrill Lynch’s Global Internet Investment.  As Slate.com immediately wrote of the “lip-stick on the pig” ad:

“This ad was produced right on the heels of Merrill Lynch’s public flogging for the sins of the infamous stock analyst Henry Blodget a few weeks back. And it was instantly interpreted as a direct shot at Merrill, so much so that CBS refused to air the Schwab ad at all. (Merrill, after all, is said to be a bigger advertiser on the network than Schwab is.)”

And as the New York Times wrote of the Schwab ad,

“In May, Schwab started airing a set of TV spots that pointed up the conflicts of interest of Wall Street firms that cater to both individual investors and corporate clients. The most controversial of those depicted a sales manager at an unidentified brokerage firm exhorting his troops to sell the stock du jour.

‘Let’s put some lipstick on this pig,’ the manager tells them.

Schwab’s timing was impeccable. The ads appeared about six weeks after Eliot Spitzer, the attorney general of New York, publicly contended that Merrill’s stock analysts had recommended stocks of companies they had privately maligned. In one e-mail released by Mr. Spitzer, a Merrill analyst called one of his recommended stocks a ‘dog.’”

Henry did much more than tout to the public a stock he privately considered a “dog”. PBS produced a fine 2002 story about Henry Blodget which provided a useful chart from which I excerpt:

MERRILL LYNCH ANALYSTS IN PUBLIC AND PRIVATE

COMPANY NAME PUBLIC ASSESSMENT INTERNAL ASSESSMENT
Excite @ Home (ATHM) 6/3/00: Merrill Lynch published rating: 2 (accumulate) -1 (buy)

7/20/00: “We do not see much more downside to the shares.” Research report

Short-term rating: Accumulate

6/3/00: “ATHM is such a piece of crap!” -Henry Blodget E-mail
Lifeminders (LFMN) 12/4/00: Merrill Lynch published rating: 2 (accumulate) – 1 (buy)

12/21/00: “We think LFMN presents an attractive investment.” Research report

12/4/00: “I can’t believe what a POS [piece of sh-t] that thing is.” Merrill Analyst Henry Blodget e-mail.
Infoseek.com 12/19/99: Analyst Henry Blodget suggests 3 (neutral) -2 (accumulate) rating 12/19/99: Analyst Henry Blodget calls stock a “dog”
Internet Capital Group 10/5/00: Merrill Lynch’s published rating: 2 (accumulate) – 1 (buy)

Placed on Merrill Lynch’s list of the top ten technology stocks (“Top Ten Tech” list), as late as September 12, 2000

10/5/00: “Going to 5″ (closed at $12.38)

10/06/00: “No helpful news to relate [regarding ICGE], I’m afraid. This has been a disaster·there really is no floor to the stock.”

InfoSpace.com 7/11/00: Report says, “InfoSpace continues to be one of the best ways to play the wireless Internet.”

Rating: 1 (buy) – 1 (buy), the highest possible rating

InfoSpace was on the “Favored 15″ List from at least August 2000 until December 5, 2000.

Was a major investment banking client.

7/13/00: Analyst Henry Blodget had acknowledged as early as June 2000 that the stock was a “powder keg” and that “many institutions” had raised “bad smell comments” about it and in October had referred to it as a “piece of junk.”

5/17/00: “This company [InfoSpace] is very important to us from a banking perspective, in addition to our institutional franchise·”

And so on and so forth. The bottom line is that Henry Blodget’s behavior towards the public of which he was putatively a fiduciary had what Hunter S. Thompson described (with reference to Nixon’s crew) as “a mean sort of consistency.”

Again, in the interests of brevity I will wrap up my preamble with the suggestion that the reader wishing to learn more might start with the SEC’s 2002 complaint against Henry Blodget.

Then read this 2003 SEC settlement announcement, “The Securities and Exchange Commission, NASD and the New York Stock Exchange Permanently Bar Henry Blodget From the Securities Industry and Require $4 Million Payment.

Be sure not to miss the (again, Nixonian) “disclosure” he made to the public about his past when, in 2004, Henry Blodget was (I-shit-thee-not) hired as a financial journalist by Slate.com (the same organization that had previous written of “Merrill Lynch’s public flogging for the sins of the infamous stock analyst Henry Blodget”).

Finally, the reader should understand that in 2007 Henry co-founded Business Insider , a website devoted to reporting on the securities of companies in the technology industry. Which is, of course, not to be confused with participating in the securities industry from which, in a settlement with the United States Securities and Exchange Commission, NASD, the New York Stock Exchange, Henry had agreed to be…. well, permanently barred.

Thus concludes my attempt at bringing newcomers up to speed on the Illustrious Henry Blodget.

And so we turn to Henry and my recent correspondences, about which, as the Good Doctor liked to say, res ipso loquitor.

From: hblodget@gmail.com [mailto:hblodget@gmail.com] On Behalf Of Henry Blodget
Sent: Sunday, December 13, 2009 9:49 AM
To: Patrick Byrne
Subject: Overstock, Deep Capture

Patrick,

Just wanted to reach out directly.  If you feel we ever get anything wrong or you want to say anything directly to our readers, please let me know.  Happy to publish under your byline and link back to Deep Capture, Overstock, or anywhere else.

Hope the holiday season is going well for Overstock.

All best,

Henry

From: Patrick Byrne
Sent: Sunday, December 13, 2009 1:12 PM
To: ‘Henry Blodget’
Subject: RE: Overstock, Deep Capture

Henry,

Wow. Mighty decent of you. Really? I’ll take you up on it.

Best returned,

Patrick

From: Patrick Byrne
Sent: Sunday, December 27, 2009 3:45 PM
To: Henry Blodget
Subject: RE: Overstock, Deep Capture

Dear Henry,

Thank you for this kind invitation. I have done so, and enclose my modest efforts here. I hope you feel this is adequate, and I thank you for publishing it. I hope it draws you much traffic and attention.

Regards,

Patrick

PS Oddly enough, the only thing I could not source appropriately was my recollection of a quote from the first time you wrote on me. It was something that I thought was gracious and funny. This quote appears (as best as I could remember it) in the second paragraph here: if you could find the actual quote, feel free to fix my recollection.

From: Patrick Byrne
Sent: Sunday, December 27, 2009 3:52 PM
To: Henry Blodget
Subject: Overstock (NASDAQ:OSTK) CEO Byrne

PPS Just fixed a couple typos I found.

Happy Holidays,

Patrick

From: Patrick Byrne
Sent: Wednesday, December 30, 2009 3:37 PM
To: Henry Blodget
Subject: Overstock CEO Byrne

Henry,

Oh well. Since you have not answered, I could not help but take one more swipe at refining this. Again, please use this last draft if you got to publish.

Can you at least confirm you have gotten these, and let me know your intentions?

Patrick

From: hblodget@gmail.com [mailto:hblodget@gmail.com] On Behalf Of Henry Blodget
Sent: Wednesday, December 30, 2009 4:04 PM
To: Patrick Byrne
Subject: Re: Overstock CEO Byrne

Patrick,

Thanks very much for sending.  Sorry for the slow reply–I’ve been out of the office this week.

I enjoyed this, and we’d love to publish it.  One issue that came up is that it’s more expansive in scope than I was expecting, and we don’t have the resources to run a detailed legal and fact check.

Given this, the easiest way to handle would be to have Deep Capture publish the piece and we’ll run the first couple of paragraphs and link to the rest.  That would also give you the ability to make further edits if you like.

Alternatively, we can send you a standard indemnification agreement that we use with some freelance and syndication work.

Sorry for this hitch.  Thanks again for writing and sending.  Look forward to running what we can soon.

All best,

Henry

From: Patrick Byrne
Sent: Wednesday, December 30, 2009 4:08 PM
To: Henry Blodget
Subject: RE: Overstock CEO Byrne

Henry,

Answers below in CAPS (which do not imply screaming!)

Patrick

From: hblodget@gmail.com [mailto:hblodget@gmail.com] On Behalf Of Henry Blodget
Sent: Wednesday, December 30, 2009 3:04 PM
To: Patrick Byrne
Subject: Re: Overstock CEO Byrne

Patrick,

Thanks very much for sending.  Sorry for the slow reply–I’ve been out of the office this week. NO WORRIES. I FIGURED YOU WERE TAKING THE TIME OFF. GOOD FOR YOU.

I enjoyed this, and we’d love to publish it.  One issue that came up is that it’s more expansive in scope than I was expecting, and we don’t have the resources to run a detailed legal and fact check. I UNDERSTAND

Given this, the easiest way to handle would be to have Deep Capture publish the piece and we’ll run the first couple of paragraphs and link to the rest.  That would also give you the ability to make further edits if you like.

Alternatively, we can send you a standard indemnification agreement that we use with some freelance and syndication work. SURE. ACTUALLY, I WOULD PREFER IT THIS WAY. YOUR SITE. MIGHT FAIR OF YOU. JUST SEND ME THE INDEMN AGREEMENT BY EMAIL. IF YOU HAVE HEARTBURN OVER ANY PARTICULAR PARAGRAPH, LET ME KNOW.

Sorry for this hitch.  Thanks again for writing and sending.  Look forward to running what we can soon. COOLIO ON ALL.

All best, RETURNED. BEST IN THE NEW YEAR.

Henry

From: Henry Blodget [mailto:hblodget@businessinsider.com]
Sent: Friday, January 08, 2010 6:01 AM
To: Patrick Byrne
Subject: Re: Overstock CEO Byrne

Patrick,

Very sorry.  Got slammed when I got back.  Will get the letter to you today.

Henry

Henry Blodget

CEO, The Business Insider

hblodget@businessinsider.com

From: Patrick Byrne
Sent: Friday, January 08, 2010 12:33 PM
To: Henry Blodget
Subject: RE: Overstock CEO Byrne

Henry,

Coolio. No worries: Believe me, I udnerstand the “slam” part.

I appreciate you doing this. I hope it brings you some attention.

Best,

Patrick

From: Patrick Byrne
Sent: Friday, January 15, 2010 2:58 PM
To: Henry Blodget
Subject: RE: Overstock CEO Byrne

Henry,

Is it something I said?

Patrick

From: hblodget@gmail.com [mailto:hblodget@gmail.com] On Behalf Of Henry Blodget
Sent: Friday, January 15, 2010 3:05 PM
To: Patrick Byrne; Julie Hansen
Subject: Re: Overstock CEO Byrne

Thanks, Patrick.

Did you get the indem letter from Julie earlier this week?  Have been waiting to get it back.  Copying her…

Henry

Henry had spoken the truth: four days earlier a colleague of his named Julie Hansen, the COO of Business Insider had, in fact, emailed an indemnity agreement. And so began again our pas-de-deux (or pas-de-trois, as it were).

From: Julie Hansen [mailto:jhansen@businessinsider.com]

Sent: Monday, January 11, 2010 12:07 PM

To: Patrick Byrne

Subject: agreement for your Business Insider post

Patrick,

Henry forwarded your email to me. Attached please find the letter agreement covering your post for the Business Insider. Please sign and return a copy to me. You can email a signed PDF or fax it to 718-785-9531.

Please let me know if you have any questions on the attached.

All best,

J.

From: Patrick Byrne
Sent: Friday, January 15, 2010 3:07 PM
To: Henry Blodget; Julie Hansen
Subject: RE: Overstock CEO Byrne

Ah-ha! No I had not, but I just found it (our traps filtered it out: I will fix that).

I will get it to back to you this afternoon or Monday morning. Thanks.

From: Patrick Byrne
Sent: Monday, January 18, 2010 10:07 AM
To: ‘Julie Hansen’; ‘Henry Blodget’
Subject: Overstock CEO Byrne

Dear Julie & Henry,

Good morning. Thanks again for this. Two issues:

1) I have faxed back the indemnity agreement. I want to alert you to one issue therein. The way it was written, no control of the litigation was ceded to the guy bearing the cost and risk. That cannot work, for the following reason: if the day after you published it Stevie Cohen sued you for a $1 billion, you could, theoretically, say “Yes, you’re right, I’ll pay.” And send me the bill. I know you wouldn’t do that, but I do not think the contract written that way. Given that I am taking the economic risk, the contract should cede control of any such case (however improbable) to me, and I’ll fight it out (with your cooperation, of course). In the expectation that you would find this reasonable (even if the formulation you sent me is your standard agreement, this is surely not a standard situation) I made this one change in the pdf you sent me, signed it and faxed it back moments ago.

2) As I had the weekend, I gave this one last turn on the wheel. Just tiny stylistic changes.

Thanks again for this. I hope it draws you much traffic and attention (and I will use my meager resources to promote same).

Much respect for your offer to let me write this, Henry.

Sincerely,

Patrick

From: Patrick Byrne
Sent: Wednesday, January 20, 2010 11:14 AM
To: Patrick Byrne; Julie Hansen; Henry Blodget
Subject: RE: Overstock CEO Byrne

Dear Julie and Henry,

Good afternoon.

Any word on timing?

Respectfully,

Patrick

From: Julie Hansen [mailto:jhansen@businessinsider.com]
Sent: Wednesday, January 20, 2010 11:16 AM
To: Patrick Byrne
Cc: Henry Blodget
Subject: Re: Overstock CEO Byrne

Patrick,

Thanks for your follow-up. I haven’t had a chance to review the changes you suggested but I will get to them ASAP and let you know.

All best,

J.

From: Patrick Byrne
Sent: Wednesday, January 20, 2010 11:24 AM
To: Julie Hansen
Cc: Henry Blodget
Subject: RE: Overstock CEO Byrne

Thank you.

From: Patrick Byrne
Sent: Thursday, January 21, 2010 11:02 AM
To: ‘Julie Hansen’
Cc: Henry Blodget
Subject: RE: Overstock CEO Byrne

Julie,

Thanks again. However, I notice this morning that Business Insider has published yet more gibberish (http://www.businessinsider.com/americas-nastiest-ceo-2010-1)  that first appeared only 2 days ago. So if it is not too much to ask, please be so kind as to let me know:

1) when you will be able to publish my piece;

2) or, failing that, when you will be able to let me know when you will be able to publish my piece.

Respectfully,

Patrick

From: Henry Blodget [mailto:hblodget@businessinsider.com]
Sent: Thursday, January 21, 2010 11:08 AM
To: Patrick Byrne
Cc: Julie Hansen
Subject: Re: Overstock CEO Byrne

Patrick,

Thanks.  Are we set on the letter?  If so, I’ll read the latest version and edit for tomorrow.

(I’ll send you the requested edits, obviously).

Henry

From: Patrick Byrne
Sent: Thursday, January 21, 2010 11:10 AM
To: ‘Henry Blodget’
Cc: Julie Hansen
Subject: RE: Overstock CEO Byrne

Henry,

Indeed we are. if you are able, please just edit in Word and track changes, so I can give you a quick turn-around. I’m honored to have you edit me.

I hope this gets you a fair bit of publicity.

Patrick

From: Henry Blodget [mailto:hblodget@businessinsider.com]
Sent: Thursday, January 21, 2010 11:21 AM
To: Patrick Byrne
Cc: Julie Hansen
Subject: Re: Overstock CEO Byrne

Thanks, Patrick.

One initial question… What does the word “choagie” mean?  Looked it up and nothing seemed to fit.

Henry

From: Patrick Byrne
Sent: Thursday, January 21, 2010 4:41 PM
To: Henry Blodget
Cc: Julie Hansen
Subject: RE: Overstock CEO Byrne

“Choagie” has the connotation of some combination of “lackey” + “sycophant” + “shill”.

Funny, I, too, have noticed that it is not in slang dictionaries I checked, though I know a couple of unrelated people who use it. Its meaning seems to be clear to everyone in context, I’ve noticed (maybe because it sounds enough like “toady”?)

If you would prefer to substitute “Toady” in the title and throughout, feel free.

From: Julie Hansen [mailto:jhansen@businessinsider.com]
Sent: Thursday, January 21, 2010 3:11 PM
To: Patrick Byrne
Cc: Henry Blodget
Subject: Re: Overstock CEO Byrne

Patrick,

I’ve reviewed the change you made and we can’t agree to that. The boilerplate language is consistent with publishing agreements we have signed with other media companies. And while you’re right that you are not a standard author – “CEO” is not in the byline of many BI writers – the rights situation is fairly standard.

Can we return to the original language?

Best,

J.

From: Patrick Byrne
Sent: Friday, January 22, 2010 12:43 PM
To: ‘Julie Hansen’
Cc: Henry Blodget
Subject: RE: Overstock CEO Byrne

Julie,

I am afraid not. Respectfully, I’m happy to indemnify you, as I said, but as written the agreement would permit Jim Chanos to file a frivolous $1 billion suit and your side to put up a weak fight (or no fight at all) and then say, “OK, Patrick will pay.”  Surely you see that this is not reasonable position.

Please let me know your final decision, either way.

Regards,

Patrick

No answer has been received, though Henry continues to find time and space to publish and republish every yellow journalism hit-piece written by any slack-jawed mouth-breathing jackanapes who can manage to sit on a keyboard.

As should be clear from the context, notice that the indemnity agreement Henry and Julie sent to me provided that, once they published my piece, if they got sued by anyone they had full control of the defense, could decide to settle for any amount, I had to pay, and I could have no input (in other words, they wanted the proverbial “blank check”).  Notice that my response did not refuse to give them that unlimited indemnity, but simply stipulated that  my lawyers got to put on the defense of my blank check (a position which would give heartburn to any lawyers but my own, I might mention). Other than that one small adjustment, I had accepted their entire indemnity agreement, as written.

For the legally-inclined reader who wishes to analyze this for herself, here is the agreement as they sent it to me, and here is the one I returned to them, signed.

A smart Midwestern fellow of my acquaintance once taught me that if someone won’t give you a response, and won’t tell you when he will be able to give you a response, it is fair to consider it a non-response.  But just in case, I let them have another 10 days.

So at this point, I think it is fair to publish what I wrote at the request of Henry Blodget, but which Business Insider has refused to publish.

(Next: The Illustrious Henry Blodget Thinks I Am a Very Bad Man, Part 2: The Essay Business Insider Requested Then Refused To Publish)

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