Take 5 With Patrick - Essays on Unrelated Subjects

How to Handle a Corrupt Reporter

February 13, 2007

Posted: Tue Feb 13, 2007 1:13 am
Post subject: Answers for a Reporter

Dear Reader,

You may know of my efforts to expose a crime that I believe is taking place on an enormous scale against millions of American workers, retirees, and savers, a crime from which a tiny segment within the hedge fund community is benefiting, and that is taking place in under the noses of our financial media. At the heart of the scandal is an obscure but in some ways mammoth corporation called, “DTCC.”The Party Line response has been to spin my efforts as just those of a CEO mad about his stock (though I started this while the stock was going up). Yet since I began my efforts a tremendous amount of data has come to light, and numerous economists, financial experts, and whistleblowers have come forward, confirming many of my claims. The story is cracking into the mainstream. Last April a Bloomberg expose by Bob Drummond detailed how counterfeit shares flooding our financial system have made a hoax out of corporate elections. In September Drummond/Bloomberg followed up describing the effects of these manipulations on hundreds of companies. Now, the current (February 12) issue of Forbes has two stories (by Liz Moyer and Nathan Vardi) that confirm claims which two years ago sounded absurd: that there is a mechanism in place to destroy companies for profit, that hundreds have been taken down, and that Organized Crime is involved.

http://www.rgm.com/articles/FalseProxies.pdf
http://www.buyins.net/articles/gamesshortsellersplay.pdf
http://www.forbes.com/home/free_forbes/2007/0212/068.html
http://www.forbes.com/home/free_forbes/2007/0212/064.html

When this is all over, one of the most interesting aspects of this story will be the battle between the 1.0 world and the 2.0 world. The opening shot may have been “RatherGate,” where Dan Rather’s journalism was successfully challenged by a swarm of bloggers (however you feel about President Bush, there is no doubt that Rather’s documents turned out to be fake). But the fight to expose this financial corruption may surpass that, because it has largely been a fight pitting, on one side, huge financial media corporations, and on the other, a swarm of bloggers, retired stockbrokers, and whistleblowers who figured out how the game was rigged and who had the data to expose it, data which much of the mainstream press did everything it could to bury.

Incidentally, I do not mean to suggest that the press is monolithic. Two entities in particular have shown great courage: Forbes and Bloomberg. However, so far their efforts have been outweighed by those of Fortune Magazine, The New York Times, and The Wall Street Journal, who have done everything they could to downplay the data which has now become incontrovertible. In fact, because I believe that a small number of members of the press are somehow involved in this, I have adopted a policy with journalists: until I trust them, I insist that communication between us be on the record unless otherwise agreed. I have stated this policy publicly. http://www.thesanitycheck.com/DrByrneJournalists/tabid/90/Default.aspx

There exists a once-respected business writer named Gary Weiss who has become reviled by many people in his profession. Over the last year or so Gary has devoted countless articles and (by the tally of one of his own colleagues) 93% of his blogs to saying that I am wrong about all this, that I am crazy, that I am a bad guy, etc. Unfortunately for Gary, he appears to have a relationship with the DTCC, that corporation at the heart of the scandal (http://antisocialmedia.net/pmwiki/pmwiki.php?n=Main.WeissDTCC ). If true, it means that a reporter, Gary Weiss, is taking part in a cover-up.

Today a reporter contacted me about this issue. A quick check confirms that Gary Weiss is no stranger to her: she wrote one of two reviews of his book (the other being by another reporter who is ridiculously biased in favor of hedge funds and against America). She and I exchanged a confusing (to me anyway) series of emails, which I post below: I think if you read them and note their obliqueness you will understand my decision simply to post my responses publicly. At her request I sanitized them of any personal contact information from her, and from other journalists. Within them were an extensive set of questions, which I post and answer below our correspondence.

Your humble servant,
Patrick

==========================================
From: xxx
Sent: Sunday, February 11, 2007 7:28 AM
To: Patrick Byrne
Subject: from susan antilla/bloomberg news columnist
Dear Mr. Byrne,
I write a column for Bloomberg News and am preparing to write a story about Overstock’s public relations/investors relations strategy. Judd Bagley already has answered a number of my questions, but some issues remain that predated his affiliation with the company. I have attached these questions to this email. Would it be possible for you to get back to me before Monday night?

Thank you for your help.

Sincerely,
Susan Antilla

________________________________________
From: Patrick Byrne
Sent: Monday, February 12, 2007 8:47 AM
To: XXXX
cc: yyy (also at Bloomberg)
Subject: RE: from susan antilla/bloomberg news columnist Bloomberg)
Dear Ms. Antilla,

It is very kind of you to write. I will work today on providing you answers to your questions, but before I do I have several points I wish to address. Please consider this off the record until we have the ground rules of our relationship worked out.

http://www.thesanitycheck.com/DrByrneJournalists/tabid/90/Default.aspx

3. As you know also from those interactions which you referred to with Judd, you know it is my general habit to reply to journalists by posting their questions along with my answers on the Internet. I mean no disrespect by this whatsoever: I have just found that the reporters generally make that extra small effort to represent my responses fairly when I do this. Would you have any objection to my operating this way with your questions?

4. In general, I see the situation as being the confluence of four issues: 1) there is a scandal called “naked short selling”; 2) there is a corporation (the DTCC) at the heart of the scandal; 3) there is a reporter (Gary) using his offices to deny, minimize, and cover-up that scandal; 4) Gary and DTCC appear to have a professional relationship ( http://antisocialmedia.net/pmwiki/pmwiki.php?n=Main.WeissDTCC ).

5. Simple research shows me that you have a connection with Gary, at least in that you gave one of the rare reviews of his book, and your review could have been written by Gary himself. Candidly, that is a little problematic for me, as is the fact that there are numerous false assumptions buried throughout your questions to me. I do not fault you for that, Lord knows it is easy to get confused about some of this. That said, would you be willing to agree to a basic rule as far as this interview goes, that rule being, I cannot be quoted except by full sentence? No partial sentence quotes?

I hope you find these preliminary questions in the spirit in which they are intended. Also, in any reply, please tell me whether you want your subsequent reply to be on the record or not. I look forward to hearing from you, and until then, I remain,

Yours,
Patrick

________________________________________
From: xxx
Sent: Monday, February 12, 2007 2:18 PM
To: Patrick Byrne
Subject: Re: from susan antilla/bloomberg news columnist
Dear Mr. Byrne
Thank you for your response.
Could you address these issues to me on-the-record?
Thank you.
Sincerely, Susan Antilla

________________________________________
From: Patrick Byrne
Sent: Monday, February 12, 2007 4:14 PM
To: xxx
Subject: RE: from susan antilla/bloomberg news columnist
Dear Ms. Antilla,

Thanks for writing back. However, I am not sure what you are saying: are you asking, “Was your letter to me, Patrick, on the record?” Yes it was. Or are you just asking me to address your original set of questions on the record? The answer to that is also yes, but I have lots going on and it may take me a day or two (if that is satisfactory).

I look forward to getting out of the meta-conversation and into the conversation!

Warm regards,

Patrick

________________________________________
From: xxx
Sent: Monday, February 12, 2007 6:32 PM
To: Patrick Byrne
Subject: Re: from susan antilla/bloomberg news columnist

Dear Mr. Byrne,

In your email this morning, you said ”please consider this off the record” until ground rules were worked out. Then you made 5 points. I guess I’m a little confused that you are now saying that the email that included those 5 points is now on the record, but thank you for clarifying.

Re your response to the questions that I sent to you: yes, I’d appreciate if you responded on the record only.

On your questions to me:

— You requested that I only use full-sentence quotations from any answers that you send. I agree to that. I’m assuming that you will understand that I may not be able to use lengthy quotations.

— Re my Bloomberg colleague: it appears you already have made a decision and acted on it, so I don’t see that my input is relevant.

— Re your proposal to post my questions publicly: I consider my questions my work product at this point. No story has been written or published. I will leave it up to you to determine the right way to handle that. If you should decide to publish my inquiries, I would appreciate that you remove my private telephone numbers.

I look forward to receiving your answers. Although I was hoping to begin writing the story this evening, I will delay that until I receive your answers tomorrow.

Thank you.
Sincerely, Susan Antilla

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

The questions Ms. Antilla attached to her first email read as follows:

1.At what point did it become a corporate strategy to attack company attackers aggressively? I am specifically referring to your public stance against naked short sellers, brokerage firms (recent lawsuit) and members of the media including Gary Weiss and Herb Greenberg.2. Did management consult with outsiders (pr people; lawyers; mgt consultants) before moving in that direction? What outside PR firms do you use today, if any?3. What portion of your time is spent on public relations/investor relations and what portion is spent on operation of the company?4. Has Overstock ever conducted any polling (or hired someone to conduct polling) of its shareholders to determine their thoughts about your aggressive PR?
— if so, what did you learn

5. What other feedback have you received, positive and negative from your shareholders about your approach to short sellers, brokerage firms, and the media?

6. Why not utilize a strategy in which you aggressively promote the positive aspects of the company rather than attack?

7. You filed suit against brokerage firms on the Friday before a Monday announcement of disappointing company results. Was the timing of the lawsuit in any way meant to provide a diversion from the bad results?

8. I spoke with a securities lawyer and former SEC regulator about your lawsuit against the brokerage firms. It was his feeling that it would be very difficult for you to get the trade data and connect the dots that would support your legal theory. Do you think you have a winning lawsuit that you will fight to the end? From your point of view, is the suit a valuable PR strategy (sending a message) as much as it is a legal strategy?

9. While there are some very aggressive public relations experts who think that your strategy is both advisable and “cutting edge,” there is also a camp that says that it is not productive to attack reporters and file lawsuits. Do you have any regrets over your public statements about news reporters or your legal techniques?

I am now answering Ms. Antilla’s questions in this letter below, and will send her a link to this message board post. I hope you in the Overstock Community do not mind terribly having this played out on your message board.

Dear Ms. Antilla,

I respectfully inform you that I am posting to this board our communications, your questions, and my answers to them: doing so was not my original intent, but your responses to my questions were so consistently oblique that I think it clear this will facilitate the most straightforward communication between us (I am not sure why some folks have so much trouble simply saying, “This is off-the-record,” a request which I always honor).

I am unable to form form reply to your questions without first addressing the paradigm and the (in my view) false assumptions which infuse it.

In brief, you are speaking from a 1.0 paradigm in which there are two competing sets of agents: “corporations” and “members of the media.” In my worldview there are also two competing sets of agents: “citizen-journalists exposing a financial scandal,” and “corporations and their employees whose involvement in this scandal is being exposed.” That some of those corporations happen to be media corporations, and their employees, reporters, neither alters that basic landscape nor makes it incomprehensible.

I hope that brief preamble will make the following responses more intelligible.

1.At what point did it become a corporate strategy to attack company attackers aggressively?

What I am doing is not “attacking,” it is “exposing,” but in any case, what should one do with “company attackers” (your term) and if they are “company attackers” why should they be uniquely permitted to atttack?

I am specifically referring to your public stance against naked short sellers, brokerage firms (recent lawsuit)…

With regard to “naked short sellers,” I view my actions less as “attacking” anyone and more as exposing criminal activities within our financial system, activities which SEC Chairman Cox said last July were “clearly violative of federal securities laws”: is Chairman Cox “attacking” naked short sellers by saying that?

…and members of the media including Gary Weiss and Herb Greenberg.

Herb may be a “company attacker” as you say, but I think my response to him has largely been ridicule and disdain, not “attack.”

If Gary Weiss is also “company attacker” as you say, then so be it, but there is no “corporate strategy” regarding Gary Weiss and, I’ll note, you have mustered no argument and adduced no evidence that there is. You have simply made a flat claim, which happens to be false.

I will answer the question that you seem to be wanting to ask here. Yes, at the start of 2006 Judd Bagley began sleuthing and blogging about Gary’s activities, and yes, later in August (September?) Judd joined us and developed our car tab (by November) and now Omuse, but Judd’s hobby of blogging about Gary is no more a reflection of our “corporate strategy” than Forbes could be said to have a “corporate strategy” of attacking Overstock, simply because they employ Gary, and Gary also has a blog 93% dedicated to attacking Overstock.

2. Did management consult with outsiders (pr people; lawyers; mgt consultants) before moving in that direction?

Only in the following loose sense. There are millions of powerless people being ripped off by forces outside of their control or understanding, and I was taught that while one doesn’t have to go around looking for bullies to confront, when one comes across bullies picking on weaker people one has to stand up for those who cannot. So if you call my Mom, my grade school teachers, my professors “outsiders” whose consultations have caused me to “mov[e] in that direction,” then I suppose I suppose the answer is, loosely speaking, “Yes.”

What outside PR firms do you use today, if any?

In general we have engaged in little outside PR, though recently there has been a small, two-woman operation back East that is doing some general PR for us. But no, this is home-grown. Can you really imagine a PR firm coming up with this as a strategy?

3. What portion of your time is spent on public relations/investor relations and what portion is spent on operation of the company?

It varies month to month, but over the span of a year I would estimate:

Public relations: 15%
Investor relations: 2%
Company operations: 83%

4. Has Overstock ever conducted any polling (or hired someone to conduct polling) of its shareholders to determine their thoughts about your aggressive PR?
— if so, what did you learn

Oddly enough, someone told me a year or so ago that he had thrown my name onto the bottom of a political poll, and (according to him) while a bit less than 10% of Americans recognized my name, those who did gave me an approval rating that would make me blush to reveal. I have my doubts about it, because the number seemed impossibly high to me.

Our company does the occasional brand awareness poll, and sometime last year we threw on a question to ask consumers if they knew about this contest and how they felt: a surprisingly small percentage had made the connection, but those who did supported my actions by a substantial (but not impossible high) margin.

Shareholders: I have gotten significantly more encouragement than discouragement from shareholders. I have considered polling them but would not know how, or what to think if the number totaled 300%.

5. What other feedback have you received, positive and negative from your shareholders about your approach to short sellers, brokerage firms, and the media?

Respectfully, I do not know what else to say beyond what I just wrote.

6. Why not utilize a strategy in which you aggressively promote the positive aspects of the company rather than attack?

Respectfully, this is just a string of bad assumptions: this is not a “strategy,” I do not call what I do “attacking,” and you are the ones who called them “company attackers”: why not ask them why they are “attackers”?

No, the timing of the lawsuit was driven more by missed phone calls, late flights, FedEx deliveries and so on and so forth: as we have said, we announce news when we have it. In addition, this whole “diversion” theory is a little odd: in your view has this been much of a diversion?

Ha-ha-ha: Please tell him I said, “Dream on.”

Do you think you have a winning lawsuit that you will fight to the end?

Yes.

From your point of view, is the suit a valuable PR strategy (sending a message) as much as it is a legal strategy?

It is not a “PR strategy” of any kind (valuable or non-valuable) and I have no idea what “message” it would purport to be sending: it is an attempt to seek rectificatory justice for a company and shareholders harmed by criminal activities.

I regret none of my “public statements” or “legal techniques,” and once again, this is not a “public relations… strategy.” Most respectfully, what part of “illegal” is so confusing? What part of, “There are millions of people whose savings are being stolen, and I cannot stand by and watch” seems so utterly incomprehensible?

Ms. Antilla, there are many, many reporters who explicitly ask me (as you have not) for confidentiality, and I always comply. I hope you understand why, given your oblique responses, I thought this conversation would best be continued in the sunlight of public observation. If you have any further questions please do not hesitate to contact me (or simply post them here and let me know). Until then, I wish you all the best, and I remain,

Yours,
Patrick M. Byrne