The Washington Post has published an online piece by Abha Bhattarai, who tells me that it (or, I sense, a longer version) will be appearing in the print edition this coming Sunday. This alignment gives us a unique moment to permit you, the public, to watch the MSM sausage being made. It will give us a view into the intellectual honesty of the Washington Post, where ‘Democracy Dies in Darkness”: I remain hopeful that this little experiment will reflect well on Abha and them.
I am going to take Abha’s online piece and reproduce it here with some comments, facts, and data inserted. This will give the editors and Abha time to do with it as they will between now and the print edition appearing on Sunday. That way, the public will have a first hand view into the process by which the Post (“Where Democracy Dies in Darkness”) manufactures its sausage, and the public can judge that process for itself directly.
I would like to note that when Abha contacted me to do this piece, I asked that we keep everything to email only. However, after many dozens of emails and some degree of trust had been established, we did have one (and, I believe, only one) phone call of ≈ 45 minutes (NB this is an estimate only, and for me it was from the other side of the world under unusual circumstances, so this estimate could be off in either direction). Thus, there is an email record of the vast majority of the communication that supported this article.
In our phone call Abha sometimes made sure I knew she was giggling with disbelief (though would provide no indication regarding the specifics as to what she was doubting, or why, though I inquired). That is OK: I have always understood that my life would strike most people as barely credible at best, and in addition, such is frequently the habit of Millennials (I believe Abha is under 30). Other than that, I found Abha professional, courteous, and, and intelligent (you would be amazed at how thick some of them are). As you will see below in some of her emails that I have interwoven below with her subsequent article, she also was willing to do original research, both at my request and on her own, which puts her head-and-shoulders above most journalists. Moreover, she is unusual in that she is often willing to communicate my positions honestly, which also puts her head and shoulders above most (but not all) journalists I have known since the Establishment and I got at cross-purposes about 15 years ago. She may imply my claims are improbable, but as you will see, for the most part she has represented them fairly. However, I will extensively call her out regarding some important areas she skews.
Best of all, you, the public, are going to be able not only to view the next link of sausage as it is made, you are going to have a chance to vote on your thoughts after Sunday’s article is presented.
With that preface, I now reproduce her article, will my comments inserted in bold italics for typographical convenience (not to imply “SHOUTING!”)
Insurers worried the retailer could not rein in Patrick Byrne’s personality and public comments. So, he says, he had no choice but to leave.
Patrick Byrne, who led Overstock for 20 years, resigned last month after saying he’d become entangled with the FBI’s “Russia investigation.” (Steven Ferdman/Getty Images)
September 26 at 7:14 AM
At Overstock.com’s 20th-anniversary party last month, employees played tug-of-war, munched on artisan pickles and scrambled through an inflatable obstacle course at the company’s headquarters near Salt Lake City. It was a celebratory affair, complete with a reggae band, but for founder and chief executive Patrick Byrne, it held a tinge of melancholy.
He was about to resign, and not exactly by choice.
The retailer’s chief financial officer had just informed the board of directors that Overstock could not renew its insurance policy as long as Byrne was in charge. The CEO’s incessant broadcasting of his involvement in a “deep state” investigation…. That is one way to put it. Here is another way: Byrne says he came forward because he felt a civic duty to expose the truth to the public. Why spin that as, “incessant broadcasting”? When the Washington Post exposes some mischief to the public, is it “incessantly broadcasting” something, or just “doing the right thing”? Because, after all, “Democracy Dies in Darkness”, right?
…. had irreparably linked his personal life with the public company. On Overstock letterhead the week before, he claimed that he had romanced a Russian agent at the urging of the “Men in Black” — his term for federal agents — and effectively inserted himself into an international political scandal.
Now Overstock’s insurance provider had concerns about the company’s ability to “manage the CEO’s personality and public comments,” according to internal emails obtained by The Washington Post.
In his Aug. 22 resignation letter, dated two days after the anniversary party, Byrne said he’d become ensnared in “certain government matters” and that his “rabbi,” Warren Buffett, had advised him to come clean to the American people. Later that day, Byrne appeared on Fox Business wearing a “Make America Grateful Again” hat With a Grateful Dead “Stealy” skullface on it: Abha is to be forgiven for not making the connection, given her youth.
and claimed a federal agent had offered him $1 billion to keep quiet.
But he was obligated to come forward because, he told Fox, “This country’s gone nuts.” That is correct. As an Asperger’s, however, I have trouble detecting sarcasm. Please let me know in the comments below: is she being straightforward here, or being snarky? Let me know. I go through life wondering when people are being sincere or joking.
Byrne’s resignation capped an unconventional and controversial two-decade run at Overstock.com, a billion-dollar retailer best known for moderately priced home goods. But the company that revolutionized furniture-buying to become one of the biggest successes in e-commerce was now reeling from a series of missteps and diversions, leaving it with hundreds of millions of dollars in annual losses.
Abha left something out. Here is Overstock Retail’s annual GAAP profitability 2009-2016, a B2Cecommerce record that is essentially unmatched, I believe.
In early 2017 I informed the public that due to Wayfair’s emergence, and the capital market’s apparent willingness to subsidize endless losses endlessly (that is, Wayfair’s losses have been and will be endless, and the capital market so far seems willing to capitalize that endlessly), that I was going to hit the throttle, accelerate, and take Retail’s losses to somewhat over $100 million while accelerating. I also said that for one year we were going to sink a similar amount of capital supporting ≈ 20 blockchain ventures). My hope was that by doing so we might start getting the strange (and to this value-investor, counter-intuitive) valuations of other Internet firms. I did hit the afterburner, we did touch 20% growth, we did lose just what I said we were going to lose.
See the graphic below illustrating our history of profitability next to Wayfair’s, and what happened when we hit those afterburners in 2017. Yet the market did not give a damn at all. Our valuation did not budge. So I killed the afterburner. On the blockchain side, we sank just what we said we were going to sink into supporting those ventures.
So I announced beforehand what we were going to do, we did it. The capital market yawned. Abha calls that “a series of missteps and diversions”. Was it a misstep to see if the market would value Overstock at something other than .15 X sales (after delivering years of profitability and growth, and having no one care whatsoever?) Was it a “misstep” to to see if we could get something closer to the 2-4X sales valuations routinely enjoyed by competitors who dream of having a string of profitable years such as we show above? Could be. It did not work, that’s true: the capital market did not care. But is it correct to call that a “misstep”? It seems to me we stepped just where we said we were going to step. Is funding the blockchain revolution actually a “diversion”? Time will tell.
The company’s flagship site had become an afterthought for Byrne, 56, who wanted desperately to sell it to focus on his cryptocurrency businesses. This is 2/3 false. Retail had not become an afterthought. Why should you, the reader, believe this? Because I said that in 2019, by reversing course and jettisoning the Wayfair strategy depicted above, Retail’s bottom line would improve > $100 million in 2019. And it looks well on track to do that. Q2 already showed positive adjusted EBITDA . Such improvement is not often normally a sign of something being, “an afterthought”.
But perhaps the biggest bombshell was Byrne’s claims of entanglement with the FBI. In a corporate news release last month, Byrne said he had been assisting federal agents in their investigation of Russian election interference through his three-year relationship with Maria Butina, the accused Russian agent.
Overstock shares fell 36 percent within days of the news release as anxious investors absorbed Byrne’s accounts of political intrigue, espionage and, in his words, a “handful of trysts” with Butina. The board was losing patience, and its chair, Allison Abraham, had begun forwarding hate mail to him, he said. Abraham did not respond to a request for comment.
Soon Overstock’s insurance carrier was expressing reservations about renewing its liability plan for directors and officers, a scenario that corporate insurance experts say is highly unusual.
“I’ve heard of companies that are too toxic to touch, but for one individual to be a liability risk for the whole company? That’s pretty extraordinary,” said Dan Bailey, an Ohio-based lawyer who has been drafting such policies for more than 30 years. “I don’t think I’ve ever seen that before.”
Note both in the oppening and here what sounds like skepticism being suggested by Abha. I supplied Abha the emails both from our then-CFO, and from the insurance brokerage, Marsh, that make clear it was “impossible” for us to get insurance at any price. “Not a question of price, a question of coverage” as one of those emails puts it. I would say that is tantamount to having, “no choice” One cannot expect directors and officers to work for a firm without being personally insured (and try recruiting any who would). Abha knows all this and possesses those emails. She disbelieves that it being “impossible” for a public company to get insurance does in fact give me no choice about stepping down as CEO? Again, Abha’s attitude towards what she is writing is difficult for me to discern. But she DOES have the emails from the CFO and from our insurance broker, Marsh. They both have a duty of loyalty to the company to tell the truth. Is she doubting their word?
Internally, executives explored whether they could get a policy that covered all directors and officers except Byrne. When it became clear they couldn’t, Byrne says, he knew it was time to walk away.
“I figured that when one is having to parse finely what ‘impossible’ means when it comes to getting insurance, it was time to leave,” said Byrne, who spoke to The Post by phone and through more than 80 emails over three weeks.
Overstock was designed to keep its shoppers guessing.
The site began as an online flea market where wholesalers could offload just about anything, including exercise machines, bedsheets and Star Wars figurines.
The company got its start in 1999, at the height of the dot-com boom, when Byrne took a $7 million stake in D2: Discounts Direct, an online outlet for excess inventory and relaunched it under the new banner. It grew rapidly: Annual revenue catapulted from $1.8 million in 1999 to $25.5 million in 2000. By 2002, the company saw $92 million in revenue and turned its first quarterly profit. Props to Abha for noting that. For 15 years, not one journalist has done the research or had the courage simply to note that simple fact. It is interesting to me that in her emails to me she noted how exceptional this fact is. She even calculated the amount of capital it took for Overstock to reach a profitable quarter versus the extraordinary amount taken by Amazon. However, her calculation and comparison of us with this Amazon on this point has been omitted from this article. Odd, that.
In fact, because this was just at a point in my correspondence with Abha that some crucial ground was covered, central to much of the story she is telling, I have found and reproduce here our full interaction on that point, so you can see it then judge it against what the Washington Post has published, and what it does publish Sunday.
ABHA TO PATRICK:
Thanks, this is helpful! I’m working on calculating the amount of capital it took to reach Q4 2002 profitability – looks like Overstock raised $39M when it went public, and then adding in previous investments. Does that seem right to you? Or are you getting to that figure another way? (Alternatively, I could show how much Overstock posted in losses before it turned a profit, vs. some of the others like Amazon, which lost $2.8B before having a profitable quarter.)
PATRICK TO ABHA
Yes the way you’re going about it is correct. Actually, you would just want to look at the balance sheet at the end of the first profitable quarter, and look at the bottom of it for the line that says “retained earnings“. It would be a negative number at that point. Whatever that negative number is, is how much capital it took to reach That point from the inception of the company.
Arguably, you might even want to do it at the (sic) read that number from the end of the previous quarter.
And yes, I did not want to make the comparison with your owner, but that would be the appropriate comparison.
Now you perhaps see why we were always a little flabbergasted. We went so far on so little capital compared to everybody else. And yet once I came out and started talking about the settlement issues, and how I thought they were going to collapse the financial system, Wall Street shut it stores [its doors] to us, basically blackballed us.
Not much to look at, but this is a document I got out of our litigation with Goldman. it took 5 years and $20 million of discovery to get it. “Securities Lending” turned out to be 75% of the revenue of Goldman Sachs (this was ’08 or ’07 (sic)
ABHA TO PATRICK
Oh man! Thanks for sharing this. Very interesting.
And thanks re: retained earnings. I see an “accumulated deficit” of $55.7M during Q4 2002, so will use that in the story. Thanks for your patience here.
I will return now to Abha’s article’s text. However, there is a lot in that previous exchange worth unpacking. Let us see how Abha and the Washington Post handle it in their Sunday print.. but one thing I can assure you: How Abha opened that part of the xchange, the comparison she made, is one that not a single other journalist in America has ever made, from Bethany Mclean forward. Not in 20 years has a journalist ever looked at such a comparison between us and Amazon or, for that matter, us and any other company. Not one of the dozens of business journalists who have written about us has ever figured out what Abha figured out at the opening of that exchange. Given that they are business journalists, and given that (my understanding anyway) is that Abha is not primarily a business reporter, one must give real props to Abha. It may also tell us lots about other things (e.g., the state of American business journalism in America). Now, back to her article.
“In many ways, Overstock revolutionized e-commerce,” said Stormy Simon, who started working for the company in 2001 and was its president from 2013 to 2016. “We were the first to ship couches and huge rugs across the country. There wasn’t a lot of competition — it was just us, Amazon and eBay.”
Many of the company’s early practices have become standard in online shopping. Overstock was a pioneer in “drop shipping,” in which companies cut out the middleman by allowing third-party vendors to ship directly to customers. Meanwhile, its Club O membership program — introduced in 2004, a year before Amazon Prime — allowed shoppers to pay a flat fee for a year’s worth of free shipping. (Jeff Bezos, the founder and chief executive of Amazon, owns The Post.) Credit to Abha for noting these, and for the Post to publish them, all things considered.
By the mid-2000s, though, new competitors emerged. Overstock moved to improve efficiency and invested heavily in updating its computer systems. But it ended 2005 with $25 million in the red. A year later, losses widened to $97 million.
Its stock also was in free fall, shedding about 80 percent of its value from 2005 to 2007. Byrne attributed that decline to systematic problems on Wall Street, including naked short-selling, in which investors bet against a company’s stock without having borrowed shares. Through the entire range of years Abha cites, and one more year beyond, Overstock was on the SEC’s Reg SHO Threshold List, a list of companies seeing excessive failures to deliver in their stock, which is how markets are manipulated. That is not my opinion: read this string of articles from 2008 when regulators across the world figured it out as well, and admitted it publicly. This question was settled over a decade ago.
It was all part of a wide-ranging Wall Street scheme, he told investors in a 2005 conference call, that involved “miscreant” hedge funds, high-profile journalists and the SEC. He claimed someone called “the Easter Bunny” had clued him in on the conspiracy, and that it was being overseen by a “Sith Lord,” a reference to a Star Wars villain. (In later interviews, he compared the network of “miscreants” to al-Qaeda.) Abha left out some important facts here:
I made clear in those interviews that the Sith Lord to whom I was referring was Stevie A. Cohen (“someday I am going to SAC up and tell the world who the Sith Lord is”). Several years later, the United States Government forced Cohen to pay a a $1.8 billion fine and commit to not touching the public markets for several years (and fought for but missed an indictment: this is the backstory of the HBO show “Billions”).
The comparison with Al Qaeda was, I said explicitly at the time, in organizational structure: a band of fellow travelers rather than a top-down hierarchy. It is called a “metaphor”. Oh, exactly as proved to be the case regarding Cohen’s SAC and a string of about 15 hedge funds, some of which (e.g., Diamondback) had spun out of Cohen’s organization. The series of arrests you saw on Wall Street 2009-2011 turned out to be from across a loosely affiliated group of fellow-traveling hedge funds (some of them had spun out of SAC, some were in a fantasy football league with Cohen)… exactly as I described.
“Easter Bunny”: yes, the source did not want me to know his real name. I still don’t. Has the Washington Post ever worked with a source who would give clues to research but not reveal his real name, and used only a fake one like “Barney Rubble”? Most papers I know have.
Although the comments raised eyebrows, the company’s board made no public effort to rein him in.
“I listened to that conference call with my jaw on the floor,” said a former executive who spoke on the condition of anonymity to discuss internal affairs. “But of course nobody pushed back. Everyone was working for Patrick. It was his company, and that was it.”
Byrne became more outspoken over time and sought a bigger platform. He started a website, DeepCapture.com, where he laid out his views…. Props to Abha and the Washington Post for mentioning this, the website that dares not speak its name. Well, MSM normally dares not speak its name, anyway. She might also have noted that in 2008 and 2009 in Internet-wide polls it was voted the best website for Business Investigative Journalism and the best to learn about Corruption in America. Those seem like rather salient omissions.
… and frequently took aim at former colleagues, journalists and hedge fund managers. (In a recent high-profile libel suit, a Canadian judge ordered Byrne and his site to pay nearly $1 million to a Vancouver businessman after DeepCapture accused him of being an arms dealer and terrorist.) Abha may have noted that the man in question ran the largest boiler-room (i.e., “Wolf of Wall Street” type operation) in the world. And that it was owned by BCCI, which collapsed in a gigantic banking scandal around the year she was born. What caused its collapse? It turned out to be the bank of choice for arms dealers and terrorists (e.g., Carlos the Jackal, Colombian narco-terrorists, etc.) Also, that I could have simply avoided the case using the same law that protects other journalists and publishers in the USA: simply on principle I posted the $1.2 million bond and fought it out in Canada to protect free speech both there and, more importantly, in the USA. There was a time a paper like the Washington Post would have applauded that. Because “Democracy Dies in Darkness”.
But the campaign also drove his billionaire father, John Byrne, Pop was never a billionaire. He was worth about $400 million when he died in 2013. But that is still a credible sum, Lord knows: still, wonder Abha did not ask, if she was going to say something like that. to resign from Overstock’s board. The man widely credited with rescuing Geico from bankruptcy in the 1970s said at the time that he disagreed with his son’s “jihad” against Wall Street. (He rejoined the board four years later, saying his son had been “right all along.”) Good of Abha to note. Most journalists do not have the integrity to note that second part.
Yet this is where I believe Abha has slipped into being less than intellectually honest (though the fault is likely her editors’), as she knows that DeepCapture was not about “taking aim” at journalists or hedge funds. This is an important point, important enough to once again break from Abha’s text, to ive you, the public, the information I gave Abha, so that you have it and can judge what she has written so far, and what comes out Sunday.
It was a frequent refrain of mine during those years that my fight with Wall Street was not about me or Overstock, it was because I knew the system was going to collapse. Please see these 7 points.
- The original DeepCapture speech in front of 1,000 hedge funds that set the thing off, where near the end I say precisely that. After laying out the whole theory for 40 minutes, I said : You’ll note that there is a word you have not heard me use. You have not heard “Overstock”. This fight is not about me, or my company. I’m doing it because think the market is going to meltdown.
- In one page introduction on DeepCapture.com in 2007, I culminate my three warnings with these words: Chapter 7 – Unsettled Trades & Systemic Risk: A third side effect of this crime is that it has created in our country’s financial system a crack so deep it could trigger a systemic collapse.
- Here is a 3 minute montage of clips (“Economic Warnings from Patrick Byrne”) from 2005-2008 where I note that the settlement system had slop that was going to crater the financial system, and that this was not about me or Overstock.
- Noted (and generally excellent) financial journalist Charles Gasparino later said in a book regarding the 2008 crisis and on CNBC, “Patrick Byrne was right all along…That guy that that everybody made fun of…”
- On October 23, 2008, Greenspan went before Congress and attribute the meltdown to the “settlement” system. He might as well have said (as Charles and my Pop eventually did), “Patrick Byrne was right all along.”
- Please scan through the 20+ articles excerpted here from 2008: “Do I Live in a Synthetic Reality?” Do-It-Yourself Home Test . They document how the regulators of the USA and the G-20 became adherents of the theory that I had been espousing for 4 years.
- At the end of 2008 (a special year in the history of Wall Street), the Wall Street Journal published this story: “2008 Lookback: Best Calls of the Year”. In it they listed 5 people who had called it right. There, after Nassim Taleb and Nouriel Roubini, was #5:
- “5. Patrick Byrne Gets His Due. The quixotic chairman of Overstock.com, one of the more colorful chief executives around, has been pounding the table on naked short-selling for years. This year, the Securities and Exchange Commission finally looked into it and issued stringent rulings. Now, it wasn’t enough that a brokerage shorting a stock knew of the availability of shares to be borrowed – they had to deliver them on time as well, and if they didn’t, they’d be barred from engaging in another short-sale unless the shares had been borrowed already. Of course, Mr. Byrne’s company’s stock still fell 25% on the year, but never mind.”
Simply so there is no question, I again post this from Greenspan:
I would love to see evidence of the Washington Post’s prescience regarding Wall Street’s coming collapse during those years…. Oh wait, there isn’t any (am I getting the Millennial sarcasm thing right?) .
Yet it is verboten, absolutely verboten, to acknowledge that the focus of DeepCapture was the systemic risk posed by our sloppy settlement system and that this turned out to be incredibly far-sighted. Before the collapse of 2008 no one would ever mention this claim, no matter how many times I publicly said words to the effect: Forget me, forget Overstock, this is about a collapse of the financial system (watch those three minutes of clips again).
Strangely, after the collapse of 2008, when one would have though they would finally acknowledge this, mention of it became even more verboten (with exceptions such as I noted above). Why is that? Because by ignoring or distorting my message for those three years, the Establishment media had slid its car keys into the pot in a game of poker. They violated all norms of journalist ethics in how they came after me, so confident were they they would never be shown up (which is simply because, in general, they don’t know how to think for themselves). They bet their credibility, and they lost it to me. That is why it is the subject which dares not be mentioned.
Incidentally, Abha has all of the above links, and has had them for a week or more. It was one of the main things we discussed by phone. She is now fully aware that she has misrepresented DeepCapture by omitting what it was really all about in the days leading up to 2008, said over and over and over again with 100% clarity. At the time, the media refused to report that this is what I was saying, instead choosing to portray it as just a tiff between me and some hedge funds. It is good to know that even today, 11 years later, the MSM media is still afraid to acknowledge that simple truth. The significance is too enormous: they spent three years spinning and downplaying my warnings to the public about the possibility of systemic collapse due to slop in our settlement system, and then the 2008 crisis happened, and Greenspan pointed “settlement” out as one of the three causes.
But this time, you the reader can join in my wonder at this fact. Because the Post is going to publish this story (or a related version of this) in its print version on Sunday. So I invite you to join the party. Please familiarize yourself with the 7 links above. Then write Abha (her email is public: abha.bhattar[email protected]). I have learned that she is taking today off, so I suggest you tell her that you have reviewed the 7 links above, and are curious to see if she will remain with her distorted description of DeepCapture for her print article, and why is it that the Washington Post (where “Democracy Dies in Darkness”), is still, 11 years after the fact, reluctant to convey the truth about this?
UPDATE: I HAVE LEARNED THAT ABHA IS TAKING THE DAY OFF. SO YOU SHOULD WRITE CAMERON BARR ( [email protected] ) WHO IS EDITING THE FEATURE COMING OUT SUNDAY, I BELIEVE, AND MARTIN BARON ( [email protected] ), HER EXECUTIVE EDITOR. BECAUSE, YOU KNOW, “DEMOCRACY DIES IN DARKNESS”.
“It became all about, ‘I’m going to take down Wall Street,’ and that became more important than the business,” said Simon, the former president. “Patrick just didn’t love retail after that.”
I am sad to learn that Stormy feels this way.
I will again post the record of profits that followed, virtually unique in B2C eCommerce. Odd for a guy that was not paying attention to his retail business.
In 2007, Byrne sued nearly a dozen major Wall Street banks, including Goldman Sachs and Morgan Stanley, for $3.5 billion, alleging that a “massive, illegal stock market manipulation scheme” had driven down Overstock’s share price. In 2010, several of the banks settled out of court for a collective $4.4 million. Merrill Lynch’s case extended into 2016, when it agreed to a $20 million settlement. (He also collected a $5 million settlement from Rocker Partners, a hedge fund he claimed was manipulating the company’s stock.)
“The lawsuits ended successfully,” a spokesman for Overstock said. “And the regulatory changes advocated by Overstock lessened the debilitating consequences of the 2008 financial crisis to some of the largest banks in this county.” That same year, the Securities and Exchange Commission banned “abusive naked short selling.”
Byrne said he personally bankrolled the $30 million for his “mitzvah with Wall Street,” which former employees say began taking priority over the company. “The oligarchy picked a fight; I clubbed them like a little baby seal,” he said in an email. “It was an honor to be able to put that wealth to such good purpose.”
Byrne’s deep distrust of Wall Street lingered. Until a few years ago, the company kept $10 million in gold and silver coins, along with enough food to feed its employees for three months (the stockpile is now down to a few weeks). “Why? To make our firm robust in the face of a number of social ills that could beset our nation,” Byrne said in an email to The Post. Abha gives no indication why this is an expression of a distrust of Wall Street. Because it is not: it is a distrust of our fiat-money-based, fractionally-reserved, and Keynsian-multiplied magic money tree greater financial system in general. And EMPs.
The company also invested heavily in blockchain, the technology behind digital cryptocurrencies. It began accepting bitcoin in 2014, making it the first mainstream retailer to do so, and has continued to pour hundreds of millions of dollars into Medici Ventures, its blockchain investment business, and tZero, its trading platform for digital coins. (That part of the business has been the subject of a years-long investigation by the SEC, though executives have said there has been no indication the agency plans to pursue legal action. The SEC declined to comment.)
Byrne has long confounded those around him. He has a doctorate in philosophy from Stanford University and a black belt in taekwondo. Much of his world view, he has said, was shaped by three bouts with cancer, starting with a diagnosis of testicular cancer in his early 20s.
Internally, Byrne was known for having grandiose plans and a short attention span, according to interviews with former employees and executives, and one former board member who spoke on the condition of anonymity to discuss the company candidly. Byrne relied heavily on an insular group of executives who referred to themselves as “coyotes” and rarely challenged his views, several of them said.
Byrne left his mark on every part of the company: Its newest headquarters was designed to look like a peace sign from above, and like a “corporate version” of the Roman Colosseum from ground level, according to a company release. He also helped create an internal voting system that allowed employees to weigh in on company decisions, such as whether Snoop Dogg should perform at the office or who should be fired. And more importantly, things like organizing our product road maps and ordering our strategic priorities. This is another point Abha knows but has curiously omitted. Again, my sense is that Abha personally is better than this, and this stuff is her editors’ at work.
In recent years, Byrne had been trying to sell Overstock’s retail business, setting up meetings with Walmart, Target, Home Depot and the furniture rental company Aaron’s, according to a person involved in the discussions who spoke on the condition of anonymity because the talks were not public. Representatives for the four retailers declined to comment, as did Overstock. As have I.
Byrne said he had hoped to sell the retail business in an auction scheduled for March 8, 2018. But days earlier, the company disclosed that the SEC was investigating its blockchain business. Almost immediately, “everybody backed out,” Byrne said, and the company was forced to put its plans on hold. Overstock has yet to find a buyer.
Meanwhile, Byrne doubled down on bitcoin, pouring his ambitions and money into blockchain technology and start-ups — which is what led him to Maria Butina.
Their story began at Planet Hollywood in Las Vegas.
It was 2015, and Byrne had just given a speech about cryptocurrency at FreedomFest, an annual meeting of libertarians that attracted such speakers as Donald Trump, Steve Forbes and Peter Thiel. He said he quickly noticed a “striking redheaded young woman” waiting to speak with him.
Butina introduced herself as the president of a gun rights group in Russia and handed him her business card, Byrne wrote on DeepCapture.com. The next day, she approached him again, with a different card. This one identified her as a special assistant to the vice chairman of the Central Bank of Russia. “Dr. Byrne, please allow me to tell you why I am really here,” she said, according to Byrne. “I have been sent here to make contact with you.”
Butina’s attorney, Robert Driscoll, disputes Byrne’s version of events: “She wasn’t sent to the U.S. by anybody, and she certainly wasn’t sent to the U.S. to make contact with Patrick,” he said, though he confirmed that the two had a romantic relationship.
Byrne invited Butina to his hotel suite for a lunch meeting. Butina told him she was being groomed to become the next president of Russia, Byrne said, and invited him to Moscow to speak about bitcoin at the Russian Central Bank.
Byrne said he then contacted federal authorities and asked whether it would be okay to accept Butina’s invitation to Russia. It took weeks, he said, to get an answer but eventually he received a “green light” telling him to move forward. He had no expectation that their relationship would turn romantic, but Butina “swept me and my liberalism off my feet,” he wrote on Deep Capture. A spokeswoman for the FBI declined to comment.
He said they spent a weekend together in New York, then met up every so often in different parts of the country. It reminded him of “Lost in Translation,” he said, referring to the 2003 film in which an aging actor played by Bill Murray and a recent college graduate played by Scarlett Johansson have a series of intimate meetings.
“We had a handful of trysts like that,” he told The Post in an email, “spread across time, in the background of the normal narrative arc of her life.”
In late 2015, he said, Butina told him she’d been given orders to make contact with the presidential campaigns of Hillary Clinton, Donald Trump, Marco Rubio and Ted Cruz. The specific order Maria always spoke the names was this: Hillary, Cruz, Rubio, and Trump. Sometimes it was Hillary, Rubio, Cruz, and Trump. (Driscoll disputes this.) Driscoll may be right to dispute this. I do not know if they could be called “orders” because Maria was not employed by anyone. She was guided by Torshin, she told me, in these priorities. But I think Driscoll is right to suggest that they should not be thought of as “orders”.
Byrne said he reported this to “the Men in Black.”
Two former FBI special agents deemed the claims improbable. It’s unlikely, they said, that a highly trained foreign agent would have revealed her targets. Abha is begging the question. There is quite a bit of doubt about whether Maria is “a highly trained foreign agent” or merely a graduate student who was hoping to network and back-channel between the US and Russian liberals. In fact, even the US government has surrendered any claim that Maria was a “highly trained foreign agent”. How wonderful that the public is getting to see such significant inaccuracies now, and will get to see in real-time how the Washington Post (where “Democracy Dies in Darkness”) handles fixing them for their print story.
— in this case, as Byrne says, the four political campaigns — or that the FBI would have approveda romantic relationship as a means to collect intelligence. They not just “approved” but “requested” . However, I acknowledge that this was highly unusual for the Men In Black. They are good men and women, and they specifically told me that “We are the good guys, we are not like the other guys, we never do this, never in our three careers have we heard of a request like this being made…” etc.
They also dismissed Byrne’s claims that his 2015 phone calls helped spearhead the massive investigation into Russian election interference that culminated in a sprawling, $32 million inquiry by special counsel Robert S. Mueller III. They are either wrong (if they are on the outside) or lying (if they are on the inside).
Byrne said he was never contacted by Mueller’s team.
“There are a lot of steps it seems he’s not aware of,” said John Iannarelli, a retired FBI special agent, who called Byrne’s claims “ridiculous.” “Nothing he has said indicates that he understands how procedures operate.” Yes, I get that a lot. He’s wrong. I know more about how such procedures normally operate than I care to remember. I also can think of the several times in my life I have been told, “You need to understand that you have a ‘non-standard’ relationship with the United States Government.”
When asked why Butina might have revealed her alleged orders, Byrne said she did so while she was “heavily ‘under the influence’” of “large quantities” of serotonin, oxytocin and dopamine — the brain chemicals that spark feelings of love and attraction.
Byrne claims his history with the FBI dates back to 2002, when his friend and former NBA player Bison Dele disappeared in the Pacific Ocean. Byrne wrote on Deep Capture that he had a “minor involvement in helping the authorities sort it out.” (Dele has never been found; authorities believe he and two others were killed by his brother.)
As for Butina, Byrne said that he was under the impression he was receiving orders from top FBI officials. Six months into the relationship, Byrne said, the bureau asked him to break up with her. And he did — by text.
Soon though, Byrne says, the “Men in Black” returned with another request: “They wanted to ask me to rekindle a romantic relationship with Maria Butina,” he wrote on DeepCapture. “Russia was trying to subvert our election, and I was to get to the bottom of Maria Butina. ‘Gloves off.’”
Byrne says he obliged, setting off a chain of events that led to his departure.
Byrne is out — but the turmoil at Overstock remains.
On Monday, the company revised down its earnings forecast for the year — in part because of “significantly” higher insurance costs for directors and officers — and announced that its chief financial officer had resigned. Its share price has tumbled about 20 percent this week.
Former employees say Overstock’s retail site has become overly dependent on sweeping discounts and antiquated ideas. They expressed doubts that the new CEO, Jonathan Johnson, a company veteran who most recently led Overstock’s blockchain arm, would be able to steer the business in a new direction.
“I’ve been shoulder-to-shoulder with Patrick for 17 years,” Johnson, who unsuccessfully ran for governor of Utah as a Republican in 2016, said in an interview. “If Patrick’s the architect, I’m the builder.”
In practical terms, Johnson says, that means Overstock.com — synonymous for many with bed frames and bath towels — could soon become solely a blockchain company. “If the right fit comes along at the right price, well, we could find another home for retail,” he said.
The company’s e-commerce business has faced mounting competition in recent years, not just from rival websites, but also more traditional retailers like Walmart and Target that are doubling down on home goods and furniture. Overstock’s largest competitor — and the one that seemed to most vex its executives — was Wayfair, a company that regularly posts hundreds of millions of dollars in annual losses but has attracted large-scale venture capital funding and has eclipsed Overstock in revenue and market share. Last year, Wayfair posted a loss of $504 million, more than double Overstock’s $218 million loss. Again, see the below graph. And yes, it is true that two years sago I told Wall Street I was going to hit the gas and lose a lot of money in an attempt to copy Wayfair, and we did just what I said, but having seen that no one cared, we snapped it back and by Q2 posted profitable Adj. EBITDA in Retail.
What is even more interesting is that Abha knows (and respect to her, for figuring it out for herself) that the proper number to look at is accumulated capital burned, and there Wayfair is approaching $3 billion. And that they will start showing profits when these two lines cross:
Wayfair’s growing market share, former executives said, was a frequent source of tension within Overstock. And although Byrne’s departure may have helped the e-commerce giant insure its executives in the short term, they say they’re still worried about the company’s long-term prospects.
“You look at it now, and the retail business just isn’t loved anymore,” Simon said. “If you’re not going to feed the baby, you should at least give it up for adoption.”
Byrne is now on an island in Asia, he says, waiting for the whole thing to blow over. He says he has a duty to distance himself — both physically and financially — from the company he started 20 years ago.
He has gold and silver reserves in Switzerland, though he is becoming worried about “the deteriorating world situation.” Last week he sold his entire stake in Overstock — worth $90 million — and is reinvesting some of it in gold, silver and two types of cryptocurrencies, to shield his fortune from “acts of retaliation from the Deep State.”
“That is important because, in fact, I am now going to shellac them,” he wrote on his blog. “Actually, ‘shellac’ is too weak a word for what I intend to do to the Deep State. Sit back and enjoy the show.”
What a wonderful, unique opportunity you, the public, have at this moment. You have Abha’s article on me. You have all the notes I have made herein: corrections, data, graphs, and links, and supplemental information. You have two days before her story appears in the print addition. For the first time I can think of, you have the chance to watch the next sausage link being made. Do not be rude or insulting: actually, Abha is definitely one of the better ones, is smart enough to be one of the best someday, and I can promise you the here-and-there skewing of truth in which she has engaged is far more likely to be a result of the Post’s editorial processes than Abha’s direct fault. Let Abha know you are watching (again, only because it is public will I share her email: [email protected] ) and, after familiarizing yourself with the content of those links, you may ask her why she has chosen to skew certain points to adhere to an 11 year old Party Line.
UPDATE: AGAIN, ABHA BEING OUT TODAY, MAY I AGAIN SUGGEST YOU SEND YOUR THOUGHTS TO HER TWO EDITORS:
CAMERON BARR ( [email protected] ) WHO IS EDITING THE FEATURE COMING OUT SUNDAY, I BELIEVE;
MARTIN BARON ( [email protected] ), EXECUTIVE EDITOR.
Let us see what changes she makes in her approach for the print edition, if any. For the next two days you can live as I have lived for nearly two decades, seeing a story come out when you already know the truth ahead of time, and know that the organization knows the truth.
For the record, my prediction is that they will do one of three things:
- Abja will publish but amend her point of view to account for the things I have documented in this blog (i.e., the honest thing to do);
- They will cancel the story to appear in the print edition this coming Sunday (9/29);
- They will ignore everything and publish the feature story with the same skewing they did here. And that way the public will get to see first-hand, for once, how the sausage is really made.
So help out by clicking those links and contacting the Post (either Abha or her editors) about them. Then let us enjoy this weekend, waiting together to see what emerges from the sausage-making machinery at the Washington Post (where “Democracy Dies in Darkness”).