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

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.

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

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 ?

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

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 ?

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.

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?

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.

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

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.

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.

“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.

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..

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.

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, 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.

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

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…

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

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

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

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 .

“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…..

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.

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.

<"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.