Patrick M. Byrne

Patrick M. Byrne (born November 29th, 1962) is an American entrepreneur who was the CEO of Overstock.com. In 1999, Byrne launched Overstock, after leading two smaller companies, including one owned by Warren Buffett's Berkshire Hathaway.[2]

Patrick M. Byrne
Born
Patrick Michael Byrne

1962 (age 57–58)
Fort Wayne, Indiana, U.S.
NationalityAmerican
Alma materDartmouth College, B.A. Philosophy, Asian Studies
Cambridge University, M.A. Mathematical Logic
Stanford University, Ph.D Philosophy
OccupationFormer CEO and Chairman,
Overstock.com
Chairman,
EdChoice
Investigative Journalist, Deepcapture.com
Parent(s)
AwardsEntrepreneur of the Year
Websitehttp://www.deepcapture.com

In 2002, Byrne took Overstock.com public. Since its initial public offering, Overstock.com has increased revenue to almost $1.8 billion, while achieving profitability in 2009.[3]

In 2005, Byrne became known for his campaign against illegal naked short selling. Byrne and securities regulators maintain illegal naked shorting has been used in violation of securities law to distort prices of public companies' stock.[4] Under his direction, Overstock.com filed two lawsuits alleging improper acts by Wall Street firms, a hedge fund, and an independent research firm.[5] In each case the defendants have settled with Overstock out of court.

Byrne has advocated for cryptocurrencies such as bitcoin.[6] In January 2014, Overstock.com became the first major online retailer to accept bitcoin.[7]

Byrne took an indefinite leave of absence from Overstock.com in April 2016 because of Hepatitis C complications.[8] Byrne returned in July 2016 as CEO after Hepatitis C recovery.[9] He resigned in August 2019,[10] following revelations that he had been in an intimate relationship with Maria Butina and comments he made supporting the Deep State conspiracy theory.[11]

Background

Patrick Byrne was born in Fort Wayne, Indiana. He is the son of John J. Byrne, former chairman of Berkshire Hathaway's GEICO insurance subsidiary and White Mountains Insurance Group.[12] He holds a certificate from Beijing Normal University, has a Bachelor of Arts degree in Chinese studies from Dartmouth College, a master's degree from Cambridge University as a Marshall Scholar, and a Ph.D. in philosophy from Stanford University.[13][14]

Byrne was a teaching fellow at Stanford University from 1989 to 1991 and was manager of Blackhawk Investment Co. and Elissar, Inc. He served as chairman, president and CEO of Centricut, LLC, a manufacturer of industrial torches, then held the same three positions at Fechheimer Brothers, Inc., a Berkshire Hathaway company manufacturing police, firefighter, and military uniforms.[12][15]

Byrne has a black belt in tae kwon do, and once pursued a career in professional boxing. He is a cancer survivor, and has ridden a bicycle across the country to raise awareness and money for cancer research at the Dana Farber Cancer Institute. Byrne has also supported implementing school vouchers and other educational reforms.[16] Byrne was the largest donor to political causes in Utah during 2003–2006, while his father was the third-largest.[17]

Overstock.com
Main article: Overstock.com

In 1999, Byrne was approached by the founder of D2-Discounts Direct with a request for operating capital. The company had generated slightly more than $500,000 in revenue the previous year by liquidating excess inventory online. Byrne found the idea of online closeouts intriguing, and invested $7 million for a 60 percent equity stake in the company in the spring of 1999. In September the same year he took over as CEO, and the following month the company was renamed Overstock.com.[18][19]

Byrne initiated a Dutch auction IPO of Overstock.com in 2002. The company was one of the first to go public under a system advanced by WR Hambrecht + Co to retain a greater share of capital within the company rather than going to the investment bank underwriters used in conventional public offerings. Byrne has said that competing banks reacted against this, attempting to obstruct the success of the offering through negative reports and by shorting the company's stock.[20] When Google later in 2004 went public via a Dutch auction IPO, Byrne commented that Wall Street firms similarly pushed negative stories, but did not keep it from going forward successfully.[21] Four years after the OpenIPO, one official of Hambrecht, its now former co-CEO Clay Corbus was added to Overstock's board of directors.[22]

Byrne abruptly resigned his board seat and position as CEO of Overstock.com after it was revealed that he had an affair with a Russian agent. Jonathan E. Johnson will serve as interim CEO until a replacement is named by the board.[23]

Campaign against naked shorting and analysts

In a conference call with analysts in August 2005, Byrne said that "there's been a plan since we were in our teens to destroy our stock, drive it down to $6–$10 ... and even a plan for how the company would then get whacked up." He said that the conspirators were part of a "Miscreants Ball," headed by a "Sith Lord," whom he refused to identify but said "he's one of the master criminals from the 1980s." Byrne said the conspiracy included hedge funds, journalists, investigators, trial lawyers, the SEC, and Eliot Spitzer. Fortune writer Bethany McLean said that Byrne had become a "hero to those who believe that short-sellers are the operators of Wall Street's ultimate black box, predators who destroy companies through innuendo, bullying, political connections—and sometimes through an illegal practice known as 'naked shorting.'" Byrne financed and largely wrote a full-page advertisement in The Washington Post which said "Naked short-selling ... is literally stealing money from the widows, retirees, and other small investors."[24] In a letter to The Wall Street Journal in April 2006, Byrne contended that "blackguards have practiced 'failure to deliver'" of securities, were "destroying businesses and (probably) destabilizing our capital markets."[25][26] Since 2005, Overstock has filed two lawsuits relating to the matters under Byrne's direction.[27] After her article appeared in 2005, McLean was attacked by Byrne with such vehemence that she ceased covering him.[28]

In the first lawsuit, filed 2005, Overstock.com filed suit against hedge fund Rocker Partners and the equities research firm, Gradient Analytics (formerly Camelback Research Alliance), saying they illegally colluded in short-selling the company while paying for negative reports to drive down share prices.[29] The defendant (i.e. Gradient Analytics et al.) moved to have the case dismissed, however the California court ruled in August 2006 that the suit should be allowed to proceed.[30] Gradient filed a counter-complaint against Byrne for libel.[31] A portion of this suit was settled out of court on October 13, 2008, when Overstock.com and Gradient dropped the claims against each other after Gradient retracted allegations that Overstock's reporting methods did not comply with rules established by the FASB, stated they believed Overstock.com complied with GAAP standards, and that three directors were independent, and apologized.[32][33] In December 2009, the suit against Rocker, whose name had since been changed to Copper River Partners, was settled by Copper River paying $5 million,[34] payment of which Byrne stated he received on December 9, 2009.[35]

Overstock.com filed a second lawsuit in 2007 against a number of large investment banks relating directly to alleged illegal naked short selling.[36] All parties have settled with Overstock except for Merrill Lynch.[37][38]

Byrne's campaign against naked short selling and others who he feels have targeted him and his company has attracted controversy, though after the crisis in the North American markets in 2008, Byrne received positive press. A Salt Lake Tribune article reported that "These days, when people talk of Byrne, the word 'vindication' comes up a lot."[39]

Libel suit

In October 2011, Vancouver businessman, Altaf Nazerali sued Byrne for libel and defamation in the Supreme Court of British Columbia for articles published in Byrne's "Deep Capture" website. The articles described Nazerali as being involved with "Osama Bin Laden's favorite financier," and that he worked with criminal syndicates including the Colombian drug cartel, the Russian mafia, and various "jihadi terrorist groups" including al Qaeda's Golden Chain. Deep Capture also accused Nazerali of "delivering weapons to war zones in Africa and to the mujahedeen in Afghanistan," of orchestrating "small-time 'pump and dump' scams… [and] bust-outs, death spiral finance and naked short selling," and of carrying out dirty work for "a Pakistani ISI asset" who "works for the Iranian regime." In May 2016, the Court found that the allegations in the Deep Capture articles were libelous and defamatory; Nazerali was awarded $1.2 million in damages, including $500,000 in aggravated damages, $250,000 in punitive damages and $55,000 in special damages.[40] Byrne was permanently banned from publishing these accusations. The Court found Byrne, his employee Mark Mitchell, and Deep Capture "engaged in a calculated and ruthless campaign to inflict as much damage on Mr. Nazerali's reputation as they could achieve." The 102-page decision said "It is clear on the evidence that their intention was to conduct a vendetta in which the truth about Mr. Nazerali himself was of no consequence."[41][42][43]

The judgment was upheld on appeal in August 2018.[44][45][46][47][48]

Media coverage

Media outlets have covered Byrne's statements against naked shorting, including The Wall Street Journal, ABC News with Peter Jennings, Fortune, CBS Market Watch, and BusinessWeek, among others. He has also appeared on Bloomberg TV, CNBC, and Fox News shows such as Your World with Neil Cavuto. In 2002, Byrne was named to BusinessWeek's list of the 25 most influential people in e-Business in 2002: the magazine cited survival strength and vision as qualities that qualified Byrne for the list.[49] and Ernst & Young awarded Byrne the "2002 Milestone Award Winner Utah Region."[16][50] Also in 2003 Overstock came no.1 in MountainWest Capital Network (MWCN) Utah100 award for the fastest growing company in Utah. Fastest Growing category are based on percentage revenue increases in the five preceding years.[51] Byrne also won the first-ever Utah Best of State Awards for Community Development in 2003.[52]

In 2008, Byrne published on his website an investigative report by a Columbia University Graduate School of Journalism reporter, Mark Mitchell, which alleged "a circle of corruption enclosing venerable Wall Street banks, shady offshore financiers, and suspiciously compliant reporters at The Wall Street Journal, Fortune, CNBC, and The New York Times".

In 2019, Byrne announced that had had a relationship with Russian agent Maria Butina and also made claims in support of a deep state conspiracy theory.[53] Byrne also claimed the Federal Bureau of Investigation encouraged him to have a sexual relationship with Butina.[54] After he resigned as Overstock CEO on August 22, 2019, in the wake of that controversy, the company's share value rose by more than 10 percent, before collapsing nearly 50% from that point. [55]

Education policy

In 2005, Byrne provided financial backing to the Class Education, whose goal is to change state laws to require schools to spend at least 65 percent of their operating budgets on classroom expenses. Proponents of the standard contend that it would free up money to increase teachers' salaries without requiring tax increases. Critics say that many services deemed "non-classroom" are necessary for education, including librarians, school nurses, guidance counselors, food service workers and school bus drivers.[56][57][58]

Byrne also serves as co-chair (with Rose Friedman) of EdChoice. The non-profit organization was founded by Milton and Rose Friedman and promotes school vouchers and other forms of school choice.[59]

Byrne and his family contributed most of the funds in support of House Bill 148 in Utah, a bill that would allow the state to provide funding vouchers for students who decide to leave public schools for private schools.[60] In January 2008, it was reported that Byrne and his parents contributed about $4 million to the pro-voucher campaign, or three-quarters of its $5.4 million funding. Opponents of vouchers, funded mostly by the teacher unions, spent $4 million; approximately $3 million came from the National Education Association.[61][62] When that bill was defeated in a statewide referendum (62% opposing vs. 38% favoring),[63] the Salt Lake Tribune reported that Byrne "called the referendum a 'statewide IQ test' that Utahns failed." He said, "They don't care enough about their kids. They care an awful lot about this system, this bureaucracy, but they don't care enough about their kids to think outside the box."[64]

Byrne criticized Utah governor Jon Huntsman for not sufficiently supporting the voucher campaign. Huntsman had before he was elected stated that he was "going to be the voucher governor", and Byrne had donated $75,000 to Huntsman's campaign for governor in 2004. However, when Huntsman was elected he went missing from the debate, and Byrne told the Associated Press that he would now bankroll anyone who could defeat Huntsman at the polls, "even a communist".[65]

gollark: Okay, that's valid potatOS installation code.
gollark: * .
gollark: rm13ugfa? That's right for potatOS?
gollark: What's in each of them?
gollark: Okay, that is WEIRD.

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