Patrick M. Byrne

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Patrick M. Byrne
BornPatrick Michael Byrne
1962 (age 55–56)
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
OccupationCEO and Chairman,
Overstock.com
Chairman,
EdChoice
Investigative Journalist, Deepcapture.com
AwardsEntrepreneur of the Year
Websitehttp://www.deepcapture.com

Patrick M. Byrne (born 1962, Fort Wayne, Indiana) is an American entrepreneur, e-commerce pioneer and CEO of Overstock.com. In 1999, Byrne launched Overstock, after leading two smaller companies, including one owned by Warren Buffett's Berkshire Hathaway.[1]

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.[2]

In 2005, Byrne become 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.[3] Under his direction, Overstock.com filed two lawsuits alleging improper acts by Wall Street firms, a hedge fund, and an independent research firm.[4] In each case the defendants have settled with Overstock out of court.

More recently, Byrne has advocated for cryptocurrencies such as bitcoin.[5] In January 2014, Overstock.com became the first major online retailer to accept bitcoin.[6]

Byrne took an indefinite leave of absence from Overstock.com in April 2016 because of Hepatitis C complications.[7] Byrne returned in July 2016 as CEO after Hepatitis C recovery.[8]

Background[edit]

Patrick Byrne is the son of John J. Byrne, former chairman of Berkshire Hathaway's GEICO insurance subsidiary and White Mountains Insurance Group.[9] 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.[10]

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.[9][11]

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.[12] Byrne was the largest donor to political causes in Utah during 2003–2006, while his father was the third-largest.[13]

Overstock.com[edit]

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.[14][15]

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.[16] 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.[17] Four years after the OpenIPO, one official of Hambrecht, its now former co-CEO Clay Corbus was added to Overstock's board of directors.[18]

Campaign against naked shorting and analysts[edit]

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," who 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."[19] 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."[20][21] Since 2005, Overstock has filed two lawsuits relating to the matters under Byrne's direction.[22] After her article appeared in 2005, McLean was attacked by Byrne with such vehemence that she ceased covering him.[23]

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.[24] 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.[25] Gradient filed a counter-complaint against Byrne for libel.[26] 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.[27][28] 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,[29] payment of which Byrne stated he received on December 9, 2009.[30]

Overstock.com filed a second lawsuit in 2007 against a number of large investment banks relating directly to alleged illegal naked short selling.[31] All parties have settled with Overstock except for Merrill Lynch.[32][33]

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."[34]

Libel suit[edit]

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.[35] 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." [36][37]

The judgment was upheld on appeal in August 2018.[38][39][40][41][42]

Awards and media attention[edit]

In 2011 Byrne was named National Entrepreneur of the Year in the Retail and Consumer Products category by Ernst & Young.

Numerous national media outlets have covered Byrne's campaign against naked shorting. Among them are the Wall Street Journal, ABC News with Peter Jennings, Fortune, CBS Marketwatch, 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.[43] and Ernst & Young awarded Byrne the "2002 Milestone Award Winner Utah Region."[12][44] 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.[45] Byrne also won the first-ever Utah Best of State Awards for Community Development in 2003.[46]

Education policy[edit]

In 2005, Byrne provided financial backing to form the advocacy group 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.[47][48][49]

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.[50]

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.[51] 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.[52][53] When that bill was defeated in a statewide referendum (62% opposing vs. 38% favoring),[54] 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."[55]

Byrne criticized Utah governor Jon Huntsman for not sufficiently supporting the voucher campaign. According to Byrne, 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, to Byrne's disappointment, the moment 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".[56]

References[edit]

  1. ^ Riding on a Raft: Patrick Byrne and Overstock.com, by Duan, Jason, Bachelor, John A III. Journal of Applied Management and Entrepreneurship, January 2006
  2. ^ "05/AR2010040502098.html Overstock's brash CEO delivers 1st annual profit], by Paul Foy, April 5, 2010". The Washington Post. Retrieved 17 August 2018.
  3. ^ "A Boxer and Drug Baron's Unlikely Alliance" Archived 2008-04-12 at the Wayback Machine., The Globe and Mail, March 2, 2006
  4. ^ "Overstock.com Inc. Annual report on Form 10-K, Legal Proceedings, 2007". Sec.gov. Retrieved 17 August 2018.
  5. ^ "Meet Patrick Byrne: Bitcoin Messiah, CEO of Overstock, Scourge of Wall Street". Wired.com. 2014. Retrieved 2015-10-06.
  6. ^ "Overstock.com Becomes First Major Retailer to Accept Bitcoins". Coindesk.com. 9 January 2014. Retrieved 17 August 2018.
  7. ^ Goldman, David. "Overstock CEO Patrick Byrne takes indefinite leave of absence over Hepatitis C complications - Apr. 11, 2016". CNN. Retrieved 25 May 2016.
  8. ^ Berthene, April. "Overstock founder Patrick Byrne returns as CEO - July 27, 2016". Internet Retailer. Retrieved 8 October 2016.
  9. ^ a b ""Patrick Byrne: Off-Price Power," Business Week, Oct. 1, 2002". Businessweek.com. Retrieved 17 August 2018.
  10. ^ "Patrick Byrne biography". Forbes.com. Retrieved 17 August 2018.
  11. ^ "Overstock.com CEO Patrick Byrne". Npr.org. Retrieved 17 August 2018.
  12. ^ a b Riding on a Raft: Patrick Byrne and Overstock.com, by Duan, Jason; Bachelor, John A III. Journal of Applied Management and Entrepreneurship, Jan 2006
  13. ^ Handful give lots of $$, by Lee Davidson and Bob Bernick Jr., May 22, 2006, Deseret Morning News
  14. ^ Overstock.com, Inc. by Jeffrey Covell, in International Directory of Company Histories, Volume 75 (2004)
  15. ^ The Renaissance Man of E-Commerce Patrick Byrne has done more in his 37 years than most do in a lifetime. Will that make his company, Overstock.com, a success? by Nicholas Stein, February 7, 2000, Fortune
  16. ^ Weinberg, Ari. "IPO Dutch Auctions Vs. Traditional Allocation". Forbes.com. Retrieved 17 August 2018.
  17. ^ "Washington Post: Breaking News, World, US, DC News & Analysis". The Washington Post. Retrieved 17 August 2018.
  18. ^ "Internet Retailer - E-Commerce - Online Retailing - Top 500 - Online Sales". Internetretailer.com. Retrieved 17 August 2018.
  19. ^ "The Phantom Menace," by Bethany McLean, Fortune Magazine, Nov. 15, 2005 Archived June 6, 2011, at the Wayback Machine.
  20. ^ "Here's the Naked Truth About Overstock.com". Wsj.com. 21 April 2006. Retrieved 17 August 2018 – via www.wsj.com.
  21. ^ CNET interview with Byrne March 6, 2006
  22. ^ Overstock CEO reflects on Cramer debacle March 28, 2007
  23. ^ Colhoun, Damaris. "The shadowy war on the press: How the rich silence journalists". Columbia Journalism Review. Retrieved 27 August 2017.
  24. ^ "California Courts - Appellate Court Case Information". Appellatecases.courtinfo.ca.gov. Retrieved 17 August 2018.
  25. ^ "Ruling, Superior Court; Overstock.Com versus Gradient Analytics et al" (PDF). Media.corporate-ir.net. Retrieved 17 August 2018.
  26. ^ "UPDATE 2-US research firm countersues Web retailer Overstock". Reuters.com. Retrieved 17 August 2018.
  27. ^ Sage, Alexandria (2008-10-13). "Overstock says settled claims against Gradient". Reuters.com. Retrieved 2008-10-17.
  28. ^ Beebe, Paul (2008-10-13). "Overstock.com settles suit with research firm". The Salt Lake Tribune. Archived from the original on 2008-10-17. Retrieved 2008-10-17.
  29. ^ "Overstock says it settles with hedge fund". Reuters.com. 2008-12-08. Retrieved 2009-12-09.
  30. ^ Metz, Cade, "Overstock's Byrne claims $5m scalp over short selling: A new look for Miscreants' Ball", The Register, December 9, 2009.
  31. ^ "Overstock sues brokers". Deseretnews.com. 3 February 2007. Retrieved 17 August 2018.
  32. ^ "Archived copy". Archived from the original on 2015-07-01. Retrieved 2017-01-17.
  33. ^ [1][dead link]
  34. ^ Steven Oberbeck, Salt Lake Tribune Saturday, August 2, 2008. Also Naked shorting's early critic starts to see some vindication
  35. ^ Mulgrew, Ian (2016-05-07). "Vancouver businessman wins $1.2 million for Internet libel". Vancouver Sun. Retrieved 2018-11-18.
  36. ^ "Supreme Court of British Columbia Decision" (PDF).
  37. ^ "2018 BCCA 104 Nazerali v. Mitchell". www.courts.gov.bc.ca. Retrieved 2018-08-18.
  38. ^ "Stockwatch". www.stockwatch.com. Retrieved 2018-08-18.
  39. ^ Canada, Supreme Court of (2001-01-01). "Supreme Court of Canada - SCC Case Information - Docket - 38113". Retrieved 2018-08-18.
  40. ^ "2016 BCSC 810 Nazerali v. Mitchell". www.courts.gov.bc.ca. Retrieved 2018-08-18.
  41. ^ "'Wild West of the internet': Seven-year online defamation battle ends with $1.1 million award". Vancouver Sun. 2018-08-27. Retrieved 2018-09-01.
  42. ^ ""If it can happen to me, it can happen to you" | Asian Pacific Post | Chinese newspaper -Vancouver, Richmond, Calgary, Edmonton, Winnipeg, Toronto, North York, Montreal". www.asianpacificpost.com. Retrieved 2018-09-01.
  43. ^ "The e.biz 25: Staying Power?". BusinessWeek. September 30, 2002. Archived from the original on May 23, 2011.
  44. ^ "SearchHallofFame.aspx Ernst & Young Entrepreneur of the Year, Hall of Fame". Eoyhof.ey.com. Retrieved 17 August 2018.
  45. ^ "MountainWest Capital Network". Mwcn.org. Archived from the original on 2008-07-25. Retrieved 17 August 2018.
  46. ^ Best of State premiere is a winner, by Jake Parkinson, Jun 23, 2003, Deseret News (Salt Lake City),
  47. ^ Teaching Schools How to Spend By Matthew Cooper Jun. 20, 2005, Time magazine
  48. ^ Finder, Alan. "Here's an Idea: Put 65% of the Money Into Classrooms". Nytimes.com. Retrieved 17 August 2018.
  49. ^ "Stateline". Stateline.org. Retrieved 17 August 2018.
  50. ^ Friedman Foundation Board of Directors Archived 2009-02-01 at the Wayback Machine.
  51. ^ "Tribune poll: Anti-school vouchers camp has 20-point lead". Sltrib.com. Retrieved 17 August 2018.
  52. ^ "Financing voucher fight". Deseretnews.com. 1 November 2007. Retrieved 17 August 2018.
  53. ^ "Voucher battle costs both sides total of $9.3M," Salt Lake Tribune, Jan. 8, 2008,
  54. ^ "Voters dislike vouchers". Azcentral.com. Retrieved 17 August 2018.
  55. ^ "Archived copy". Archived from the original on 2007-12-28. Retrieved 2007-11-07.
  56. ^ ""Overstock chief blasts Huntsman over vouchers," the Associated Press, Nov. 8, 2007". Heraldextra.com. Retrieved 17 August 2018.

External links[edit]