Overstock.com: Patrick Byrne's Private War Against Naked Short-Sellers

| About: Overstock.com, Inc. (OSTK)

In yet another in his ongoing series of "man bites dog" stories, Gary Weiss chronicles the latest escapade of one of my column's picks for worst CEO's of the year for two years straight: Overstock's (NASDAQ:OSTK) Patrick Byrne.

Reading through Gary's post, which was about a post Byrne himself made on his own message boards at Overstock, I couldn't help but think how delusional the good Doctor (as in Ph.D, as if we are supposed to be impressed) has truly become. Not that he already wasn't hovering well above this planet when he gave his infamous "Sith Lord" speech of several years ago, in which he tried to connect the dots between hedge funds, government officials and journalists in what he alleged was one of the great scandals of all time. All of us (me, NY Gov. Eliot Spitzer, Jim Cramer and a host of others) supposedly were being controlled by a mysterious "Sith Lord" who was said to be one of the great demons from Wall Street's past.

It was so bizarre as to be truly laughable. Byrne threw out libelous statement after libelous statement with no regard to truth. He appears to have tried to sucker in a few gullible journalists on the notion they would win the Pulizter Prize if they could crack this story wide open. (I'm just guessing on that one, but one reporter spent close to a year coming after me and others -- openly claiming that he believed everything Byrne was saying -- before finally giving up and quitting his job.) And Byrne filed a number of lawsuits, one of which included at least one affidavit filled with falsehoods about yours truly.

Acting like a spoiled rich kid, who never had to play by the rules, Byrne became a modern day Sen. Joe McCarthy, except instead of going after Communism, and calling everybody a Communist, his rant zigged and zagged and zigged around a central theme: That Wall Street and the modern economic world, as we know it, was about to be destroyed by illegal naked short-selling in the stock of his company and others. Pretty soon all short-sellers were "illegal" naked short-sellers and all journalists who had been known in the past to quote them, and also happened to question his motives or his company's prospects, were "captured," "co-opted" and/or "corrupted."

Enter Byrne's latest post: As Gary points out, Byrne whines about how rather than going after all of the people he wanted them to go after, regulators instead have turned their attention to him, making him "the target of a federal investigation." Byrne goes on to say: "I have no beef with it, actually. Everything I have done has always been legal and ethical" -- at this point Gary uses a picture of Pinocchio -- "but I do recognize that it has been irregular and, coloring outside the lines as far as I have, I do not begrudge the federal attention I have received."

But that's not the point of Byrne's post: No, in the wake of the market's mini-meltdown last week, he explains that it was he, Patrick Byrne, who was trying to warn regulators that "we were standing at the edge of an economic crisis perhaps comparable to the 1929 market collapse, due primarily to the SEC having become a 'captured regulator' which turned a blind eye to the fraud it was created to suppress." He wisely doesn't use the term "naked short-selling." Instead, in an apparent attempt to capitalize on the market's turmoil, he refers to "latent derivative risk (in the form of unsettled trades in our settlement system) among a vast network of hedge funds and their prime brokers."

In some way, dear readers, it would appear, our pal Patrick was trying to suggest that the market's latest upheaval is the result of (drumroll, please!) naked short-selling and other problems at the SEC. He talks about how he tried to "open the eyes of the financial media" and how he was vilified. Poor, poor (richer than rich) Patrick.

The ironic twist here, to those who have been following all of the elements of this saga, is that the market's meltdown wasn't at all tied to naked short-selling, and related issues; instead, it was tied to the mortgage mess, which started with subprime mortgages.