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Chief Audit Director Jumps Ship From Overstock

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Against all odds, the story of Overstock continues to get worse. The company has been a laughing stock to almost anyone who can be bothered to think about it anymore. It’s the focus of an SEC investigation. It is run by a chief executive whose name—Patrick Byrne—long ago became synonymous with wacky conspiracy theories. It regularly deploys nasty tactics to defame reporters who dare mention its deterioration. An it’s bleeding directors.
The latest news hit on Thursday when Ray Groves resigned from the board. Groves, who once ran Ernst & Young, was the head of Overstock’s audit committee. He was, in the eyes of some observers, the last and best hope the company had to maintaining a sense of credibility. His departure comes as only the latest of a series of resignations by board members. The past year has seen also seen departures by directors John Fisher and John Byrne, the CEO’s father. When your father bails on your company, you know you are in trouble. Or rather, you would know. Patrick Byrne seems to think it’s a sign of his company's strength. Or something. We’ve long ago given up trying to figure out anything about what goes on inside of Byrne-the-younger’s brain.
But other’s have not. After we took off for the long-weekend, Gary Weiss, Sam Antar and Herb Greenberg all looked into the latest resignation. What’s behind the latest departure? Well, the same thing that was behind the departure of Fischer and Byrne-the-elder: the CEO’s ridiculous “jihad” against the “sith lords” on Wall Street he claims are behind a naked shorting conspiracy that is depressing his company’s stock price.
“In a letter contained in an SEC filing this morning, Groves told the company, ‘My resignation relates to the company's prime broker suit.’ That's Overstock's suit alleging that prime brokers are somehow involved in a naked shorting conspiracy,” Greenberg reports.
[But is it more than the Overstock's lawsuit against prime brokers? Read more after the jump.]

Sam Antar, who was the CFO of Crazy Eddie before he was convicted of felony charges related to fraud at the company, knows a bit about what happens when the government closes in on a company. “Many former friends, colleagues, and co-workers distanced themselves from us. Eventually, I would learn that Eddie’s father (Sam M. Antar), brothers (Allen Antar and Mitchell Antar), and his brother-in-law Ben Kuszer had set us up to take the fall. Later, even my cousin "Crazy" Eddie Antar left me out to hang,” Antar writes on his White Collar Fraud blog. “Is a similar situation, going on at”
From the looks of the evidence marshaled by Antar, the answer is an unequivocal yes. The sailors are scurrying for the life-rafts even as a wet-kneed Captain Byrne continues to shout orders to man the guns against the naked short sellers that no-one but him can see.
But is it just the lawsuit against prime-broker’s that sent Groves overboard? Perhaps not. Antar points out that Overstock is beset by problems—he details to accounting and disclosure issues—that that may have prompted the resignation. In a recent discussion on an internet message board, Captain Byrne refused to answer a question about why Groves left, citing board privacy as the reason for his reticence. But this excuse for silence doesn’t seem to be holding up.
Antar and Gary Weiss point out that SEC regulations require exactly the opposite of what Byrne think they do. “Overstock can't just cherry-pick the reason that are least embarrassing and leave the rest, the ones that make the CEO look like a jerk, concealed from shareholders and left in the ‘privacy of the boardroom,’" Weiss writes in his latest post.
Ray Groves Resigns as Director of [Press Release]
Ray Groves Resignation Letter [SEC]
Overstock's Board: Who Will be Next? [Herb Greenberg's Market Blog]
Why are people distancing themselves from CEO Patrick Byrne? [Sam Antar's White Collar Fraud]
Will the Last Director Please Turn Out the Lights? [Gary Weiss]
The "Private Dick' That Patrick Byrne Forgot [Gary Weiss]