Fake News Pioneer Patrick Byrne Faces Reckoning

02/16/2017 01:29 pm ET Updated May 15, 2017
Judd Bagley, founder of the Deep Capture fake news site, after his arrest on eight forgery counts.
Utah County Sheriff's Office
Judd Bagley, founder of the Deep Capture fake news site, after his arrest on eight forgery counts.

There’s been a victory in the struggle against fake news, and chances are you’ve never heard about it.

I’m referring to a legal battle involving a right-wing financier named Patrick Byrne, CEO of Overstock.com. A few months ago he was trounced in a Canadian court for outlandish lies on his fake news website, “Deep Capture.”

At the end of this month Byrne has a moment of truth: he must either post with the court nearly C$1.5 million in a long-shot effort to overturn the libel verdict, or let a humiliating court judgment stand. Either way, “Deep Capture” is kaput, its credibility shattered by the libel suit and the forgery conviction of Judd Bagley, the Byrne deputy who founded the site.

The Byrne saga provides a blueprint for how fake news can be trounced. It takes considerable fortitude—and, alas, financial resources, which most victims of such scoundrels simply do not have.

I’ve written about Byrne over the years. He’s a kind of bush-league Donald Trump, a “born on third base but thinks he hit a triple” kind of guy, noted for his attacks on the press, loony conspiracy theories, nauseating misogyny and well-documented accounting games.

Byrne has hit back against his critics and the press with ”Deep Capture,” the brainchild of his former public relations director, a convicted forger and drug addict named Judd Bagley. Byrne also put on his payroll the right-wing conspiracy theorist Mark Mitchell. ( Bagley went back on the Overstock payroll before the libelous articles were published and has since left the company to head PR at InsideSales.com. He was dismissed from the case, as was Overstock itself.)

“Deep Capture” is pretty much defunct in recent months, and now is only dusted off on occasion to give the rare skeptical journalist a shot across the bow. The last time he did that was in November 2015, in a post attacking M.L. Nestel of the Daily Beast, one of thew few mainstream publications to probe Byrne. Nestel was not scared off. Most journalists are, I’m sad to say.

While it was active, “Deep Capture” churned out a steady diet of convoluted conspiracy theories and childish name calling (I was once compared to “Scaramouch,” which I guess is supposed to be an insult). One of those “articles” targeted an obscure Vancouver businessman named Aly Nazerali. It’s not clear why he targeted Nazerali. He was not a critic of Overstock, but was a secondary player in a conspiracy theory whipped up by Mitchell as “investigative journalism” to burnish the site’s luster.

The problem is that it wasn’t journalism—it was sheer nonsense. As the Daily Beast article recounted:

. . . Mitchell described Nazerali as a man in cahoots with “Osama Bin Laden’s favorite financier,” and said that he worked with a variety of criminal outfits around the globe, including La Cosa Nostra, the Colombian drug cartel, the Russian mafia, and various “jihadi terrorist groups” including al Qaeda’s Golden Chain. [The site] 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 ISIS asset” who “works for the Iranian regime.”

Nazerali was raked over the coals by Byrne’s lawyers in days of pretrial examination. But at the trial the defendants did not put on a case, producing not a shred of evidence nor any witnesses. The judge blasted Byrne & Co. for abusing pretrial discovery, saying in his decision:

The reasonable inference to draw is that they knew from the beginning of the trial that they could not justify the Articles’ false and extravagant language. Their approach to the defence of the action was an attempt to intimidate the plaintiff and to humiliate him into abandoning his lawsuit.

In justifying an award of punitive damages, the judge pointed to the extreme malice shown by Byrne and Mitchell, “the overt animosity, even hatred of the plaintiff, expressed by Mr. Byrne,” their “reckless indifference for the truth” and “reckless disregard for the reputation of non-parties.” The decision singles out a creepy attempt to blackmail Nazerali, contained in an email published in the decision.

Overstock CEO Patrick Byrne after his <a rel="nofollow" href="http://garyweiss.blogspot.com/2013/02/the-lessons-from-overstoc
Salt Lake City PD
Overstock CEO Patrick Byrne after his arrest on weapons charges in 2013: “The truth was of no consequence.”

The decision spells out all the ingredients that go into running a fake news site:

  • Contempt for the truth. “Mitchell did not attempt to contact the plaintiff before posting the Articles” and blew off Nazerali’s effort to get Mitchell to remove his lies. “No effort of consequence was made after Mr. Nazerali contacted Mr. Mitchell to review the Articles to determine if they were false. On the contrary, Mr. Nazerali’s approach to Mr. Mitchell was treated with scorn.”
  • Personal animosity. The decision noted that Byrne said to Nazerali during a deposition, in the presence of the court reporter and parties: “I know your kind, you are not the kind that does the dirty work themselves. You employ others to do your dirty work. I hate your kind of people.”
  • Use of journalism as a bludgeon. The decision points out that Mitchell once emailed Byrne, saying “I am open to changing the story if he can provide other verifiable information that would be valuable” and “I might even suggest that I will be willing to remove his name from the story altogether if he were to provide me with, say, trading records” on a “global terrorist.”
  • Deception. Mitchell added: “if Nazerali agrees, nothing lost, after he gives me the information I will just put him back in the story. Sleazy, but, well it is what it is”;

The judge’s decision was scathing, summing up the evidence by saying:

Mitchell, Byrne and Deep Capture LLC engaged in a calculated and ruthless campaign to inflict as much damage on Mr. Nazerali’s reputation as they could achieve. 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. Their mission was to expose what they conceive to be corrupt business practices damaging to the global economy. Mr. Nazerali became a convenient means to that end, even when he himself could not be demonstrated to be corrupt.

He slammed the defendants for demonstrating “an indecent and pitiless desire to wound.”

Byrne’s tactics have been effective as discouraging critical coverage of the company.

For every M.L. Nestel there are perhaps ten journalists who are scared away—and some who become conduits for fake news. Perhaps the most egregious example is Cade Metz, who retailed Byrne’s stock market conspiracy theories for The Register, a British technology blog, and went on to write flattering articles on him for Wired. Early in 2014 he wrote a lengthy profile that mentioned neither the libel suit nor Bagley’s guilty plea to forgery, even though Metz had written about Bagley numerous times for the Register and Wired.

A June 2016 article in Columbia Journalism Review described how effective such smear tactics can be. Noted journalist Bethany McLean was viciously attacked by Byrne after she wrote a critical article on Overstock. Among other things, she was accused of trading sexual favors to advance her career. The article observed that she “decided to stop covering him. McLean had gone up against many powerful companies in her day, most notably Enron, but as the mother of two small children, she didn’t want the risk. In that way, she says of Byrne, ‘he won.’”

Byrne eventually lost because he tangled with a man well-heeled enough to sue for libel. As a Canadian resident, Nazerali was able to take advantage of that country’s pro-plaintiff libel laws. The court awarded him C$1,205,000, very large by Canadian standards, of which C$750,000 consisted of aggravated and punitive damages.

Byrne appealed, and that’s where the day of reckoning comes in.

In a December 2016 ruling the British Columbia court of appeals required Byrne to post security for the entire amount of the judgment. Subsequent court decisions, most recently a Feb. 9 ruling granting Nazerali legal fees, bring the total to just under C$1.5 million. He has until February 28 to post a letter of credit for the full amount, which is over $1.1 million in US dollars. If he doesn’t Nazerali can get the appeal dismissed.

It’s a lose-lose proposition for Byrne. But either way it’s a big victory in the fight against fake news.

Postscript: the funds were posted shortly before the February 28 deadline, so the saga continues. See Overstock CEO’s Fake News Woes Continue as the Media Wakes Up, posted on March 2, 2017

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