Byrne caught up in Russia probe, leaves Overstock

By Brice Wallace 

One of Utah’s most prominent business executives has left one of the state’s most prominent companies.

Patrick M. Byrne, who in 1999 acquired a failed online company and relaunched it as Overstock.com, resigned as CEO and board member of the company on Aug. 22 following his public claims that he had been involved in political espionage and had a romantic relationship with alleged Russian agent Maria Butina.{mprestriction ids="1,3"}

Following Byrne’s resignation, the board of directors of the Midvale-based company appointed Johnathan E. Johnson III as interim CEO and Kamelia Aryafar as a board member and executive vice president of the company’s retail business.

The company’s stock fell 36 percent after Byrne released information Aug. 12 about his claims. In his resignation letter to shareholders, Byrne said that that “the news that I shared is bubbling (however haphazardly) into the public.”

“Though patriotic Americans are writing me in support, my presence may affect and complicate all manner of business relationships, from insurability to strategic discussions regarding our retail business,” he wrote. “Thus, while I believe that I did what was necessary for the good of the country, for the good of the firm, I am in the sad position of having to sever ties with Overstock, both as CEO and board member….”

He told shareholders that it had “been an honor to serve you through thick and thin, threats grand and arcane, for the past 20 years” and said the shareholders own “some disruptive assets.”

“One of them changed how furniture gets purchased in the United States and has run up a record of GAAP profitable years that is nearly unrivaled in B2C e-commerce, on a fraction of the capital of every competitor they ever faced (a fact missed by most). And you own blockchain assets that seem poised to revolutionize capital markets, finance and governance for the poor. It has been 20 years of remarkable innovation from a team that is now honed for it.”

Allison Abraham, chair of the company board, said “we respect and understand Patrick’s reasons for resigning and acknowledge his momentous achievement in taking Overstock from a startup 20 years ago to one of the nation’s leading online retailers and positioning it at the forefront of the blockchain revolution.”

In 1999, Byrne acquired a 60-percent stake in D2-Discounts Direct and later in the year became CEO and relaunched it as Overstock.com, specializing in selling excess inventory online. Overstock.com grew into a nearly $2 billion revenue company that has nearly 40 million customers per month and later branched out into blockchain technology. Byrne created subsidiary Medici Ventures to advance blockchain-based technologies.

In this year’s second quarter, the company reported a net loss of $24.7 million, or 69 cents per share, which compares with a loss of $64.9 million, or $1.51 per share, for the 2018 second quarter. Revenues totaled $373.7 million, down from $483.1 million a year earlier.

Johnson now takes over as interim CEO. He has been with the company for nearly 17 years and serves on the board of directors and as president of Medici Ventures. He will continue to serve on the boards of Overstock, Medici Ventures and tZERO and as president of Medici Ventures.

“Jonathan’s diverse and extensive experience here has prepared him well to successfully oversee both our retail and blockchain businesses,” Byrne said.

“In his 20 years as Overstock’s leader, Patrick’s vision for Overstock as an innovation leader has come to fruition,” Johnson said. “It will be my mission as I take the helm to continue and build on Overstock’s achievements and success. I am confident Overstock’s future — both in retail and blockchain — is bright.”

Johnson served as the chairman of the Overstock board of directors from 2014-17, transitioning to the position after five years as the company’s president, and later as the acting CEO and executive vice chairman of the board. Johnson joined the company in 2002 as its general counsel and held various business and legal-related positions within the company prior to becoming president. Prior to joining Overstock, Johnson was with TenFold Corp. in various positions, including CFO and general counsel, and practiced corporate law in Los Angeles with two international law firms.

Johnson also ran for Utah governor but lost the Republican nomination to incumbent Gary Herbert in the 2016 primary.

Aryafar has been with Overstock since 2017 and serves as the chief algorithms officer.

“Kamelia is a brilliant machine learning scientist and e-commerce veteran who has already made great contributions to our science, engineering and analytics by advancing data-driven technology,” Byrne said. “Her addition to the board will continue to propel Overstock forward in its visionary direction.”

“Dr. Byrne,” Aryafar said, “has successfully created and molded Overstock over the years by pioneering the marriage of tried-and-proven competitive business principles with cutting-edge data analytics and technology — a true visionary. I am excited to join the board and I look forward to continuing the company’s trajectory and contributing to its future success.”{/mprestriction}