Overstock Faces SEC Probe,
Details Short-Selling Lawsuit
By CAROL S. REMOND
DOW JONES NEWSWIRES
August 12, 2005 5:32 p.m.
NEW YORK -- Overstock.com President Patrick Byrne said in a conference call Friday that the Securities and Exchange Commission began an informal inquiry into the company in February.
Mr. Byrne was speaking during a conference call to discuss a lawsuit filed Thursday by Overstock.com and a private investor named Mary Helburn against research firm Gradient Analytics Inc., hedge fund Rocker Management LLC, Rocker Partners LP, Rocker Offshore Management Co. Inc., well-known short seller David Rocker, Marc Cohodes, James Carr Bettis, Donn Vickrey, and Matthew Kliber.
Overstock.com CEO Patrick Byrne discusses the company's lawsuit against Rocker Partners and Gradient Analytics.
Overstock and Ms. Helburn claim in the suit that the defendants "have conspired to denigrate Overstock.com's business for personal profit."
A person at Rocker Partners said Friday the fund hasn't been served and had no comment. Gradient couldn't be reached for comment. A spokesman for the SEC declined to comment.
Mr. Byrne said in the conference call that the SEC was pushed into starting an inquiry into his company. He didn't give details about the nature of the inquiry or say whether it is still ongoing.
Ms. Helburn is described in the suit as a citizen of California and one-time holder of 500 shares Overstock.com. She is the executive director of the National Coalition Against Naked Shorting, or NCANS, an organization that alleges a vast short-selling conspiracy. Mr. Byrne said he has been a major contributor to NCANS.
Mr. Byrne has said that he believes that his company's stock has been pressured by illegal short selling, dubbed naked short selling, or selling short without first borrowing stock as typically required. Short sellers sell shares in the hope that the price will go down.
Overstock.com's suit against Gradient and Rocker was filed by several law firms, including two Texas law firms that represent small-capitalization companies that have attempted, so far unsuccesfully, to sue dozens of brokerage firms and the Depository Trust and Clearing Corporation, or DTCC. These suits filed by small companies generally alleged that DTCC, which manages a global electronic clearing system, and the brokerage firms conspired to allow illegal short selling of their shares.
Mr. Byrne concluded his presentation about Overstock.com's lawsuit against Gradient and Rocker by giving a warning to the "Sith Lord," a person who he said is looking to damage Overstock.com to ultimately take over the company. "You know who you are. I hope it is worth it because if the Feds catch you again...," Mr. Byrne said.
Mr. Byrne didn't identify the "Sith Lord" during his presentation but said that he was a "master criminal from the 1980s."
The Sith Lord appears to be a reference to the malevolent character in several Star Wars movies.
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